Favela Holding creates R$50m venture capital fund for startups

Favela Holding cria fundo de capital de risco de R$ 50 mi

At the age of 14, Celso Athayde’s task was to help his mother take other children from the Favela do Sapo, in Rio de Janeiro’s west zone, to the beach in exchange for payment. The informal business, called “Mãe Praieira”, gave parents the tranquility to go out to work without the fear of leaving their children home alone. “What my mother sold was credibility, reputation. Today, I would invest in her project,” says the CEO of Favela Holding, who is launching a venture capital fund of R$ 50 million for startups in the slums.

The initiative is a spin-off of a pioneering fund announced in December 2016 and launched in February of the following year. Of the 22 companies that currently make up Favela Holding, 10 are the result of these investments. The successful track record led to the decision to launch, five years later, the Favelas Fundos on the same day as its predecessor — February, 8. “Although it is not part of the official calendar, we consider the date as the National Day of Favela Entrepreneurship,” says Mr. Athayde.

Of the R$50 million planned, R$20 million will be available immediately: 13 holding companies will invest an average of R$1 million each. The rest will come from Favela Holding CEO’s own resources and from businessman and investor Evanildo Barros Júnior, who works in the marketing and technology sector and has experience in structuring companies. The remaining R$30 million have already been provisioned and will be invested later.

To apply for financing, the entrepreneurs will fill out a form available on the Internet. The CEOs of the companies of Favela Holding will select startups from various segments that are in one of three stages of maturity.

The idea is to concentrate investments in startup companies that are already operating, or companies that have reached a more mature stage and need to accelerate operations. The authors of projects in an initial stage, which have not yet left the paper, will be directed to an eight-month entrepreneurship course. The amount of the contributions will depend on the characteristics of the company and stage of the business.

Besides the amount, the difference between the previous fund, of R$ 3 million, and the one being launched now is that this time the initiative is more structured in terms of management and market approach, says Mr. Athayde. For the first time, most (75%) of the resources came from the entrepreneur himself, who reinvested the money obtained from the sale of his participation in Avante, a microcredit startup.

Professional management of the resources and speaking the language of the investors is fundamental to carry out the proposal of creating more businesses in the slums, he says. “In the communities, everyone finds a way to get by, everyone is creative, but there are opportunities that the residents themselves don’t realize.”

Founder of Central Única das Favelas (Cufa), Mr. Athayde left the organization in 2015 to create Favela Holding, which has different partners for each company. Among them are companies such as Comunidade Door, of billboards; Data Favela, of research; and Favela Log, of distribution and delivery of products.

Mr. Athayde knows well how favelas operate. Between the ages of six and twelve, after his parents separated, he lived under a bridge in Madureira, in Rio’s north zone, with his mother and brother, who was murdered. Later, he worked as a street vendor, joined the hip hop movement, and was one of the founders of Cufa.

Last month, Mr. Athayde became the winner of the Social Impact and Innovation Entrepreneur Award granted by the Schwab Foundation, linked to the World Economic Forum. The award is scheduled to next May during the Forum in Davos, Switzerland.

Before that, Mr. Athayde will announce his next project: Expo Favela, scheduled to take place between April 15 and 17 at the World Trade Center in São Paulo. The idea is to gather entrepreneurs and investors in the same space, promote lectures, meetings, and a business fair. The information provided by the candidates to Favelas Fundos will help to select the exhibitors, he informs. “We will have people from the favela and the asphalt, in the audience and on the stage”.

Source: Valor International

https://valorinternational.globo.com

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Distributed generation law expected to create ‘gold rush’

Camila Ramos — Foto: Leonardo Rodrigues / Valor
Camila Ramos — Foto: Leonardo Rodrigues / Valor

President Jair Bolsonaro early January signed into law the legal framework for local energy generation, the so-called distributed generation. It generated urgency in the development of new projects in Brazil. The sector foresees a “gold rush” this year to guarantee the use of the distributors network, the so-called Tusd. The haste is explained because the new regulation establishes that the ventures that request connection to the network up to 12 months after the law was signed off will not pay for this connection fee during 23 years.

The Brazilian Association of Distributed Generation (ABGD) predicts that the sector can reach 100% growth in 2022, with injection of up to 8 gigawatts (GW) of installed capacity and investments of approximately R$35 billion in the year.

A feasibility study by consultancy Clean Energy Latin America (Cela) in the concession areas of 25 distributors showed that photovoltaic solar generation projects installed on the roofs of consumers themselves will continue to be advantageous even with changes in tariffs in the coming years. However, the scenario is different for remote distributed generation projects, in which the customer contracts the service of a company that builds solar farms in the concession area of the same distributor, in exchange for a discount on the energy tariff.

