The median estimate from 26 consultancies and financial institutions surveyed by Valor Data expected a 0.6% decline in the period
11/10/2024
Core retail sales volumes dropped 0.3% in August compared to July, in seasonally adjusted terms, according to the Monthly Survey of Trade (PMC) released by the Brazilian Institute of Geography and Statistics (IBGE) on Thursday (10).
The decline was smaller than anticipated, as the median estimate of 26 consultancies and financial institutions polled by Valor Data was a 0.6% drop, with projections ranging from a 1.8% fall to a 0.2% rise. In July, core retail sales had advanced 0.6% compared to June.
Year-on-year, core retail grew 5.1% compared to August 2023. The sector has shows a 4% increase in the 12 months through August and a 5.1% rise in 2024.
The 5.1% gain year-on-year was higher than expected. The median forecast was a 4.1% rise, with projections ranging from a 2% to 5.7% increase.
Core retail’s nominal revenue remained stable in August compared to July. Year-on-year, it rose 9.8%.
Sales declined across most of the core retail sector in August, with seven of the eight activities surveyed by the PMC reporting drops compared to July.
PMC data also show that five out of eight activities saw year-on-year growth compared to August 2023. Overall, core retail grew 5.1% in this comparison.
From July to August, the following segments experienced declines: personal and household goods (-3.9%); books, newspapers, magazines, and stationery (-2.6%); office, IT, and communication equipment (-2%); furniture and appliances (-1.6%); textiles, clothing, and footwear (-0.4%); fuels and lubricants (-0.2%); and hypermarkets, supermarkets, food products, beverages, and tobacco (-0.1%).
The only positive outlier was the pharmaceuticals, medical, orthopedic products, and cosmetics segment, which grew 1.3% between July and August 2024.
Year-on-year, core retail grew 5.1% from August 2023, with a 4% increase in 12 months and a 5.1% rise in 2024 — Photo: Gabriel de Paiva/Agência O Globo
Capital flight from Brazil has not yet impacted local currency significantly, but it is restricting gains
10/11/2024
Sérgio Goldenstein — Photo: Carol Carquejeiro/Valor
U.S. dollar outflows from Brazil through the country’s financial account totaled $52.4 billion between January and September, marking the second-largest outflow for the period in history. The negative financial flow this year is on track to become the worst ever, surpassing 2020, when the capital flight was significant due to the pandemic’s impact.
In addition to higher U.S. interest rates and the appeal of its stock market driven by artificial intelligence companies, which have affected emerging markets, Brazil faced more structural outflows linked to Brazilian investments abroad, spending on crypto assets, and sports betting.
These dollar outflows through the financial account have curbed the gains the Brazilian real could have achieved from strong export inflows. For now, the net balance of the foreign exchange flow remains positive, preventing pressure on the local currency. However, this could change by the end of the year.
While there is still one quarter remaining, a reversal of robust outflows seems unlikely. If another $2 billion leaves between October and December, the financial flow this year would become the largest outflow in history, surpassing the 2020 record.
Historical data shows that the last months of the year, particularly December, are marked by a consistent withdrawal of dollars from the country, driven by multinational remittances to their headquarters and dividend payments abroad.
“We are likely to see a larger financial outflow this year than in 2020 because, at the end of that year, there was a sense that the pandemic was coming to an end—which we later saw wasn’t the case—and that led to an inflow of dollars in November, which helped offset the negative flow of the period,” said Iana Ferrão, an economist at BTG Pactual. “In November 2020, there was a $5.5 billion inflow through the financial account, and in December, there was a relatively low outflow of almost $5 billion for that month.”
Data from Brazil’s Central Bank shows that in the last quarter of 2020 the financial account in contracted foreign exchange was negative by $291 million. However, it’s worth noting that the historical average for the fourth-quarter foreign exchange flow is an outflow of $5.2 billion through the capital account, dating back to 1982, when the Central Bank’s historical series began. Looking at more recent figures, the outlook is even worse: in the last three years (post-pandemic stress periods), there was an average outflow of $11.2 billion from the financial account in the last quarter.
“The months of November and December are characterized by stronger capital outflows through the financial account, so this outflow we’ve seen so far is likely to continue,” said Andrea Damico, CEO and chief economist at consulting firm Buysidebrazil. “At this time of year, we typically face two pressures: there’s the more cyclical outflow driven by year-end seasonality, but also a more structural outflow that has been growing in recent years, linked to Brazilian investments abroad, spending on streaming, sports betting, and crypto.”
As reported by Valor, the pace of dollar outflows from Brazil due to crypto asset purchases and sports betting has recently drawn the attention of market participants. There is growing concern that this capital flight could affect not only Brazil’s external accounts but also the local currency, which is already being held back by capital outflows.
