Companies find better environment to raise funds abroad

Brazilian companies are likely to find room to raise funds abroad again in the coming months despite several risks in the international landscape. The cost of operations is up following the recent rise in the yields of U.S. Treasuries, but there are signs that global investors are once again looking at this model as an alternative for companies that need to raise higher volumes of funds with longer terms.

Samy Podlubny, head of debt capital markets and structured debt at UBS in São Paulo, believes that there is a potential for 10 to 15 companies to make external issues in the next window, which typically opens between April and May. Of these, six are discussing the operation with the bank, and two or three have already submitted documents.

“Of course, not all of them will actually raise funds, but it is a fact that, at the current level of volatility, deals are likely,” he said.

VIX, an index that measures the volatility of options on S&P stocks and is seen as a barometer of the appetite for risk in the global market, is around 20% this week after exceeding 36% earlier this month. This relief has already paved the way for some Latin American companies to tap the market. “They are companies from countries with an investment grade, which come out ahead, which shows that the market is buying again,” he said.

Bank of America’s monitoring of the secondary bond market shows that after rising strongly for months, the total cost of these securities has slowed down in recent weeks. The average rate of a basket of securities is now close to 5.6% after peaking at 5.8% in mid-March. In June last year, when the market still did not anticipate any interest rate hike by the U.S. Federal Reserve, this rate was close to 3.7%.

“There is still volatility, with good days and bad days, but the environment is constructive,” said Caio de Luca Simões, head of fixed income at Bank of America. The market is going through a peculiar moment in which assets from Latin American emerging markets are performing better than those in Eastern Europe because of the war in Ukraine.

Besides the fact that it is now clearer which countries, companies and industries will be most affected by the Russia-Ukraine war, Mr. Simões links this improvement in the environment for external funding to the fact that it has already become clearer what the Federal Reserve is expected to do regarding monetary policy. “The Fed has already signaled that it is going to raise interest rates, that it is not going to stay behind the curve,” he said. Thus, the so-called “price shift” may have already occurred.

Another factor that may help boost this market is the fact that there have been few offerings this year. According to Mr. Simões, so far Latin American issuers have issued 49% less than the volume seen in the same period of 2021. This means that funds have room and interest in absorbing primary issues.

Rodrigo Fittipaldi, head of fixed-income issues at Credit Suisse in Brazil, the dominant variable at the moment is the behavior of interest rates in the United States. The behavior of the U.S. curve, which underwent a major correction in the last few months, has caused a lot of uncertainty and impacted the global debt market, he said. At the same time, higher commodity prices ended up providing a counterpoint and bringing support to assets of emerging markets. “The level of the spread [rate paid above the 10-year U.S. interest rate] has now settled down. If the interest rate scenario in the United States stabilizes, then this spread may close even more,” he said.

Mr. Fittipaldi believes that there is room for a total volume of about $15 billion in issues this year, compared to $30 billion raised in 2021. A good part could materialize between April and May. “Some issues were shelved because the market was too volatile,” he said. “The best window is now, but I don’t rule out that the market will remain active in the second half of the year, even with elections, since the political noise seems to have subsided.”

Mr. Podlubny, with UBS, also notes that the local debt market has been a good option for many companies, as it offers price conditions that are often better than those seen abroad. On the other hand, terms here are shorter and there is no room for very high volumes of funding. “The local market is liquid but does not have the same depth as the international market, and companies do not always get the term they need,” he said. “But local money is cheaper.”

Source: Valor International

https://valorinternational.globo.com

/by

Japanese companies will develop solar farms in Brazil

West Berkshire council plans to build £10m solar farm - BBC News

Fazsol has signed a contract with Órigo Energia to build 17 solar farms with 33.4 megawatts of capacity, in the distributed power generation model, in which the consumer chooses its own supplier.

The investment in the project is about R$150 million. The contract is part of Fazsol’s growth strategy in Brazil. Fazsol is the result of a partnership between Japan’s Shizen Energy and Espaço Y, a Brazilian holding company in the home construction segment. Shizen intends to operate in the country through the joint venture to assist Japanese companies in Brazil to decarbonize their power generation mix.

According to the terms of the partnership, Fazsol will develop the solar farms, while Órigo will be the bridge with the final consumers. The farms will be built in the Federal District, Minas Gerais and Ceará, and will be able to generate enough power to meet the demand of 130,000 homes for a year.

The farms are expected to start operating in November. Bruno Suzart, Shizen Energy’s manager for Brazil, said that the contract will allow Fazsol to increase fourfold the volume of power generated in the country, in addition to tripling the team. “This will help us to find new clients,” he said.

Fazsol boasts 25 renewable power projects in operation in Brazil, with 8.6 MW of capacity. The company intends to invest R$1 billion by 2024, when it expects to have 200 MW of solar plants in operation in the country.