The consultancy shows that remote generation projects that request access until January 2023 will remain competitive, but some initiatives will become more restricted over the years, especially in the case of plants with a capacity above 500 kilowatts (kW). “There will be a huge demand for new projects in the next 12 months, as everyone will want to conform to the old law. This year we will see, by far, the largest volume of new distributed generation projects in Brazil,” says the consultancy’s CEO Camila Ramos.

Cela’s study shows that the new rules may impact the ability of remote generation projects to offer discounts on regulated tariffs, mainly in regions of the states of Pará, Maranhão, Piauí, and Tocantins. According to Ms. Ramos, companies will need to pay more attention to strategic planning, in addition to seeking to become familiar themselves with the regulatory framework and tariff calculations to proceed with the implementation of projects with the new rules.

“From now on, it will be more important in the companies’ strategy to define the location and size of projects. Consumers in some states will have more viable projects than in others,” says Ms. Ramos.

About 80% of the investment planned for 2022 in the sector will be in microgeneration, below 75 kW, a consumer profile that has been consolidated in Brazil for years, according to ABGD. “It is better to install [a photovoltaic system] this year because we will have a better compensation condition. Yes, there will be a race for the sun,” says the association’s executive president, Guilherme Chrispim.

Cela’s CFO, Marília Rabassa, recalls that the payback periods for investments in distributed generation vary according to the tariff in each region and the incidence of solar radiation.

In this context, large banks and investment funds have shown greater interest in the segment, despite the rise in interest rates. This is the case of Itaú BBA, which has operations that total more than R$1 billion. The bank has seen demand for financing in the sector grow, according to the head of energy in the project finance area, Allan Batista. “Now we have a framework, we know the modeling, how to assess risk and scenarios. That sensitivity brings a little more appetite in terms of credit and investments,” he says.

Mr. Batista believes that the 12-month window after the landmark legislation can bring above-average investments. He highlights that the current volatility in interest rates is not likely to inhibit investors in the sector, who tend to have a long-term view. “We see delays in projects and a lot of cost overruns due to [prices of] commodities. We have a break-even dynamic this year: on the one hand, we have a time lag to have a greater benefit in 2022, and on the other hand, this extra cost,” he says.

The sector has experienced a strong movement in search of resources in recent months. Meu Financiamento Solar, Banco BV’s financing platform, provides for R$1 billion per month in operations this year.

Evolua Energia, a company based in Minas Gerais that started operating in 2020, raised R$123 million in August last year, through the issuance of a real estate receivables certificate (CRI), advised by Banco Modal. The company intends to carry out a similar new issuance, in addition to using its own cash to finance the expansion of the current generation capacity to 90 MW from 32 MW by the end of the year. According to the company’s CEO, Tarcísio Neves, the capacity could double in 2023, with the acceleration of the implementation of projects requesting access to the network in the coming months.

Evolua’s idea is to expand its operations beyond Minas Gerais, with new projects in the Northeast region. “We are accelerating the request for access opinions in 2022 to ensure the continuity of the implementation of the parks. Thus, we will develop a portfolio of projects now to support new investments in plants in 2023 and 2024 with current conditions”, explains Mr. Neves.

Mr. Chrispim, with ABGD, states, however, that there are possible obstacles to the growth of distributed generation in Brazil this year, such as the difficulty of expanding the skilled workforce, which has already affected the deadlines of some projects. Other factors, such as exchange rates, freight costs, rising commodities, high global demand, and an election year will continue to put pressure on the sector. “We had recent global inflation and everything went up. This movement already happened in 2021 and now we see that the price has stopped going up but is not going down. There is an expectation of stability, but not of reduction,” he says.

Source: Valor International

https://valorinternational.globo.com

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NOOA expands plant, seeks new markets in agribusiness

NOOA - Typeface on Behance

NOOA Science and Agricultural Technology will invest R$42 million to expand the capacity of its bio-inputs factory, located in Patos de Minas (state of Minas Gerais). Founded in 2016, the company has already invested R$100 million in research and currently delivers biological solutions for the cultivation of corn but intends to launch biological solutions for other crops as well.

According to Claudio Nasser, president of the company, the purpose of NOAA’s innovations is to rebalance the ecosystem of crops, a primary step for the improvement of Brazilian agriculture, he says. “It is important to bring back [to crops] some microorganisms so that we can reduce the use of pesticides that no longer do the same control as before,” he explains.

