Brazil’s first forest concession moves forward with consultation phase

Government intends to restore 15,000 hectares in Bom Futuro National Forest in Rondônia state

09/04/2024

The government expects to complete Brazil’s first public concession for forest restoration by the end of this year. This is also the first project to restore degraded lands financed through carbon credits, which could be an important test for the functioning of this mechanism. The goal is to restore 15,000 hectares in the Bom Futuro National Forest in Porto Velho, Rondônia.

Still in public consultation, the bid has attracted interest from private-sector companies and was well-received by the Indigenous community neighboring the territory. However, it still raises questions regarding oversight, land regularization, financing, and security.

As planned, the Bom Futuro National Forest (Flona) will be subdivided into blocks and handed over to the administration of companies. They will need to restore the land by bringing the vegetation as close as possible to the region’s original vegetation, said Renato Rosenberg, director of Concessions of the Brazilian Forest Service, an agency linked to the Ministry of the Environment and Climate Change.

The restoration of each degraded hectare in that forest is expected to require around R$20,000 for irrigation, soil recovery, and seedling planting. As a result, restoring the area would cost around R$300 million. Companies will be able to capture the carbon credits related to the new trees that will be planted and a portion of this revenue will go to the Brazilian state in the form of a concession fee.

Mr. Rosenberg said revenue is not the focus, though. “The government’s primary objective is not revenue generation and that’s why we are minimizing the concession fee.” Under the model being designed in partnership with the Brazilian Development Bank (BNDES), the proposal that offers the highest percentage of revenue—with a cap close to 15%—and a fixed payment at the time of contract signing wins. The financial equation, however, may vary according to non-mandatory actions that the project wants to encourage. “Investments in research and purchasing seedlings and seeds from Indigenous communities could be some of these actions. It’s not mandatory, but if they do it, they get a bonus,” he said.

Neighboring the Bom Futuro Flona, the Karitiana Indigenous community views the project’s arrival with optimism, both in economic terms and for the security of the demarcated territory, which occupies about 800 hectares. “We need to restore reforestation. We are suffering a lot from invasions by miners and loggers, and I think they [the concessionaires] can help monitor our region as well,” said Edilene Karitiana, one of the group’s leaders.

However, the format of the security scheme for the territory to be granted, which has a history of invasions and actions by land grabbers and organized crime, has not yet been defined. Without police power, concessionaire companies will need relevant support from the State to operate with some security in the area.

From the government’s perspective, part of the risk “is inherent to the business risk itself and is the same as in the case of a project in a private area,” said Mr. Rosenberg. “On the other hand, only the public power has police power. Therefore, part of this risk will be allocated to the granting authority,” he added, noting that the limits of each actor’s role will be discussed in the public hearings scheduled for this month.

The Karitiana people also see opportunities for selling seedlings. The supply of seedlings for restoration projects is one of the possible bottlenecks for the government’s goal of restoring 12 million hectares, as revealed to Valor in July last year by the president of the Brazilian Forest Service, Garo Batmanian. At the time, he estimated a demand of about 5 billion seedlings of various species. Production at that time was around 150 million seedlings per year.

In the case of concessions, according to Mr. Rosenberg, this risk is private and with little chance of problems. “They [concessionaires] will have a very comfortable maximum schedule to carry out the restoration. During this period, they will have time to organize the nurseries, whether vertical or horizontal,” he said.

One organization interested in participating in the bidding, re.green!, emphasizes that it already adopts partnerships with local communities in other projects, especially seed collection courses, an essential activity in seedling production. The company’s director of institutional relations, Mariana Barbosa, says that the Bom Futuro Flona could be a milestone for forest restoration in the country but notes that there are still questions to be answered.

“It’s a unique and innovative model. We see it as a positive agenda and have been studying the bids over the past few months. The current stage is precisely this: understanding how it will work, moving from a place of looking at opportunities to now seeing the project taking shape,” Ms. Barbosa said.

Mr. Rosenberg came out optimistic from the initial surveys with potential interested parties. Biomas, a company created in 2022 by Itaú Unibanco, Santander, Rabobank, Vale, Suzano, and Marfrig to operate in reforestation and conservation, is also interested in participating.

