Two-way trade with U.S. reaches all-time high

Abrão Árabe Neto — Foto: Sergio Dutti/Valor
Abrão Árabe Neto — Foto: Sergio Dutti/Valor

After falling more than 20% amid the pandemic shock in 2020, the Brazil-United States two-way trade recovered more than expected last year and reached an all-time high of $70.5 billion. That means a 43% year-over-year growth, or 9.3% more than the amount seen in 2019, of $64.5 billion.

The data are from the U.S.-Brazil Trade Monitor prepared by the American Chamber of Commerce for Brazil (Amcham). “We expected some recovery after the drop seen in 2020, but this is very substantial,” said Abrão Árabe Neto, Ancham Brasil’s executive vice president.

Brazil, which typically has a deficit trade balance with the U.S., reported a record negative balance also in 2021, of $8.3 billion. This deficit was the country’s largest with a trading partner last year, Amcham said.

The U.S. remained Brazil’s second main trading partner, with a 14.1% share in 2021, behind China. The Asian giant accounts for 27.1% of the pie.

Brazilian exports to the U.S. reached the unprecedented amount of $31.1 billion last year, up 4.7% from 2019, before the pandemic. They were driven by rising prices in sectors such as steel and oil and increased U.S. demand. “Domestic demand started heating up again in the U.S., which has been driving exports,” Mr. Árabe Neto said.

Brazilian imports totaled $39.4 billion, up 13% from 2019, an all-time high driven by broader factors. The result was boosted by purchases of natural gas and vaccines to tackle the water crisis and the pandemic, respectively. The previous peak, of $36 billion, had been seen in 2013.

U.S. natural gas purchases, which grew 2,330% from 2020 and totaled $3.3 billion last year, fueled Brazilian thermoelectric power plants. Brazil was the world’s fourth largest buyer of liquefied gas from the U.S. in 2021, Amcham said. “In value, liquid gas was Brazil’s second most imported product from the U.S. If we look at other years, imports were very low: $244 million in 2018, $269 million in 2019, $135 million in 2020,” Mr. Árabe Neto said.

Brazil’s mass vaccination against Covid-19 led to a 406% increase in vaccine imports in 2021, compared to 2020, totaling $2.3 billion. Petroleum fuels, however, remained the main product imported by Brazil ($7.4 billion).

Amcham projects a moderate increase in Brazil-U.S. two-way trade over 2022. “There is a considerable degree of uncertainty around the world,” Mr. Árabe Neto said. On the one hand, the performance of the economy and global trade tends to remain positive, although at a slower pace than in 2021.

The opportunities opened up by Joe Biden’s multi-billion infrastructure plan, a weakened real against the dollar this year and the high prices of key products like oil and pulp are likely to drive Brazilian exports to the U.S. On the other hand, this year will still be impacted by considerable uncertainty associated with possible new waves of the pandemic, fast inflation, China’s slowdown, supply chain failures, and geopolitical and climatic events.

Uncertainties such as that imposed by elections in Brazil affect the expectations of economic agents, Mr. Árabe Neto said. But he also says companies exposed to the Brazil-U.S. two-way trade already have consolidated operations. “Of course, the political scenario has a relevant influence on the international trade and investments, but we will continue to have favorable aspects for bilateral trade,” he said.

From the U.S. standpoint, he said, Brazil has also shown itself to be a relevant partner. “Among the main U.S. export destinations, Brazil was the second fastest growing. Brazil is not in the top 10 of American imports [in values], but was the second fastest growing in relative terms,” Mr. Árabe Neto said.

Source: Valor international

https://valorinternational.globo.com/

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Brazil loses lead in exports bound for Argentina

Argentina desobriga teste PCR para brasileiros vacinados

Brazil lost in 2021 the historical crown of exports bound for Argentina. After a technical draw in 2020, China surpassed Brazilian sales to Argentines by more than $1 billion last year. The Asian country’s achievement is unprecedented, records from the Argentine government since 2002 show.

China had already been ahead of Brazil by a few months in the last two years. In the full year 2020, China “won” by a difference of under $10 million, which left the Asian country and Brazil with an equal 20.4 percent share of Argentina’s $42.4 billion in total imports. Last year, the Chinese lead became clear.