Son of an executive that worked for Sementes Agroceres in the 1960s and 1970s, Mr. Nasser has breathed the air of agribusiness since he was a child. Today, he holds 50% of NOOA, among other family-controlled businesses. Of the total investment in the expansion, 70% will be made with its own capital and the rest with loans.

After the expansion is concluded in June this year, the company plans to substitute part of the volume of products delivered today by suppliers.

One of the company’s bets is a bacterium that helps corn to survive the “veranicos” (periods of 15 to 30 days of intense heat and lack of rain). “It is the great innovation we have brought so far,” says Mr. Nasser.

The solution does not solve the prolonged drought, he points out, but if there are normal rainfall regimes and a 30-day window of drought, the bacteria helps to prevent productivity losses. “Soil is important to maintain productivity and so is keeping soils from becoming desertified,” he says

Brazilian Agricultural Research Corporation (Embrapa), which is a NOAA partner, isolated the Bacillus aryabhattai bacterium from research with cacti from the Agreste region, in the Northeast of the country. The microorganism helps plants to root up to 2.5 meters deep into the soil (the common is between 30 and 40 cm) in search of water and nutrients.

“Our research indicates that it will be useful in other crops as well,” continues Mr. Nasser, reminding that, despite the years of research and solutions developed, “no one can work miracles.” The role of the farmer, increasingly receptive to biological solutions, is fundamental for the effectiveness of product application and the timely progress of the crops.

Source: Valor International

https://valorinternational.globo.com

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Pix’s acceptance reaches record level in January

Seguro-PIX: bancos oferecem proteção em caso de sequestro | 1 Bilhão | iG

The acceptance of Central Bank´s instant-payment system Pix as a means of payment in the largest online stores in the country reached a record level of 64.4% in January, according to a study by consultancy Gmattos, obtained by Valor. A year ago, this percentage was only 16.9%. If the growth rate is maintained, it is possible that, in the coming months, the instant payment instrument will reach or even surpass banking bar-coded bills known as “boletos” in the ranking of the most available payment methods in e-commerce.

Today, Pix, launched in November 2020 by the Central Bank, occupies the third position on the list, behind credit cards (accepted in 98.3% of stores) and boletos (74.6% accepted). The study, conducted since January 2021, analyzed 59 online stores, which together account for 85% of the country’s e-commerce.

Co-founder and CEO of Gmattos, Gastão Mattos explains that the advance of Pix does not necessarily mean that there will be a drop in the acceptance of boletos. “In contact with the stores, we realized that the boleto fills a necessary space. A part of the people would stay on the margin of consumption without this option.”

The level of boleto penetration in e-commerce remained relatively stable throughout the year. Research shows that, so far, the more affected means of payment was, in fact, debt. The modality was available by 37.3% of the brands analyzed in January 2021, a level that dropped to 30.5% last month. “Pix is beating debt because the usability is much better in e-commerce”, says Mr. Mattos.

According to Mr. Mattos, the acceptance of Pix in e-commerce could reach that of the boleto in the coming months, possibly until May. It is necessary to consider, however, that from now on the growth of the modality tends to slow down. “There are already 120 million keys enabled and this is the main subject of this industry. If the store hasn’t put this option in place yet, it’s probably because they have some non-trivial difficulty in doing it.”

In his view, security problems involving instant payment, such as key leakage, are “certainly negative”, but not strong enough “to shake the reliability of the payment”. Last week, the Central Bank reported the third data breach in six months, raising concerns about the modality’s security.

On the other hand, among the factors that can help keep the availability of Pix growing, he cites the agenda of new features to be implemented by the monetary authority, such as installment payments. In addition, he also highlights the differentials that shopkeepers are offering to those who opt for instant payment, such as discounts of up to 10% of the cash value.

The credit card, historically a major driver of e-commerce, continues in the first position in the ranking. Features such as interest-free installments and points in frequent flyer programs encourage consumers to use it, says the consultancy.

Source: Valor International

https://valorinternational.globo.com

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Hapvida, Intermédica merger to generate R$1.4bn additional EBITDA

Nova Hapvida Intermédica estima sinergias de R$ 1,38 bilhão até 2024 | Brazil Journal

The merger between health plan operators Hapvida and NotreDame Intermédica (GNDI) will generate a R$1.4 billion increase in the combined company’s EBTIDA until 2024. Of this amount, 40% of synergies will be captured this year, and most of the gains will come from the increase in revenue with the creation of a medical plan with national coverage. The estimate is that the sale of this new national plan can bring an increase of R$800 million in recurring EBITDA in three years.