Shizen arrived in Brazil in 2018. The company was founded in 2011 by three Japanese entrepreneurs from the renewable power industry as discussions emerged in the country with the shutdown of nuclear power plants after the Fukushima accident. The company operates in four other countries through partnerships and Fazsol was the chosen one in Brazil.

In the last few months, the company made studies about the potential of renewable power generation in Brazil at the request of the Japanese government. “We want to repeat, with Fazsol in Brazil, Shizen’s successful experience with Japanese companies in other countries. We are able to serve these companies in their own language, and negotiations can occur according to the format they are used to,” Mr. Suzart said.

The fact that Órigo is also backed by Japanese investors helped in the negotiation, Mr. Suzart said. “There is a cultural connection between the companies. Some presentations even took place in Japan,” he said.

Japanese group Mitsui & Co has a 17% stake in Órigo. The remainder is split between investment funds TPG and MOV Investments, and part is dispersed in the Brazilian stock exchange. The company operates a solar power subscription business in which customers receives credit on their electricity bill for power generated in solar power farms.

The plants built by Fazsol will serve these Órigo customers. “The agreement will enhance the company’s mission: to democratize access to clean power in Brazil,” said Rodolfo Molinari, Órigo’s chief business officer.

Based on this contract, Fazsol intends to expand and operate in other markets in which it was not yet present in Brazil. Until then, the company had focused on the development of distributed generation plants. “This is a structuring project, which allows us to look towards expansion,” said Fazsol’s director Nélio Pereira.

The company is considering tapping the free market. “We can help transform the companies that are already in the free market into self-producers; in this case, there is a complementary cost efficiency,” Mr. Pereira said.

Source: Valor International

https://valorinternational.globo.com

/by

Economic crisis prompts Brazilians to move abroad

What are the benefits of moving abroad

The flight of Brazilians to other countries, especially to the United States, gained strength last year, with the worsening of the economic crisis in the country and the permission of people vaccinated against Covid-19 to go abroad.

In 2021, 17% of the Brazilians who left the country did not return, the highest number in the Federal Police survey, which began in 2010, when 7% of those who had left did not return. In 2019, that portion was 5%.

According to the Ministry of Justice’s International Migration Observatory (Obmigra), the continued negative balance of the movement of Brazilians and migrants residing in the country has proven to be “structural”.

This scenario is also confirmed by data on remittances from abroad to Brazil, deportations, and detentions at the U.S. border, which hit a record high last year.

Part of this flow continues to be people with low education who use illegal schemes to cross overland from Mexico to the U.S.

But, although more numerous, those Brazilians who pay for the services of coyotes to complete the crossing are only part of the picture of emigration. In recent years, and especially with the improvement of the pandemic, the number of professionals and families seeking American visas, to undertake or continue studies, has also increased.

Antônio Tadeu de Oliveira, Obmigra’s statistics coordinator, says that the large number of arrests of Brazilians at the U.S. border reinforces the perception of the occurrence of negative migratory balances, i.e., more Brazilians leaving the country.

“From 2012 to now, when the economic scenario worsens, we start to see this movement of outflows outweighing inflows,” says Mr. Oliveira. According to him, this is reinforced when we look at data from the Federal Police and the Federal Revenue (of people who stopped income to deliver their income tax returns in Brazil), as well as the number of arrests and deportations, and the increase in remittances sent from Brazilians living abroad. He notes the U.S. is the main destination for Brazilian emigration.

“With the pandemic, there were border closures and reduced flow. But what we have seen now is people here seeking opportunities in other countries. Not only Brazilians, but also foreigners,” he continues.

One of the signs of the increased flow of migrants, the number of arrests of Brazilians attempting to enter the U.S. hit a record last year. The average daily number of arrests of Brazilians at the border rose to 148.8 in 2021 in fiscal year 2021 (October 2020 to September 2021) and 18.6 in 2020 from 49.3 in 2019, according to data from the U.S. Customs and Border Protection (CBP).

In a December report, CBP said that arrests skyrocketed in fiscal year 2021 for countries that historically have not been common sources of migration at the U.S.-Mexico border, highlighting Brazilians and Ecuadorians, for example.

Brazilians ranked sixth among nationalities detained in 2021 by the CBP. The figures coincide with the number of Brazilians deported from abroad, which is the highest in a decade. In 2011 there were 2,721 Brazilians deported. In 2019 there were 2,348, slowing to 1,586 in 2020. Last year, however, the number grew to 2,449.

Sociologist Sueli Siqueira, a specialist in the migration of Brazilians to the U.S. at the Vale do Rio Doce University, says that the profile of today’s migrant is different from that of previous decades.

In the past, the most common thing was adults traveling alone and looking for ways where they could not be noticed by the police. Today, whole families migrate and want to be noticed by the authorities.