Natalia Renteria, director of Regulatory Affairs at Biomas, believes that the concession proposal “makes perfect sense” for the company. She reiterates that the success of a concession of this type can be a milestone for scaling restoration projects. “For a sector that is still in its infancy, it is very important. To scale in line with the country’s climate commitments, an economic model that stands on its own is necessary. And concessions fit into this. We are evaluating this opportunity and view the opening of this process very positively.”

The bid schedule includes a public consultation with Indigenous peoples confirmed for next Monday (9) at the central village of the Karitiana Indigenous Land in Porto Velho. On the 10th, the advisory council of the Bom Futuro Flona will meet, and the public hearing will take place the following day.

After these events, there will be a two-week period for clarifying doubts before forwarding the final version of the bid to the Federal Court of Accounts (TCU). The public spending watchdog has 75 days to analyze the material.

*Por Murillo Camarotto — Brasília

Source: Valor Inaternational

https://valorinternational.globo.com/
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Vibra prioritizes Petrobras brand renewal amidst growth strategy

CEO Ernesto Pousada outlines plans for expanding international presence and exploring new market opportunities

09/02/2024

Ernesto Pousada — Foto: Leo Pinheiro/Valor

Ernesto Pousada — Foto: Leo Pinheiro/Valor

Vibra CEO Ernesto Pousada said the company’s top priority is renewing the Petrobras brand across its network of fuel stations. According to him, internal research indicates that consumers identify strongly with the BR brand, particularly in segments like convenience stores (BR Mania) and oil change services (Lubrax).

However, the outcome depends on ongoing discussions with the state-owned oil company. If Vibra is unable to renew the contract for the use of the BR brand across its more than 8,000 stations, the alternative plan is to develop the Vibra brand, a move that other companies have already tested, Mr. Pousada noted. “Both parties need to advance the discussions in the coming years. Vibra is keen on renewing, but under certain conditions,” Mr. Pousada said during Vibra Investor Day on Thursday (29th).

The contract for the use of the BR brand by Vibra is set for 10 years and will expire in 2029. Petrobras has not commented on the matter.

Mr. Pousada also said that part of Vibra’s growth strategy involves increasing lubricant sales to international markets, particularly in Latin America, where the company currently has a minimal presence. The company’s market position in this sector is still very small, leaving room for growth until it becomes the regional leader, the CEO mentioned during the event.

The initial phase of international expansion will focus on the southern part of South America, in the six countries where the company already operates, said Vanessa Gordilho, Vibra’s executive in charge of business, products, and marketing. “It won’t be starting from scratch and doesn’t require much effort,” said Ms. Gordilho.

According to Mr. Pousada, the past four quarters have been dedicated to “getting the house in order.” Additionally, the CEO said that the company will continue preparing its internal processes and management for a new growth cycle, which he expects to occur in the coming years.

Another avenue for expansion is through Comerc, whose acquisition of the remaining 50% stake was announced last week. The company plans to implement a strategy to capitalize on R$1.4 billion in synergies, which includes refinancing Comerc’s debt—currently more expensive than Vibra’s average debt cost—among other initiatives, said Clarissa Saddock, Vibra’s chief renewable energy and ESG officer.

Vibra also sees opportunities in its recently formed partnership with Itaú for energy commercialization, especially given the prospects for the complete opening of the market in the coming years, and in pending projects related to micro and mini-distributed generation and energy efficiency.

Regarding natural gas, Mr. Pousada mentioned that the company does not yet have a significant presence and is seeking the “right angles” to gain access to the molecule and advance in this segment, aiming to complement its product portfolio for clients. However, the executive said that the company does not have a strong desire to enter the natural gas market, and any moves in this area will be approached with capital discipline. Mr. Pousada also projected a 15% growth in the liquid fuels market by 2030.

*Por Fábio Couto — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/

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Companies return to foreign debt market in September

With expected interest rates cut in the U.S., Brazilian companies should resume bond issuance

09/02/2024

Investment banks are preparing their first meetings with foreign investors to launch Brazilian companies’ issuances in the international debt market. Around six deals are expected for September, according to sources interviewed by Valor, including issuances by Raízen and banks. Subsea engineering company Oceânica, which is new to this type of transaction and tried to launch an offer in August, is also among possible candidates.

