Trump’s return escalates tensions for Brazil’s economy

Concerns mount over potential U.S. trade retaliations against Brazil amid an already challenging economic outlook

01/22/2025

The return of Donald Trump to the U.S. presidency has introduced an additional layer of uncertainty to Brazil’s already challenging economic landscape, analysts warn.

Over the past two years, Brazil’s “strongly expansionist” fiscal stance has pushed the economy beyond its potential, raising inflationary risks. This domestic backdrop now intersects with “strong headwinds from abroad,” which are expected to worsen, wrote Silvia Matos and Armando Castelar in the January edition of the FGV Ibre Macro Bulletin, shared exclusively with Valor.

For Elizabeth Johnson, an analyst at TS Lombard, Mr. Trump’s return adds another element of unpredictability to Brazil’s economic prospects. Despite being one of the least U.S.-dependent nations in Latin America and running a trade deficit with the country, “there’s concern that Brazil and its leftist leader, President Lula, could become easy targets for Trump as he pushes his ‘America First’ agenda,” Ms. Johnson explained in a report to clients.

FGV Ibre researcher Lia Valls also recalled Mr. Trump’s past comments about Brazil’s “high import tariffs” and lack of reciprocity, raising the possibility of Section 301 investigations. This U.S. trade law allows for retaliatory actions if American companies are deemed disadvantaged.

Ms. Valls explained that with the WTO dispute resolution mechanism currently paralyzed by U.S. blockages, Brazil could face difficulties in challenging such measures or imposing counter-retaliation. “As during Trump’s first term, the way forward is through negotiation,” she said.

While a blanket increase in tariffs on Brazilian goods seems unlikely, Ms. Valls did not rule out sector-specific hikes, particularly on steel or possibly meat products, influenced by U.S. industry lobbying.

Global trade war

Indirect impacts could be equally significant. Ms. Johnson of TS Lombard warned that a promised trade war could destabilize China—Brazil’s largest trading partner—and the global economy. Facing multiple challenges, including soaring public debt, high inflation, and slowing growth, Brazil risks a hard landing ahead of its 2026 presidential elections, especially if the trade conflict disrupts agricultural exports or prompts populist policy measures to manage the fallout.

Luis Otávio Leal, chief economist at G5 Partners, noted that Mr. Trump’s apparent moderation toward China during his inaugural speech, alongside his recent outreach to Chinese President Xi Jinping, might indicate a willingness to negotiate. However, this could harm Brazil’s soybean exports, which had benefited during Mr. Trump’s first term due to U.S.-China trade tensions.

“I don’t believe lightning strikes twice,” Mr. Leal said. “I think regarding China and the U.S., Brazil will be harmed either way. Whether due to a reduction in international trade, a global trade war, or because the U.S. and China reach an agreement, which would reduce our agricultural exports there.”

China currently absorbs nearly 75% of Brazil’s soybean exports. While the 2025 soybean harvest is largely secured, a U.S.-China agreement in the first half of the year could jeopardize Brazil’s mid-year corn exports and the 2026 harvest, Mr. Leal added.

Brazil’s commitment to non-alignment in foreign policy and trade could be tested by intensifying U.S.-China tensions. Ms. Valls of FGV Ibre emphasized the significance of Brazil signing the Mercosur-European Union trade agreement as a step toward diversifying its trade relations.

“The agreement still requires approvals and, even once approved, includes a tariff reduction schedule that spans up to 18 years in some cases. However, it could result in trade diversion from U.S. imports, particularly in the industrial sector. Notably, a framework was negotiated for the treatment of critical minerals, which could affect U.S. interests in this area,” Ms. Valls noted.

At the same time, China has been preparing for potential U.S. retaliation under Mr. Trump. In late 2024, during Chinese President Xi Jinping’s visit to Brazil, the two nations signed 37 agreements, including memoranda on technology, health, and innovation. Significantly, China opened its market to Brazilian sorghum exports, a move Ms. Valls interpreted as a preemptive strategy against potential U.S.-China conflicts.

Paris Agreement

Mr. Trump’s withdrawal from the Paris Agreement, executive orders curtailing incentives for the energy transition, and announcements of increased oil production signal that the U.S. is “turning its back on the world,” Mr. Leal of G5 Partners warned. He noted that these actions could present challenges for Brazil, which holds a key position in global climate discussions, and potentially undermine the COP30 climate conference set for November in Belém.

Diplomatically, Brazil’s 2025 presidency of the BRICS bloc—with members including China, Russia, and Iran—adds another layer of complexity. The U.S. has long viewed BRICS with skepticism, and any renewed discussions about a common currency within the bloc could provoke retaliatory actions from the Trump administration, Mr. Leal cautioned. As BRICS president, “Brazil will be in the spotlight,” he said, and Mr. Trump will not hesitate to push back if the bloc challenges U.S. interests.

*By Marta Watanabe, Marcelo Osakabe e Anaïs Fernandes — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Gerdau outlines conservative plan for 2025

Early months of Trump’s administration, high interest rates in Brazil are key for company’s strategy

01/21/2025

Gerdau has developed a conservative plan for 2025 to navigate the early months of Donald Trump’s administration and the high interest rate environment in Brazil. In an interview with Valor, CEO Gustavo Werneck said the company is prepared to operate in any scenario, even the most complex ones.

“Gerdau believes that under the Trump administration, the industry in general, including the steel sector, has the potential to perform well in the medium term. However, we do not expect Trump’s measures to significantly impact our sector in the very short term,” he said.