“Now they turn themselves in, as if they were falling, which gave rise to the name ‘cai cai’ [falling] for the agents or coyotes who make this crossing possible,” says Ms. Siqueira. “Since they are with children, they are detained, but no longer separated, as was the case under [former U.S. President Donald] Trump. A date is set to present themselves to U.S. immigration and they are given an ankle monitor or cell phone [by which they are monitored]. Sometimes the deadline to report is quite long and it gives them time to settle down and get a house, a job.”

She adds that not only are whole families migrating nowadays, but the intention is to go and not come back.

“They are entire families, with children, mother and mother-in-law, who close their homes and have no intention of returning. Before they migrated, earned money, and came back. There was the idea of returning and sending remittances to relatives. Today, the intention is to migrate with the whole family and not return,” she says.

Even with this change, the amount of remittances sent by Brazilians living abroad has been growing, especially those from the U.S.

According to Central Bank data, total international remittances sent from Brazilians living abroad to Brazil rose to $3.8 billion in 2021 and $3.3 billion in 2020 from $2.9 billion in 2019. Of the $500 million more sent last year, compared to 2020, over $450 million came from the U.S.

The U.S. tops the ranking of countries of origin of remittances to Brazil. In 2021, more than $2 billion left the U.S., 28.9% more than the previous year. The UK came second, followed by Portugal, Switzerland, and Spain.

Maxine Margolis, anthropologist at the University of Florida and author of the books “An Invisible Minority: Brazilians in New York City” (2009) and “Goodbye Brazil: Brazilian Emigrants in the World” (2013), says that more than the desire to enter the U.S., today there is a strong desire to leave Brazil.

“There was a feeling among many Brazilians that, with [President Jair] Bolsonaro, things would get much better. But the economy is not going well, and many have lost confidence,” she says, remembering that a Brazilian earns in one week doing cleaning in New York what he would earn in four weeks working in Brazil.

Source: Valor International

https://valorinternational.globo.com

/by

Project aims to restore 1m hectares of forest

Ricardo Rodrigues, Bernardo Strassburg and Thiago Picolo — Foto: Leo Pinheiro/Valor
Ricardo Rodrigues, Bernardo Strassburg and Thiago Picolo — Foto: Leo Pinheiro/Valor

A group of major investors, renowned biodiversity researchers and economists has created a company to implement the largest project to restore degraded areas in the country: re.green is born with initial capital of R$389 million and the pioneering goal of restoring 1 million hectares of Atlantic Forest and Amazon rainforest.

The initiative to regenerate tropical forests on a large scale is unprecedented in Brazil and perhaps the world. One million hectares is almost half the area of the territory of the state of Sergipe and 250 times the size of Tijuca National Park, in Rio de Janeiro. It is equivalent to the area of Suzano’s native forest, one of the largest private protected areas in the country.

“re.green is born from science, contains science, and intends to do a lot of science,” says one of the founders and partners, economist Bernardo Strassburg, a reference in global studies on priority areas for ecosystem restoration. “It will be by far the largest experiment in tropical ecology on the planet,” he says.

To get an idea of how big the ambition is, in Brazil’s climate commitment launched in 2015, one of the strategies for the country to cut its greenhouse gas emissions by 43% from 2005 levels was to restore and reforest 12 million hectares by 2030. This has not even begun.

re.green took one year and a half to mature and stimulated four heavyweight investors close to environmental agendas — BW (family office of the Moreira Salles family), the manager Lanx Capital and its private equity arm Principia, Gávea Investimentos and Dynamo.

The return on investment will come with the sale, in a few years, of premium carbon credits — because they will include, at the same time, benefits in climate, communities, and biodiversity — and timber and non-timber products from the regenerated forests. The plan is to capture 15 million tonnes of CO2 per year.

re.green’s board is chaired by Marcelo Medeiros (former partner at Banco Garantia and executive at Credit Suisse) and its members include João Moreira Salles, Fábio Barbosa (ex-Santander and Grupo Abril, and partner at Gávea), Arminio Fraga (Gávea), Marcelo Barbará (founding partner at Lanx and Cambuhy), and Ana Luiza Squadri (partner at Principia Capital Partners).

The intention of re.green’s founders and partners is to restore a large part of Brazil’s environmental liabilities by turning degraded and abandoned pastures, for example, into forests again. Or to establish partnerships to restore large areas on private and corporate properties. The third front is to restore areas in conservation units.

One of the strategies is to buy areas and form biodiversity corridors. “We will plan the space to expand the habitats of native species, preferably near conservation units,” says Ricardo Rodrigues, one of re.green’s partners.

He is a professor of Restoration Ecology at the University of São Paulo and a reference in the field of restoration in the Tropics, with more than 30,000 hectares of Atlantic forest restoration. He founded in Piracicaba (state of São Paulo) the Bioflora nursery, the most symbolic of native seedlings of the Atlantic forest, with almost 30 years.

