The Organization for Economic Cooperation and Development (OECD) on Tuesday invited Brazil to open membership discussions — but has imposed conditions: effective protection of the environment and action on climate, including halting deforestation, as well as the fight against corruption. The invitation to Brazil and five other countries — Argentina, Peru, Romania, Bulgaria, and Croatia — was approved by consensus by the 38 members of the OECD.
The invitation for talks come five years after Brasília formally requested membership – which has become a priority for the country’s foreign policy. It is a victory for Brazilian diplomacy, since the expectation in Europe was that this would hardly happen before the November 2022 presidential elections, due to the “great reticence” of some members towards President Jair Bolsonaro. France joined the consensus by signaling that it will be “demanding and vigilant” in negotiations with Brazil, according to European sources.
The OECD’s approval means just that — starting negotiations. The entity sent a letter to President Bolsonaro on Tuesday. And the understanding in the organization’s circles is that the country that responds first — confirming commitments to OECD values — starts the process first. In fact, there seems to be some concern that one or the other will take longer. The current government of Argentina may have some difficulty with capital controls, for example, notes one source.
Negotiations could take three to five years for the country to complete the process of compliance with the OECD’s 253 legal instruments. The invitation for membership will come after the negotiations, so not before 2025.
In a statement released early Tuesday evening, OECD Secretary-General Mathias Cormann said the process for acceptance as a member will include a strict and in-depth assessment by more than 20 technical committees of the candidate country’s alignment with OECD standards, policies and practices. As a result of those technical reviews — and prior to any invitation to candidate countries to join the organization as members — changes in the candidate country legislation, policy and practices will be required to align them with OECD standards and best practices, thus serving as a powerful catalyst for reform.
“Brazil has intensified its participation in the OECD since the request for accession [in 2017] and now we are well prepared to move forward,” said the Brazilian ambassador to the entity, Carlos Márcio Cozendey.
Last week, the Minister of Economy, Paulo Guedes, sent a letter to the OECD assuring commitment that Brazil will comply with the codes of capital liberalization and invisible transactions, the entity’s two main instruments in the economic aspect. This move strengthened “Brazil’s credentials” to finally receive the invitation, according to a government source. In any case, the parallel process in the OECD Council of Ministers was already underway. None of the other five candidate countries for membership has even begun the process of binding to the organization’s required codes.
These codes allow aspiring countries to make gradual progress toward liberalization of capital, investment, and services, with expectations of an improved business environment. And, according to sources, before sending the liberalization and intangibles codes to Congress, the government needs to comply with those requirements.
In Brazil, the new foreign exchange law has been approved. Being part of the OECD means having greater contact and more convergence with international best practices, as well as a boost to the domestic reform agenda, according to the government’s evaluation. But the OECD itself signaled that the candidates should commit themselves to other priority issues.
“The OECD invitation translates the international recognition for the agenda of structural economic reforms led by Minister Guedes and supported by President Bolsonaro,” said the Secretary of International Affairs of the Ministry of Economy, Erivaldo Gomes. “At the same time, it stresses the importance of following up on those reforms, especially the tax overhaul, a necessary condition to complete the process of joining the organization.”
For the National Confederation of Industry (CNI), this is “an extremely important step for the Brazilian productive sector,” which will serve as an impetus to leverage important reforms, increase the competitiveness of industry, and foster more sustainable growth in the country.
Brazil has been a key partner of the OECD since 2012 and formally applied to join the group in 2017. It is also admittedly the candidate country most convergent with the organization’s legal instruments — and the country most engaged with the organization’s committees and working groups, integrating discussions in more than 30 instances.
São Paulo – Exports of ornamental stones from Brazil to the Arab countries were up 59% in 2021 year on year, grossing approximately USD 10 million. Despite not being one of the top destinations of Brazilian ornamental rocks, the industry is optimistic with the result of sales to the region, industry group Centrorochas reported.
The top Arab buyers of rocks from Brazil last year were the United Arab Emirates with a 48.3% share, Lybia at 30.4%, Qatar at 9.4%, Algeria at 4.8%, and Iraq at 2.5%. The rates take into account the total shipments to Arab markets.
“The Arab market is strategic for Brazil in regard with exports, given the potential and the high consumption of ornamental rocks in the region. It’s a priority market of It’s Natural – Brazilian Natural Stone, a project that we carry out in partnership with Apex-Brazil. We believe this region holds an extremely large potential, and we’re working on actions to strengthen the brand. An example was participating in The Big 5 202. Brazil is among the top ornamental stone suppliers in the world and has increasingly stood out in the supply of finished products, serving big projects across the world,” Centrorochas Tales Machado was quoted as saying in a statement.
Overall exports
Ornamental stone exports from Brazil posted an all-time record in 2021, topping pre-pandemic levels. Revenue reached USD 1.34 billion. Last year, 2.4 million tonnes of rocks were exported from Brazil to 132 countries in five continents, up 35.5% year on year.