According to Mr. Werneck, Gerdau’s operations in the U.S. market have seen improvement since Mr. Trump’s first term. The United States accounts for about 40% of the steel group’s revenue.

In the U.S., Gerdau produces long steel products (used in the infrastructure industry), including rebar. “Everything we produce there is consumed by the U.S. market. Interestingly, in recent years, our performance in the United States has surpassed that in Brazil. We will observe the impacts of the first months of Trump’s administration to understand the outlook for the second half of the year.”

In Brazil, steel imports remain the primary challenge for the national industry, particularly from China, despite the implementation of tariffs, according to Mr. Werneck.

The steel sector, according to the CEO, continues to engage in discussions with the Brazilian government to address the persistent import issue. “The government has been very open to the industry. Therefore, our current debate focuses on what additional measures should be taken to reduce the penetration of imported steel.”

He said that historically, imports represented about 10% of the total in the country—now it stands at 25%. The expectation is to discuss additional measures.

The weak Brazilian real scenario is favorable for Gerdau, the executive note. On the other hand, the exchange rate and current interest rate levels raise concerns about the economy. He noted that the construction sector is performing well, but there is concern about prospects for real estate financing. “Will it continue to generate demand from the second half onward?” the executive questions. He sees the same situation in the automotive sector.

Gerdau plans to maintain its investment schedule both in Brazil and abroad. Mr. Werneck did not provide details on the amount but mentioned that Gerdau invests around R$5 billion to R$6 billion annually. According to him, the company has always maintained a trusting relationship with the country and intends to continue its growth plans.

An exception will be in Mexico, where the company already has a strong presence but had planned to invest in a new plant—an investment estimated at $600 million. The group plans to wait a few more months to assess the commercial relationship between Mexico and the United States before making a final decision on the new investment.

In the U.S., the expectation is to continue investments in the group’s plant in Texas.

Gerdau currently has no plans to shut down additional capacities in Brazil. Last year, the group halted operations at the Barão de Cocais plant in Minas Gerais. An important new rolling mill is expected to be inaugurated in Ouro Branco, also in Minas Gerais. “This is an important investment for us, even in the face of predatory imports of hot coil in Brazil at the moment,” the CEO said.

Currently present in seven countries (down from thirteen), Gerdau does not intend to withdraw from any of its current locations.

With low debt levels, the company is set to complete its share buyback program this year and will evaluate in the coming months whether to extend the program.

Mr. Werneck emphasized that having low leverage (a debt-to-EBITDA ratio of 0.32 times) is important and healthy in the current high-interest-rate environment in the country. “Over time, we will continue to analyze opportunities for acquisitions and consolidation in the countries where we operate.”

For the executive, the group has been doing its homework. “This year, we will focus internally, seeking greater efficiency,” he said.

*By Mônica Scaramuzzo  — Davos

Source: Valor International

https://valorinternational.globo.com/
/by

Rainfall brings relief to Brazil’s energy consumers

Outlook indicates reservoir recovery and reduced reliance on thermoelectric plants following worst drought in 80 years

01/21/2025

The heavy rains that have swept across much of Brazil since December have significantly improved hydropower reservoir levels after 2024 saw the worst drought in over 80 years. With projections suggesting further reservoir recovery, experts foresee reduced reliance on costly thermoelectric plants in 2025. However, specialists warn that challenges remain.

Prior to 2024, Brazil’s last major water crisis occurred in 2021, prompting the government to activate all available thermoelectric plants and hold an emergency auction for new power plants—a move that faced scrutiny. Conditions improved as rains returned in 2022 and persisted, albeit in smaller volumes, in 2023.

The combination of reservoir recovery, increased wind and solar energy production, sugarcane bagasse-fueled thermoelectric generation during the harvest season, and strategic thermoelectric dispatching by the National Electric System Operator (ONS) helped Brazil navigate the historic drought last year without significant disruptions. The Electric Sector Monitoring Committee (CMSE) reported on January 9 that ONS projections indicated reservoir levels in Brazil’s national grid (SIN) could reach between 62% and 92% by the end of the dry season in June.

ONS Director-General Márcio Rea said as of January 15, reservoir levels were at 57.2% in the Southeast/Central-West subsystem—Brazil’s primary energy region—and 59.5% in the Northeast.

Mr. Rea expressed optimism, noting that preventive measures combined with river flows at 97% of the historical average indicate a “very good” situation if rains continue in critical areas. “We are working to store as much as possible,” he said.

Optimizing resources

ONS Operations Director Christiano Vieira explained that the operator’s strategy is to maximize water storage during the rainy season for use during the dry season. This usage, he explained, tends to be less intense from April to June due to increased wind and solar generation, with consumption rising from July, when temperatures are typically higher. “There’s a depletion [reduction in levels] of 7% to 10% per month until October and November, when the rainy season returns,” Mr. Vieira said.

Valor columnist Edvaldo Santana, a consultant and former director at the National Electric Energy Agency (ANEEL), emphasized the significant rainfall in December and January, noting, “It hasn’t rained this much in December for 20 years.”

Fred Menezes, executive director of Armor Energia, echoed this, highlighting accelerated reservoir recovery in the North, Central-West, and Southeast regions since November. Mr. Menezes mentioned that on January 4, the average level was 54.8%, with expectations that by the end of the wet season in November, reservoir levels will reach or exceed those of 2024.