With a total of $13.5 billion shipped last year to Argentina, the Chinese have accelerated exports and will hold just over a fifth – 21.4% – of Argentina’s foreign purchases in 2021, compared with 14.3% in 2011. Brazil increased its shipments to the neighboring country last year, but not at the same pace. With shipments of $12.4 billion, or 19.6% of Argentina’s import share in 2021, Brazil has lost ground in the last decade. In 2011, the country held 30% of the foreign purchases of the Mercosur partner. The data are from Indec, Argentina’s official statistics agency.

The Chinese have come to stay in first place in the ranking of suppliers to Argentina, experts say. “We must get used to this reality. We took Argentina’s market for granted,” said José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB). “And China will maintain its effort to gain markets, whether they are close or geographically distant.”

Last year, the sale of Chinese goods to Argentina rose 56.3%. The pace was much faster than Argentina’s total imports average growth of 49.2%. Brazilian exports to the neighboring country grew 43.3%. Among the main products exported by China to Argentina last year were vaccines, certainly driven by Covid-19. The records show, however, that the Asian country’s advance is not cyclical. It is a growing trend over more than a decade.

Well before overtaking Brazil, China took from the United States, in 2010, the position of second largest supplier to Argentina. That year, Argentina imported $6.1 billion from the U.S. and $7.7 billion from China. Brazil still led the pack, with $18 billion imported by the neighbor. In the following year, Brazilian exports to Argentina peaked at $22.2 billion, more than double the $10.6 billion sold by the Chinese.

In the following decade, however, this situation gradually changed. Following Argentina’s economic roller-coaster ride since then, both Brazilian and Chinese shipments to the country of Diego Maradona – and Alfredo Di Stéfano and Lionel Messi – saw ups and downs. But in each recovery of the Argentine economy, the Asian country’s appetite was greater and Argentina absorbed products made in China at a faster pace than those of Brazilian origin. The difference in shipments became smaller and smaller, until the technical draw in 2020, when the Chinese sold $8.66 billion in goods to Argentina, while Brazilians exported $7.6 million less. Last year, with a new and more vigorous start from China, Brazil lagged behind.

Considering broader factors, Brazil may have been even more favored last year than China in exports to Argentina, Mr. Castro said. That’s because most Brazilian goods imported by Argentina are transported by roads, so they felt less the logistical supply shocks that hit ships and containers needed for the goods to cross the sea from Asia. Moreover, Mr. Castro said, Brazilian shipments were also favored by the high prices of iron ore, one of the five Brazilian items most exported to Argentina last year.

Welber Barral, a consultant and a partner at BMJ, highlights that due to the relatively low exports from Argentina to China, their bilateral trade resulted in a deficit of $7.4 billion for Argentina in 2021. With Brazil, which typically imports higher values, the negative balance was much smaller, at $665 million. “The trade deficit is important at this moment for Argentina, given the more complicated scenario of their external sector,” he said. Even so, Argentina has not stopped buying more Chinese products.

“Some people said that the Common External Tariff would create a protection for intra-bloc trade, but this was not enough,” Mr. Barral said, referring to the set of tariffs charged when a country in the Southern Common Market (Mercosur) imports products from non-members. Brazil’s official figures also show that the trade relations with the bloc’s partner have lost steam. In 2010, the neighboring country accounted for 9.2% of total Brazilian exports. In 2018, the share fell to 6.4% and has not recovered further. Last year it was 4.2%.

The strengthening of the China-Argentina trade relations is not an outlier, said the economist Livio Ribeiro, a researcher at Fundação Getulio Vargas’s Brazilian Institute of Economics (FGV/Ibre) and partner at BRCG Consulting. “China has been advancing in the provision of industrial goods to Latin America as a whole since the mid-2000s, and in the last decade products made in China have invaded the region,” he said. This simply shows that China is more competitive, according to him. “It is hard to see a scenario in which the space it occupies does not increase. Right now, I can’t imagine something that would lead to a stagnation of Chinese expansion” in the region.

And it’s not just about China’s advance taking space from Brazil in the region’s markets, Mr. Barral said. In last year’s data, the former Brazilian foreign trade secretary said, other Asian countries such as Indonesia, Thailand and Korea increased their exports to Argentina at a rate above the average. These values are smaller, but form a representative set and show that the recovery of Brazilian shipments with the recovery of the economy expected for the region will face competition from Asia as a whole and not only from China. According to Indec data, the import of Thai products by Argentina totaled $1.6 billion in 2021, up 54% year over year. Imports of Korean products totaled $648.3 million, up 77.4% year over year.