Warren Investimentos Chief Strategist Sérgio Goldenstein noted that for now the overall foreign exchange flow is positive from January to September, indicating that despite the strong outflow from the financial account, the commercial account has seen higher inflows. “Obviously, if the financial outflow had been weaker, the real would be stronger,” he said. “Looking at the overall picture, for now, the foreign exchange flow hasn’t hurt the exchange rate, because it’s positive by around $6 billion.”
The issue is that the buffer provided by the commercial flow to Brazil’s real could shrink by year-end, also due to seasonality. It’s common for dollar inflows from exports to be more concentrated in the first half of the year, when most soybeans are shipped. As a result, if the negative trend in the financial account continues, weaker inflows through the commercial account expected in the last quarter could push the 2024 foreign exchange flow toward one of the most negative in history, explained Ms. Ferrão of BTG Pactual.
“The commercial flow, which has been supporting the foreign exchange flow, is likely to weaken by year-end due to seasonality and lower commodity prices compared to last year,” Ms. Ferrão said. “Given the difficulty in estimating the financial flow, unless there is a significant increase in foreign direct investment and portfolio investment, we could see a substantial outflow of dollars in this last quarter, which may put pressure on the exchange rate.”
There are expectations of capital inflows through portfolio investments, particularly in fixed income, due to the prospect of a higher Selic rate in Brazil and the monetary easing in the U.S., which would widen the interest rate differential between the two countries.
“Central Bank data shows that August saw more positive dollar inflows through portfolio investments, with $2.6 billion coming in, mostly concentrated in debt securities,” said Mr. Goldenstein from Warren. “For now, it’s just an initial positive sign. We’ll have to see if this trend continues. In theory, with lower U.S. interest rates, there should be some reallocation to Brazil, but it will happen gradually—it won’t all come at the end of this year. The U.S. overnight rate will remain high, even with cuts.”
Ms. Damico from Buysidebrazil added that with lower U.S. interest rates, the search for risk assets grows, which also tends to benefit emerging markets and, therefore, the Brazilian stock market. But like Mr. Goldenstein, she doesn’t expect an immediate inflow of dollars into Brazil. “Structurally, there are factors that could support foreign portfolio inflows, but it’s not automatic—it won’t all happen by the end of the year. It will come gradually,” she said.
On the other hand, a factor that could exacerbate dollar outflows from Brazil at the end of this year is related to dividend payments and the domestic economy’s strength. With stronger economic activity and a tight labor market in Brazil, companies tend to see higher earnings, which, in theory, would increase the amount paid in dividends abroad. However, Mr. Goldenstein pointed out that the Brazilian real’s decline throughout the year means that Brazilian companies’ earnings will translate into lower dollar amounts by year-end. “There could be a decline in capital outflows due to the depreciation of the Brazilian real, but the flow won’t be much different from what we saw last year,” he said.
AGU is requesting information on measures taken to manage gambling and betting ads directed at minors
10/09/2024
Brazil’s Attorney General’s Office (AGU) has issued an extrajudicial notice to YouTube, TikTok, Kwai, and Meta (including Instagram and Facebook). The notice seeks information on the steps being taken to manage advertising related to gambling or betting that might be directed “by and for” minors.
The notice also inquires whether the platforms’ “terms of use” include specific rules for protecting minors and if there are designated channels for reporting inappropriate advertising on this issue. The AGU recalled that both the operation and advertising of these activities to individuals under 18 are prohibited by law.
“Considering specifically the advertising of games disseminated through digital platforms, there’s no doubt that those directed by and for minors are unequivocally abusive/illegal. This holds true whether the advertising comes from regulated companies or those in the process of regulation (fixed-odds betting firms) or from gambling (a criminal offense), as both the operation of these activities and their advertising are prohibited for children and adolescents, as evidenced by the following provisions of sports betting legislation, in addition to the entire protective legal framework for children and adolescents,” states the notification.
The notification further emphasizes the need to differentiate between fixed-odds betting firms, which are in the process of regulation in Brazil, and gambling, which is illegal and classified as a criminal offense.
According to the AGU, these notifications are part of an ongoing administrative process within the office, initiated following a request from the Ministry of Health regarding the topic of betting games and their impact on federal public policies, particularly those related to the mental health of the population.
The document notes that, according to the Department of Mental Health, Alcohol, and Other Drugs of the Ministry of Health, “Gambling Disorder” has been included in the International Classification of Diseases (ICD-11), showing similarities with disorders related to substance use.
When reached by Valor, YouTube , TikTok, Kwai, and Meta declined to comment.