Currently, the two vertical health operators have regional operations. Hapvida is strong in the North and Northeast regions, and Intermédica has a greater presence in the Southeast region. This presence in specific markets keeps them from selling their health insurance plans to large companies that have employees distributed throughout the country.

This market is served by Unimeds, Bradesco, SulAmérica, and Amil, which work with an accredited network. Hapvida and Intermédica operate with their own network. Of the 27 capitals of the country in which the companies are present, they have vertical units in 19 of them.

Intermédica estimates that, currently, around 40% of its offers are rejected due to the lack of a product with national coverage. This represents about 1 million users that could be captured over the next three years and lead to a 2.1% increase in market share for the combined company. In the current scenario, the operators together have around 18% of market share.

“We believe that in two months, this new product with national coverage will be on the market,” said Irlau Machado, president of NotreDame Intermédica. “Over the last few months, we have been working with our integration teams, refining data to offer this product soon,” added Jorge Pinheiro, president of Hapvida.

Both executives will share the chairmanship of the board of directors of the combined company and each will continue to carry out the day-to-day activities of their respective health operators for the next three years – a period in which the healthcare sector will still undergo a process of consolidation. “We don’t want to discourage the current moment of the two companies, which continue with their growth agendas, regardless of the merger,” highlighted Mr. Pinheiro.

The increase in revenue will also come from expanding the offer of individual plans in the country, which is scarce in São Paulo, and from cross-selling products such as dental insurance hospital services. The two operators together have 84 hospitals, some of which have idle capacity. In 2021, Intermédica’s revenue from hospital services was R$1.2 billion.

The cost line, with the renegotiation of supply contracts, should bring savings of R$241 million. In terms of expenses, savings of R$339 million are expected — totaling an impact of R$580 million on EBITDA.

According to the executives, synergies should exceed the amount of R$1.4 billion, announced yesterday. That’s because the companies still have not measured all the revenue opportunities, since the merger was approved in December. Tax gains from the merger were not accounted for, nor were future acquisitions. “There is a truckload of opportunities for more synergies,” said Mr. Pinheiro.

Another relevant gain not yet accounted for is the reduction in medical costs. The two executives are committed to predictive health solutions through diagnostic medicine. The goal is to integrate, through artificial intelligence, the data obtained in the exams carried out in the operators’ own laboratories. And, with that, to trace the trends of risk of emergence and worsening of diseases, adoption of the best medical treatments, in addition to monitoring chronic patients. Hapvida has around 200 laboratory units and GNDI has been investing to expand this division.

The announced synergies were slightly below market forecasts, but most of the projections considered the fiscal gain, which was not accounted for by the operators. The companies’ papers closed yesterday’s trading session with a drop of 4.67%.

Next Friday, the shares of the two operators will be integrated and on Monday the shares of Intermédica will no longer be traded on the stock exchange B3.

Source: Valor International

https://valorinternational.globo.com

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Government to inject credit in small companies, special advisor says

7 Glorious Advantages of Being a Small Business

The government intends to inject credit into micro and small companies in 2022, special advisor to the Economy Ministry Guilherme Afif Domingos told Valor. He expects volumes to continue growing. From April 2020 until now, R$146.9 billion have been released, according to data from Portal do Empreendedor, a gateway to small independent businesses.

“It will be the time and the turn of the guarantee funds”, he said. Credit expansion will be supported by these instruments, which serve to cover banks’ losses in the event of default.

According to Mr. Afif, the Brazilian National Bank of Social Development (BNDES) will specialize in the management of specific guarantee funds for certain types of companies – credit to startups, for example.

In addition, there are plans to make permanent the resources of the Guarantee Funds of Operations (FGO), which in the last two years covered losses on loans from the Program of Support to Micro and Small Businesses (Pronampe), and from the Investment Guarantee Fund (FGI), which did the same in relation to Emergency Program for Credit Access (Peac).

These two funds received contributions in 2020 and 2021, as part of measures to fight the pandemic, but now they need to return the money to the Treasury. However, the maintenance of resources in the FGO and FGI is discussed, since Pronampe was converted from an emergency program into a permanent policy and there are plans to extend the Peac Maquininhas, the receivable guarantee modality.

The bill 3.188/21, authored by Senator Jorginho Mello (Liberal Party, PL of Santa Catarina state), under analysis in the Senate, goes in that direction. The proposal still needs to go through the Chamber of Deputies.

According to Mr. Afif, the FGO can be replenished with the funds that return from operations carried out in the last two years.

There are doubts in the technical area, for example, about how this resource should be treated in relation to the spending cap.