As for the products, more than half of what China exported to Argentina last year were capital goods plus parts and pieces. The Asian country is furthest ahead in this category. Brazil still exports more intermediate goods and vehicles to Argentina, something that is based, experts indicate, on the integration of the two countries in the Mercosur.

Of the $13.5 billion that the Argentines bought last year from China, $4.3 billion were capital goods and $2.7 billion were parts and pieces for this category of use. Brazil exported, respectively, $1.6 billion and $2.4 billion, considering a total of $12.4 billion in exports to the Mercosur partner.

“Brazil is losing ground in machinery and equipment. This means that Argentina may even remain as the largest importer of industrialized products from Brazil, but in an increasingly less representative way. Even as Argentina is recovering in capital goods purchases, there hasn’t been a greater absorption of Brazilian products,” Mr. Barral said.

According to data from Argentina’s Indec, imports of capital goods in 2021 rose 38.1% year over year on average. The purchase of products in this category from China went well beyond, with an increase of 56.4%. Imports from Brazil in this category rose 17.6%. Mr. Barral believes that, in addition to competitiveness issues, the lack of financing lines that encourage exports of machinery and equipment to the neighboring country affects Brazilian performance.

Source: Valor international

https://valorinternational.globo.com/

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Bolsonaro’s disapproval rate reaches 64%

Brazil News: Bolsonaro's Disapproval Reaches Record With Lula Gaining Ground - Bloomberg

President Jair Bolsonaro (Liberal Party, PL) has a disapproval rate of 64%, the highest since the beginning of his administration, according to an XP/Ipespe poll released Thursday. On the other hand, 29% approve his government. The poll shows that 55% of respondents consider the Bolsonaro administration to be bad or terrible, while 23% see it as excellent or good and 21% as regular. According to the poll, 65% of respondents consider that the Brazilian economy is on the wrong path. For 26%, the country’s economy is on the right track.

In closed-ended answers, former president Luiz Inácio Lula da Silva leads the voting intentions with 44%; Jair Bolsonaro appears in second place, with 24%; former judge Sergio Moro (Podemos) and former governor of Ceará Ciro Gomes (Democratic Labor Party, PDT) tied for third place, with 8%; São Paulo’s governor, João Doria (Brazilian Social Democracy Party, PSDB), have 2% of the voting intentions; tied with 1% are Simone Tebet (Brazilian Democratic Movement, MDB), Alessandro Vieira (Citizenship) and Felipe d’Ávila (New Party, Novo). In the open-ended answers, Mr. Lula da Silva have 35%; Mr. Bolsonaro has 23%; Messrs. Moro and Gomes have 4%; Mr. Doria, 1% of voting intentions. Pollsters conducted interviews with 1,000 people between January 24-25, with a 3.2% margin of error.

Source: Valor international

https://valorinternational.globo.com/

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Machinery industry expects higher investment this year

Intelligent construction machinery industry is imminent - 深圳市菲莱克电子有限公司

The machinery and equipment industry is likely to increase investments in Brazil this year, with injections estimated at R$15.45 billion. José Velloso, head of the Brazilian Machine and Equipment Industry Association (Abimaq), said the funds are needed to support revenue growth in 2022, estimated at 6%.

“Last year, we invested R$14.52 billion, an amount 68% higher than we expected. Not one sector in Brazil has invested and invests as much as machinery and equipment,” said Mr. Velloso.

Most of the resources – 38.2% – will go to technological modernization to increase productivity in factories, according to Mr. Velloso. “Even with market growth, companies are unlikely to prioritize increasing capacity. They seek more efficiency,” he said.

According to Abimaq’s estimates, total net revenue will grow 6% this year. In 2021, the indicator reached R$222.44 billion, up 21.6% year over year. According to the organization, apparent consumption reached R$308.91 billion, up 14.8% from 2020. Internal net revenue, according to Abimaq, grew by 25.3%, reaching R$168.08 billion.