“The pace of reservoir recovery in 2025 is faster and more consistent,” Mr. Menezes said. According to the ONS, all subsystems should exceed 60% of reservoir storage by the end of January, with three surpassing 70%.

Franklin Miguel, president of Electra Energy, noted reservoir levels have risen nearly ten percentage points since late 2024, making the current levels the third highest in five years. “This above-average rainfall was crucial in reversing the decline in hydraulic storage levels nationwide.”

The Generation Scaling Factor (GSF)—a measure of hydroelectric output relative to guaranteed capacity—is expected to average around 70% during the dry season, allowing wind, solar, and sugarcane bagasse plants to support hydroelectric generation.

Ampére Consultoria projects a GSF of 84.3% for 2025, slightly below the preliminary figure of 87.3% in 2024, according to the Electric Energy Commercialization Chamber (CCEE). Higher reservoir levels will ease pressure on the grid, reducing reliance on high-cost thermoelectric plants and keeping market energy prices low.

Electricity prices in Brazil’s free market are projected to average around R$60 per megawatt-hour in the first half of 2025, with some increases expected in the latter half of the year to R$130/MWh–R$150/MWh. “This price rise, despite favorable conditions, reflects a more conservative operational approach with heightened risk aversion parameters,” Mr. Miguel of Electra Energy, noted.

For regulated market consumers, favorable hydrological conditions should keep tariff flags green in the first half of the year, with yellow flags—indicating minimal additional charges—possible in the second half, Ampére Consultoria predicted.

While the improved hydrological conditions provide short-term relief, specialists urge caution. Consultant Santana warned that even if reservoirs reach 90% capacity by March, a severe dry season combined with high temperatures and heavy reliance on hydroelectric plants during evening demand peaks could diminish “hydraulic comfort” by September.

Despite uncertainties, Mr. Rea and Mr. Vieira affirmed that energy security for 2025 is assured, even under the ONS’s most severe climate scenarios. They emphasized, however, that weather forecasts beyond 15 days remain uncertain, requiring continued vigilance.

*By Fábio Couto  — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
/by

Trump’s support for oil could impact Brazil’s trade balance

U.S. President’s speech reaffirms campaign promises to focus on fossil fuels, countering global decarbonization trends

01/21/2025

In his inaugural address on Monday (20), U.S. President Donald Trump reaffirmed his administration’s intent to prioritize hydrocarbon production over renewable energy sources. Mr. Trump announced plans to declare a national energy emergency, signaling a shift away from transitioning to a low-carbon economy and emphasizing fossil fuels such as oil and gas.

“The inflation crisis was caused by excessive spending and skyrocketing energy prices. Therefore, today I declare a national energy emergency. We will drill, baby, drill,” he said, referencing oil and gas field exploration—a central theme of his campaign. Mr. Trump outlined a strategy to replenish U.S. strategic reserves and increase exports.

While his commitment to boosting U.S. oil exports was clear, its impact on Brazil’s market appears limited, according to Décio Oddone, a former managing director of Brazil’s National Petroleum Agency (ANP). Mr. Oddone said that Brazilian oil differs from U.S. oil, ensuring demand for both.

Felipe Perez, an analyst at S&P, noted that the Brazil-U.S. relationship would hinge on Mr. Trump’s tariff policies. Other factors, such as Brazil’s focus on local content in the oil industry and strengthening ties with BRICS nations (Russia, India, China, and South Africa), will also play a role, he added.

The global impact of Mr. Trump’s measures on oil prices remains uncertain. On Monday (20), U.S. crude (WTI) fell 2.35% to $75.57 per barrel, while Brent crude, traded in London, declined 0.59% to $79.10.

Analysts interviewed by Valor believe it’s too early to predict oil price trends. Victor Arduin, risk management manager for energy and currency at Hedgepoint, said Mr. Trump’s decisions might not affect prices in the short term. However, an increase in U.S. supply could drive prices lower in the medium term. “If regulations are relaxed, U.S. production—currently at approximately 13 million barrels per day—could expand,” Mr. Arduin noted.

According to Mr. Arduin, the energy emergency scenario mentioned by Mr. Trump creates favorable conditions for expanding U.S. production. The impact of his measures on prices will also depend on decisions regarding sanctions on Iran and Russia, as well as relations with Venezuela, experts said.

A potential decline in oil prices could challenge Brazil’s trade balance, according to Mr. Arduin. Oil became Brazil’s top export item in 2024, with exports totaling $44.8 billion—a 5.23% increase from 2023—accounting for 13.3% of the country’s total shipments, per the Ministry of Development, Industry, and Trade (MDIC).

“The Brazilian trade balance, currently benefiting from higher prices and increased oil output, could face difficulties,” Mr. Arduin pointed out. If prices fall, Brazil would need to significantly ramp up production to maintain oil’s contribution to the trade balance—a challenging task without investments in expanding reserves.

Brazil’s oil production is projected to reach 3.6 million barrels per day by 2025, a 6% increase from the 2024 average of 3.4 million barrels per day, according to the Brazilian Institute of Petroleum (IBP).

As global forums discuss climate change mitigation, Mr. Trump’s statements contradict the global agenda. Mr. Oddone, currently the CEO of Brava Energia, believes Mr. Trump’s actions could slow the energy transition. “His measures will likely cool renewable energy plans, especially in areas with strong U.S. influence,” Mr. Oddone said. In addition to declaring the exit from the Paris Agreement, the U.S. President is expected to roll back environmental regulations governing oil activities.