The market expects a busy season, starting Monday (2) after the return of vacations in the Northern Hemisphere and the Labor Day holiday in the U.S. In this scenario, some issuances may be brought forward not only to take advantage of more attractive rates but also to avoid proximity to the elections in the U.S., which could increase volatility.

The year has already surpassed 2023 in the amount raised with offers abroad. Brazilian companies issued $16.4 billion in bonds so far this year, compared to $16.1 billion last year, according to data from Bond Radar. People familiar with the matter say the expectation is that transactions will reach around $20 billion at the year-end.

The banks coordinating the operations have different readings of the impact of the election in the United States on the deals. Samy Podlubny, head of debt capital markets at UBS BB, says potential issuers are currently divided into two groups: those betting on September and those looking at January 2025 to avoid an issuance during the race for the White House. “Although they know this month’s window could be complicated, given the concentration of deals in a shorter time, several companies accelerated to issue before the [U.S.] elections,” he said.

Gustavo Siqueira, Morgan Stanley’s country head of fixed-income capital markets, says companies should try the September window. However, he does not expect an impact from the U.S. elections on the markets. “We see a more active month but some deals could be delayed to October or November,” he pointed out. According to the executive, the market is liquid and investors are seeking return, which opens up room for issuing companies. “We see a recovery after two weak years.”

From the beginning of August—when a steep drop in the stock market in Japan shook global markets—until now, the conditions for raising funds through bonds abroad have improved, according to Caio de Luca de Simões, head of debt capital markets at Bank of America in Brazil. “Treasuries became more stable and net interest rate spread returned to an appropriate level, after a period of strong volatility,” he said. “We are seeing one of the best cost scenarios for fundraising in the last two years.”

Pedro Frade, in charge of foreign debt at Itaú BBA, says rates contracted in the last month, both in Treasuries and Brazil risk. However, according to him, attention is focused not only on the next Fed meeting but also on the numbers about inflation and unemployment in the U.S., which could change the market’s mood and shrink the window for issuances. “Frequent issuers benefit from shorter windows,” the BBA executive points out, explaining that these deals are typically completed very quickly, making it possible to avoid market volatility.

He estimates a concentration of deals in the first half of the month. Given these uncertainties, the number of issuers that will be able to tap into the window is unknown. “Many companies will do their math to determine if the foreign market is the right path for them,” Mr. Frade says.

One of the points to be monitored by issuers in the next window is the high level of competition with other deals by companies from the same region. According to UBS BB projections, the number of offers from companies in Latin America could reach 15 in September. From Argentine companies alone, three deals are expected.

“Investors select not only [a deal] in Brazil but in Latin America as a whole, as the budget is usually the same,” Mr. Podlubny points out. “It doesn’t mean investors are short of funds but perhaps they don’t have time to dive deep into all deals and may choose to prioritize just a few. That could have an effect, for example, on the size of books.”

Miguel Diaz, debt market specialist at Santander Brasil, says the scenario is favorable given the current rates in the U.S. market, which have caught the attention of issuers. He expects up to eight issues between September and early October.

Matheus Licarião, head of debt capital markets at Santander Brazil, says investors’ agenda is very positive after Labor Day. He is working with two possible scenarios for the month. In the first scenario, as companies understand that the market has already priced the start of a reduction in interest rates, they choose to launch deals early this month—taking some distance from the U.S. elections. On the other hand, companies could choose to wait for the Fed’s monetary policy decision on September 18.

If optimism increases after that date, the space could be open to both frequent and new issuers, the executive says. “It’s a good timing for companies [to access the market]. The question is whether it will be a good or a very good window,” he points out.

When contacted, Raízen said it is always attentive to opportunities in the capital market, thanks to its “strategic positioning, quality of management, financial innovation,” and investment grade by three rating agencies. “It’s natural that the financial community keeps us on their radar and sees us as a candidate.” Oceânica did not respond to a request for comment.

*Por Fernanda Guimarães, Rita Azevedo — São Paulo

Source: Valor Inaternational

https://valorinternational.globo.com/
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Starlink says it will not comply with Brazil’s Supreme Court decision

Satellite broadband company dominates Brazilian market and has already requested telecoms telegulator ANATEL to expand network in the country

09/02/2024

Starlink informed Brazil’s telecoms regulator ANATEL that it will not comply with the decision by Justice Alexandre de Moraes of the Federal Supreme Court to suspend access to Elon Musk’s social media platform X.