“It was the best year for the sector ever in the country. And we estimate that by 2022 we will grow even more, on a very high base of comparison. And we have several factors that are likely to support this evolution, especially sectors such as infrastructure and construction,” said Mr. Velloso. “Production is expected to grow 4.5% and exports 15.6%. We are very optimistic for this year.”

Last year, machine makers closed with a backlog of 10.8 weeks, up 21.3%. According to Abimaq, with this performance of the Brazilian market, the level of utilization of the installed capacity was 79.2%.

International trade also performed well in 2021. Exports grew 34.2% in 2021, to $9.37 billion, and imports reached $21.16 billion in 2021, up 23.4%.

The level of employment also followed the positive moment of the sector. The manufacturers ended the year with a payroll of 367,500 people, 42,000 more jobs than in 2020. “Our expectation is a 5% increase in the number of jobs this year,” he said.

Source: Valor international

https://valorinternational.globo.com/

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Offshore wind power decree expected to unlock investments

The potential of offshore wind energy – Magnus Commodities

A decree published by the federal government on the main guidelines for offshore wind projects in Brazil was well received by players in the electricity sector, who said it may unlock investments.

The main point is related with the assignment of the use of physical spaces and natural resources for this type of renewable generation. As previously reported by Valor, giant companies like Shell and Iberdrola are looking to Brazil because of its power generation potential but were waiting for a more secure regulatory environment.

The decree 10,946/2022 says that the Ministry of Mines and Energy must issue complementary rules by June 15, 2022. Experts and international entities say that the measure removes the legal and regulatory risk and helps projects in the Brazilian seas to get off the drawing board.

In a note, the ministry said the decree aims to fill the gap identified by public institutions, companies, experts and organizations of a regulatory framework for the exploration of offshore electric potential in Brazil, especially related to issues about the deployment and the concession model.

For Abeeólica, the trade group that represents the sector, the decree is a crucial advance so that Brazil can unlock investments and deploy offshore wind farms with security for investors, government and society.

“In a sector that is taking its first steps, this security is key, so that companies, society and government know what the technical criteria, requirements, study obligations are, and the agencies that will be responsible for analyzing, approving and formalizing the progress of each stage of the projects, which are more complex than onshore wind farms,” said Elbia Gannoum, head of the association.

Ben Backwell, CEO of the Global Wind Energy Council, said Brazil has virtually unlimited offshore wind resources and wind power companies have already filed for permits for projects totaling 46 gigawatts. This represents an opportunity to meet the growing demand for energy, develop green hydrogen projects, and create large amounts of investment and skilled jobs.

“This decree brings clarity and certainty that the wind power industry needs to move forward and continue to develop large-scale projects off the coast of Brazil, while the authorities prepare a comprehensive system for licensing areas, as well as competitive auctions and other mechanisms for capturing offshore wind power,” he said.

The forecast is that by 2050 Brazil will reach an installed capacity of electricity generation by offshore wind of nearly 16 GW, if there is a 20% reduction in capex from this source, according to the National Energy Plan 2050.

Although the decree is considered an advance for legal and regulatory security, the energy partner of law firm Lefosse, Pedro Dante, questions the feasibility of these projects in the short term and considers it premature to say that all issues are properly addressed and resolved.

“Due to the still high costs of offshore plants, it is still not possible to say that this type of energy source will be competitive in the short term, there is a natural competition in relation to price with renewable energy sources that are already in the consolidation phase in the country, such as solar power and onshore wind power itself,” says Mr. Dante.

Lawyer Rodrigo Machado Santos, a partner at Madrona Advogados, said that the decree was the right choice, since the legislation already deals with the assignment of areas and commercialization of electricity.

“It seems there is no need for a legal framework for additional regulation, especially because offshore generation does not mean a new type of generation, but simply involves issues such as ownership over the areas – which is already provided for in law.”

Source: Valor international

https://valorinternational.globo.com/

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Economists review contribution of agriculture to GDP

Minus 23.9 per cent: In falling GDP, Agriculture output is only positive | Business News – India TV

The contribution of agriculture – considered by economists as a pillar of the economic activity this year – to Brazilian GDP is now seen as a question mark due to the excessive rainfall in some regions and drought in others. The prevailing view is that the sector will have a positive 2022, but not as good as previously expected, which is driving downward revisions.