Brazil’s Environment Minister Marina Silva, who leads the government’s environmental policy under President Lula, expected strong rhetoric from Mr. Trump. In a statement, Ms. Silva said Mr. Trump’s speech confirmed pessimistic forecasts about upcoming challenges. “His initial announcements contradict efforts for energy transition, climate change mitigation, and the promotion of renewable energy,” Ms. Silva remarked. She described the coming times as “challenging” but emphasized the importance of information, commitment to life, and political negotiation.

The Brazilian government believes President Trump’s measures will be tempered to avoid harming the U.S. economy. Officials close to Ms. Silva noted that formally withdrawing from the Paris Agreement requires a year’s notice, limiting its impact on the upcoming COP30 climate conference, scheduled for November in Belém, Pará.

Brazil’s environmental team is confident that the fight against climate change will have broad international support, particularly from the European Union and emerging economies. That reinforces the notion that energy transition policies are an “irreversible path.”

Observers also anticipate resistance from U.S. state governors heavily invested in renewable energy sources such as wind and solar. These subnational actors may oppose Mr. Trump’s fossil fuel agenda.

Mr. Trump’s comments are expected to reverberate at the World Economic Forum in Davos, Switzerland, which began Monday (20). Energy Minister Alexandre Silveira, representing Brazil, was reportedly instructed by President Lula to position Brazil as a safe destination for renewable energy investments.

In Davos, Mr. Silveira will highlight opportunities in green hydrogen, biofuels, and solar and wind power—key government strategies to drive economic growth, job creation, and income generation. The minister, the sole high-ranking federal official attending the forum, will participate in a panel on Brazil’s energy market—on Tuesday (21)—and meet with international executives and delegations.

*By Kariny Leal e Rafael Bitencourt  — Rio de Janeiro, Brasília

Source: Valor International

https://valorinternational.globo.com/
/by

Amid crisis, Unimed Nacional to receive R$1bn capital injection

Regional Unimed units to aid Brazil’s largest healthcare operator contributing 10% of technical reserves to avoid intervention

01/20/2025

Unimed Nacional, a healthcare plan operator with 2 million clients nationwide, has reached an agreement to receive a R$1 billion capital injection from 300 regional cooperatives in Brazil. This move aims to balance its accounts and stave off an “intervention” by the National Regulatory Agency for Private Health Insurance and Plans (ANS).

The regional Unimed units will disburse 10% of their technical reserves this year. This is the first time local medical cooperatives are required to use their own funds to rescue Unimed Nacional—the largest in the sector, which has amassed a net loss of nearly R$1 billion between 2023 and the first nine months of 2024, Valor has learned.

Under market rules, local cooperatives participate in Unimed Nacional, and cooperative member physicians have stakes in regional Unimed units. Thus, when profits are realized, the cooperative members receive earnings, and when there are losses, they are required to make contributions. Despite using the same brand nationwide, each regional Unimed operates independently.

The capital injection was contingent upon a change in leadership. A new election is expected, and a new Unimed Nacional leadership will likely be determined within this quarter. “I believe that with this capital injection and new management, the Unimed Nacional issue should be resolved. The situation will be solved this year,” a person familiar with the matter said.

When approached, Unimed do Brasil, the entity responsible for medical cooperatives, did not comment on the Unimed Nacional case.

The largest medical cooperative in Brazil, with revenue of R$6.5 billion by September, secured this funding, but its situation raises a red flag for the Unimed system—including around 300 cooperatives and 20 million healthcare plan users, accounting for nearly 40% of the entire market.

Industry experts interviewed for the report unanimously state that most medical cooperatives lack professional management, with leadership changes every three or four years and physicians maintaining their own schedules.

“Once elected, they continue with both roles, as a practitioner and a manager simultaneously, without an exclusive dedication,” said doctor José Carlos Abrahão, former president of ANS and the National Healthcare Confederation (CNSaúde).

Among the few cooperatives that boast a professionally managed leadership, are Unimed units in Belo Horizonte, Curitiba, Porto Alegre, and Seguros Unimed, which show positive figures, dividend distribution, and lower complaint rates.

According to ANS data, 109 Unimed healthcare and dental plans faced operational losses from January to September 2024—combined, they total 7 million clients. Considering net loss (including financial revenue), 69 ended in the red. Under the sector’s rules, healthcare operators are required to have reserves in case of bankruptcy, and many only achieve a positive bottom line through financial revenue.

Currently, the most emblematic case is Unimed Ferj, which represents all Unimed units in the Rio de Janeiro state and took over Unimed-Rio’s portfolio last year. Its financial statements do not post a deficit, but this comes at the cost of delayed payments to physicians, hospitals, and other healthcare facilities, with debts generated in 2024 already reaching R$400 million (considering Unimed-Rio’s liabilities, the debt is around R$2 billion). In nine months, Ferj recorded revenue from health plan subscriptions of R$2.9 billion, while expenses for payments to healthcare facilities amounted to R$1.9 billion—a R$1 billion deficit. The margin in the sector is tight. For comparison, Unimed Porto Alegre also had revenue of R$2.9 billion, but medical expenses were nearly R$2.5 billion.