In the case of partnerships, re.green provides the seedlings, the seeds, and the implementation of the forests, and keeps the carbon credits, explains economist Thiago Picolo, CEO of the new company. “The purchase of properties is a possibility, mainly because of the permanence of the projects and the carbon credits. It is essential that we can guarantee that the restoration will last forever,” explains Mr. Picolo, who was CEO of Hortifruti Natural da Terra, a food retail chain focused on fresh and organic products that was sold in 2021 to Americanas S.A.

The choice of priority areas to be regenerated is one of the distinguishing features of Mr. Strassburg’s new company and study area.

“We are using science to prioritize where we will regenerate forests. Where it will have the most impact for biodiversity, for carbon capture, and where it will be financially viable,” he says.

It is not a random choice, but areas that, if regenerated, can have ten times more impact on climate and biodiversity than others, explains Mr. Strassburg, a professor of sustainability science at the department of Geography and Environment at the Catholic University of Rio de Janeiro (PUC-RJ).

The first place of interest for re.green is in the South of the Bahia state, a region that is a biodiversity hotspot with great impact also for carbon sequestration. Another priority region is in the state of Pará. In the case of the purchase of areas, the promise is to return to society the land restored and as a conservation unit.

Mr. Rodrigues reminds that a current trend in restoration projects and carbon sales is concentrating on “easier situations”. These are areas with potential for natural regeneration. “If we only have this option we will leave a trail of degraded areas that no longer have the potential for natural regeneration because they have been so exhausted. re.green has not shied away from this. It’s a huge challenge,” he says.

In the case of carbon credit sales, re.green’s project is to qualify for the sale of carbon removal credits, which have, on average, a price five times higher than avoided deforestation credits. They are at a premium because they seek Verra CCB certification (which certifies projects with simultaneous climate, community, and biodiversity benefits).

“The restoration economy is a complex ‘business case’. It requires a lot of initial investment and returns over time. You have to wait for the forest to come back. It’s a patient capital,” says Mr. Strassburg.

The initial strategy is to divide the regeneration efforts equally between the two forest biomes. “The beauty of this project is also the fact that it generates an entire restoration chain, with social impact in the generation of jobs for seed collectors and in the seedling nurseries,” says Mr. Rodrigues.

Source: Valor International

https://valorinternational.globo.com

/by

Pix gains ground as payment method among online stores

Para especialistas, exclusividade do BC no Pix aumenta vulnerabilidade

Brazil’s largest online stores are increasingly adding Pix as a payment method, with a record share in March, while debt cards are losing ground since the launch of Central Bank’s instant-payment system, the latest edition of the payment study Gmattos found.

Last month, 69.5% of the analyzed stores offered the option of payment via Pix, compared with 16.9% in early 2021, when the survey was held for the first time. The method is behind credit cards (accepted by 98.3% of stores) and banking bar-coded bills known as boletos (accepted in 76.3% of them). The study included 59 online stores, which account for 85% of e-commerce in the country.

According to the survey, the availability of debit card payment, which has never been very high, has been dropping substantially. In the January 2021 edition, it was 37.3%; two months later, it peaked at 42.3%; last month, it dropped to 27.1%.

Gastão Mattos, co-founder and CEO of Gmattos, believes that debit cards are close to the floor, but sees no sign of recovery. Rogério Panca, head of the Brazilian Association of Credit Card Companies and Services (Abecs), told Valor this week that the expansion of payments with debt cards in e-commerce is a priority of the trade group.

Mr. Mattos believes that Pix may reach 90% of stores by the end of this year or early next year. He recalled that 72% of stores that don’t work with Pix are making some kind of cash payment available, including boletos and debit cards. In other words, they have some propensity, in terms of business strategy, to also offer the Pix.

“In these stores, the option is not offered yet probably due to technological difficulties, such as integration,” Mr. Mattos said. Companies that do not offer any cash payment alternative typically work with higher average ticket sales.

The acceptance of boletos, on the other hand, has remained relatively stable. With the growth of Pix, the spread between both has shrunk, and the instant-payment system could soon reach the second position in the ranking, although there is no direct competition between payment methods.

According to Mr. Mattos, the number of online stores that offer some kind of discount for consumers who pay with Pix has been increasing. In addition to the fact that payment is instantaneous, the method also increases the cart conversion rate, or the number of purchases actually completed after the items are added to the online shopping cart. This rate is around 30% with debit cards and 80% with Pix.

Credit cards, a traditional driver of e-commerce, remains in the top of the ranking. Mr. Mattos points out, however, that alternative installment plans are on the rise. “This is a strong trend for the year. The existing options are clearly not meeting everyone’s needs,” he said, citing installment plans via boleto and direct financing with large banks. “I think smaller, digital banks will also offer more such options.”

