BNDES, Petrobras lead as federal government sees dividends surge

Federal revenue in 2024 expected to be second-highest on record, aiding efforts to erase primary deficit

01/13/2025

Boosted by extraordinary payments from oil giant Petrobras and the Brazilian Development Bank (BNDES), Brazil’s federal revenue from dividends and profit-sharing rebounded in 2024, helping the government stay within its fiscal target range. Government projections indicate R$72.97 billion in dividends from state-owned enterprises (SOEs) last year, which, if confirmed, would mark the second-highest figure on record in nominal terms, trailing only 2022’s R$87 billion.

From January to October 2024, federal receipts totaled R$41.3 billion. While November and December figures have not yet been officially released, preliminary data from SOEs and public disclosures suggest the government is close to meeting its target. Treasury data through November, delayed by nearly three weeks, will be released on January 15, with full-year figures expected in February.

According to XP Investimentos, government revenue from dividends and profit-sharing reached R$72.38 billion in 2024, driven by significant year-end transfers from BNDES and Petrobras. BNDES told Valor it transferred R$5.8 billion in dividends to the federal government in November and an additional R$13.6 billion in December, while Petrobras contributed approximately R$9.7 billion during the same period.

Petrobras and BNDES accounted for the bulk of SOE dividend payments in 2024. Petrobras said it distributed R$29.7 billion to its controlling shareholder, while BNDES transferred R$29.5 billion. Together, the two state-owned companies represented 81% of the federal government’s dividend revenue. Banco do Brasil followed with R$7.5 billion (10%), and Caixa Econômica Federal contributed R$2.79 billion (3.8%). The remainder came from smaller state-owned enterprises.

After years of lower transfers, except in 2022, the upward trend in dividend payments provided critical support for primary fiscal results. These revenues, categorized as primary revenue, have become essential for the government’s effort to erase the primary deficit.

BNDES President Aloizio Mercadante said the bank increased dividend payments in 2024 to support fiscal results, while Petrobras approved extraordinary distributions from reserve accounts.

In a statement, BNDES confirmed it had “expanded dividend payments to contribute to fiscal efforts and economic stability,” while ensuring it could still invest in strategic sectors. Petrobras said “its distributions aligned with its corporate bylaws and shareholder remuneration policy”, which allows extraordinary payments as long as the company’s financial sustainability is preserved.

Economists are divided on whether the trend of high dividend payments will continue. Tiago Sbardelotto of XP Investimentos expects extraordinary transfers, particularly from Petrobras and BNDES, to remain a key strategy for boosting fiscal results amid challenges in increasing tax revenue through legislative changes. “It’s unlikely we’ll see dividend levels drop back to R$30 billion or R$40 billion in the coming years,” he said.

Felipe Salto, chief economist at Warren Investimentos, said BNDES’s payments are likely to remain elevated but cautioned against overreliance on Petrobras. “Petrobras’s payments depend on oil prices, so the government shouldn’t count on this revenue source for its fiscal recovery plans. BNDES, on the other hand, is tied to its operational policies, which suggest higher dividend payments as the bank increases disbursements,” Mr. Salto said.

Mr. Salto added that while dividend revenue is valuable, it should not form the backbone of fiscal policy. “This income is welcome but unpredictable. A sound fiscal strategy requires permanent measures to control spending and increase revenue,” he said.

Fiscal targets

Finance Minister Fernando Haddad said the government ended 2024 with a primary deficit of 0.1% of GDP, estimated at R$10 billion to R$15 billion depending on GDP calculations. This excludes extraordinary expenditures related to the state of Rio Grande do Sul.

Mr. Sbardelotto of XP warned that 2024’s results should be interpreted cautiously. “The fiscal target was only met because of significant extraordinary revenues, including dividends,” he said.

Banco do Brasil said its dividend payments complied with its “corporate bylaws, shareholder remuneration policy, and board decisions.” Caixa Econômica Federal noted that its 2024 dividend payments were related to 2023 results. “There was no dividend anticipation in 2024. We clarify that the amount paid in the 2024 fiscal year complies with Caixa’s bylaws.”