“Just because the ownership has changed doesn’t mean everything will improve. Ferj lacks the expertise to manage a portfolio of that size. I believe the regulator [ANS] should have been stricter, as the issue has persisted for many years,” said another person familiar with the matter. The crisis at Unimed-Rio has dragged on for over a decade, with public accusations of fraud in previous managements.

In December, ANS and Unimed FERJ reached a new Term of Commitment, granting FERJ until March 2026 to resolve issues of supplier payments, provision regularization, and complaints. Among major healthcare operators, FERJ leads the regulatory agency’s complaint index, with an indicator of 448.7 compared to 143 for the second place, Unimed São Gonçalo-Niterói. This new agreement did not have the support of the Prosecution Service, Public Defender’s Office, and other Unimed units, as happened with the 2016 agreement, which was not fulfilled.

FERJ said that the commitment term does not provide extended deadlines for adjustments. It adds that it is a document that formalizes operational monitoring and commitments then assumed as provided by law and imposes a fine in case of non-compliance. FERJ also argued that 65% of the R$1.6 billion debt has been renegotiated, with payments up to date. Regarding the delay in payments to physicians, it noted a cash flow issue in December.

Other emblematic cases also involve mismanagement, a problem reported for many years. One such case is Unimed Paulistana, which served 740,000 clients in the São Paulo capital and closed in 2015. This cooperative was created to replace Unimed São Paulo, which also went bankrupt years earlier. Paulistana’s clients shifted to the insurance company, FESP, and Unimed Nacional, currently facing issues. Currently, the city of São Paulo—the largest market in the country—does not have its own Unimed.

In 2023, Unimed Vitória (Espírito Santo) lost R$145 million by investing a significant portion of its reserves in the Infinity fund, which failed. The investment was maintained even after the Brazilian Financial and Capital Markets Association (ANBIMA) disqualified the asset manager in December 2022. The new management that took over the medical cooperative after this incident stated that it “has been acting with austerity and agility in all its actions, especially in the financial sphere,” and that the loss was recorded in the third quarter of 2024’s financial statements.

Last year, the Federal Prosecution Service of Mato Grosso initiated investigations into possible misconduct at Unimed Cuiabá during the 2019-2023 management period. According to the Federal Prosecution Service, “indications of illegal practices related to the financial and administrative management of the entity were identified, including the submission of documents with serious accounting irregularities to ANS, which concealed a deficit of around R$400 million in its 2022 balance sheet.”

Unimed do Brasil reported that “the Unimed System shows operational performance above the market, with 63% of medical cooperatives posting positive results, compared to 51% of healthcare operators in other modalities.”

*By Beth Koike, Valor — São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

St George Mining secures niobium sales deal

Fangda commits to purchasing at least 20% of niobium output from the Araxá Project in Minas Gerais, with upfront payment to St George

01/20/2025

Australian mining company St George and China’s Liaoning Fangda Group, one of the world’s largest steel producers and heavy mining equipment manufacturers, signed a memorandum of understanding to collaborate on the development of a niobium and rare earth elements extraction project in Araxá, Minas Gerais. St George expects to finalize similar agreements in the coming weeks.

Under the agreement, Fangda has committed to purchasing at least 20% of the niobium output from the Araxá Project, providing upfront payments to support the project’s financing. Production, projected to begin in 2027, is expected to reach 5,000 tonnes of niobium annually. Thiago Amaral, St George’s director in Brazil, noted that Fangda also manufactures mining equipment that could be utilized at the Araxá site, located adjacent to CBMM’s mine. Additionally, Fangda will provide technical consultancy and support for the mine’s development and construction.

The deal took approximately four months to negotiate. “As a private company with significant niobium consumption, Fangda proved to be the ideal partner for this process,” said John Prineas, executive chairman of St George Mining.

Mr. Prineas noted that discussions with other potential buyers are ongoing, with plans to secure more niobium pre-sale agreements in the coming weeks. In addition to Fangda’s commitment, St George has a similar deal with SKI HongKong Limited (SKI), which also involves pre-purchasing 20% of the Araxá Project’s niobium output.

The pre-sale agreements come as a strategic solution for St George, which has faced difficulties raising funds.

Last week, St George announced commitments to raise A$20 million in a new share placement on the Sydney Stock Exchange. The funds will be used to pay for the Araxá Project.

The Araxá Project encompasses three licenses owned by Itafos Araxá Mineração e Fertilizantes, a subsidiary of Itafos. In August 2024, St George signed a binding agreement to acquire the project for $21 million plus a 10% equity stake in St George. Of the total, $10 million has already been paid, with $6 million due by May 2025 and the remainder by February 2026.

St George aims to produce 5,000 tonnes of niobium annually by 2027. For comparison, CBMM, the global leader in niobium production, processes 150,000 tonnes annually.

To advance the project, St George will conduct additional drilling to evaluate the mine’s resources, with only 10% of the area currently explored. The next phase involves establishing an industrial complex, estimated to cost R$2 billion. Financing for this phase will rely on loans and additional pre-sale agreements for niobium.

The primary product will be ferroniobium, although the company is also considering producing niobium oxide. The Araxá mine contains reserves of rare earth elements, which St George also plans to exploit.

Mr. Prineas emphasized that the company does not intend to compete directly with CBMM, which dominates 80% of the global niobium market and is controlled by the Moreira Salles family. “Our goal is to meet the demand currently unmet by CBMM and supply the market,” Mr. Prineas said.