According to a study by consultancy firm Kantar Ibope Media, online sports betting companies invested a total of R$2.3 billion in internet and TV advertising from January to August this year. Of this amount, R$960.3 million was spent on digital media advertising.
12-month inflation climbs 4.42%, according to IBGE data
10/09/2024
September sees 0.44% rise in consumer prices, falling short of expectations — Photo: Daniel Wainstein/Valor
Brazil’s official inflation rate, tracked by the Broad Consumer Price Index (IPCA), increased to 0.44% in September, following a 0.02% drop in August. In September 2023, the IPCA recorded a 0.26% rise. These figures were released on Wednesday by the Brazilian Institute of Geography and Statistics (IBGE).
The September rate was slightly below the median forecast of a 0.45% increase, gathered from 39 financial institutions and consultancies surveyed by Valor Data.
Over the 12 months leading up to September, inflation rose 4.42%, compared to 4.24% up to August. The median estimate by Valor Data was 4.43%, with projections ranging between 4.21% and 4.51%.
The 12-month IPCA result exceeded the core inflation target set by the National Monetary Council (CMN) and pursued by the Central Bank, which is 3% for 2024. However, it remained within the permissible deviation of 1.5 percentage points, either up or down.
From January to September 2024, the IPCA increased by 3.31%. During the same period in 2023, the cumulative rise was 3.50%.
Among the nine spending categories used to calculate the index, housing shifted from a 0.51% decrease to a 1.80% increase between August and September, driven by a 5.36% hike in electricity prices. Food and beverages moved from a 0.44% decline to a 0.50% rise. Transportation went from 0% to 0.14%, and health and personal care increased from 0.25% to 0.46%.
In negative territory were household goods (from 0.74% to -0.19%), personal expenses (from 0.25% to -0.31%), and communication (from 0.10% to -0.05%). Education rose less (from 0.73% to 0.05%) and clothing (from 0.39% to 0.18%).
The IBGE calculates Brazil’s official inflation based on the consumption basket of families earning between one and 40 minimum wages, covering 10 metropolitan regions, along with the cities of Goiânia, Campo Grande, Rio Branco, São Luís, Aracaju, and Brasília.
Spread of inflation
Inflation became more widespread among the general items that make up the IPCA in September. The so-called Diffusion Index, which measures the proportion of goods and services with rising prices, increased to 56.5%, the highest since May (57.3%), up from 56% in August, according to Valor Data calculations that consider all items in the basket.
Excluding food, one of the more volatile groups, the index fell from 61.7% to 54.7%, returning to levels similar to June (54.5%) by these measures.
Core inflation average
The average of the five core IPCA components monitored by the Central Bank saw a slight decline to 0.22% in September, from 0.24% in August, according to calculations by MCM Consultores.
In the 12-month accumulated IPCA, the average of the five core components adjusted slightly from 3.80% to 3.81%.
The annual inflation target set by the Central Bank is 3% for 2024, 2025, and 2026, always with a tolerance range of 1.5 percentage points above or below.
Growing distrust in fiscal policy, combined with the beginning of the monetary tightening cycle, has led to a sharp rise in real market interest rates, reflected in B-Series National Treasury Notes (NTN-Bs)—Brazil’s inflation-indexed bonds—which are now nearing the psychological 7% mark for some maturities. At Tuesday’s (8) weekly National Treasury auction, three-year bond (May 2027) rates hit 6.709%, raising concerns about the government’s increasing financing costs and worsening debt structure.
The recent spike in real market interest rates mirrors stress levels last seen in early 2016 during Dilma Rousseff’s administration.
“Brazil has experienced fiscal distortions and some uncertainty around the Central Bank, but the latter is being addressed,” said Luciano Rais, head of fixed income at Santander Asset Management. However, he warned that the fiscal risks continue to rise. “The current agenda is more focused on boosting revenue rather than cutting spending,” he added.
“The market is mainly suspicious of the structural side. While the deficit is a key concern, it’s being tackled with temporary revenue sources, whereas spending increases appear permanent,” Mr. Rais continued. He also noted that despite restrictive interest rates, economic growth remains strong, which is a concern for the Central Bank as it resumes its tightening cycle.
“The Central Bank’s rate hikes are impacting NTN-B and fixed-rate bond yields. Although longer-term NTN-Bs offer attractive yields, these higher rates don’t seem unjustified. Expected real interest rates will need to rise further,” Mr. Rais explained.
Ronaldo Patah, Brazil strategist at UBS Global Wealth Management, agreed that fiscal uncertainty and the recent monetary tightening have fueled the surge in NTN-B rates. He pointed out that while U.S. Treasury movements have been more restrained—with the real U.S. 10-year rate rising only slightly from 1.74% at the beginning of the year to 1.77% now—the Brazilian 10-year NTN-B rate has soared from 5.4% to 6.5%.