This week’s change in BNP Paribas’s forecast for Brazil’s GDP this year, which went to -0.5% from +0.5%, includes a revision in the agro GDP to 1.5% from around 5%, said Gustavo Arruda, head of research for Latin America at the bank. “We were quite surprised, it changed very fast.” He estimates that agriculture directly took 0.2 percentage point from its GDP projection. Considering indirect effects — on the industry, for example, as tractors play an important role in car production, Mr. Arruda says — the negative impact could be closer to 0.3 pp.

Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV) still maintains a positive total GDP for 2022, but has adjusted the estimate to 0.6% from 0.7% because, among other things, the revision of agricultural growth to 3.5% from 5%.

Barclays, which revised its projection for the Brazilian GDP in 2021 to 4.3% from 4.5%, kept its forecast at 0.3% for 2022, but says it is monitoring potential negative risks. Among them, in addition to the omicron variant, Roberto Secemski, the bank’s chief economist for Brazil, cites “extreme heat and drought conditions in southern Brazil threatening soybean and corn production, which normally lead agricultural gains in the first quarter of each year.”

Under the natural phenomenon La Niña like now, the typical impacts are exactly drought in southern Brazil and rainfall in the Northeast region, said César Castro, an agro specialist at Itaú BBA. “In 2021, the effects of La Niña were milder.”

In Brazil, Mr. Castro said, the bulk of the grain crop comes first from soybeans in the Cerrado region and then from the second yearly crop of corn, which is sowed now and harvested just before the middle of the year. In the South region, where the drought is very severe, however, the picture of “more soy, less corn” is a little different. There, the first corn crop alone may already total between 25 million and 30 million tonnes, while corn’s second crop could reach 80 million. “Those 30 million are suffering a lot,” the analyst says.

As a result, he said, the projections for Brazil’s first corn crop face downward revisions of up to 5 million tonnes, while the soybean crop is now expected to shrink by around 10 million tonnes. “Everything regarding soybeans is happening now,” Mr. Castro said, noting that Paraná and Mato Grosso do Sul, the most relevant states for planting, are also suffering with the drought.

Even though the first corn crop is less representative in Brazil, it has the important role of “creating a cushion” until the middle of the year for the demand of livestock, Mr. Castro said. “A big part of the corn issue in Brazil is solved in the second half of the year. Last year, there was a huge harvest loss, which meant that the cushion is very short. So, we are going to have a regional problem.”

Based on worsened estimates, Itaú Unibanco, which used to calculate an agriculture GDP growth in 2022 close to 5%, now foresees between 1% and 2.5%. “There is still uncertainty about how the IBGE revision will be,” said Luka Barbosa, an economist with the bank, mentioning Brazil’s statistics agency. In any case, the changes in projections for the agribusiness makes Itaú more comfortable with its estimate for the economy in general. “Before, we saw this strong agro GDP in 2022 as an upside risk to our projection of -0.5% for Brazil’s GDP. Now, we are much less worried,” he said.

Corn and soybeans crops under pressure led Itaú to revise its preliminary projection for this first quarter’s GDP to 0.4% from 0.7% — the number fell a bit more, to 0.3%, after considering additional data from other sectors. “It is still a positive first quarter, because of agribusiness, but less than before,” Mr. Barbosa said.

In its last report, on January 11, the National Supply Company (Conab) cut almost 7 million tonnes from its forecast for the grain harvest, to 284.39 million tonnes, which would still be a record number. These data, however, refer to the week to December 18, and further downward revisions are expected to occur, said Cristiano Oliveira, chief economist at Banco Fibra.

His projection for agriculture in the GDP, which was once of 4% growth, is now at 2.5%. This value is enough to put the Brazilian GDP very close to zero, but, taking into account the most recent information on some crops, Mr. Oliveira says he sees a slightly negative bias for the Brazilian economy in 2022.

Despite the importance of agribusiness for the Brazilian economy, it represents something close to 5% of the GDP, Mr. Oliveira said. “There is a chain, where the participation of agribusiness is greater. But, for the purposes of IBGE’s calculation of the GDP, this would be included in industry and services,” he said. Therefore, he says that one cannot “blame” agribusiness in case the GDP becomes negative this year.