*By Jéssica Sant’Ana  — Brasília

Source: Valor International

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

Local investors stay bearish but take tactical approach in Brazil

Price levels prompt only selective strategies among major asset managers, which remain cautious on domestic markets

01/10/2025

Pessimism continues to dominate sentiment among key Brazilian asset managers, following a peak in negativity during November and December sparked by frustration over the government’s spending review package. While the significant decline in domestic asset prices has made it less appealing to take new bearish positions, most firms are adopting a more cautious stance toward local markets. However, they maintain a defensive view on equities, the real, and local interest rates due to persistent concerns over Brazil’s debt trajectory.

“The government faces enormous difficulty in implementing measures to contain public spending, and the debt trajectory is unsustainable. We’ve spent considerable time debating whether the cuts will be R$40 billion or R$70 billion, but the truth is that this discussion is far from addressing the scale of adjustment needed to put debt on a sustainable path. We should be aiming for a primary surplus of 2% to 2.5% of GDP,” said Aurelio Bicalho, chief economist at Vinland Capital, during the firm’s monthly call this week.

Mr. Bicalho noted that as 2026 approaches, the presidential election will likely come into focus during the second half of the year. Investors will start assessing the current government’s competitiveness for re-election amid an environment of economic slowdown, high inflation, and a restrictive benchmark Selic rate.

In this context, Vinland Capital remains cautious on Brazil, according to portfolio manager José Monforte. “The root of the fiscal issue is not being addressed, which makes it very difficult to take any bullish position on Brazil. On the other hand, levels are important. We continue to hold a bullish bias in Brazil’s interest rate curve, particularly in the longer term, starting with the DI (Interbank Deposit) contract for January 2027. In currencies, our bias remains long on the dollar against the euro, yen, and real,” Mr. Monforte said.

Ibiúna Investimentos also pointed out that without an effective response to Brazil’s fiscal challenges, the upward movement in the interest rate curve, the depreciation of the real, stock market weakness, and worsening inflation expectations are unlikely to have run their course. “We remain alert to any potential shift in fiscal adjustment strategy, but until we gain greater clarity, we maintain defensive positions in Brazilian assets,” the firm’s team noted in a December letter.

Ibiúna continues to hold bets on rising nominal interest rates and implicit inflation rates (extracted from public bonds), in addition to long positions on the dollar against a basket of currencies that includes the real.

A similar approach is taken by Bruno Marques, co-manager of XP Asset Management’s macro funds, who highlights two parallel issues in Brazil: the monetary outlook, where the Central Bank needs to raise interest rates further, and the fiscal scenario. “These two issues are not isolated, as one of the reasons the Central Bank needs to increase rates is the fiscal influence on economic activity. On the other hand, tighter monetary policy contributes to a rising debt-to-GDP ratio over the coming years,” he said.

Mr. Marques said XP Asset has closed its long positions on interest rates but maintains some that reflect a negative outlook on Brazilian assets, including bets on the dollar strengthening against the real and rising implicit inflation rates. “We remain very concerned about Brazil. Looking ahead, it’s remarkable that even with all the deterioration seen in December, there has been no action from the government. If you’d asked us three or four months ago what would happen if the dollar reached R$6, we would have said the government would definitely change its stance. We haven’t seen anything close to that.”

Mr. Marques noted that recent statements from government officials and members of the economic team still lack a sense of urgency regarding price levels and market dynamics. “There’s talk of improving communication or explaining better what the government is doing, but that’s not the issue. There’s a significant deterioration in the debt-to-GDP ratio with no sign that this will change.”

Rising rates

Pedro Dreux, partner and macro manager at Occam, pointed out the rapid deterioration in domestic asset prices observed in December, as markets priced in a Selic rate above 17% for 2025.

“At this level of interest rates, we have no structural positions. While we believe the fundamentals will continue to deteriorate, it’s not obvious to bet on rising interest rates at these levels,” Mr. Dreux said. He added that volatility is likely to remain high and that the deteriorating environment remains challenging.