The continuity of the FGO is necessary to guarantee the expansion of credit for micro and small companies in 2022, said the president of the Brazilian Development Association (ABDE), Jeanette Lontra. The organization brings together development institutions, from BNDES to regional development agencies and credit cooperatives.

“It is in these countercyclical periods that the national development system shows its importance,” said Ms. Lontra. The amount contracted by micro and small companies in these institutions grew 118% during the pandemic, she said. The national development system made R$62.5 billion available to Pronampe.

According to Mr. Afif, guarantee funds make credit available to micro and small companies because they circumvent a problem that this public faces: lack of guarantees to be offered to financial institutions. It was based on this diagnosis that he, at the head of Sebrae (small-business support service), created the Guarantee Fund for Micro and Small Businesses (Fampe), 25 years ago. The formula proved to be right during the pandemic, with the performance of FGO and FGI.

Mr. Afif smiled when asked how much the hike in basic interest rates would derail plans to strengthen credit. “Microentrepreneurs have always worked with high interest rates,” he said. The creation of guarantee funds works in the opposite direction, that of reducing the cost of operations. “The spread goes down because the risk is lower.”

Source: Valor International

https://valorinternational.globo.com

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Cash transfer programs gain strength

Understanding Cash Transfers | NYU Steinhardt

Cash transfer programs are taking up more space in the government’s welfare budget. The change gained strength with the pandemic and tends to continue at least this year, with cash transfer program Auxílio Brasil. At the same time, some public policy experts warn that the federal government has paid less attention to social programs that are considered more complex to execute, compared to those that distribute income directly.

Between 2018 and 2021, the share of direct transfer programs within the welfare budget rose to 48.3% from 34.8%, according to figures obtained by Valor from the Transparency Portal. The big hike came in 2020, in the first year of the pandemic, when emergency aid caused direct transfers to exceed R$300 billion. The number fell back in 2021 but remains much higher than before the pandemic.

“The forecasted expense with Auxílio Brasil [for 2022] is almost equal to the expense of social programs in 2021,” says the Senate’s agency Independent Fiscal Institution (IFI) in its latest Fiscal Monitoring Report. This year’s budget foresees R$89.1 billion for Auxílio Brasil, against R$90 billion last year, considering Auxílio Brasil itself, the emergency aid, and former program Bolsa Família. But the IFI points out that “the amount [for 2022] represents a significant advance over” the R$38.1 billion spent on Bolsa Família in 2019.

“At least during the pandemic, cash transfers gained relevance, while in other components of social policies there was a drop in resources when they were most needed,” says Marcelo Neri, director of FGV Social, the Center for Social Policy at the Fundação Getulio Vagas. He mentions two examples of policies that have lost resources in recent years: one aimed at homeless people, whose expenses went to R$ 52 million in 2020 from R$94 million in 2017; and the other is to combat child labor, whose expenses went to zero in 2020 from R$69.9 million in 2017.

But he also sees problems in the way the cash transfer policy has been implemented. “It’s a generosity that happens in a kind of erratic, impulsive way, which is not good because stability and predictability are more to the poor than to any other segment,” he says, regarding the transition of social programs in recent years and the uncertainty about the situation of Auxílio Brasil next year. Currently, the payments are forecasted until the end of 2022 only.

FGV establishes R$261 per month per person as the poverty line in Brazil. According to Mr. Neri’s calculations, the number of people below this line increased to 27.6 million in October last year from 23 million before the pandemic.

This is because the R$400 minimum per family of Auxílio Brasil “does not take into account the size or the degree of poverty” of the family group. “Besides, there was a weakening of the health and education conditionalities that are so necessary,” he says. “In short, social policy loses focus and durability.”

Rafael Osório, from the Institute for Applied Economic Research (Ipea), recalls that “the fiscal situation got much worse as of 2016,” which caused several social programs to be canceled or lose importance, such as Literate Brazil and the Food Acquisition Program.

“There is a big fiscal constraint, and it is of no use pretending that it doesn’t exist. But it would be important for the options to be clearer, and this doesn’t always happen,” he says. “The society needs to understand that there are priorities, that you can’t do everything at once right now.”

Naercio Menezes Filho, professor of the Ruth Cardoso Chair at business school Insper, says, “if we think of a global budget, there are so many bad programs to cut before we get to the social area, such as subsidies for rich families in other states, sector funds.”

Still, he argues that direct transfers “are the most effective thing the government can do.” According to Mr. Menezes Filho, this type of program brings benefits on several fronts, such as poverty reduction, improved health, education, and family consumption indicators, while not reducing job offers for mothers.