Rabobank has been working for some time with a more conservative forecast for agriculture GDP in 2022, up 3.5%, coming from an expected drop of 0.5% in 2021, said Mauricio Une, the bank’s chief economist. “We are comfortable [with the projection]. With that, we have a total GDP this year around 0.6%,” he said.

In the soybean crop, for example, the projection is of a certain stability: 140 million tonnes, compared to 137 million tonnes last year, according to Mr. Une. “We still have a good year despite the drought. There is some support, which we have to monitor”, he said. Mr. Castro, with Itaú BBA, projects a soybean crop around 135 million tonnes. “We expected a slightly higher production than in 2021, but it’s still a reasonable number.”

Other crops, such as sugarcane and coffee, and cattle raising are likely to perform well, said Mr. Oliveira, with Fibra. Mr. Une notes that coffee is on a positive biennial basis in 2022 — the strongest harvest takes place every two years. “Last year, we saw frosts affecting coffee seedlings. For this year, we expect a recovery to 63.5 million this year from 57 million bags in 2021.”

The difficulties faced by corn tend to dissipate throughout the year, Mr. Castro said. If it is planted in the right window for soybeans, until the end of February, it creates a great chance of not suffering from drought or frost, the analyst said. “Since soybeans are being harvested and the weather outlook is relatively good from now on, we think there are conditions for the second yearly crop returning to normality,” Mr. Castro said. He projects 116 million tonnes of corn for 2022, compared to 87 million in 2021.

Mr. Oliveira, with Fibra, said that the second yearly crop of corn may benefit from stronger market prices. Prices for corn on Brazilian stock exchange B3 have remained at a relatively high level, as well as international values, said Mr. Une. “As much as there is this drop in volume expectations, we have a holding price,” says the Rabobank economist.

In the view of Mr. Arruda, with BNP Paribas, the behavior of the second yearly crop of corn, both in terms of damage by the drought and the increase in the cost of inputs, will be key to understand the dynamics of the year. “Agricultural margins will still be historically consistent, but well below 2021, because costs have risen too much, especially those of fertilizers and chemicals,” Mr. Castro said. Lower profits in agriculture reduce some of the “irrigation” that the sector manages to pass on to the GDP in the form of investments and hiring, Itaú’s analysts say.

Source: Valor international

https://valorinternational.globo.com/

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Brazil vows again to eliminate tax on financial transactions to join OECD

OECD - Fórum Mundial de Bioeconomia

Brazil had already promised — in 2020 — to eliminate the Tax on Financial Transactions (IOF) in the discussions at the Organization for Economic Cooperation and Development (OECD). This tax, in any case, would not be an obstacle for Brazil to start membership negotiations, but certainly its elimination will facilitate the country’s adaptation to the entity’s rules, according to sources consulted by Valor.

Economy minister Paulo Guedes said Wednesday that the OECD invitation to Brazil was made possible after the Congress passed the Foreign Exchange Law at the end of last year. It allowed the Secretariat of Federal Revenue to commit to reducing IOF on international flows. And it also committed to do this in a letter sent last week to the OECD.

The Secretary of International Affairs of the Economy Ministry, Erivaldo Gomes, said: “In fact, it is not necessary to remove the IOF to start the accession process. But it is necessary to enter the codes of capital liberalization and invisible transactions, and to complete the accession process.”

In 2017, Brazil asked to join the OECD. At the same time, it anticipated and asked for accession to the Capital Movement Liberalization and Current Transactions Codes. These standards allow, for applying countries, gradual progress toward liberalization of capital, investment, and services, with an expectation of improvement in the business environment.

The OECD Investment Committee then created a specific group and analyzed policies in Brazil that were considered relevant to the accession to both codes. This group then mentioned the IOF, seen as discriminatory. Applying countries can have a list of exceptions, but those cannot be very different from the ones of other countries belonging to the entity.

In the discussions, it was agreed that Brazil would not eliminate the IOF but would zero the rates starting from a schedule that would begin in 2021. The measure was pending approval of the foreign exchange law in Congress. What Mr. Guedes did last week was to reaffirm this promise. With this, the Investment Committee will be able to finish its report on Brazil.

The report will go to the OECD board. Then, Brazil will approve the decree on the IOF, and the committee finally decides whether to approve Brazil’s treaty accession to the two codes. All of this happens in a process that is independent of OECD accession, but which in practice is essential for the country’s acceptance by the entity.