One of the reasons is a higher confidence of businesspeople in exporting their products following the signing of an industry agreement between Centrorochas and the Brazilian Trade and Investment Promotion Agency (Apex-Brazil). The entities developed the project It’s Natural – Brazilian Natural Stone, which currently supports around 140 firms by encouraging exports.
The United States ranked first as the top consumer of rocks from Brazil at 62.7%, followed by China at 11.5%, Italy at 6.5%, and Mexico at 3.8%. These four countries are part of the eight target market pointed by the industry projects. The others are the UAE, India, United Kingdom, and Russia
“In a year with serious logistical difficulties, the country’s stone industry hit an all-time high. The credibility of Centrorochas among businesspeople, together with a milder situation of the pandemic in the second half of 2021, the development of actions of the industry project and the resumption of the global construction industry, contributed to this increase. We topped by almost USD 40 million our largest revenue up to then, which had been seen in 2013,” Tales Machado was quoted as saying.
“The year of 2021 was full of challenges, but together we knew how to turn them into opportunities and victories. It’s rewarding to see that our partnership with the ornamental stone industry produced record-high exports, thus creating more jobs and revenue to thousands of Brazilian families,” Apex-Brasil president Augusto Pestana said in a statement.
The Brazilian government has amended immigration rules to grant temporary visas to professionals working remotely in a bid to attract well-paid individuals to contribute to the country’s economy.
Announced today (24), the measures establish an initial one-year visa, which can be renewed for an equal period. According to justice secretary and head of the National Immigration Council, José Vicente Santini, the new regulations are expected to boost local tourism and respond to global trends.
“Digital nomads’ salaries come from external sources, and the resources these immigrants bring can boost the national economy. This is an important step for Brazil to promote one of the world’s most modern working models,” he said.
Professionals can apply for the digital nomad visa at any Brazilian consular office, presenting proof of their remote worker status and documents such as an employment contract with an international organization and health insurance and evidence of availability means of subsistence in Brazil.
On the other hand, the increase of Brazilian remote workers taking up jobs with foreign employers has been a concern for the sector. The Federation of Associations of Brazilian Information Technology Companies (Assespro) launched a manifesto today calling for public policies to prevent a “labor blackout” of skilled tech professionals.
According to the trade body, the growing demand for IT experts globally and the acceleration of remote working has contributed to many experienced professionals being hired by companies abroad, without having to emigrate, in a phenomenon described as a “virtual brain drain”.
The association warned that best available estimates indicate that Brazil’s shortage of skilled professionals is expected to grow to 450,000 within three years. It added that the lack of strategies and policies from central government to support innovation and skills creation has been discussed since 2018. Still, the scenario remains unchanged in terms of strategy, while execution has become increasingly unviable due to the various budget cuts suffered by the Ministry of Science, Technology and Innovation in recent years.
Stressing the real possibility that Brazil may lose a significant amount of its technology experts to employers overseas, Assespro urged government leaders to “urgently unite to implement public policies that prevent this catastrophic situation.” It added the issue of skills shortages is the greatest challenge the sector has faced in the trade body’s 45-year history.
“Innovation processes arise from the existence of problems. Given the size of this problem, however, the collective action of all the actors involved is essential”, the manifesto noted.
The country’s steel industry ended 2021 with strong growth in volume of crude steel produced, domestic sales and apparent consumption, as expected, despite the sharp deceleration of indicators in the last month of the year. The data are from the Instituto Aço Brasil, which represents steelmakers.
In a year marked by strong domestic demand until July and an increase in exports in the second half of the year, steelmakers in the country produced 36 million tonnes of crude steel, up 14.7% from 2020. In rolled products, the sector reached 26 million tonnes, up 19.3% year over year.
The performance was also robust in domestic sales, which totaled 22.4 million tonnes, up 15% year over year. In the year of the pandemic, the sector was impacted in the second quarter, but saw strong steel sales from July onwards.
Also with a record, since 2013, apparent consumption (local sales plus imports) of steel products totaled 26.4 million tonnes, up 23.2% year over year.
Faced with a heated market and difficulties in meeting all demand from local mills, imports of finished material grew by 144% in the year, totaling 5 million tonnes.
With an increase in steel production and an accommodation of domestic demand – which was supplied from the middle of the year with domestic supply and the entry of foreign material –, exports rose and ended the year up 3.9%, totaling 11 million tonnes. Benefited from higher steel prices in the international market, they generated $9.3 billion.
In December, indicators focused on the domestic market lost steam due to macroeconomic uncertainties as of September: in the production of crude steel (-11.4%), rolled products (-16.8%), domestic sales (-24.7 %) and apparent consumption (-17.3%). Exports, on the other hand, gained momentum, with an expansion of 74.9% —1.3 million tonnes. Imports continued to expand, with 309,000 tonnes (up 49.9%). Sources say there is still a lot of steel in the ports waiting to be cleared.