The information was passed informally by the company to the agency’s chief, Carlos Baigorri, as revealed by TV Globo.

ANATEL has initiated a procedure on the 30th to notify internet carriers and shut down the platform.

Starlink offers satellite internet services and, like X, is owned by billionaire Elon Musk. With the platform’s non-compliance with court decisions, Justice Moraes ordered the company’s accounts to be blocked so that the imposed fines could be paid.

According to the president of ANATEL, the company is conditioning the cut-off of access to X on the suspension of the blockade of its accounts. He also stated that the maximum sanction for a telecommunications company, in case of non-compliance with decisions, is the revocation of the license, which would prevent Starlink from operating in Brazil.

Justice Moraes ordered the shutdown of X on Friday. The measure was adopted after the platform began to disregard court decisions and refused to appoint a new legal representative in Brazil.

In May, Starlink reached 42.5% of the market, overtaking Hughesnet, which held 38.1%, according to ANATEL. In June, Starlink had 215,500 customers, mainly in the Amazon region.

*Por Isadora Peron — Brasília

Source: Valor International

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Embraer says Azul’s crisis will not affect sales

Airline expected to continue buying from Brazilian plane maker just like Gol continues seeking Boeing planes despite being in financial restructuring

08/30/2024

Azul’s financial restructuring is unlikely to affect Embraer’s sales, said Antonio Carlos Garcia, the plane maker’s chief financial officer. David Neeleman’s Azul is the only airline currently operating Embraer’s commercial models in Brazil but, according to Mr. Garcia, it continues to buy planes, and will keep doing so just as competitor Gol continues to seek Boeing planes despite its ongoing financial restructuring in the U.S.

At an event at B3 to mark Embraer’s 35 years of stock exchange listing, Mr. Garcia praised the company’s partnership with Azul. “They take planes from leasing companies. We already know that the lessors will continue to extend credit to Azul, just as they do for Gol. We have a lot of confidence in Azul’s business model. Things are more complicated for them, but we think they will pull through,” he said.

Regarding the aircraft manufacturer’s performance, CEO Francisco Gomes Neto stated that the next five years would be positive due to strong demand for its planes. “Our order book has surpassed $21 billion, which accounts for more than three years of production. And we have several sales campaigns underway,” he said.

The executive recalled that Embraer faced various challenges in recent years, including the pandemic and the failure of negotiations to create a joint venture in the commercial division with Boeing. “The year 2020 was difficult, with enormous losses. But one year later, at the end of 2021, the cash flow, which was negative by R$900 million, turned positive by R$300 million. The losses turned into profits,” he said.

Similarly, margins began to recover. Rodrigo Silva e Souza, vice president of marketing and market strategy for Embraer’s commercial aviation, highlighted that since last year, the company has had better margins on aircraft sales due to a change in discount policy.

“In new sales since last year, we have been working to increase profitability and capitalize on favorable market conditions. Therefore, I believe that in 2026 and 2027, we should significantly improve profitability,” he said during the event on Thursday (29).

According to the executive, the discount policy was designed considering various factors, including the pandemic, the end of the agreement with Boeing, and Airbus’s acquisition of Bombardier’s C-Series jet program (now A220).

“These factors made us have to be more aggressive to keep the company afloat during critical years. This has already changed due to strong market demand. We no longer need to be as aggressive as before. We have basically sold out the 2025 line and a good part of 2026,” he noted. According to Mr. Souza, Embraer expects to reach 2026 producing 100 commercial planes per year.

The government’s decision to release credit to airlines using the National Civil Aviation Fund (FNAC) as a guarantor, but without the obligation to use it to purchase Embraer aircraft, did not shake the Brazilian manufacturer.

“We do not rely on mandatory customer purchases. We do see that the Brazilian market—like others—needs more connectivity,” said Mr. Souza.

“If we take two of the largest regions, São Paulo and Rio, they represent 40% of the traffic. It is a concentrated market that needs to be decentralized and new routes developed,” he said. The use of smaller aircraft, such as Embraer’s commercial jets, would be central to this strategy.