Mr. Patah added that even if the government meets its primary fiscal target for this year, lingering doubts over whether it can achieve a zero deficit next year are contributing to a roughly 100-basis-point increase in real interest rates as risk premiums become embedded in bond prices.
“Without new measures and relying on non-recurring revenues like this year, the expected deficit for 2024 is 0.8% of GDP—well short of the zero target,” warns Mr. Patah, noting the possibility that the government may need to revise its fiscal framework targets. Such a revision could worsen the perception among financial agents, potentially driving real interest rates even higher.
Mr. Patah points to two negative signals on the fiscal front: the government’s push to extend the gas allowance and its proposal to exempt individuals earning up to R$5,000 a month from paying income tax. However, he acknowledges that Moody’s upgrade of Brazil’s sovereign rating, with a positive outlook, might encourage the government to pursue fiscal balance to reclaim its investment-grade status.
Amid these challenges, Luiz Alberto Basqueira, partner and head of fixed income at Ace Capital, sees a negative bias in medium- and long-term real interest rates. His concerns center on Brazil’s public debt trajectory and the recent deterioration in its structure. “We don’t like the level of nominal interest or real rates, particularly in the medium and long term. This is a bias, and we are reducing our exposure to these parts of the curve,” he explains.
Mr. Basqueira also highlights potential external pressures on rates. He suggests that the U.S. Federal Reserve, which has started its monetary easing at a pace of 50 basis points, may not be able to deliver the number of rate cuts the market anticipates. Additionally, with Donald Trump remaining a frontrunner in the U.S. presidential race, Treasury yields could face upward pressure, which would likely spill over into the Brazilian market.
According to Mr. Basqueira, Ace Capital’s strongest conviction in the interest rate market comes from a more pessimistic outlook on inflation. “Beyond structural factors like strong economic activity, a tight labor market, exchange rate fluctuations, and unanchored inflation expectations, we see heightened risks linked to climate issues such as heat and drought. We are particularly pessimistic about food inflation, which we expect to reach 8% this year and 7% next year—well above market projections,” says Mr. Basqueira, adding that he favors long positions (betting on the rise) in short-term “implicit” inflation.
Mr. Basqueira also highlights that competition for funds with the credit market is another factor pressuring medium- and long-term real interest rates. “The demand for hedging from credit funds has contributed to the upward pressure on the real interest rate curve,” he explains.
Moreover, the substantial issuance of incentivized bonds has negatively impacted government bonds. “In addition to the competition, the government misses out on revenue due to the tax exemption for these bonds. They undeniably divert resources that could help finance public debt,” he notes.
As of last month, NTN-B issuances made up just over 10% of the total for the year, as the National Treasury has chosen to focus on selling post-fixed Financial Treasury Bills (LFTs), which are tied to the Selic, Brazil’s benchmark interest rate. This shift has raised concerns among market participants about the composition of the public debt.
“If the government believes that current interest rates are too high and expects them to fall, it makes sense to shorten the debt by selling LFTs, which are indexed to the Selic rate. In a rate-cutting cycle, the cost of the debt would drop quickly. However, if the debt is shortened and the government fails to regain fiscal credibility, the debt structure becomes more vulnerable,” warns Mansueto Almeida, chief economist at BTG Pactual and former Treasury secretary.
“You shift from long-term financing, like the NTN-B, to shorter-term financing with LFTs, which have a maturity of up to six years. This creates a more fragile debt structure,” explains Mr. Almeida. “Selling an NTN-B at a 6.5% interest rate is very expensive. If the government is confident it can take steps to demonstrate its commitment to fiscal policy and bring down that interest rate, it might make sense. But if those actions don’t materialize, if market doubts persist, and if long-term rates remain at this elevated level, the government will be adding to the fragility of its debt financing.”
Mr. Rais, from Santander Asset Management, adds that there is ongoing debate among market participants over whether the Treasury is facing a lack of demand for NTN-Bs or is simply unwilling to accept the high market interest rates. “If the Treasury has demand but chooses not to issue NTN-Bs due to the high rates, it may be a risky move to leave the debt more exposed to post-fixed rates,” Mr. Rais says, highlighting the potential risks if the Selic rate needs to rise further.
*By Gabriel Roca, Gabriel Caldeira, Victor Rezende — São Paulo
Profit is expected to rise nearly 20% this year, driven by a growing client base and a unified structure for the group’s 10 companies
10/08/2024
Gabriela Onofre — Photo: Divulgação
As one of the largest advertising and marketing groups globally, Publicis is seeing expanding revenue and profit in Brazil. Business trends indicate a 14% increase in revenue and an almost 20% jump in profit this year compared to last year. Led by Gabriela Onofre, with a more centralized structure and lower costs, the number of clients and the budget of some advertisers already in their portfolio have grown.