The five asset managers that gained the most clients in 2021 together attracted almost 1.6 million new shareholders to their investment funds. Three of them are “independent” and two are linked to large banks.
XP Allocation Asset Management, linked to XP, was the one that gained the most clients, with 478,700 new members. Then comes the asset management of Nubank, Nu Asset Management, with the arrival of 430,000 investors. The asset managers of Caixa Econômica Federal and Bradesco appear in third and fourth places, but in fifth place comes again an independent company of the big banks: Vitreo Gestão de Recursos, linked to Empiricus (currently of BTG), with 174,000 new investors.
Some factors explain the growth of these independent firms. The launching of alternative products, such as foreign-oriented funds or less talked-about assets like cannabis, water and uranium; low initial minimum contributions; and marketing strategies to draw individual investors.
The survey also shows that the asset management companies linked to the five main retail banks in the country (Banco do Brasil, Bradesco, Caixa, Itaú and Santander) closed last year with 15.63 million members, compared to 15.10 million in 2020 – a 3.5% growth. The other asset managers had a 30% growth in 2021, reaching 8.29 million members.
Valor talked to the five firms that attracted the most clients last year to understand what strategies were adopted and what to expect for 2022.
XP Allocation Asset
The success of XP’s management company, for example, is due to different factors, according to CEO Bruno Castro. The main ones are the launching of products with differentiated strategies and the low initial investment amounts, which brings the company closer to the individual investor, considered by Mr. Castro as “the heart” of the company. “We focus on bringing products that were previously available only to institutional or qualified investors to the other XP clients,” he said.
Some of the main highlights of the year, according to him, were real estate funds and also the launching of exchange-traded funds (ETFs), like XINA11, which follows Chinese stocks. There is also an ETF that replicates the average price of gold.
By being connected to the largest investment platform in the country, the XP manager also has the advantage of the broad base of the broker, which counts on independent agents and investment advisors to help in the distribution of its products. Mr. Castro, however, emphasizes that XP Asset practices “the same rebate rules of the market.” The rebate is a kind of commission paid by the managers to these professionals who resell the funds.
For 2022, the manager says that it will continue to keep an eye on the so-called “thematic funds.” “Our international grid tends to become more robust, with more sophisticated products. We have recently launched water, carbon and internet funds, and we will continue to keep an eye on this,” Mr. Castro said.
Caixa DTVM
The wide distribution network was an asset for Caixa’s growth last year, while higher interest rates helped boost fixed income products.
The bank serves a less coveted slice of the market: the lower income bracket. “We are present in 99.83% of Brazilian municipalities, and the growing number of customers are the main levers of new shareholders,” the state-owned bank’s asset manager said in a statement. “Caixa Asset has structured and positioned itself to meet the needs of the lower income bracket. The products and the way to invest are simple and give returns.”
According to Caixa’s firm, fixed income products were the ones that attracted the most new shareholders throughout 2021. One reason was the increase in the Selic, Brazil’s benchmark interest rate. This contributed to increase the yield of this class of assets, since many fixed income products have their variation tied to the Selic. Another possible reason was the debut of Caixa’s insurance unit Caixa Seguridade on the stock exchange. According to the bank, “new investors came to the customer base through the initial public offering.”
Fixed income and credit strategies are the focus of Caixa’s asset manager for this year, the bank said.
Bram
Bradesco links the growth of its asset management business to two main reasons: the wide range of products, including those coming from partnerships with other assets, and the distribution on different platforms.
Ricardo Eleutério, the asset manager’s director, explains that the firm’s funds are currently available on 16 platforms, which have attracted 64,000 shareholders. “This accelerated a lot in 2021, when we sought partnership with independent distributors and attracted more investors,” he said.
The presence of house funds on partner shelves, however, is not the only reason for the result. According to Mr. Eleutério, Bram’s own shelf also justifies the arrival of new shareholders. He says that the firm has a very diverse menu of funds and, therefore, is able to meet the most diverse types of profiles in different scenarios.
“In 2020, we saw a lower interest rate, which made investors look for multimarket and equity funds. And we had many options of these products. Last year, with higher interest rates, the demand started to be for fixed income funds and even with a certain risk, such as private credit funds, for example. And we also had funds,” he said.
According to the executive, in the last two years the management company greatly accelerated its offer, as was the demand from the public. One path for this was partnerships with other firms, including international ones.
“We accelerated the offer with new products, alternative strategies and increased the product grid locally and also abroad,” he said. “We made many exclusive partnerships abroad. Where we didn’t have a presence, we started to have one. We were not in Asia, for example, so we made partnerships with managers bringing funds from Asia. For 2022, we believe this trend will continue and we will continue to do more partnerships.”
Nu Asset
Nubank’s fund manager links its growth to the ease of use of its digital platforms, through which investors can invest simply and on their own. According to Andrés Kikuchi, leader of Nu Asset, the company makes every effort to present the available products in a clear way to investors to facilitate their understanding and decision making.