CEO Francisco Gomes Neto praised the Brazilian government for the support it has offered the company. “The perspective they have is that in other countries where planes are produced, the percentage of national production flying is 40%. Here, it is only 12%. We have only one airline with Embraer jets,” he said.

*Por Cristian Favaro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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States’ security spending rises 14% above inflation in first half

Despite no constitutional spending mandates, states increase investments in public security amid rising concerns

08/30/2024

Ursula Dias Peres — Foto: Silvia Zamboni/Valor

Ursula Dias Peres — Foto: Silvia Zamboni/Valor

Despite the absence of budget allocations tied to specific revenue sources and the urgency highlighted by public opinion polls, public security has become an increasingly significant area of expenditure in Brazilian states. In recent years, spending in this sector has grown at a faster rate in real terms than the overall state expenditures.

In the first half of 2024, the combined security expenditures of Brazil’s 26 states and the Federal District amounted to R$55.76 billion, marking a 14.2% real increase compared to the same period in 2018. During the same timeframe, the total aggregated state spending rose by 9%. Meanwhile, education and healthcare expenditures saw even more significant increases of 36.5% and 37.4%, respectively.

Public security, education, and healthcare constitute the trio of state public services with the highest spending volumes. Together, they represented 37.2% of total state expenditures from January to June 2024. Among these three sectors, security is the only one without constitutionally mandated spending, which partly explains why its share of total state expenditures has grown less than that of education and healthcare.

Security spending accounted for 8.7% of total state expenditures in 2018 and 9.3% in 2023, but the share declined slightly to 9.1% this year, with a cumulative increase of 0.4 percentage points over the period. In contrast, education’s share increased to 15.1% in 2024 from 12.1% in 2018, and healthcare’s share grew to 13% from 10.3%, reflecting respective increases of 3 and 2.7 percentage points, always considering the expenditures of the first semester. Part of the spending in these three areas came from a reduction in Social Security expenditures, which decreased to 16.7% from 18.6% of total state expenditures between 2018 and 2024.

The data, which includes both current expenses and investments, were sourced by Valor from the summarized budget execution reports submitted by the states to the National Treasury. The figures were extracted between August 8 and 12 and include only settled values, excluding intra-budgetary expenses.

Experts point to several contextual factors, such as the COVID-19 pandemic and the significant revenue increases experienced by the states in recent years, to explain the current expenditure landscape in key state-provided services.

In the realm of public security, the data shows substantial spending despite the lack of mandatory allocations, as seen in healthcare and education, according to Ursula Dias Peres, a public policy professor at the University of São Paulo (USP). “There is a pressing need and substantial budgetary commitment in security, with funds coming primarily from state treasuries rather than dedicated funds,” Ms. Peres said. However, she noted significant variation among the states.

Minas Gerais, São Paulo, and Rio de Janeiro are among the states with the highest absolute expenditures on public security. In the year’s first half, Minas Gerais spent R$8.78 billion, São Paulo R$7.47 billion, and Rio de Janeiro R$7.44 billion.

Although the absolute spending figures are similar, São Paulo has a significantly larger population than Rio de Janeiro, said Vilma Pinto, head of the Independent Fiscal Institution (IFI), a Senate-affiliated fiscal policy watchdog. According to the Brazilian statistics agency IBGE, São Paulo is home to 44.4 million people, while Rio de Janeiro has 16.1 million. “Thus, the per capita expenditure in Rio is higher than in São Paulo. However, we also need to assess the efficiency of resource use. The discussion should not only focus on the level of spending but also the quality of those expenditures,” noted.

The study also reveals significant differences in the spending structure. In Minas Gerais, security expenses account for 18% of total state spending. In São Paulo, the figure is 4.7%, and in Rio, it’s 15.1%. The shares of education and healthcare expenditures also vary among the three states, though to a lesser extent. São Paulo allocates 16.1% and 10.5% of its total spending to education and healthcare, respectively. In Rio, the shares are 8.2% and 8.6%. In Minas Gerais, these figures are 15.7% and 12.3%, respectively, for the first half of 2024.

Ms. Peres attributes the heterogeneity in public security spending to the current sector management. “The Unified Public Security System (SUSP) exists in law, but the states, responsible for 80% of the financing, are the primary operators of public security. The federal government doesn’t have the same influence as it does in healthcare, education, or social assistance,” she said.