*By Cibelle Bouças  — Belo Horizonte

Source: Valor International

https://valorinternational.globo.com/
/by

Agribusiness faces uncertainty over impact of Trump’s return on trade

Industry anticipates intensified U.S.-China trade tensions, but implications for Brazil remain unclear

01/20/2025

Four years after concluding his first term as president of the United States, Donald Trump has returned to office. Since his victory in November last year, Brazil’s agribusiness representatives have been evaluating the potential consequences of a renewed trade war between the U.S. and China.

In 2018, Trump imposed tariffs ranging from 10% to 50% on hundreds of Chinese imports, including agricultural and other products. Beijing retaliated by restricting imports of U.S. goods. These measures ultimately benefited certain segments of Brazilian agribusiness, such as the soybean sector, which gained market share in China due to the tariffs imposed on U.S. soybeans.

Experts consulted by Valor indicate that the direction of U.S. trade policy under Mr. Trump’s second term is still uncertain. “First, we need to see if Trump follows through on the 100 measures promised for inauguration day. Then, we need to analyze and understand those announcements. Without concrete details, it’s difficult to assess the direct impact on agribusiness,” said Marcello Brito, professor and technical coordinator at the Dom Cabral Agroenvironmental Foundation.

Despite the lack of clarity regarding Mr. Trump’s trade policies, Mr. Brito believes there will be no immediate disruption to the agricultural trade flow between Brazil and the U.S. In 2024, the U.S. was Brazil’s second-largest importer of agricultural products, with purchases rising 23% year-on-year to $12.1 billion, according to Brazil’s Ministry of Agriculture. Green coffee sales led the way, surging 67.6% to $765 million.

“It’s not feasible for the U.S. to suddenly impose tariffs on Brazilian coffee without having the capacity to replace what they might stop importing. Any tariff increases will be applied cautiously, targeting products with minimal impact on domestic demand,” Mr. Brito assessed.

The professor noted that a potential new trade war between the U.S. and China may have a limited effect on Brazil’s agricultural exports. “Last time, Brazilian agribusiness benefited because a large gap opened in the Chinese market,” Mr. Brito said. “But I don’t think that will happen again. There’s no longer room for a significant increase in export volumes.”

While the specifics of any new trade dispute remain unknown, global market conditions have shifted since 2018. For this reason, Mr. Brito expects limited repercussions from a more aggressive U.S. trade policy targeting Brazilian exports.

“In this second term, Trump faces a geopolitically different world. Beyond the lack of unoccupied market space, geopolitical disturbances like wars have already been factored into prices, and trade has adjusted accordingly,” he added.

Chris Trant, head of agriculture at U.S.-based consultancy HedgePoint Global Markets, suggested that Brazil will continue to dominate China’s grain supply. In 2023, China imported 105 million tonnes of soybeans, 75% of which came from Brazil.

“Trump’s proposed tariffs may create volatility in the grain market, but U.S. farmers are less dependent on China thanks to strong domestic demand. Meanwhile, China has reduced its reliance on U.S. soybeans by focusing on Brazil. A critical issue will be whether Trump reduces support for biofuel and renewable energy production,” Mr. Trant said.

The potential introduction of new policies favoring the oil industry, as seen during Mr. Trump’s first term, could impact the grain market, especially corn, noted Tiago Medeiros, Brazil director at U.K.-based trading firm Czarnikow. “Trump will aim for U.S. energy self-sufficiency, which means increasing not just oil exploration but also domestic ethanol production, particularly in California,” Mr. Medeiros said. In the U.S., corn is the primary feedstock for ethanol production.

*By Paulo Santos  e Camila Souza Ramos — Campina Grande (PB), São Paulo

Source: Valor International

https://valorinternational.globo.com/
/by

Under pressure, government revokes Pix oversight rule

After wave of fake news, Lula administration withdraws regulation targeting transactions above R$5,000

01/17/2025

Facing a surge of misinformation about taxes on the popular Central Bank’s instant-payment system, known as Pix, the Lula administration revoked on Wednesday (15) a regulation from the Federal Revenue that had caused political embarrassment. The rule sought to increase oversight of monthly transfers exceeding R$5,000 made by individuals. In a damage-control effort, the government also issued a provisional presidential decree (MP) to reaffirm the free nature of Pix and equate the instant payment system to cash transactions.

The announcement came after President Lula summoned Finance Minister Fernando Haddad, Federal Revenue Secretary Robinson Barreirinhas, and Attorney General Jorge Messias to the Planalto Palace to address growing public dissatisfaction. Newly appointed Communications Minister Sidônio Palmeira also influenced the decision to revoke the rule.

“People distorted an act of the Federal Revenue,” Mr. Barreirinhas said. “We decided to revoke this measure. The rule turned into a weapon for criminals. The ‘Revenue’ will not tolerate its name being used for scams,” he added.

Mr. Haddad said the decision to issue an MP, emphasizing that the measure reinforces existing legislation ensuring Pix remains free. “Pix is protected by confidentiality, like any other payment method,” he said.

The MP will also guarantee that Pix payments are treated like cash, bank transfers, or checks, prohibiting “criminals” and businesses from charging fees for such transactions. “We’re ensuring by law that if Pix is available, buyers pay the same amount as they would with cash,” Mr. Haddad added.

As of the publication of this article, the measure had not yet been published in the “Official Gazette of the Union.”

The Finance Minister noted that the Central Bank, which created Pix, was consulted on the matter. He dismissed claims that a decline in Pix transactions in January was due to the misinformation campaign, attributing the drop to seasonal factors consistent with previous years.