“With simple language and investments starting at R$1, the process is 100% guided through an application to define profile, amount to be invested, monitoring and redemption request,” says the executive.
Currently, the company has five funds available in the Nubank app or on the NuInvest platform. The product Nu Seleção, for example, is made up of multimarket funds composed, in different proportions, of assets such as fixed-income securities, stocks in Brazil and the United States, gold and dollars.
The funds with the largest number of shareholders are Nu Seleção Cautela, with 236,000 shareholders, followed by Nu Seleção Equilíbrio and Nu Seleção Potencial, with about 86,000 and 85,000 shareholders, respectively.
The accumulated profitability from March last year until December for Nu Seleção Cautela was 3.34%, while that of Nu Seleção Potencial was 2.19%, and that of Nu Seleção Equilíbrio, 2.51%. As a reference, the interbank deposit rate (CDI) in 2021 was 4.42%, while Ibovespa fell almost 12%.
Vitreo
The other successful asset manager is Vitreo. The rise in the number of shareholders in its funds was explained especially by the launch of different thematic products that were pioneers in the market, according to George Wachsmann, founding partner of the firm. “Since the beginning of Vitreo we have had this idea of bringing the best investment opportunities. Many of them sometimes are not available to clients in general, or even to anyone in Brazil, and this was accentuated last year,” he said.
The executive says that the last launch of the firm was a metaverse investment fund, which invests exclusively in companies that have the so-called metaverse as a business. “This fund alone attracted 10,000 shareholders,” he said.
Another example was the launch of a fund that invests in uranium, which already gathers 9,000 investors and had a 50% increase last year.
In order to hasten and make launches that are appealing to the public, with the potential to appreciate in the market, Vitreo relies on the partnership with the analysis company Empiricus, which, just like the asset manager, now belongs to BTG Pactual.
The Asian Infrastructure Investment Bank (AIIB) approved its first credit operation for Brazil, in the amount of $100 million for the Minas Gerais Development Bank (BDMG). This comes four months after Brazil became an effective partner in this China-led, Beijing-based multilateral development bank.
The funds are expected to be available to BDMG in three tranches between 2022 and 2024, to create lines of credit for companies. There is no size limitation for tapping the line. However, due to the characteristics of the operation, the funds are expected to be allocated especially in medium and large companies.
BDMG’s CEO Sérgio Gusmão Suchodolski celebrated the fact that the institution was AIIB’s first partner. “We believe that this pioneering operation will be strategic to accelerate the efficient mobilization and allocation of funds to finance sustainable development projects, using the broad bases of the BDMG, which is a last-mile development bank.”
“This partnership strengthens the role of Brazil, which has joined the other members of the Asian Bank in designing a new international financial architecture that will be key to meeting the challenges of development in emerging economies, in order to build a more sustainable world in this century,” the executive added.
AIIB’s credit operation is the first with Brazil and the second in Latin America (there was a previous operation with Ecuador). It is also the first operation in Latin America with a non-sovereign entity.
The first contacts between BDMG and AIIB to carry out this loan were made in December 2020. However, since 2019, Mr. Suchodolski, who leads the Brazilian Development Association (ABDE), which brings together 31 firms in the sector, had been carrying out efforts to make sure that Brazil would be a founding member and partner of the AIIB, noting that this opened up opportunities for access to a new source of multilateral funds.
The accession agreement was finally enacted in September 2021 by the Brazilian government. The country contributed $1 million to the bank’s capital. On the other hand, the expectation in government circles is that Brazil will have access to up to $350 million in financing.
There are two general eligibility criteria for allocation of the funds approved on Thursday. First, investments in global public goods (like renewable power) are eligible. It means that coal-related projects, including coal mining, coal transport or coal-fired power plants, as well as infrastructure services dedicated solely to supporting any of these activities, cannot be financed. Large dams cannot be financed either.
Second, the funds could be used for operations that foster trade and connectivity with Asia. In the case of connectivity, it is understood as operations in which the parent company (or economic group) is of Asian origin (that is, some regional member of the AIIB) or operations that contribute to activities that encourage trade in products between regions Minas Gerais-Asia, with a direct or infrastructure-related relationship.
In addition to the $100 million credit, a $1 million donation was approved for BDMG by the Multilateral Cooperation Center for Financing for Development, a mechanism that aims to foster high-quality infrastructure investments and connectivity in developing countries through partnerships.
Pátria Investimentos fund closed an agreement to purchase the hydroelectric plants of British company ContourGlobal in Brazil for $313 million, including debt – Pátria will pay $162 million. The assets traded have an installed capacity of 168 megawatts (MW).
The deal, expected to be completed in the second quarter, was a first step in ContourGlobal’s plan to monetize its renewable energy assets in the Brazilian market. The divestment of assets is part of the company’s strategy to increase its market capitalization and unlock shareholder value.