The journey to streamline the French group’s structure began 14 years ago. In 2010, then P&G marketing director Onofre faced the challenge of managing brand communications with five Publicis agencies. Frustrated by the lack of integration and the complexity of coordinating multiple operations, she approached the group for a more centralized approach. This led to the creation of a media planning hub to align and mediate P&G’s strategies.
In July of last year, Onofre returned to Publicis, this time invited to take on the role of Chief Executive Officer (CEO) of the group, a position previously unheard of in Brazil.
Over the past year, her mission has been to implement a unified structure for the group’s companies in Brazil, focusing on client needs and aligning with Publicis’s global standards.
This new phase represents almost a natural continuation of the initiative she championed over a decade ago, now on a much larger scale. “For me, as a client, it was obvious, but not for the agencies. The group began to listen more to client needs,” she notes.
According to Onofre, the strategy of investing in new services—in September, Publicis acquired Mars United Commerce, specializing in retail media, and in July, Influential, a marketing influence firm—was the key factor for the group assuming the position of the second largest advertising and marketing group globally last year, dethroning the Omnicom Group, which held the spot for decades.
In Brazil, the group, comprising 10 companies including five advertising agencies, is projected to end the year with a 14% revenue growth, in line with the 14% recorded in Latin America in the first half. The profit projection is an increase in the range of 20%.
Since Onofre’s arrival, Publicis has secured 16 new clients, including Heinz, Banco Inter, Decathlon, Barilla, Pfizer, and Ferrero, among others. The company also expanded its scope with existing clients like Nestlé, Bradesco, Claro, and P&G.
A new agency, Le Pub, was established in the group. An office relocation took place in June this year to bring together 1,150 employees from agencies Le Pub, DPZ, Leo Burnett, Publicis, and the group’s business units. Talent, with 350 employees, was excluded for now due to a recent relocation during the pandemic.
“The changes are taking effect. We restructured the agencies to make them more agile and unified the group culture into a single structure. Our goal is to have diverse operations and build this ‘Lego’ according to each client’s needs. We’ve also brought clients closer. They now visit the agency more often,” explains Onofre. The reorganization also reduced operational costs.
The new structure, strongly grounded in data and technology, uses automated tools to optimize media buying and allow for more precise campaign execution. “Data enriches the creative aspect. With it, we better understand our clients and their consumers, presenting more effective solutions,” states the CEO.
With a background in food engineering, Onofre expresses a passion for data. “You can’t take the engineer out of me. At P&G, where I spent 18 years, I used a lot of data. At Johnson & Johnson, I worked more with consumer emotions. Publicis is a blend of all these experiences,” she indicates.
In her first year at the helm of Publicis Brazil, there’s also a significant milestone: currently, 70% of the top leadership in the advertising and marketing group is composed of women. At the start of her leadership in July 2023, this figure was 30%.
This statistic includes leaders in operations, communication, marketing, media, and human resources, as well as the presidencies of business units and agencies. The group has 10 companies and employs 1,500 people in the country.
The CEO recounts facing prejudice when she took over at Publicis: “I’ve had a client request a man be present at a meeting right when I joined Publicis. In such moments, I try not to judge, as this behavior isn’t so different from what we see in society at large. My approach is to understand his viewpoint and how to change that perception. I believe these barriers break down as I demonstrate that I understand business as well as he does and when we deliver good results.”
Onofre observes that “while female leadership has always been an important issue, it became crucial with the weight of the position. This shift in proportion within the group happened naturally.”
“If I’m here today, it’s because both men and women recognized my potential and opened doors for me. Now, I feel it’s my responsibility to do the same,” she says.
Rate cuts in the U.S. expected to boost appetite for risk in emerging markets, focusing on liquid stocks
10/08/2024
Felipe Thut — Photo: Celso Doni/Valor
Three years after the last wave of initial public offerings in Brazil, investment banks have been meeting with privately held companies and potential candidates to re-enter the market starting in 2025, when the long drought of IPOs on the B3 stock exchange is expected to end.
The list of potential candidates is large, mainly comprising major companies. CantuStore (a vehicle accessories platform), BRK (sanitation), Inspirali (medical education), Compass (gas), and Aegea (sanitation) are seen as possible pioneers when the IPO window reopens.
The delayed rate cuts by the U.S. Federal Reserve pushed back the timeline for IPOs in Brazil. Domestically, uncertainty about the Brazilian government’s fiscal discipline also hindered a resurgence in offerings this year.