But he also states that the cash transfer programs implemented in Brazil in recent years are only enough to lift families out of extreme poverty. For the Insper professor, it is necessary to go a step further, making these families overcome poverty as well. “A family that can’t buy clothes, pay for transport or rent generates a lot of stress, and this stress is transferred to the child who can’t develop his cognitive skills properly.”

However, he recognizes that the values in this case “would be high”, reaching R$ 2,000 per month for a family in São Paulo, for example.

In a study done for Millenium Institute and anticipated to Valor, researchers Vinícius Botelho, Fernando Veloso and Marcos Mendes say that “Auxílio Brasil has brought few advances in the social agenda” of the country. According to them, the program does not “create mechanisms that guarantee that low-income families acquire conditions to provide for their sustenance in the long term.”

“Although there was an expectation that cash transfer programs would allow the intergenerational overcoming of poverty, mainly through health and education, their effects in this direction were quite limited,” they say.

For the group, “it is crucial that the social protection agenda be resumed in Brazil”, with short-term poverty reduction and “long-term solutions”. “All this within a budget that does not overburden public accounts,” they say, pointing out that “Auxílio Brasil will have a cost 2.5 times greater” than that of Bolsa Família “with limited gains in terms of poverty reduction and inequality.”

Economy Minister Paulo Guedes often defends the importance of cash transfer to combat poverty, citing the concept of basic income developed by American economist Milton Friedman. “It is better [to do] cash transfer to the most fragile than to create a ministry, which passes the money to another ministry, which gives money to a public bank, which will give money to an agent, which will then pass it on to the most fragile,” he said last week.

The presidential message sent by Jair Bolsonaro (PL, Liberal Party) to Congress last week said that “through Auxílio Brasil, the government will continue to prioritize the integration of various public policies of welfare, health, education, and employment so that the citizen is guaranteed not only the cash transfer but also achieve socioeconomic emancipation and autonomy and exercise full citizenship.”

Source: Valor International

https://valorinternational.globo.com

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The R$1.3bn ‘good bacteria’ seek new markets

Luiz Chacon Filho — Foto: Claudio Belli/Valor
Luiz Chacon Filho — Foto: Claudio Belli/Valor

In the mid-1990s, a 21-year-old boy approached the management of chocolate manufacturer Lacta offering the use of bacteria as a solution to a problem in the production line. “You’re crazy,” was what he heard. Sometime later, however, the then tie salesman Luiz Chacon heard a very different reaction from the same executives. “Set up a company and we will buy it from you.”

Some 25 years later, with revenues of R$800 million in 2021, two factories, a research center, and 600 employees, including 70 researchers, Superbac still faces the initial challenge of showing the benefits that biotechnology offers with the “good bacteria”. With 90% of its revenue coming from agribusiness, the company plans to return to its origin and grow in segments such as sanitation, oil and gas, and retail. The projection for this year is a growth of 60% and revenues of R$1.3 billion.

“We are a process substitution company. There is no genius on our part. What we do is replicate what nature already does, in an accelerated way,” says Mr. Chacon. He adds that biotechnology allows to reduce or replace the use of chemicals and pollutants with sustainable alternatives using bacteria. “Being a pioneer is positive, but it imposes the challenge of changing the customer’s habit by new technology. This is costly and takes time.”

Mr. Chacon has a degree in business administration and no background in biology. He says he looked for experts from the University of São Paulo to find out which bacteria could solve Lacta’s problem. Then he started to culture the suggested bacteria in a homemade way in an office downtown he shared with a real estate broker.

When he closed his first contract with Lacta, Mr. Chacon looked for a company that could produce biotech products with scale and stability. He found a supplier in Wisconsin, in the United States, and started to import everything he sold in Brazil. “It is a region in the United States that concentrated brewers, who had experience in fermentation,” he recalls. In the 2000s and with the first contributions from angel investors, Mr. Chacon bought the American company.

The next step was to define a segment that would allow him to gain scale and start generating revenue. The option was to buy a small family-owned fertilizer company in the municipality of Mandaguari, in the state Paraná, in 2015, and start the construction of the research center in an area in front of the new plant.

To sustain the expansion over the years, Mr. Chacon went on to make successive capital raises, but always kept control of the company. Today Superbac is a privately held company, with audited earnings reports, a board of directors with professional members, and major partners such as Temasek, Singapore’s sovereign wealth fund, and the family office of the Pfeffer family.

Going public is not ruled out, but it is not a short-term alternative and is unlikely to be carried out in Brazil. The American market already has biotechnology companies with open capital and can price the sector better, Mr. Chacon says.