In this line, the British company also intends to sell, in the first half of the year, its wind farms in Brazil. Pátria has exclusivity in the transaction. In all, according to information on the company’s institutional website, ContourGlobal operates 598 MW of wind power, including the Asa Branca farm (160 MW), in Rio Grande do Norte, and the Chapada complex (438 MW), in Piauí.
With the acquisition of ContourGlobal’s assets, the fund expands its portfolio of renewables. Pátria is an investor partner of Essentia, which operates in the Brazilian solar and wind energy market, and in Chile’s Latin America Power (LAP).
Pátria declined to comment on the new investment. With $25 billion in assets under management, the fund also operates in the power generation sector through Arke — a joint venture with Shell and Mitsubishi Power, responsible for the construction of the Marlim Azul gas thermal plant (565 MW), in Macaé, Rio de Janeiro.
ContourGlobal said it would still decide whether to use the proceeds from the sale of the hydroelectric to reinvest in new business opportunities or to increase shareholder remuneration. The company, listed on the London Stock Exchange, has a global portfolio of 6.3 gigawatts.
The agreement with Pátria includes nine small plants: Goiandira (27.7 MW), Nova Aurora (21.6 MW), São Domingos (25 MW) and Galheiros (12 MW), in Goiás; Presidente Goulart and Alto Fêmeas (18.7 MW) and Sítio Grande (23 MW), in Bahia; Pirapetinga (19.8 MW) and Pedra do Garrafão (20.3 MW), in Rio. The plants were purchased in 2016 by British company Neoenergia and account for less than 3% of ContourGlobal’s global revenues.
Commenting on the sale, ContourGlobal’s chief executive Joseph Brandt said, in a statement, that the deal is consistent with efforts to “unlock the value of undervalued assets in the portfolio.” The negotiation with Pátria does not include ContourGlobal’s portfolio of cogeneration thermoelectric plants in Brazil, which totals 76.1 MW.
For the coordinator of the Electric Sector Study Group (Gesel), at the Federal University of Rio de Janeiro (UFRJ), Nivalde de Castro, the acquisition reinforces Pátria’s interest in renewables and shows the liquidity of the domestic market. According to him, the country is well positioned to attract investors because it has a “consistent regulatory framework.”
The sector’s revenue predictability also contributes to providing liquidity to assets. Mr. Castro believes that purchases and sales of renewable assets tend to grow, as companies define strategies in the energy transition. “Renewables are gaining great importance in the energy transition, assets have increased in value, so movements of this type become natural.”
As a child, Juliana Coelho liked numbers. For this reason, she decided to study engineering. She chose a specialization in chemistry because she knew that an engineer’s chances of launching a career in the state of Pernambuco were limited to the petrochemical complex. But when she reached the end of her penultimate year of college, in 2010, a new event emerged, which would later diversify the region’s economic activity and completely change the professional trajectory imagined by the young woman. In December of that year, Fiat announced the construction of a factory in Pernambuco.
Today, the 32-year-old engineer is traveling through Europe to visit some of the 92 factories that make up Stellantis, a company that was born a year ago from the merger between the brands of the Fiat, Chrysler, Peugeot, and Citroën groups. Ms. Coelho just took over one of the most important positions in the manufacturing area of the new super automaker. She is the new world head of the so-called Stellantis production way, which will extract the best from the methods that each of these brands has developed to manufacture vehicles throughout centuries-old histories.
The executive is in Paris and had just finished a French class (a language she is learning during her trip) when she gave an online interview to Valor. The French capital could be one of the alternatives for the new address of the engineer born in Olinda. She is still studying the best housing location for her and her husband, a fitness trainer also from Pernambuco, to whom she has been married for two and a half years.
Europe tends to be a strategic point both for traveling between the assembly lines spread across the continents and for the proximity to the company’s global management, which is currently working intensively to fine-tune the synergies between the brands. The housing issue does not seem to concern her at a time when the pandemic has taught us lessons about, as she cites, working in the “nowhere office”.
Nine years have passed since the engineer, then recently graduated from the Catholic University of Pernambuco, was selected as a trainee to work at the factory that Fiat was starting to build in Goiana, 64 kilometers from Recife and a little less from Olinda. In the last three years, her professional career took a turn, in parallel with the revolution that involved the company that hired her.
In 2018, Fiat announced the acquisition of Chrysler. With the union, Goiana, a city selected by the Italians after the federal government extended tax incentives in the Northeast and Central-West regions, would be chosen to house a modern factory of the Jeep line. And more recently, the union with Peugeot gave rise to Stellantis.
Aware of the dream that her granddaughter began to cherish since it became known that an automaker would go to Pernambuco, Miriam, maternal grandmother of the recent graduate, kept an eye on the news widely publicized in the local press about hiring. “Looks like they’ve already called a group. Are you not on the list?” Yes, she was. She and 39 other newly graduated engineers formed the first group of trainees at the first vehicle factory in Pernambuco.