“Each state implements its own policies, with vastly different governance in public security, policing strategies, salary structures, and approaches to repression or intelligence work, including the use of body cameras. The federal government is trying to regulate these areas now, but the differences remain stark. This disparity in governance is reflected in the budgets,” Ms. Peres noted.

Minas Gerais often includes pension costs for civil servants in its security spending, which can inflate its expenditures relative to other states that do not follow the same accounting practice, Ms. Peres said. In a statement, the Minas Gerais government said the state’s public security spending includes the costs of retired military personnel, as they do not retire but rather enter a remunerated retirement status at the end of their service period as prescribed by law.

Ms. Pinto highlights that the SUSP was created in 2018. “However, there are challenges in realizing the institutional potential of this tool. There needs to be an effort to improve the governance and efficiency of these expenditures,” she said. Ms. Pinto also noted that public security has become a more recent topic of debate, driven by public opinion polls revealing widespread feelings of insecurity among the population.

In Rio de Janeiro, the lack of a comprehensive public security policy explains the high expenditures in this area, said sociology professor Daniel Hirata, from the Fluminense Federal University. He said that the state’s strategy relies heavily on police operations. Mr. Hirata added that, when analyzing police lethality, most deaths in São Paulo occur during robberies and chases. In Rio, however, lethality is higher during police operations, an “indication of the central role these operations play in the state’s security strategy.” These operations, he noted, are “extremely costly,” requiring large numbers of personnel, heavy weaponry, vehicles, and technology. “These operations are necessary. The problem is that they have become routine and the primary tool of public security, leading to very high costs,” he added. In Rio, “we are addressing symptoms rather than the root of the problem,” he said.

Overall, Ms. Peres said, there is low investment in intelligence and investigative policing. “This has led to a very complex situation today, with significant increases in crimes against assets and swindle. Our police are not focused on these issues. We have an overt police force dedicated to combating street violence and drug trafficking, but not investigative intelligence. We are facing more scams, including crimes committed via mobile phones and the internet. Addressing this requires investment in software, monitoring, and specialized training.”

A review of the sub-function data for public security expenses reported in the fiscal reports shows that, on average, 29.3% of spending in this area goes to policing across the 26 states and the Federal District. The sub-function “information and intelligence” accounts for only 2.4% of the spending. “This is very low, even though the public often demands police presence. People want to see patrols,” Ms. Peres noted. “Administratively, it is easier to spend on personnel than to manage complex bidding processes for contracts that require specific management.”

According to the 2024 Brazilian Public Security Yearbook, the swindle rate per 100,000 inhabitants increased by 8.2% in 2023 compared to 2022, while the rate of electronic swindle rose by 13.6%.

In a statement, the Rio de Janeiro government said that public security consumes a larger portion of the budget due to payroll expenses for security forces and the prison administration, “without compromising investments in health and education.” The statement noted that more than R$4 billion has been invested in the current administration, focusing on police technology and modernization. Rio, the statement said, is the state that has acquired the most body cameras for police forces—more than 13,000 units have been installed in the Military Police alone—and will soon have over 5,800 security force vehicles equipped with onboard cameras.

In a separate statement, the São Paulo government emphasized that it is among the leaders in security investments, with over R$15 billion allocated in 2023. In volume, this is nearly 15 times the amount invested by states allocating around 10% of their budget to security. The statement also highlighted that total expenditures on security, prison administration, and Fundação Casa (an institution for juvenile offenders) amounted to R$11 billion, equivalent to 6.9% of the state’s total spending.

Unlike other states, the statement added, São Paulo’s debt service payments to the federal government account for a significant portion of settled expenses (7.9%). Additionally, transportation costs (6.4%) are significant in São Paulo due to its extensive road network, which is less of a factor in other states, many of which rely more on federal highways. “These are specific characteristics of each federation unit, which do not indicate low values allocated to the sector,” the statement concluded.

*Por Marta Watanabe, Rafael Rosas — São Paulo, Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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São Paulo ranks fifth among states with most wildfires in August

Fires surge by 915% following a series of incidents last week, leaving situation still worrisome

08/29/2024

The number of wildfires reported in São Paulo this month has increased by 915% compared to the same period last year. The only state with a worse outcome was Mato Grosso do Sul, where fire incidents rose by 1,825%.