With the end of the construction of the R$200 million research center, and well positioned in agribusiness, Mr. Chacon defined 2022 as the beginning of diversification. The goal is to reduce dependence on fertilizers to 65% to 70% of revenues in three years. And in 10 years to have at least half of the revenue coming from other sectors.

“Thanks to agribusiness, in six years we went to revenues of R$800 million from R$20 million. Now it is time to expand into other sectors. The solutions already exist, and I have the scale to meet the new demand with the same strength as agribusiness.”

Today the company is in charge of all the sewage treatment of three cities in Israel, including Jerusalem.

Source: Valor International

https://valorinternational.globo.com

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Manufacturing industry worsens deficit; exports lose sophistication

Helping the manufacturing industry rebound from the pandemic | World Economic Forum

While the trade balance as a whole ended 2021 with a record surplus, the manufacturing industry saw its deficit deepen to $53.3 billion, the worst result since 2014. In the pre-pandemic period, in 2019, the negative balance was $42 billion, according to data from the Institute for Industrial Development Studies (IEDI).

In another type of calculation, by product class, a survey by the Brazilian Foreign Trade Association (AEB) shows that the deficit in manufactured goods reached $111 billion last year, the worst since at least 2000. The difference is almost $40 billion compared to 2019, when the deficit in this calculation was $82.7 billion.

The deficit in the manufacturing industry last year deepened even with the 26.3% increase in sector exports compared to 2020. In comparison with 2019, there was also a rise: 14%. Imports, however, grew at a faster pace. From 2020 to last year, it was up 35.1%.

“It is also necessary to point out that there is a low basis for comparison,” points out economist Rafael Cagnin, with IEDI. Even before the pandemic, he recalls, in 2019, exports from the manufacturing industry fell by 5.2% against the previous year, under the effects of the trade conflict between the U.S. and China and the already weakened Argentine economy.

More than the size of the deficit, says Mr. Cagnin, what is more, worrying is the sharp deterioration in sectors with greater technological intensity, important not only for providing economic dynamism but also for greater insertion in global production chains. IEDI’s series since 1997 shows that in 2013 the manufacturing industry had the worst deficit ($65.3 billion).

In that year, the medium-high and high-tech sectors accounted for 36.1% of total manufacturing industry exports. Last year the share was 27.6%. In these two technological bands are the aircraft, pharmaceutical, automobile and electrical machinery and material industries, among others.

High technology, specifically, highlights Mr. Cagnin, fell to 3.9% from 6.4% in the same period. In this group, he says, the aircraft industry is still experiencing the overall effects of the Covid-19 pandemic. The scenario shows, however, that the loss of space on the scale had already been happening before.

Mr. Cagnin draws attention to a kind of “mirroring” in the data related to the composition of the import and export agenda according to technological intensity. While 72.4% of manufacturing industry exports are of low and medium-low technological intensity goods and less than 30% are of high and medium-high technology, the opposite is true for imports. In the list of imports, 71.6% are typical goods from the medium-high and high technology industry, and the rest are medium-low and low technology.

“This pattern reflects lags in technology and innovation that have become more pronounced in recent years and that could become even more pronounced,” warns Mr. Cagnin. He recalls that the world is currently undergoing a process of transformation, such as digitalization, which redefines the technological standards that are used in the rest of the world and result in greater competitiveness.

For Mr. Cagnin, integrating into global value chains is crucial to keep in line with this evolution. For this, he says, an environment of modernization and technological innovation is needed, as well as conditions for this insertion. It is necessary, he argues, to advance in the competitiveness and trade integration agenda, which involves the discussion of old and unresolved issues (tax overhaul, for example), as well as new debates related to the technological race and the policies aimed at it.

Trade integration, says Mr. Cagnin, demands a commercial opening that should generate not only imports but also exports. An opening that goes beyond tariff issues, but that allows the country to be in harmony with various regulations, such as phytosanitary and technical standards, traceability mechanisms, seals, and certifications. “There is an opportunity to advance in this integration and set foot in the changing world.”

For Livio Ribeiro, a researcher at the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV) and a partner at the BRCG consultancy, the IEDI data show that Brazil’s strategic position in terms of sectors, comparative advantages, and value-added research and development is very limited to specific segments that have a more global reach. “Furthermore, in the aggregate, our export-oriented manufacturing industry has an overly regional tone. In addition, there is a mid-chain industry that is not competitive in the world and is increasingly less competitive in our region.” A reflection of this, he says, is the loss of market in South America to Asian countries.