But there was no factory to train in the immense land, where there was once a sugarcane plantation, which was turned into a construction site when the engineers arrived. The trainee group was then sent to Italy and Serbia to learn in the factories there. The dream of the young woman who always liked cars came true. The interest in automobiles arose because an uncle had a rental company and offered the fleet for relatives to ride. In the Coelho family, there are no other engineers. Her father, now deceased, worked in administration. Her mother is a physical therapist. One of the two brothers – both younger than her – is studying business administration in Portugal and the other, a nutritionist, lives in Olinda.
Upon returning from the European factories, Ms. Coelho was ready to start work. Her training in chemistry directed her to the area of car painting. She started in the technical area. But curiosity, willingness to learn, and also to pass on lessons learned ended up involving her in the area of hiring personnel. Naturally, she became an area leader and a supervisor.
At that moment, she began to realize that other Pernambuco workers, candidates who, like her, would have their first job in a factory there, and that none, like her, knew what it was like to produce cars, could learn quickly. “Opportunities can arise not only for those who have experience, but for those who are willing to learn”, she highlights.
Those who knocked on Fiat’s door came from very different backgrounds. They were shellfish gatherers, fishermen, sugar-cane cutters. And, among them, some even with skills that, curiously, are useful in an automaker. Ms. Coelho cites the example of those who had already worked as artisans. “Just like in crafts, controlling the seals of a bodywork also requires skill with the hands”, she says.
Over time, the Goiana factory needed to be expanded. At the same time, Ms. Coelho was building an ascending career in the company. From painting, where she rose to the position of supervisor, she moved on to the assembly line, where she took over management four years after she started working for the company. With the industrial expansion, the engineer also continued to be involved in people management, the hiring process and, as she says, “learning and passing on” acquired knowledge.
In March 2018, the company where Ms. Coelho works, which at the time was just Fiat Chrysler, announced that the Goiana plant would start operating 24 hours a day, with three production shifts. The news was received with celebration, with the presence of the then-president Michel Temer, who brought the company even better news: the extension, for five years, of the special tax regime for factories in the automotive sector installed in the Northeast region. The benefit had already been extended in 2009.
Since then, the controversy that has always existed around tax incentives for automakers in the North, Northeast, and Central-West regions has intensified. Companies with factories outside these regions have bolstered lobbying with politicians, with complaints that they would lose out in competition with companies enjoying tax breaks. On the other hand, the groups installed in these regions have always argued the need for incentives to offset the cost of logistics that involves transporting parts from the South and Southeast and, on the other hand, cars ready for these markets.
Ms. Coelho defends ways to guarantee development for these regions. She says that other countries stimulate, through incentives, regions where the industry is not so present. “Decentralization is fundamental. We need to get rid of the geographic map that boils down to three or four states,” she highlights.
“See what that factory was (in Goiana) and what it will be; it is necessary to invest not only where there is already development,” says the engineer who declares – and in fact, proves – to be very calm. The new professional challenge has taken more time, which she finds natural. “At work, I tend to do my best,” she says. But, in general, the executive manages to balance professional and personal life. “On Sundays, I usually go to my grandmother’s house, stay with my husband and the whole family, go to church.”
The first experience away from home, from her grandmother, mother, brother, and Olinda, was in November 2018. Ms. Coelho was transferred to Betim, in the state of Minas Gerais, to assume the position of chief engineer for Fiat Chrysler manufacturing throughout Latin America. She and her husband moved to Belo Horizonte, where they lived until July 2020. The new position helped her not only see the cars produced but the entire company.
A new promotion, however, took her back to her homeland. Ms. Coelho was assigned to direct the entire factory, which at that time was practically the same size as it is today, with 13,500 employees and 16 suppliers within the industrial park. She was the first woman to assume this role in the company.
But, when she arrived, there was no one. It was at the beginning of the pandemic. A period when virtually all automakers had laid off employees, who would only return to work after companies organized factories to ensure distancing and safeguard measures to prevent the spread of Covid-19.
Of course, she already knew she wouldn’t find workers. But, after seven years of direct work on assembly lines, the feeling of emptiness was unsettling. However, the pandemic also left good lessons for those who always live in the crowd. “We learn to connect with people, to listen to them in a moment of learning and a lot of responsibility. It is in difficult times that we see the qualities of people.”
A little over two months ago, she began to undergo discreet interviews at the company. Questions suggested that she was undergoing a secret selection. “I imagined that all of that was for a new job opportunity at the company, but I wasn’t sure what it was”, she says. She does not know which or how many candidates were in the running. Upon being asked to take charge of Stellantis’s new production system, she understood why she had been interviewed.
Each of the automaker’s brands has, over decades, developed its own means of producing vehicles. From the best each one offers, Stellantis’ own model will be built. The Brazilian executive will lead this process, which also involves the synergies the company’s global management has pursued since the first day of the company’s creation. In her new position, Ms. Coelho says she will always be very close to the group’s factories around the world, establishing a new methodology based on the application of the best methods adopted until today by the two groups.