As a result, São Paulo is now the fifth state with the most wildfire outbreaks in the country (3,483) during the period from August 1 to 26—up from 13th place during the same period last year. Currently, the state is only behind Mato Grosso, Pará, Amazonas, and Mato Grosso do Sul, according to data from INPE (National Institute for Space Research).

The series of fires that struck the São Paulo countryside last week emerged almost simultaneously and in predominantly agricultural areas, according to a survey by IPAM (Amazon Environmental Research Institute) based on satellite-mapped heat sources.

Of the 2,600 heat sources reported in São Paulo between August 22 and 24, 81% occurred in areas used for agriculture, such as those occupied by sugarcane and pasture, according to a cross-analysis of satellite images from the environmental monitoring network with land cover and usage data from the MapBiomas network. Approximately 72% of São Paulo’s territory is occupied by agricultural activities.

Satellite images show the emergence of smoke columns within a 90-minute interval, between 10:30 am and 12:00 pm on August 23. The study strengthens comparisons between the incident in the São Paulo countryside and the so-called “Day of Fire,” mentioned by Environment Minister Marina Silva. She said that President Lula’s government is investigating whether the wildfires in the state have similar motivations to the criminally induced forest fires in August 2019 in the municipalities of Altamira and Novo Progresso, both in Pará state.

After two days without fires, São Paulo state recorded three new fire outbreaks on Tuesday (27th) in Batatais (350 km from the capital), in the metropolitan region of Ribeirão Preto, prompting a task force to combat the flames. Batatais is one of the cities on the state Civil Defense’s list of 48 municipalities on high alert for fires.

The outlook for the coming days remains concerning. The São Paulo Civil Defense has classified the metropolitan region of São Paulo as at emergency risk for fires this upcoming weekend.

According to meteorologists from the state agency, the classification is due to the hot and dry weather expected to return to the state starting this Friday (30th). With no rain in the forecast, the relative humidity in São Paulo city could drop to 20% over the weekend, according to INMET (National Institute of Meteorology), and temperatures are expected to reach 30°C in the capital.

There are four stages of warnings for fire risks: low (yellow), high (orange), alert (red), and emergency (purple).

The wildfires affecting different parts of Brazil may be linked to a historic lack of rain—the most severe in the last four decades—impacting 16 states and the Federal District.

The data comes from CEMADEN (National Center for Monitoring and Alerts of Natural Disasters), which considered information from May to August for all states since 1981, the year official records began.

Preliminary figures from the center for this August show that approximately seven out of ten Brazilian municipalities are affected by some level of drought: mild, moderate, extreme, or severe.

Meanwhile, Supreme Court Justice Flávio Dino ordered the federal government to mobilize, within 15 days, the Armed Forces, Federal Police, Federal Highway Police, National Force, Military Firefighters, and environmental enforcement agents to combat the wildfires in the Pantanal and Amazon—biomes that have been suffering from fires in recent days, with smoke spreading across the country. To fund the emergency actions, the federal government may open an extraordinary credit line through a provisional presidential decree.

Source: Valor International

https://valorinternational.globo.com/
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Brazil’s top court threatens to ban Elon Musk’s X

Justice Alexandre de Moraes ordered Musk to appoint X’s new legal representative in the country within 24 hours

08/29/2024

Alexandre de Moraes — Foto: Rosinei Coutinho/SCO/STF

Alexandre de Moraes — Foto: Rosinei Coutinho/SCO/STF

Brazil’s Supreme Federal Court used its X account to announce a ruling by Justice Alexandre de Moraes against the social media platform. In the post, Mr. Moraes ordered Elon Musk, the owner of X, to appoint a legal representative for his company in Brazil. Mr. Moraes also threatened to suspend X’s operations in the country if the company continues to disregard court orders.

The official account of the Supreme Court tagged the profiles “@GlobalAffairs” and “@elonmusk” in the post and attached the document signed by the judge.

In recent weeks, the social media platform began to disclose confidential decisions from Mr. Moraes using the company’s official profile. Now, Mr. Moraes used the same method to notify Mr. Musk. On August 17, the company announced, also in a post on the platform, that it would “cease operations” in Brazil.