Wallets were accepted by 44.1% of the stores analyzed in March, up from 54.2% in the same month of 2021, Gmattos said.

Source: Valor International

https://valorinternational.globo.com

/by

Apollo wants Novonor shares in Braskem

Odebrecht diz que vai vender a Braskem. Falta combinar com a Petrobras | Brazil Journal

The sale of Braskem became competitive again. U.S.-based asset management company Apollo Capital made a non-binding offer of R$44.57 per share for the stake that is in the hands of Novonor (ex-Odebrecht), Valor has learned. Three sources familiar with the matter confirmed the interest of Apollo, which in the past had a relevant stake in the petrochemical company Lyondellbasell.

At the price offered by Apollo, the Odebrecht holding company would raise R$13.6 billion with the sale of 38.8% of the total capital of the petrochemical company. The amount is higher than the price of the company’s PNA share at Wednesday’s closing on the B3, of R$43.36.

Apollo has resumed talks and is interested in Braskem’s assets, a source familiar with the matter said. In Brazil, Starboard is a partner of Apollo. Although it has submitted the best offer in terms of price for Braskem, the fund is not alone in the competition for the Brazilian petrochemical company.

According to market sources, rival Unipar is still evaluating the assets, and holding J&F Investimentos, owned by the Batista family, is also in the race. J&F is being advised by CF Partners, of former Braskem CEO Carlos Fadigas, in the search for investment opportunities in energy and petrochemicals, a person familiar with the matter said. However, the holding company has not yet made a bid to Novonor.

BTG Pactual is also committed to the proposed purchase of Novonor’s debts with creditor banks, which total almost R$15 billion, as Valor reported in March. With the transaction, BTG would take over the petrochemical company shares that guarantee these debts. The talks are still at an early stage and would have to be approved by the creditors.

The buyer of Novonor shares will have to extend the offer to Petrobras, Braskem’s second largest shareholder, with 47% of the common stock and 36.1% of the total. The state-owned company has a tag-along right, which allows it to sell the shares it holds under the same conditions offered to Novonor, according to the company’s shareholders’ agreement.

For a market source, the R$44.57 per share that would have been put on the table may not convince Novonor, which together with Petrobras gave up selling part of its position in a secondary offering in January, because the price investors were willing to pay, around R$40 per share, was considered low. With the capital market stuck due to the adverse external scenario and volatility because of the elections in Brazil, there is no expectation that the secondary offering will take place in the first half of the year.

The petrochemical company’s strategy is to spin off its green plastics division to unlock market capitalization. To do so, it is seeking investors for this business.

The sale of Braskem’s assets has become a complex negotiation, full of comings and goings. Last year, Braskem was approached to sell the assets in sliced form, but the negotiations fell apart. Lyondellbasell even made an offer for the company, but dropped out of the deal.

Novonor, CF Partners, J&F and Unipar declined to comment. Apollo did not immediately reply to a request for comment.

Source: Valor International

https://valorinternational.globo.com

/by

Pátria seeks buyer for data center company

Odata would be valued at about $1 billion — Foto: Divulgação

The asset management company Pátria Investimentos decided to put its data center division up for sale and is already in advanced talks with international M&A boutiques and foreign investment banks to define who could take over the business, sources familiar with the matter say. Odata would be valued at about $1 billion and is likely to attract the interest of foreign rivals in the sector and investment funds, sources say.

Created in 2015, the data center division of Pátria began as a startup offering infrastructure to house servers that process information with global distribution. The business has grown in recent years and has a presence in Colombia and Mexico.

Late last year, the company took a $30 million loan from the International Finance Corporation (IFC), a World Bank arm, to finance the expansion of its data center structure in Brazil and Latin America.

For 2022, Odata has investment plans of around R$1.2 billion to strengthen its expansion in the state of São Paulo and also in Rio de Janeiro, the company told Valor recently.

A good part of Odata’s revenue comes from large cloud computing service providers, with long-term contracts – the company did not reveal the exact turnover. Besides service providers, the company has clients in education, telecommunications and finance.

The data center sector has received heavy investments. The consultancy IDC Brasil estimated that the companies’ spending on public cloud services in Brazil could reach $3 billion last year.

Sources say that Pátria’s business division may attract foreign groups, which are consolidating this segment in the international market.

In a more recent move, the Rio de Janeiro-based investment group Piemonte Holding bought five data centers from telecom Oi, which is under judicial reorganization and sold several assets, for R$325 million, and committed to invest R$42 million in the operation.

The Digital Colony group, owner of Highline in Brazil and which bought the towers auctioned by Oi, also has plans for multimillion investments to build new data centers in Brazil, Chile and Mexico through its company, Scala Data Centers.

With about $24 billion in assets under management at the end of last year, Pátria has heavy investments in companies in the country through funds in the infrastructure and real estate industries, as well as relevant stakes in the healthcare, agribusiness, food, and financial services industries.