“The signals from the government indicate that no structural measures on spending are forthcoming, and the market is beginning to realize that the adjustment to our debt will likely come via inflation,” Mr. Dreux said during Occam’s monthly call. For him, this raises the possibility of inflation reaching 7% or 8% this year.

Verde Asset, led by Luis Stuhlberger, noted that the seasonal outflows of dollars in December were worsened by widespread pessimism among economic agents following the presentation of the fiscal package. The firm’s management team explained that the Central Bank’s large-scale foreign exchange interventions mitigated the immediate impact of these outflows but cautioned that such interventions cannot be sustained at the same pace going forward.

“The inflationary impacts of currency depreciation will be felt throughout 2025 and will force the Central Bank to raise interest rates to levels we thought were long forgotten. The economic model of a fiscal accelerator with a monetary brake is heading straight for a wall. While the prices of many assets already include significant risk premiums, we continue to maintain a more negative stance,” Verde Asset team said. They are holding short positions in equities and the real, along with a small bet on declining real interest rates.

Other asset managers echoed negative views on Brazilian assets in their monthly letters. Bahia Asset Management disclosed that it maintains long positions on nominal and real interest rates and short positions on the real against a basket of currencies. Similarly, Opportunity Total took a short position on the real, arguing that the Central Bank’s foreign exchange policy has temporarily distorted the price of the Brazilian currency, which “still faces weak fundamentals and relatively low carry in the short term.”

Kinea Investimentos is also holding short positions in the Brazilian stock market. “This reflects not only our view of the internal instability still present but also our negative outlook on emerging markets compared to the high real interest rates in the U.S. economy,” the firm noted.

Legacy Capital, meanwhile, maintains low exposure to the domestic market but expressed concern in its monthly letter about the Central Bank’s accelerated pace of reserve sales. The firm also projects inflation of 6.2% for this year.

  • By Gabriel Roca e Victor Rezende — São Paulo

  • source: Valor International
  • https://valorinternational.globo.com/
/by

Inflation hits 4.83% in 2024, surpassing target ceiling

IPCA accelerated to 0.52% in December; Central Bank’s inflation target was set at 3%, with a tolerance of up to 4.5%

01/10/2025

Brazil’s official inflation rate, measured by the Broad National Consumer Price Index (IPCA), accelerated to 0.52% in December 2024, up from 0.39% in November. This brought the IPCA to a year-end increase of 4.83%, according to data from the Brazilian Institute of Geography and Statistics (IBGE). The result exceeded the inflation target ceiling for 2024, which was 3% with an upper tolerance of 4.5%. The 2024 rate also surpassed the 4.62% inflation in 2023.

December’s inflation rate was slightly below the median projection of 0.53% from 34 financial institutions and consultancies surveyed by Valor Data, but it fell within the range of estimates, which varied from 0.29% to 0.60%.

For the full year, the median projection was 4.84%, with estimates ranging from 4.59% to 4.91%.

This marks the third time in recent years that the inflation target has been missed, repeating what occurred in 2021 and 2022. In 2021, the IPCA rose 10.06%, far above the 5.25% ceiling. In 2022, inflation reached 5.79%, also exceeding the target of 5%. In contrast, the 2023 rate of 4.62% was within the target range of 3.25% with a tolerance of 4.75%.

The year 2024 is the last in which the inflation target applies to the calendar year. Starting in January 2025, the target will shift to a continuous system, measuring 12-month inflation on a rolling monthly basis.

Inflation drivers

Among the nine categories of expenses used to calculate the IPCA, housing prices showed a smaller decline, moving from a 1.53% drop in November to a 0.56% decrease in December. Several categories reversed course, including household goods (from -0.31% to 0.65%), apparel (from -0.12% to 1.14%), health and personal care (from -0.06% to 0.38%), education (from -0.04% to 0.11%), and communication (from -0.10% to 0.37%).

Meanwhile, food and beverages slowed their pace of increase (from 1.55% to 1.18%), as did transportation (from 0.89% to 0.67%) and personal expenses (from 1.43% to 0.62%).