For this revival to happen in 2025, foreign investors are expected to play a key role in the IPOs, making new stock market debuts possible.
Felipe Thut, head of investment banking at Bradesco BBI, pointed out that just like during the IPO boom between 2006 and 2008, international investors are likely to account for most of the demand in these transactions. The Fed’s rate cuts should push capital back into emerging markets as investors seek higher-risk opportunities. During that earlier period, foreign investors bought around 70% of the IPOs in Brazil—a trend that reversed during the wave of 2020 and 2021, when low interest rates in Brazil and increased risk appetite drove substantial capital flows into local equity and multimarket funds.
However, Mr. Thut emphasized that to attract foreign capital, these operations must be large enough to ensure liquidity—an essential requirement for international investors. “On the downside, Brazil’s equity and multi-market fund industry is struggling. So, we’ll have to depend on foreign investors. On the upside, we expect foreign capital to flow into emerging markets as interest rates decline,” he said.
At a recent Bradesco BBI event in São Paulo, which brought together around 15 private companies, Mr. Thut noticed the strong interest from investors in meeting with these firms. “With resources being scarcer, they want to be more selective about where to invest,” he noted.
Mr. Thut also said that during these meetings, investors often use the opportunity to compare data and performance with companies already listed on the stock exchange. “It’s a chance for them to interact with firms they don’t have easy access to,” he said.
He mentioned that sanitation was among the most sought-after sectors, particularly after the privatization of Sabesp. Technology, retail, and services also drew significant attention from investors.
Events with private companies are common on B3, but since 2022, the scope has expanded, addressing new topics. Rafaela Vesterman, client relationship manager at the exchange, said that this year alone, 111 private companies have participated in activities, both in-person and online. Many of these companies had planned to go public during the last window, but their plans were derailed by increased market volatility. Discussions at these events cover topics like investor relations, diversity, and sustainability. Publicly traded companies are also invited to share their experiences on the road to the IPO and the realities of management after going public.
UBS BB hosted 100 Brazilian companies in New York, all of which are publicly traded, for meetings with over 200 foreign investors. The general sentiment was that while investors are cautiously optimistic about Brazil, there is room for resource allocation, especially as demand for assets outside the U.S. rises due to the Fed’s rate cuts. “With the long-term rates in the U.S. declining, investors are seeking higher returns in other regions,” said Anderson Brito, global head of investment banking at UBS BB.
Initially, the capital flow is expected to target the secondary market—already traded stocks. The next step will be the return of follow-on offerings, with some possibly occurring later this year, though most are still on hold. By 2025, the much-anticipated resurgence of IPOs is likely to materialize after a three-year hiatus. “We’re seeing many banks forming syndicates with companies eyeing the first half of 2025,” Mr. Brito said.
American investors are expected to once again dominate the offerings, as has been the historical average, but European investors are becoming more consistent participants in these transactions.
Bruno Saraiva, co-head of investment banking at Bank of America in Brazil, estimated that the IPO comeback may only occur in the second quarter of 2025. For him, investors are waiting for Brazil to present more positive news regarding public finances and a clearer narrative about the country, which is currently clouded by “too much noise.”
“Right now, Brazil isn’t on foreign investors’ radar,” Mr. Saraiva said. “We should benefit from capital flows to emerging markets with the Fed’s rate cuts, but we’ll remain sidelined until we resolve our fiscal challenges.”
CantuStore said it couldn’t comment on IPO plans due to regulations from the Securities and Exchange Commission of Brazil (CVM) and company policies. BRK confirmed that it is registered as a category A public company with the CVM, allowing it to access the capital markets. “The company continues to monitor market behavior based on opportunities,” it said in a statement.
Aegea, meanwhile, noted that an IPO is always a possibility but that there are no immediate plans to go public. “This decision depends on market conditions, the use of proceeds, and joint decisions with shareholders. Managing the company’s capital structure is a key part of our strategy, and accessing the public equity market is one option under consideration,” the company said.
Inspirali and Compass declined to comment on their plans.
Gilberto Kassab, president of the Social Democratic Party (PSD), believes that Governor Tarcísio de Freitas of São Paulo was the most influential political supporter in the state’s capital
10/08/2024
Gilberto Kassab — Photo: Edilson Dantas/O Globo
Gilberto Kassab, national president of the Social Democratic Party (PSD) and São Paulo’s secretary of government, celebrated his party’s success in this year’s elections, winning 878 mayoral races in the first round, including three in state capitals. Speaking to Valor, Mr. Kassab emphasized that the results showed the political center as the country’s dominant force. He also noted that those who tried to nationalize the election miscalculated, and pointed out that Governor Tarcísio de Freitas of São Paulo, from the Republicans Party, was the most influential political supporter in the state.