Last year, the asset management company tried to draw investors for part of its businesses. However, the adverse international backdrop since last year and the political uncertainties due to the presidential elections in Brazil left the plans frozen for the end of this year or 2023.

Among the fund’s assets that may go public are the health companies Athena and Elfa. Another Pátria’s company that may go public is Lavoro, of agricultural inputs distribution, with presence in Latin America.

In January last year, Pátria’s private equity firm made its debut on the Nasdaq after raising $588 million. A good part of the proceeds will be used for acquisitions.

Pátria and Odata declined to comment.

Source: Valor International

https://valorinternational.globo.com

/by

Government picks Ferreira Coelho to run Petrobras

José Mauro Ferreira Coelho — Foto: Leo Pinheiro/Valor
José Mauro Ferreira Coelho — Foto: Leo Pinheiro/Valor

After setbacks in the last few days, the government managed to appoint José Mauro Ferreira Coelho as Petrobras’s CEO and Márcio Andrade Weber as chair of the state-owned oil company.

The two positions were open after Adriano Pires and Rodolfo Landim gave up, this week, to run for these positions, respectively. The new names were seen by sources familiar with Petrobras as a victory for Mines and Energy Minister Bento Albuquerque, to whom the company is subordinated. “Bento has succeeded,” a source said.

Mr. Coelho is supported by his technical background in the industry – he chairs the state-owned company PPSA –, while Márcio Weber, the new candidate to be Petrobras’s chair, was an “internal solution” since he is a member of the current board of the oil company. He has experience in the oil market and enjoys the respect of the board members.

Coelho has a military background, having been an officer in the Army between 1983 and 1991, and a researcher at the Military Institute of Engineering. He also held the board of the Energy Research Company (EPE) and was secretary of oil and gas at the MME before joining the PPSA board. He has defended the practice of parity to international prices, a policy that Petrobras has followed since the Temer administration and that has been a frequent reason for the company’s wear and tear with President Jair Bolsonaro. The last two presidents: Roberto Castello Branco and Joaquim Silva e Luna were fired for readjusting fuel prices in the domestic market following oil variations in the international market. Silva e Luna remains in the presidency of the company until next week.

After the frictions caused by the nomination of Adriano Pires, Mr. Coelho’s announcement was seen as a new demonstration of strength by Mr. Albuquerque. Mr. Coelho was seen as his right-hand man in the ministry and, with this appointment, the minister will have two names of his trust in strategic state-owned companies in the sector: Itaipu and, now, Petrobras.

The two nominations pave the way for Petrobras shareholders to elect the company’s new board of directors at the Annual and Extraordinary General Meeting (AGOE) scheduled for next Wednesday. Since the retreat of Messrs. Pires and Landim, the federal government’s ticket was incomplete. From the original eight names, six were left. On Tuesday night, the ministry said that it had filled out the list of the federal government, the company’s controlling shareholder, for the board.

The ticket is now composed by Márcio Weber, José Mauro Ferreira Coelho, Sônia Villalobos, Ruy Schneider, Luiz Henrique Caroli, Murilo Marroquim, Carlos Eduardo Lessa Brandão and Eduardo Karrer. There are also seven candidates of suggested by minority shareholders for the board.

There are, therefore, 15 candidates for ten seats. The federal government’s candidates must face two minority shareholders’ candidates in a multiple-choice system in which the individual candidates with the most votes win. The remaining minority shareholders’ candidates will face each other in two elections in which the federal government does not vote.

One is in the separate election of the controlling shareholder related to the common shares (three names for one seat) and the other related to the preferred shares (two candidates for one seat). Petrobras’s board has 11 members, but the 11th person is elected by the employees. The name is Rosangela Buzanelli Torres, who is also already on the board. The mandate is for two years, until the 2024 general meeting, but with presidential elections ahead, chances are the board will be changed again next year.

It is not clear yet if there will be enough time until next week’s meeting for the names of Messrs. Coelho and Weber to be evaluated by Petrobras’s corporate governance bodies, responsible for analyzing if the names fit the company’s rules and the Law of State-Owned Companies. The eligibility committee (Celeg), linked to the people committee (COPE), can make this analysis in time for the meeting. “I believe they will try to do it,” a source said. If it is not possible, this check can be left for after the meeting. Mr. Weber’s name has already been checked, since he was on the first federal government list and is a candidate for reelection.

On Wednesday, Celeg concluded that Mr. Weber meets the necessary requirements and has no restrictions to run for the board. The committee said, however, that Mr. Weber will need to “adopt the necessary measures so that the company in which he has a stake formally abstains from providing services to Petrobras and its equity stakes, as well as relevant suppliers and competitors in the oil and gas sector”. Mr. Weber advises the PMI group that operates four deepwater drilling rigs that have Shell and ENI as clients.