In the post, the justice ordered the appointment, within 24 hours, of the name and qualifications of the new legal representative of the company in Brazil, “under penalty of immediate suspension of the social media X (formerly Twitter) until the court orders are effectively complied with and the daily fines paid.”

In April, Justice Alexandre de Moraes launched an investigation into Elon Musk after the businessman announced he would defy court orders and publicly release content from profiles blocked by Brazil’s Supreme Federal Court. Mr. Musk was also implicated in a separate investigation into the activities of so-called “digital militias,” which are groups known for spreading disinformation and attacking political opponents. This investigation is targeting allies of former President Jair Bolsonaro.

After that, there were new episodes of confrontations between the justice and the billionaire. Recently, the social media platform also ignored a decision from Brazil’s electoral court to suspend the profile of Pablo Marçal, a candidate for the mayor of São Paulo.

In light of the successive clashes, justices Dias Toffoli, Luiz Fux, and Edson Fachin, rapporteurs of three cases dealing with the Internet Civil Framework and digital platforms in the Supreme Court, decided to include their cases in the court’s agenda for a vote.

Last week, they asked Chief Justice Luís Roberto Barroso for the cases to be analyzed together, preferably in November. The date of the trial has not yet been set.

*Por Isadora Peron — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Uncertainty about next steps for interest rates

Market has discussed need for rate hike in last weeks

08/28/2024

Igor Velecico — Foto: Silvia Costanti/Valor

Igor Velecico — Foto: Silvia Costanti/Valor

The mounting uncertainty regarding the direction of monetary policy has been significant in recent weeks. The perception of an economy resistant to slowing down has joined the U.S. dollar’s appreciation against the real this year, supporting a growing view that the Central Bank will be forced to resume monetary tightening in September.

Alongside this perception is the recent communication from some Central Bank officials, particularly directors Gabriel Galípolo (monetary policy) and Diogo Guillen (economic policy).

Before the interest rate decision in July, few analysts projected new increases in the Selic policy interest rate, such as XP Asset Management and Novus Capital. After the policy meeting, the scenario gained significant supporters including Legacy Capital, Itaú Asset Management, and ASA. More recently, some sell-side players have also adopted this scenario, including XP and BTG Pactual.

However, there remains some uncertainty on the radar. Not by coincidence, although the interest rate curve and the COPOM digital options market continue to indicate a majority chance of the Selic tightening cycle beginning in September, the consensus in the Focus—Central Bank’s weekly survey with economists—still puts the policy rate at 10.5% per year, although the average of projections has increased.

In recent days, banks like Barclays, J.P. Morgan, and Morgan Stanley reaffirmed their projection that the Selic will remain at 10.5% per year.

The appreciation of the Brazilian real since the peak of stress, when the exchange rate reached R$5.86 per dollar, and the expected economic slowdown are cited by those who reject the view that an interest rate hike is necessary. Additionally, an imminent easing of the U.S. Federal Reserve’s policy would also factor into the equation.

Valor spoke with two market participants with differing views on the necessity of a process to raise the Selic starting in September, as has been priced in the market rates for some time now.

Igor Velecico, Genoa Capital’s chief economist, has adopted a scenario in which the Central Bank raises the policy interest rate by 25 basis points in September, reaching 12% per year by early 2025. According to him, the resumption of tightening is necessary, as the context encompasses an economy that is not in equilibrium. “And this generates inflation,” he said, projecting 12-month IPCA (Brazil’s official inflation index) at 4.3% this year and 4.2% in 2025.

“The Central Bank will gain credibility if it does the right thing. The right thing to do at the moment is to raise interest rates to address domestic imbalances and bring inflation closer to the target of 3%,” said the economist, who sees an “overheated” economic activity in the country.

On the opposite side, the chief strategist at Warren Investimentos, Sérgio Goldenstein, sees no need for an additional tightening of interest rates and projects the Selic to remain at 10.5% per year for a longer period.

“If the Central Bank promotes a cycle of a 150- to 200-basis-point increase [in the Selic], its model, over the relevant horizon, will point to an IPCA projection of 2.7%. Instead of initiating a tightening cycle only to soon have to start a cutting cycle, it seems much more coherent to keep the Selic stable, with a strong discourse,” argues the professional, who previously headed the monetary authority’s open market department.

*Por Gabriel Roca, Victor Rezende — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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