Stellantis’ global meetings are usually conducted in English, a language she speaks. But in conversations with Carlos Tavares, the company’s global CEO, she will always have the chance to practice her native language. Mr. Tavares was born in Portugal.
Being part of the improvement of gender diversity in an industry that has historically been an essentially male environment is something that delights the engineer. She says she has never felt prejudice. She believes that it is necessary to encourage women to work in sectors where, sometimes, they themselves do not believe they will adapt. “This opportunity is fantastic; the diverse, the portrait of society, already appears in our meetings”, she says.
Ms. Coelho is also interested in monitoring studies and research that point out global trends in mobility. She recognizes that a lot has changed since owning a car was one of the most important achievements for a young person. Even so, she believes that interest in cars persists and will continue. On this trip to France, the changes in mobility and the offer of means of transport, in Paris especially, caught her attention. But, not for that reason, to her delight, the cars lost prominence. “In Paris, you take a car if you want and the city is still full of them,” she says.
For her, “the plurality of mobility”, on the other hand, gains importance. This is the case, for example, of the shared use of vehicles, as a service. “People will continue to like the cars, even if not just through owning them,” she says. What matters in this context, she says, is that the industry continues to pursue environmental goals. “The zero-carbon challenge is fundamental”, she emphasizes.
The return of the new Stellantis global executive to Brazil is scheduled for next Monday. This time, probably for a little while. The new role will certainly require continental travel. But Olinda and Goiana will remain there, as witnesses that the automobile industry can always be surprised to find hidden talents in lands where until a few years ago no one knew how to manufacture a car.
The government of Minas Gerais unveils this Friday the public notice of the public-private partnership of the so-called Rodoanel de Belo Horizonte. It is an ambitious project to build from scratch a 100-kilometer beltway around the state’s capital city. The project will require investments of R$5 billion, of which R$3 billion will come from the public coffers.
The auction is scheduled to take place on April 28. The group that asks for the lowest contribution from public resources wins. The tariff was set at R$0.35 per kilometer, and the collection system will be “free flow” – without toll booths and payment according to the distance traveled.
The idea of the beltway is old, but it became economically viable after the multi-billion indemnity paid by mining giant Vale as reparation to the state for damages caused by the Brumadinho tragedy, a dam failure that claimed 270 lives three years ago. The government’s R$3 billion contribution to the project will come from this agreement, signed in early last year.
“As the construction work is carried out, the measurements will be made, and the company will receive the payments. The project has this advantage. The company will have funds available, money earmarked for this. The funds will be deposited by Vale and allocated to a specific account for the project. It is a very firm guarantee,” said Fernando Marcato, secretary of infrastructure and mobility of Minas Gerais.
The construction work will be carried out in stages, starting with the two busiest stretches, North and West, which pass through cities like Santa Luzia, Contagem and Betim. These two parts, which account for 70% of the traffic, are expected to be ready within four years, when toll collection will begin. The other stretches, Southwest and South, are expected to be delivered in up to six years.
As the route does not exist yet and, therefore, the traffic is unknown, the government created an additional risk sharing mechanism: in the first three years of toll collection, in each stretch, there will be the payment of a consideration to cover operating costs. “It is a way to mitigate the demand risk,” Mr. Marcato said. After this period, the private-sector company will be fully responsible for traffic variation.
The project is expected to draw the interest of several groups in the sector despite being a challenging undertaking, with a large volume of property expropriations, complex environmental permits procedures and resistance from cities cut by the beltway.
Since last year, the mayors of Contagem and Betim have been asking for a change in the route, so that the cities are not cut by the road. The mayor of Belo Horizonte also criticized the project and said mayors are not being heard.
Mr. Marcato says that there was a broad dialogue with all involved, during the two public consultations held in January and November 2021. He says that, after the contributions, changes were made to the southern stretch to reduce environmental impacts. However, the claims of Contagem and Betim were not met, as they proved to be unfeasible, he said.
“There was a request to put the track completely outside urban regions. As the cities requested, we studied this possibility, but we couldn’t do that. This change would have increased the project by 30 kilometers, and would have made it R$1 billion more expensive. Besides, it would lose a lot of demand, the beltway would lose its function,” he said.
Two other major challenges of the enterprise are the environmental permit and the high volume of expropriations required for the construction work. To reduce the uncertainties for the private sector, the state capped compensation costs. “If this is exceeded, the government steps in.”
Part of these eventual additional expenses are expected to be covered by Vale’s funds, since the interested parties will probably offer a discount in relation to the R$3 billion set aside for the road. In this case, the “remaining” funds will cushion additional expenses, including unexpected environmental compensations.
The companies that tapped the capital markets to issue debt in 2021 taking advantage of the very low Selic rate will see their costs with interest expenses almost double in 2022. This is because, of the R$250 billion of funds raised last year through bond issues, 76% are pegged to the interbank deposit rate (CDI).
This higher cost does not yet bring to the fore a solvency risk for those companies that, in most cases, still require low leverage. But it will certainly affect profitability, with a direct effect on profit and, consequently, on growth capacity in the medium term.