Mr. Kassab expressed confidence in Mayor Ricardo Nunes, from the Brazilian Democratic Movement (MDB), as the favorite in São Paulo’s runoff and expected him to secure most of the votes that went to businessman Pablo Marçal, from the Brazilian Labor Renewal Party (PRTB). However, he cautioned that “no election is won before the votes are counted.” When asked about Mr. Marçal’s endorsement of Mr. Nunes, he said now was the time to “bring together all the support.”
“The biggest mistake in this election was by those who believed the campaign would be nationalized, as it became clear that local issues and circumstances prevailed,” Mr. Kassab said. “The second mistake was by those who claimed the world was polarized and the political center would disappear—those people were proven wrong,” he added confidently.
“The center is larger than both the right and the left,” he continued, rejecting the label of “Centrão” typically applied to parties that support any government in power. Instead, Mr. Kassab defined the PSD as part of the political center, which also includes the MDB and the Brazil Union Party, in his view. “It’s clear that the center is the biggest political force in Brazil, larger than the Liberal Party (PL), Progressive Party (PP), and Republicans,” he said.
According to data from the Electoral Court, the combined votes of the PSD, MDB, and Brazil Union totaled 40.161 million, surpassing the 32.953 million votes obtained by the main right-wing parties (PL, PP, and Republicans). The left-wing parties (Workers’ Party, or PT, Brazilian Socialist Party, PSB, Democratic Labor Party, PDT, and Socialism and Liberty Party, PSOL) received a total of 21.156 million votes.
Mr. Kassab also observed that neither President Lula (PT) nor former President Jair Bolsonaro (PL) played decisive roles in São Paulo’s elections. “They did their part,” but both stepped back when they realized they weren’t essential in the state’s capital, he explained. “They might have been crucial in other cities, but not in São Paulo,” he concluded.
In this context, Mr. Kassab viewed Governor Tarcísio de Freitas as the main political force in São Paulo city. “He was very important, bringing a manager’s perspective, partnership, and the example of what would be good for the city, and he is highly approved,” Mr. Kassab observed.
Mr. Kassab sees Mayor Nunes as favored to win. “Marçal is a conservative candidate, and his voters are mostly conservative, right-leaning,” he noted, adding that São Paulo voters’ rejection of Congressman Guilherme Boulos (PSOL), who represents the left, was more significant.
He emphasized that the second round provides an opportunity to “show more, with more time, what has been done and what will be done, to present the team, and to have the right conversations at the right time with the right people.”
Mr. Kassab described Mr. Marçal as a figure who made his mark, garnered millions of votes, and is part of democracy, but noted that the social media influencer is not a politician by trade. “I’m not sure how long he’ll remain in politics,” Mr. Kassab said. When reminded that Mr. Marçal came close to making the runoff, threatening to edge out either Mayor Nunes or Mr. Boulos, he replied, “Almost, but not quite.”
He dismissed the idea that Mr. Marçal’s electoral performance posed a threat to traditional politics. “It’s not like that; nothing beats the work done by a manager. Ricardo [Nunes] is doing very well. No social media or digital mobilization can overcome the mayor’s accomplishments,” he stated firmly.
For the first time since 1992, when municipal elections were held after Brazil’s redemocratization, the MDB lost its position as the party with the most mayoral victories, electing 847 mayors—31 fewer than the PSD.
The PSD, led by Mr. Kassab, also reelected the mayors of Rio de Janeiro, Eduardo Paes; Florianópolis, Topázio Neto; and São Luís, Eduardo Braide. The party secured spots in runoffs in Belo Horizonte with Fuad Noman and Curitiba with Eduardo Pimentel.
The PSD made significant gains in regions led by its key figures. In São Paulo state, where Mr. Kassab led efforts to recruit mayors in recent years, the party elected 203 mayors—139 more than in 2020. In Minas Gerais, Senate President Rodrigo Pacheco nearly doubled the number of mayors, electing 140.
In Bahia, Senator Otto Alencar elected 115 mayors, six more than in the previous election. In Paraná, Governor Ratinho Júnior won in 162 municipalities, 33 more than four years ago, and is awaiting the second round in the capital.
Mr. Kassab dismissed criticism from opponents regarding the PSD’s control of three ministries in the Lula administration while being a key ally of the governor of São Paulo. He argued that the party remained neutral in the presidential election, though some branches, like those in Rio de Janeiro, Bahia, Minas Gerais, and Maranhão, campaigned for Mr. Lula while he supported Mr. De Freitas in São Paulo.