Source: Valor International

https://valorinternational.globo.com

/by

Toll road market to be tested by auctions this month

One of the most awaited auctions is that of the north stretch of the São Paulo beltway — Foto: Zanone Fraissat/Folhapress
One of the most awaited auctions is that of the north stretch of the São Paulo beltway — Foto: Zanone Fraissat/Folhapress

Inflation of inputs and global uncertainties have affected highway auctions this year, but the calendar of projects remains active. In April, three important state projects are planned: a block of roads in Rio Grande do Sul, the Belo Horizonte beltway (skirting the capital city of Minas Gerais) and the São Paulo beltway. The contracts add up to R$11.4 billion in investments in new projects.

There are groups studying the three assets, but there is uncertainty about the bids. This is the case of the auctions in Minas Gerais and São Paulo, scheduled for the last week of April. Some groups have requested the postponement of the projects to have more time for analysis. There is no decision yet. The Rio Grande do Sul government decided to keep the scheduled date, even in the face of uncertainties, as a test. The bidding will take place on the 13th, and the envelopes will be delivered this Thursday.

The highway segment is going through a challenging moment. The cost of raw materials such as asphalt and steel skyrocketed, increasing projections for investments. In addition, the high interest rates in Brazil increase the cost of debt for companies. To make things worse, the country will hold presidential elections this year, and the world faces the uncertainty caused by the war in Ukraine.

“There is a huge challenge, because the market has changed a lot between the definition of model and the date for the delivery of the bids,” said Guilherme Martins, head of structuring of companies and divestments at the Brazilian Development Bank (BNDES). The state-owned bank is carrying out studies for several highway projects in Rio Grande do Sul, Minas Gerais, Pernambuco and other states.

These challenges have been dealt with on a case-by-case basis, he said. In some, there will be a need for adjustments, for example, with the reduction of mandatory construction works or an increase in the tariffs of the bidding.

Despite that, the Rio Grande do Sul government has chosen to test the market. “We decided to keep the auction because we found that the project had ‘fat’, which would draw bids despite all the challenges. We believe there will be interest. Maybe less than in a calmer environment and maybe with a not-so-relevant discount [on the tariff]. If it fails [to draw bids], we will reevaluate,” said Leonardo Busatto, the secretary of partnerships of Rio Grande do Sul.

The government plans to bid three blocks of highways. The asset to be offered this month is block 3, which includes roads connecting Caxias do Sul to the capital city and other cities in the countryside. “We gave priority to this block because it is smaller and has a greater possibility of drawing interest, including from regional groups,” the secretary said.

The Rio Grande do Sul highway auction will be an important test for the other projects in the sector, Mr. Martins, with the BNDES, said. “It is the first relevant concession this year and since the beginning of the war. It will be a barometer for the market.”

One of the most awaited auctions is that of the north stretch of the São Paulo beltway. It is a public private partnership that includes completing the construction work and operation for 31 years. Investments are expected to total R$3 billion, of which R$1.7 billion will be required to complete construction.

Part of the funds will come from the government, which is willing to disburse up to R$2 billion. The amount, however, will be the selection criteria for the auction, so it may be discounted depending on how competitive the bidding is.

The project is considered very complex and challenging. The main concern is about the condition of the track already built – about 25% of the construction work remains to be done.

“There is a difficulty in understanding the state of the work that has been executed, and there is a concern of a mismatch between the described and the effective quality,” said Caio Loureiro, a partner at law firm Tozzini Freire. For him, the period given until the auction is considered exiguous and the participation of the private sector is a question mark at this moment.

The São Paulo state government said that “it is confident in the auction result.” And added that the Institute for Technological Research (IPT) has prepared independent technical reports, and that the contract provides, after signing, “a period of six months for an independent rapporteur to analyze the work. In addition, “any divergence may be resolved by an independent technical commission.”

For Lucas Sant’Anna, a partner at Machado Meyer (who worked on modeling the project), the expectation is positive. “We have seen reasonable interest from large groups in the sector,” he said.

Among analysts, the perception is that the interest in the Belo Horizonte beltway has been even greater than that of São Paulo. Four companies are interested, including international groups, said Fernando Marcato, the state’s secretary of infrastructure.

The government mulls postponing the auction at the request of the interested parties. “As some groups are based abroad, the crisis in Russia brings some uncertainty and requires additional studies. The industry is going through difficult circumstances. We are studying the matter. Chances are we will postpone it because we want to draw competition,” he said.

The Belo Horizonte beltway project is also a public-private partnership expected to draw R$5 billion in investments. Of this total, about R$3 billion will come from the government – the funds come from the agreement signed by the state with mining giant Vale after the massive dam failure in Brumadinho.

Since this project will be built from scratch, the contract is seen as very challenging, but also very attractive, said Ana Cândida Carvalho, a partner at law firm BMA Advogados.