Mr. Gomes notes that the IOF on foreign exchange generates some distortions in economic transactions abroad, negatively affecting domestic and foreign investors, as well as citizens.

“One of the distortions condemned by the OECD and the IMF is multiple exchange rates, that is, different exchange rates for different transactions,” says the secretary, noting that the IOF has five rates for different types of exchange operations.

According to Mr. Gomes, this taxation “discourages and/or increases the cost of investments in Brazil since the mere flow of resources are punished with taxes before they produce any economic result.”

He notes that the OECD codes do not allow the use of this type of measure that is considered discriminatory, “but allow the use of macroprudential regulatory measures that are non-discriminatory.”

Source: Valor international

https://valorinternational.globo.com/

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India leaves door open for settlement in sugar dispute with Brazil

India loses WTO dispute over sugar subsidies; set to file an appeal | Business Standard News

India left the door open on Tuesday to seek a negotiated solution with Brazil, Australia and Guatemala over its subsidies that have an impact on the international sugar market and were condemned by a panel of the World Trade Organization.

In December, the WTO published the panel’s decision, which found that New Delhi massively increased subsidy to the sugar sector and reintroduced a floor price that led to production exceeding domestic demand. And it defined that the Indian government has to modify these measures to comply with international rules.

The dispute was part of Tuesday’s agenda of the Dispute Settlement Body, led by the delegations of Brazil, Australia and Guatemala, after India appealed against its defeat — a formality that, in practice, blocks the victory of the three countries.

Brazil, Australia and Guatemala noted that the panel concurred with virtually all of the grievances presented, and regretted that India had “appeal into the void” and left the case with no prospect of resolution in the short term. It is because the Appellate Body, which normally has seven judges, is now empty, because of the block made by the U.S. to the appointment of new arbitrators.

By appealing into the void, India is, in effect, free to maintain the policies condemned by the WTO. India does not participate in an entity’s 25-member parallel mechanism to resolve its disputes.

In its intervention Tuesday at the WTO, Brazil once again complained that the condemned Indian policies cause damage to Brazilian producers, regretted the Indian reaction of appealing into the void Appellate Body and reiterated the willingness that a solution be quickly adopted for India to respect the decisions of the panel.

The Indian delegation answered, criticizing several legal aspects of the decision taken by the panelists. But it left the “door open,” in the expression of one negotiator, to seek a negotiated solution. The point is whether it will move from rhetoric to effective negotiation.

The government of India continues to be under strong pressure from its producers not to change minimum price policies that end up encouraging an increase in production, part of which is diverted to the international market, bringing down prices. Indians have increased their share of the global sugar trade thanks to subsidies.

The Brazilian government has a Provisional Measure ready, which remains in the Chief of Staff Office, by which the federal government may retaliate proportionally and unilaterally, in cases of victories in WTO disputes, when the losing country makes the so-called “appeal into the void.” India is an obvious target.

Source: Valor international

https://valorinternational.globo.com/

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Government picks admiral as new head of Itaipu

João Francisco Ferreira — Foto: Divulgação
João Francisco Ferreira — Foto: Divulgação

Admiral Anatalício Risden Junior will be the new Brazilian director-general of Itaipu Binacional. The military takes the place of the retired general João Francisco Ferreira, who resigned on Tuesday. The information was first reported by Valor and later confirmed by Binacional.

Sources in the electric sector consulted by Valor informed that his position was being negotiated by center-right parties that wanted to have a say, and Mr. Ferreira had anticipated his resignation to avoid wear and tear. The name of the substitute has yet to be evaluated by the board of Eletrobras, Brazil’s main power utility Eletrobras.

The confirmation, however, must be officially published on the Daily Gazette. Mr. Risden has a degree in Naval Sciences, is 62 years old, was born in Curitiba (Paraná), and served for more than 40 years of active duty in the Navy.

The announcement of Mr. Ferreira’s departure was made to advisors, assistants and directors. The military is reticent and prefers not to stay during the transition period because, according to him, he no longer sees any sense in making decisions knowing that he will not stay.

Mr. Ferreira took over the command of Binacional in April 2021, replacing the also General Joaquim Silva e Luna, who held the post for two years and today is the CEO of Petrobras after being appointed by President Jair Bolsonaro.