For Mr. Ribeiro, it is necessary to assess which sectors may be able to compete and could be the target of a policy in this respect. However, he says, this needs to be done carefully, which allows the sector to walk in its own ways. The evaluation, he defends, should consider the industry in a broad way, with a view to the best cost-benefit for the country.

The data compiled by AEB, based on a survey by the Foundation for Foreign Trade Studies Center (Funcex), also show that the loss of share of manufactured goods in total Brazilian exports is a long-standing phenomenon. In 2011, they accounted for 36.1% of shipments, a share that dropped to 27.4% last year. It was the basic products that advanced in the period, to 59.4% from 47.8% of Brazilian exports, almost seven percentage points more than in 2019. Semi-manufactured products had a very similar share, to 13, 2% in 2021 from 14.1% in 2011.

AEB’s president José Augusto de Castro points out that the share of manufactured goods was the lowest since 2000. The greater shipment of basic goods, a class made up mainly of agricultural and metallic commodities, is due to the high Brazilian productivity in these sectors, which has provided robust trade surpluses for the country. He argues, however, that greater conditions of competitiveness are needed to stimulate the export of manufactured goods with higher added value, which would also contribute to the generation of more jobs in the country.

Haroldo Ferreira, executive president of footwear industry association Abicalçados, says that exports contributed to the recovery of the sector last year. According to the association, the shipment of Brazilian shoes rose 32% in volume in 2021 compared to the previous year. In values, the high was 36%. The biggest foreign market was the U.S.

Daiane Santos, an economist at Funcex, points out that it is necessary to look at the main export destinations for manufactured goods. China, despite being Brazil’s main trading partner, with 31% of Brazilian shipments in 2021, consumed only 2.3% of exported Brazilian manufactured goods. The main buyer of goods in this class was the United States, which absorbed 21.6% of manufactured goods. Argentina was left with 12.9%. In total Brazilian exports in 2021, the two countries had a share of 11% and 4%, respectively.

Source: Valor International

https://valorinternational.globo.com

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Petrobras analyzes opportunities to enter new markets

Política de Bolsonaro tornou Petrobras mais vulnerável a crises – RBA

Petrobras is analyzing opportunities in markets such as small nuclear power plants, geothermal energy and different types of wind and photovoltaic energy. While participating in the Latin America Investment Conference 2022, promoted by Credit Suisse on Thursday morning, the CEO of the state-owned company, Joaquim Silva e Luna, mentioned for the first time some of the areas that are under study by the company in the energy transition scenario. Side by side with the CFO and head of investor relations, Rodrigo Araujo, Mr. Silva e Luna also reiterated that the company maintains its intention to relaunch the processes of refinery sales that have been closed without success.

Mr. Araujo confirmed that the company’s idea is to relaunch the divestments of the Alberto Pasqualini Refinery (Refap), in Rio Grande do Sul, and for the Presidente Getúlio Vargas Refinery (Repar), in Paraná. The executive did not give details about the deadlines. Petrobras signed an agreement in 2019 with antitrust watchdog Cade to sell eight refining assets outside the Rio-São Paulo axis by the end of 2021. With the pandemic, however, the processes have been delayed.

With the changes in the energy market, Petrobras’ current focus is on “the best production with the lowest carbon level,” the CEO said. “We have a commitment, an ambition aligned with the Paris Agreement, in which we have a commitment to reduce emissions from our operations by 25% by 2030,” he said.

In the CFO’s view, the company has a competitive advantage in areas such as high technology and large-scale projects “We have to analyze what kind of investment we can make for the energy transition. I understand that petroleum will still be a source that will last for a long time,” added Mr. Araujo.

There are no specific resources allocated to new energy sources yet, but studies on the company’s entry into new markets are underway at the oil company’s research center.

The CEO said that Petrobras has an expected value for the decarbonization set as a whole and does not look specifically at one project. “We don’t think about any kind of investment without the clarity that it will have a return,” Mr. Silva e Luna added.

According to the executive, Petrobras has learned from past problems to strengthen governance. “We try to make technical collegiate decisions, building a collective will about our decisions and not letting external pressures influence them,” he said.

On fuel prices, Mr. Silva e Luna said that the company has social responsibility, but that it cannot make public policy. “Our focus is on generating value for our shareholders, investors, the federal government and for society in general,” he said.

According to him, Petrobras management is committed with the investors. In the last five years the company has paid more than R$1 trillion in taxes. According to the CFO, there is comfort with the leverage of the oil company in terms of capital structure. “We see possibility and dividend return much higher than in the past, to have a more consistent and robust distribution,” he said.

Source: Valor International

https://valorinternational.globo.com

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