“The higher interest rate causes a redistribution of results, which used to go to shareholders and now also go to creditors,” said Alexandre Muller, JGP’s managing partner. In order to estimate the impact of the higher Selic policy interest rate, which started 2021 at 2%, the analyst looked at the evolution of the debt of the companies that make up IDEX-CDI, an index created by JGP that includes CDI-linked, liquid bonds. Considering an average CDI of 4.46% last year, the effective interest cost of these companies will be R$6.68 billion in 2021. If the Selic increases to 12%, as predicted by the market, the average CDI this year would increase to 12.31%, raising the cost of this group of companies by 84% in 2022, to R$12.31 billion.
Mr. Muller explains that one indicator tracked by JGP is the return on invested capital (ROIC). A given company whose operations generate an 8.9% ROIC creates value when the cost of capital is 6.5%. The point is that when the cost of capital goes up, smaller, less profitable companies suffer. “Interest rate changes cause more market concentration, because larger companies, which have the power to adjust prices, can survive, while smaller ones have a harder time.”
But higher interest rates are not the only factor making companies’ debt more expensive. Vivian Lee, a partner at Ibiúna Investimentos, recalled that the spread, which is the rate paid above the CDI for the bonds, can also go up again in the coming months. She recalled that in 2021, as investors migrated to fixed income assets from the stock market, there was a strong flow to corporate debt funds, which reduced the spread substantially, to nearly 1.4%. The companies took advantage of the favorable moment and accelerated issuance between October and November. At the same time, faced with a more uncertain environment of rising interest rates, corporate debt funds became more selective at the end of the year.
With a more balanced demand and a flood of offerings, the spread rose to around 1.8%. “The market was busy at the end of the year, showing that even with the migration to fixed income, investors will not support such low spreads,” he said. The point, he said, is that issuers who need to roll over their doubts or even strengthen their cash reserve this year have to do so in the first half of the year, because from then on investors’ willingness to take risk is likely to decrease due to the presidential election. In other words, there may be a new concentration of offerings in the coming months and, therefore, a repricing of securities. “Whoever needs to go back to the market may have to pay a higher spread, besides a much higher CDI,” he said.
For Laurence Mello, head of corporate debt strategy at AZ Quest, the landscape for companies will worsen with the interest rate hike, “but won’t necessarily be bad,” especially when looking at the “high grade” companies, those with good risk ratings. These are companies that have already made adjustments and are now in good liquidity conditions. “Looking at the structure of their balance sheets, the companies are able to pay debts,” he said. Even so, financial costs will rise, impacting profitability and these companies’ performance in the stock market.
The consequence will be, in his view, a setback in the dynamics of the debt market, which went through a period of lengthening terms and reducing spreads. “Companies will need more leverage, more equity, and will make shorter term issues,” Mr. Mello said, adding that this dynamic may affect the speed of growth of these companies.
The impact of the increased cost of debt is likely to be different depending on the company’s profile, said Artur Nehmi, head of fixed income at Sparta. Sectors that offer basic public services, whose capital has natural protection from the rise in inflation, will have fewer problems, he said. This is the case of companies in the energy, infrastructure or sanitation industries, which are important issuers of bonds. But cyclical companies will have a harder time, as their revenues will drop due to the economic slowdown, while financial expenses will increase with higher interest rates.
Another company profile that may be more affected by the increase in interest rates are those that exchanged IPOs for debt offerings as a way of strengthening cash reserve. “Some of these companies had room on their balance sheets to issue equity, but not necessarily to issue debt,” he said.
For Ricardo Carvalho, an analyst at Fitch, higher interest rates will pressure the companies’ financial expenses. But the perverse effect for companies will come from demand. “Interest rates rise because inflation is high, and this combination impacts income and has a restrictive effect for companies,” he said. He points out that companies’ leverage ratios are still low – their net debt-to-EBITDA ratios are at 1.5%, according to Central Bank data, compared with 3.5% in 2019. This means that balance sheets are likely to remain well, even as credit cost conditions worsen. “The question mark now is how long interest rates will stay high. But companies did their homework, lengthened their liabilities and are more prepared to face this more adverse scenario,” he said. “Results will be weaker in terms of revenues and interest rates, but this is not a risk that concerns us.” Given this, Mr. Carvalho believes that there will be a smaller number of upgrades of companies’ ratings. “Yet we don’t expect a material number of downgrades either.”
For Yuri Ramos, head of investment banking at BV, the Selic and the cost of debt is likely to have an accounting impact for companies. But, according to him, most of them were already planning for a higher interest rate level, which may indicate a milder effect on these companies. Even with this interest rate increase underway, he said, the capital market is likely to remain heated this year, propped up by infrastructure companies, for example. He recalled that there were several concessions in this sector last year, such as that of Rio’s sanitation company Cedae, and companies will seek long-term financing to make the necessary investments viable.