The government’s U-turn followed widespread criticism and pressure from various sectors, including evangelical groups often critical of Lula administration.

Sources told Valor that pastors from different neo-pentecostal denominations contacted government intermediaries, warning that the controversy was reaching low-income communities, potentially eroding support for the Lula government.

The issue resonated with evangelicals partly because many churches rely on Pix for collecting tithes, the financial contributions made by congregants. In response, Mr. Lula’s aides worked with these influencers to mitigate the crisis’s impact.

Combating misinformation

Despite revoking the rule, the president and ministers discussed launching a new public campaign to counter misinformation about Pix. The effort may build on initiatives by Empresa Brasil de Comunicação (EBC) on social media.

During the announcement, Mr. Haddad criticized opposition figures and members of former President Jair Bolsonaro administration. “We revoked the rule to uproot this lie,” he said, referencing plans by former Finance Minister Paulo Guedes to propose a financial transaction tax, which never materialized.

Mr. Haddad also took aim at Senator Flávio Bolsonaro, who has faced allegations of embezzlement through kickback schemes. “The senator’s kickback schemes were uncovered because authorities flagged suspicious financial movements. Bolsonaro’s supporters can’t complain—they were caught by the Revenue,” Mr. Haddad said.

In response, Senator Bolsonaro issued a statement denying wrongdoing and criticizing the Lula administration, declaring, “I have a clean record.”

Attorney General Jorge Messias announced that he had directed the Federal Police to open an investigation to identify those behind the fake news campaign about Pix taxation. Mr. Messias also noted that authorities had detected “abusive practices in consumer relations” involving Pix and said the National Consumer Secretariat was being tasked with addressing potential violations.

Finally, the government plans to involve state governors in standardizing regulations related to Pix, aiming to prevent misuse and ensure consistency across the country.

*By Estevão Taiar, Renan Truffi e Fabio Murakawa – Valor — Brasília

Source: Valor International

https://valorinternational.globo.com/
/by

Debt relief plan sparks tensions between government and states

Governors of Rio, Minas Gerais, and Rio Grande do Sul threaten to reject the program

01/17/2025

A day after President Lula signed into law the State Debt Payment Program (PROPAG) with key vetoes, tensions between the federal government and state administrations escalated on Wednesday (15). While the National Treasury defended the program, opposition governors sharply criticized the changes.

The harshest criticism came from governors Cláudio Castro (Rio de Janeiro), Romeu Zema (Minas Gerais), and Eduardo Leite (Rio Grande do Sul). Leading opposition states and some of Brazil’s largest debtors, these governors oversee administrations under the Fiscal Recovery Regime (RRF), established in 2017 to assist states in severe financial distress.

According to the presidency, Mr. Lula vetoed provisions that could impact the federal government’s primary fiscal balance. One of the vetoed measures would have allowed entities joining PROPAG to be exempt from meeting the targets and obligations of the Fiscal Recovery Regime. This veto was considered the most significant by the states.

Introduced by Senate President Rodrigo Pacheco and approved by Congress, PROPAG aims to renegotiate state debts with the federal government. The program allows payments over 30 years with real interest rates between 0% and 2% annually. The terms depend on asset transfers from states to the federal government, contributions to the Federative Equalization Fund, and investment commitments from state governments.

Governors now hope Congress will override the vetoes in the coming days. If lawmakers fail to restore the original provisions, governors have threatened not to participate in the debt renegotiation program.

States push back

Rio de Janeiro Governor Cláudio Castro said his state is evaluating whether to join PROPAG. He noted that Rio is reviewing its assets, including properties and credits, and exploring alternatives such as creating a real estate fund to address its nearly R$200 billion debt. “We’re conducting a thorough analysis to see how far Rio can go under this new reality without jeopardizing salaries, public accounts, or anything else,” Mr. Castro said during a press conference at the Guanabara Palace.

Mr. Castro described the vetoes as “disloyalty” and “100% political,” arguing they disadvantage states governed by Mr. Lula’s political opponents. “This isn’t a political war—it’s a federative issue. But I’m certain there’s a strong political component in the federal government’s stance,” he said.

Minas Gerais Governor Romeu Zema said his state, with debts of R$163 billion, will not join PROPAG if the vetoes remain. “We hope these vetoes are overturned. Otherwise, this plan won’t work—it’ll be worse than what we already have. If it remains as mutilated as it is, we won’t participate because it’s worse than the RRF,” Mr. Zema said. He also noted that he is coordinating with Governors Eduardo Leite, Cláudio Castro, and Ronaldo Caiado (Goiás) to lobby Congress to overturn the vetoes.

The National Treasury dismissed the governors’ criticisms, arguing that they do not reflect the approved legislation. National Treasury Secretary Rogério Ceron emphasized that states can remain in the RRF while joining PROPAG. Mr. Ceron estimated that the program would cost the federal government around R$20 billion if all states participate.

Despite the short-term fiscal impact, Mr. Ceron said the program provides long-term solutions for state debt, enabling resources to be redirected to areas like education through savings on interest payments.

He said that states remaining in the RRF while joining PROPAG would retain benefits such as federal guarantees for loans with private or multilateral institutions. However, they would continue to face strict spending limits tied to inflation. States leaving the RRF would lose federal guarantees but gain more flexibility with less restrictive spending rules.