One of the main risks is the expropriation required for the construction work. “This is always a bottleneck, and in this case, because it is a metropolitan region, the list of properties to be expropriated is long. The cost is not the biggest concern. The timeline is the most concerning factor instead, because it depends on lawsuits,” she said. Even so, she sees a lot of interest in the project, especially from large operators.

Source: Valor International

https://valorinternational.globo.com

/by

Market eases bets on longer cycle of interest rates hikes

Central Bank building — Foto: Jorge William/Agência O Globo
Central Bank building — Foto: Jorge William/Agência O Globo

The yield curve has fallen over the last three weeks as the Central Bank’s Monetary Policy Committee (Copom) signaled that it is likely to end the tightening cycle in May after raising the Selic, Brazil’s benchmark interest rate, to 12.75%.

Market agents not only removed bets on a longer cycle as a result. They also started to see cuts totaling 250 basis points in 2023 – around two times what they projected in March 16, the last meeting of the Copom.

Since then, the market has bought into the Central Bank’s statements that the tightening cycle will end in the next meeting of the Copom, and now consider in the future interest curve an interest rate between 12.75% and 13% for this year. In the period, the two-year rate, more associated with short-term inflation, dropped almost 100 basis points, to 12% from 12.935%. The five-year rate also saw a crucial loss of risk premium, to 11.10% from 12.17% — falling below the level seen before the war.

“There was a very strong repricing of the curve as the Central Bank was more emphatic in its statements about stopping the tightening cycle and insisting that the 12.75% level is enough for inflation convergence [with the target],” said Filippe Santa Fé, a fixed-income manager at ASA Hedge. “In this context, it is normal for the market to bet that the rate will plummet along the curve.”

The still challenging inflation scenario is key for the market to adopt a structural bet on lower future interest rates. BTG Pactual projects that the IPCA, Brazil’s official inflation rate, is likely to peak between April and May. This factor, added to the prospect of the end of the tightening cycle, is expected to remove more premium from the fixed rate curve ahead, said economist Álvaro Frasson.

“We see an important disinflation ahead, even though it will be slower than expected,” he said. “The Selic will probably be forced to remain high, between 9% and 10%, in order to deal with any fiscal risk.” BTG estimates that the Central Bank will not be able to interrupt the tightening in May and will raise the benchmark interest rate for the last time to 13.25% in June. The bank foresees a rate of 9.5% at the end of 2023.

The pricing extracted from the yield curve points to a scenario for the moment in which the Selic will end 2022 between 12.75% and 13%, then decline to 10.5% in 2023, still well above the median of 9% of the most recent Focus, Central Bank’s weekly survey with economists. Before the last meeting of the Copom, nominal market rates projected a basic interest rate of 13.5% at the end of this year and 12.25% at the end of next year.

“I don’t think a 250-basis points cut is too much, given that the Selic is likely to have risen more than 1,000 points by the end of the cycle,” said Vinicius Alves, a strategist at Tullett Prebon. The market underestimates the risk of an accelerated tightening in the United States that could limit the eventual impetus for interest rate cuts, he added. “That’s something that would cause the dollar to gain ground globally, pick up inflation and require the [Brazilian] central bank to keep a tight policy for longer,” he said.

Christiano Clemente, the chief investment officer of Santander Private Banking, is dissenting from the recent pricing of Selic declines. “The market is thinking that the Central Bank will stop raising in the middle of this year and, in a matter of four to six months, start to cut the rate,” he said. “It doesn’t make sense to me to raise interest rates and then start cutting them soon after. The most reasonable thing would be a rate that remains constant over a certain time horizon.”

Mr. Clemente notes that the term structure of interest rates is back to the level seen before the war in Ukraine, “returning” the post-war peak stress – the five-year rate even began to trade below the 10.16% seen before the conflict. “But no doubt the Central Bank has taken over the narrative and the more appreciated exchange rate has also helped the curve to fall,” he said.

Mr. Santa Fe also added a caveat about the rates, saying that the high inflation and pressured cores, as well as above-target inflation expectations for 2023, do not support a bet on an end to tightening, let alone monetary easing. “I think we will have a partial correction of this movement,” he said. “The exchange rate has helped the curve to fall and an interruption in that dynamic could lead to a rate adjustment.”

In fact, this was the tone on Tuesday: the rates saw strong advances, reflecting the general movement of higher global interest rates, especially in the U.S. The interbank deposit rate for January 2024 rose to 12% from 11.82%, while the rate for January 2027 rose to 11.1% from 10.85%.

It draws the attention of financial agents that the curve has deepened its “inversion” – that is, the difference between the two- and five-year interest rates became even more negative.

Huang Seen, head of fixed income at Schroders, says that short interest rates have remained high, but long rates have declined with foreign capital inflows.

Source: Valor International

https://valorinternational.globo.com

/by