Comparing year-end figures, food and beverages—the category with the largest weight in the IPCA—jumped from a 1.03% increase in 2023 to 7.69% in 2024. Household goods rose from 0.27% to 1.31%, and communication saw a slight uptick from 2.89% to 2.94%.

Other categories experienced slower price growth in 2024, including housing (5.06% to 3.06%), apparel (2.92% to 2.78%), transportation (7.14% to 3.30%), health and personal care (6.58% to 6.09%), personal expenses (5.42% to 5.13%), and education (8.24% to 6.70%).

The IBGE calculates the IPCA based on the consumption patterns of households earning between one and 40 times the minimum wage, covering ten metropolitan areas as well as the cities of Goiânia, Campo Grande, Rio Branco, São Luís, Aracaju, and Brasília.

Core inflation

The diffusion index, which measures the proportion of goods and services with rising prices, climbed to 69% in December from 57.8% in November, according to Valor Data calculations. Excluding food, one of the most volatile categories, the index also rose, from 51.7% to 68.9%.

Core inflation, calculated as the average of five components monitored by the Central Bank, increased to 0.58% in December from 0.39% in November, according to MCM Consultores.

On a 12-month basis, the core inflation average rose from 4.21% to 4.34%.

The Central Bank’s inflation target remains at 3.0% for 2024, 2025, and 2026, with a tolerance range of 1.5 percentage points above or below the target.

* By Lucianne Carneiro, Valor — Rio de Janeiro

Source: Valor International

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

Vale hits lowest market cap since 2016, Citi reports

Iron ore outlook for 2025 fuels pessimism for sector stocks; banks slash target prices

01/08/2025

Vale’s market capitalization dropped below $40 billion for the first time since 2016, according to Citi, and continued to decline on Monday (6), reaching $36.8 billion, based on Valor Data. Brazil’s mining giant now lags significantly behind its Australian competitors, BHP Billiton, valued at $124.2 billion, and Rio Tinto, at $96.5 billion.

On Monday, Citi and Jefferies both announced cuts to their target prices for Vale’s New York-traded American Depositary Receipts (ADRs). Both banks cited pessimism over iron ore’s outlook for 2025, driven by expectations of slower economic growth in China this year.

Citi reduced its target price for Vale from $15 to $12, while Jefferies lowered its projection from $14 to $11. Jefferies also downgraded its expectations for CSN Mineração.

Despite the downward revisions, the new targets still reflect potential upside from Vale’s current stock price. On Monday, Vale’s ADRs closed at $8.62 in New York, a 0.12% decline, while in Brazil, shares fell 1.28% to R$52.56. Meanwhile, iron ore prices dropped 2.21% on the Dalian Commodity Exchange, settling at $102.65 per tonne.

A market source noted that bank projections tend to prioritize Chinese economic data over Vale’s internal fundamentals. For years, the miner has been considered a mirror of global iron ore market trends. Vale declined to comment.

Iron ore outlook

Citi estimates that iron ore prices will average $95 per tonne in 2025, down from $106.73 per tonne at the close of 2024. The bank foresees a balanced supply and demand scenario, assuming that China’s crude steel production has peaked and will gradually decline. Stronger supply from Brazil and Australia is expected to put pressure on other producers to cut output.

According to Citi, Vale could counter this pessimism by accelerating cash generation and increasing shareholder payouts.

Jefferies also painted a bleak outlook, predicting that prices for major metal commodities are unlikely to recover in 2025 due to global macroeconomic pressures. The bank expects stronger demand only between 2026 and 2027, which could lift commodity prices and boost sector stocks.

In November 2024, UBS lowered its target price for Vale from $14 to $11.50. While acknowledging the company’s progress, such as its R$170 billion settlement for the Mariana dam disaster and its leadership transition, UBS expressed concern about the medium-term fundamentals for iron ore. “In our view, China’s steel exports are vulnerable to global restrictions and are unlikely to be fully offset by government stimulus,” UBS wrote.