“It’s more than legitimate for them to be part of the federal government, just as it’s legitimate for me to be in the state government. We ask for votes to govern together,” Mr. Kassab explained. Now, he said, the PSD is preparing for 2026. “We dream of having our own presidential candidate,” he concluded.
The partners are clashing over management and control of the pulp producer in two ICC arbitrations and one at B3’s CAM, alongside ongoing litigation in regular courts
10/07/2024
— Photo: Anna Carolina Negri/Valor
A third arbitration in the Eldorado case, held in secrecy, has ordered the pulp producer to pay its shareholders, J&F Investimentos and Paper Excellence, the minimum mandatory dividend required by Corporate Law for 2023 within ten days, with continued profit distribution where applicable, until the end of the proceedings, Valor found.
In this latest development of the six-year dispute between the partners, the tribunal also ordered the freezing of Paper’s shares in Eldorado.
The decision, issued on Friday (4), comes from a newly formed arbitration tribunal at the International Chamber of Commerce (ICC), created last year at the request of J&F.
This is the second arbitration proceeding related to Eldorado at ICC Brazil. The first, initiated by Paper against J&F in 2018, resulted in a unanimous win for the Asian partner in 2021 but has been suspended since September 20 following a ruling by the Brazilian Court of Appeals for the Fourth Circuit (TRF-4). J&F is currently contesting the award in the court system.
Following Friday’s ruling, Eldorado will have to distribute up to R$560.5 million in profits—nearly half to each shareholder—in the coming days. This amount represents 25% of the pulp producer’s net profit of R$2.35 billion last year.
As reported by Valor in May, Paper, which owns 49.41% of Eldorado’s shares, voted at an April meeting to distribute 100% of the pulp producer’s 2023 net profit. However, J&F, which holds the majority on Eldorado’s board, allocated R$105 million for legal and tax incentive reserves while retaining the remaining R$2.24 billion. According to sources familiar with the dispute, Eldorado failed to distribute the required 25% of its profits to shareholders, as mandated by Brazilian Corporate Act.
Additionally, in a March 3 ruling, the arbitration tribunal prohibited Paper from transferring its shares in Eldorado—whether through sale or as collateral for financing—until the arbitration concludes. The tribunal also ordered Paper to reimburse J&F for any dividends received if J&F prevails in this dispute.
The two partners, J&F—owner of JBS—and Paper, controlled by Indonesian businessman Jackson Wijaya, have been locked in a legal battle over control of Eldorado since mid-2018. The company was valued at R$15 billion in the sale and purchase agreement signed in September 2017, but Paper has accused the Batistas of deliberately obstructing the purchase of the remaining shares.
After losing the first arbitration at the ICC, J&F initiated a new proceeding at the same tribunal, seeking to nullify the contract. The Batista holding company argues that Paper misrepresented facts when signing the agreement, alleging, among other points, that Paper failed to secure the necessary approvals from Congress and the National Institute of Land Reform and Colonization (INCRA) to finalize the transaction in Brazil.
This is the same argument supporting a popular lawsuit filed in May last year by Luciano José Bulligon, former mayor of Chapecó, with the Brazilian Court of Appeals for the Fourth Circuit (TRF-4), the appellate court for the South region. This lawsuit eventually led to the suspension of the first arbitration at the ICC. Mr. Bulligon is invoking legislation governing foreign purchases of rural land in Brazil in an attempt to annul J&F’s sale of Eldorado to Paper.
In addition to the two arbitrations at the ICC, Paper and J&F are also clashing at the Market Arbitration Chamber (CAM) of B3, where the dispute revolves around the management of Eldorado.
Paper declined to comment, and J&F had not issued a statement by the time this article was published.
In a statement to the market on Friday (3), Eldorado confirmed the order to pay the mandatory minimum dividends for 2023. The company also noted that if this third arbitration results in the annulment of the 2017 sale agreement, Paper will be required to return the dividends received to J&F. “Furthermore, the arbitration court prohibited shareholder CA Investment (Paper’s company) from transferring Eldorado shares it owns until a final decision is reached in the ongoing arbitration, which will be duly recorded in the company’s books,” the statement read.
Braskem to issue 10-year bonds, buy back notes due in 2081 — Photo: Divulgação/Braskem
Braskem has commenced a series of investor meetings on Monday to issue 10-year debt securities abroad. The company is also launching a buyback program for bonds issued in 2020 that are set to mature in 2081.
This issuance represents the longest-term debt for the company. The offering is being coordinated by Citi, Itaú BBA, Morgan Stanley, Santander, and SMBC Nikko, with Bank of America, BNP Paribas, Credit Agricole, Deutsche Bank, and Mizuho also participating.
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