Source: Valor international

https://valorinternational.globo.com/

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Carrefour may be forced to sell 11 stores to merge with BIG

Carrefour (CRFB3) compra Grupo Big e dispara na Bolsa

Antitrust watchdog CADE greenlighted the purchase of BIG by Carrefour provided that part of the stores of the chain bought is sold. There are 11 stores on the list of recommendations for divestment, according to an agreement between Carrefour and CADE.

The term of the Merger Control Agreement (ACC) signed foresees structural measures related to the competitive behavior to be adopted by Carrefour. In addition to the sale of supermarkets, hypermarkets and cash-and-carry stores, the proposal defines commitments related to non-competition and the economic maintenance of the stores until the effective transfer.

BIG has 388 stores and, in a statement released Tuesday, Carrefour highlighted, without providing figures, that the closings are less than 10% of the total base, and lower than initially unveiled by the CADE. Carrefour also says that the proposal is yet to be evaluated by the CADE’s court by June 2022, if the board decides to use the maximum deadline.

The CADE’s analysis indicates that there are no competition concerns in the wholesale distribution and gas station markets. In the retail and cash-and-carry segment, the antitrust watchdog removed competitive risks in most relevant markets, but for a small portion, it says that there are not enough elements to rule out the likelihood of companies exercising market power.

The eleven units listed by CADE could be sold by Carrefour are located in Rio Grande do Sul, Ceará and Pernambuco. The South and Northeast regions have 82% of BIG’s points. According to the list, in Gravataí (Rio Grande do Sul) are the Nacional supermarket, the BIG hypermarket and a Maxxi cash-and-carry store. In Juazeiro do Norte, Ceará, the hypermarket BIG Bompreço and the cash-and-carry store Maxxi appear on the list.

In Olinda, Pernambuco, the hypermarket BIG Bompreço is on the list. In Recife, in the same state, hypermarket Walmart Caxangá and hypermarket Walmart Casa Forte may be sold.

In Santa Maria, in the same state, the hypermarket BIG Nossa Senhora de Lourdes may be sold, while in Viamão, the hypermarket BIG Santa Cecília and the cash-and-carry store Maxxi may have the same fate.

The market expectation is that the value per asset will be below the ceiling of R$50 million paid in store purchases by funds in recent years.

Amounts in this range have been disbursed for stores in places like São Paulo and Rio de Janeiro. Carrefour declined to comment.

“We can buy if CADE really makes the decision, but the best units are in the Northeast region, because it is harder to find good locations in these capitals,” says the manager of a fund focused on retail properties said. Another source recalled that the South region doesn’t have as much demand for real estate now. “In Gravataí and Santa Maria, for example, it is not difficult to find well-located land,” said this source.

“There are cases of companies that ‘keep’ a lot of assets in regions that they know can be targeted by CADE. They keep these businesses on their feet, without much money, until the sale is approved”, the head of a cash-and-carry chain that competes with Maxxi said.

One point raised by an executive of another fund is limitations to be defined by the CADE. He recalled that, in order to maintain the level of regional competition, buyers may have to continue with the food retail activity in these locations for a certain period.

In the market today, the scenario is of companies leaving the hypermarket sector, while investments have been basically focused on cash and carry. GPA, owner of Extra, sold 71 hypermarket stores to Assaí for R$4 billion three months ago). Cash-and-carry stores and small supermarkets have been leading the organic expansion.

Among wholesalers, there is a greater number of deals being closed, and of companies with cash – despite the fact that many have already disbursed a large sum of money in acquisitions and openings since 2019, including Assaí, Fort (Pereira group) and Muffato group.

Real estate funds are likely to have the appetite to make bids as they could buy the stores and rent them. This is not a very long list as there are two main active players in the sector. One is the FII SuccesPar Varejo, which acquired nine stores from GPA between 2019 and 2020 and closed one of the largest recent deals among funds – the purchase of 17 properties, including buildings and land, from the same group for R$1.2 billion in October.

In another deal, in September 2020, two funds from TRX Gestora de Recursos agreed to buy 11 GPA stores for R$233.6 million.

Despite the worsening of the market environment since the end of last year, an executive sees room for attracting new resources focused on segments with proven return potential, considering the performance delivered in the portfolios.

Source: Valor international

https://valorinternational.globo.com/

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