“This program resolves debt issues for all states willing to join PROPAG. There might be short-term pressures for states leaving the RRF, but they have the option to stay and many have accumulated reserves to manage their obligations,” Mr. Ceron said.

Rio Grande do Sul’s Finance Secretary Pricilla Santana said the state will not join PROPAG due to Mr. Lula’s vetoes, citing increased fiscal burdens, especially after 2024’s devastating floods. “Rio Grande do Sul doesn’t have the economic or financial capacity to join PROPAG—it’s not in our interest,” Ms. Santana said.

She added, “My pragmatism dictates that I must address the state’s finances based on what is currently certain and concrete: Complementary Law 206 and the RRF. Politically, I know the governor will work hard to overturn the vetoes, and I hope for that outcome.”

*By Jéssica Sant’Ana, Guilherme Pimenta, Paula Martini, Victoria Netto e Cibelle Bouças  — Brasília, Rio de Janeiro, and Belo Horizonte

Source: Valor International

https://valorinternational.globo.com/
/by

Drought, intense heat worry soybean farmers in southern Brazil

In some areas, weather conditions may impact crop yields

01/15/2025

Prolonged dry spells in key soybean producing regions of southern Brazil are raising concerns among farmers about the performance of the 2024/25 harvest. While crops in Paraná are in their developmental stages, planting in Rio Grande do Sul is nearing completion amid rising temperatures that could surpass 40°C in the coming days.

In a crop monitoring bulletin released earlier this week, Brazil’s National Supply Company (CONAB) reported that soybean fields in Rio Grande do Sul are already feeling the impact of a drought lasting up to 40 days in some areas. In Paraná, dry conditions are affecting crops in their reproductive phase. Nevertheless, CONAB has so far maintained its forecast for the country’s total soybean harvest.

In Campo Mourão, northwest of Paraná state, farmer Wallace Lopes told Valor that his soybean fields have seen no rain for 20 days. “My average yield is 90 sacks per hectare, but I’m forecasting just 60 sacks this season. If it doesn’t rain soon, I think yields will drop to 30 sacks. The plants are stunted due to the heat and will likely lose productivity,” he said.

In Cascavel, western Paraná, where soybean cultivation covers nearly 100,000 hectares, the drought has already taken a toll, according to Paulo Cezar Vallini, director of the local rural union. He estimates a 10% drop in the harvest, which could reach up to 15% in some areas of the municipality. Initial projections put average productivity at 63 sacks per hectare.

Further west in Palotina, the lack of rain is also expected to impact yields, said Edmilson Zabott, president of the city’s rural union. “We’re facing a worrying situation with soybean crops. Farmers here initially expected yields of 70 to 75 sacks per hectare, but now we’ve adjusted that down to 50 to 55 sacks,” Mr. Zabott said.

He noted that rainfall stopped just before Christmas, a critical period for soybean crops requiring water for grain filling. “We didn’t get the regular rainfall we needed, and the heat has been unusually intense,” he said.

Despite farmers’ concerns, Carlos Hugo Godinho, an agronomist with Paraná’s Department of Rural Economics (DERAL), said it is still too early to assess potential losses in the state’s soybean production.

“The current conditions are considered very good overall. The drought’s effects don’t seem alarming for now, as crop maturation is generally uniform,” Mr. Godinho said. However, he acknowledged the situation could change, as widespread rainfall in the state is not expected until January 17.

The northern and western regions of Paraná, where temperatures are higher and rainfall scarce, remain the most concerning. “We’ll have a clearer picture later this week, and it’s possible the conditions recorded initially could worsen,” Mr. Godinho added.

In Rio Grande do Sul, insufficient soil moisture is delaying soybean planting. Rising temperatures are exacerbating the situation.

In areas such as the Western Border, northwest, and northern regions of the state, the lack of rain has stalled planting, which has reached 98% of the planned area. The state’s Technical Assistance and Rural Extension Company (EMATER/RS) has already noted losses in potential productivity.

“I’ve visited some parts of the state, and losses are evident in microregions, expanding with each rainless day. The combination of dry weather and high temperatures is affecting soil moisture, creating challenges even for irrigated areas,” said Alencar Rugeri, technical director of EMATER/RS.

However, Mr. Rugeri emphasized that these conditions are not uniform across the state. “In the Western border, some fields still show good potential. While some areas haven’t seen rain for 40 days, others received significant rainfall,” he said.

In Dom Pedrito, in the far south of the state, the lack of rain has not yet led to soybean losses, according to José Roberto Pires Weber, president of the local rural union. “We haven’t had rain for over 30 days. This could lead to productivity losses, but it’s premature to say for sure. There’s still time for recovery if it rains soon,” Mr. Weber noted.

Mr. Rugeri added that high temperatures are particularly detrimental to crops in the grain-filling stage, which accounts for 25% of the state’s soybean plantings. The productivity of the remaining 75% is still undetermined.

While weather forecasts predict continued heat, Mr. Rugeri urged caution before concluding whether the state’s projected harvest of 21.65 million tonnes will be achieved.

“We’re at a critical point for crop development. It’s impossible to determine the final size of the harvest now. While the outlook is challenging, there’s still room for improvement,” he said.

*By Paulo Santos  e Carolina Mainardes  — Campina Grande (PB), Ponta Grossa (PR)

(Marcos Fantin contributed reporting)

Source: Valor International

https://valorinternational.globo.com/
/by