UBS projects iron ore prices to hover around $100 per tonne in 2025, with a potential drop to the $80–$90 range. In a December report, UBS reiterated its concerns, particularly highlighting the anticipated tariff war targeting Chinese products following Donald Trump’s inauguration as U.S. president. UBS also recognized Vale CEO Gustavo Pimenta’s improvements in operational performance since taking office in October but cautioned that returns between 2025 and 2026 could be limited due to the company’s heavy financial commitments.

Not all analysts share the pessimistic outlook. Santander’s head of mining research, Yuri Pereira, is more optimistic about 2025. Santander maintained its $15 price target for Vale’s ADRs and projected iron ore prices at $115 per tonne.

Mr. Pereira does not expect a significant increase in supply from the world’s top players, which should help stabilize prices. “Everything depends on iron ore prices and each company’s strategy. Prices could rise, prompting companies to boost production to take advantage, but the market has been fairly balanced,” he said in an interview with Valor.

* By Kariny Leal  e Felipe Laurence  — Rio de Janeiro, São Paulo

Source: Valor International

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

Brazil’s Central Bank makes record dollar intervention in December

Last month, monetary authority sold $21.57bn in the spot market to counter a record $26.41bn outflow

01/09/2025

The Central Bank of Brazil carried out its largest monthly intervention in the spot dollar market in December 2024, marking the most significant activity since the country adopted the floating exchange rate in 1999. The monetary authority sold $21.57 billion in the spot market last month, a record intervention driven by a historic dollar outflow of $26.41 billion, according to monthly currency flow data dating back to 1982.

“December is always a challenging month. However, the outflow in 2024 was significantly stronger, heavily concentrated in the financial account,” explained Sérgio Goldenstein, chief strategist at Warren Investimentos and former head of the Central Bank’s Open Market Department (DEMAB). “It made sense for the Central Bank to intervene in the spot market rather than through swaps because the pressure was concentrated precisely in the spot market, given the volume of physical dollar outflows.”

Until November, Brazil’s currency flow remained in positive territory, buoyed by strong commercial account results that more than compensated for financial outflows. However, this trend reversed sharply in December, a month typically marked by substantial dollar outflows for profit and dividend remittances. In October, Valor had already highlighted that financial account outflows were heading for a record high in 2024.

Over the year as a whole, Brazil posted a total net outflow of $18.01 billion. The commercial account contributed positively with an inflow of $69.2 billion, but this was outweighed by the financial account’s outflow of $87.21 billion.

Faced with December’s unusually high outflows, the Central Bank engaged in unprecedented foreign exchange market activity. In November, it conducted line auctions (dollar sales with a repurchase commitment), a tool traditionally used at year-end to address specific demands. However, the monetary authority also opted to sell reserves in the spot market to alleviate the impact of accelerating financial outflows.

The decision to auction dollar sales in the spot market was driven by the rapid deterioration of exchange rate levels. This was partially attributed to heightened fiscal risk perceptions following disappointment with the federal government’s spending review package, as well as increased global risks. The Central Bank’s focus on reserve sales was also influenced by unhedged dollar outflows—dollar movements without the purchase of future contracts.

“Throughout the month, we observed that some outflows were unhedged, which was crucial in the real’s depreciation movement. As the Brazilian currency experienced a rapid devaluation, driven by increased risk premiums, I believe this devaluation was decisive for the Central Bank to intervene more effectively in the exchange market through spot auctions,” Mr. Goldenstein noted.

Throughout 2024, the Central Bank maintained a strategy of targeted foreign exchange interventions. For instance, in April, it used currency swap contracts to manage the maturity of NTN-A bonds, while in August and early September, it conducted both swaps and spot auctions to address the rebalancing of the EWZ index fund, the top ETF for Brazilian stocks in New York. By contrast, in 2023, the monetary authority made no extraordinary interventions.

Central Bank’s approach

Pramol Dhawan, head of emerging market portfolio management at Pimco, which oversees approximately $2 trillion, believes Brazil’s current currency intervention program is largely reactive and needs a structured approach, as it may not effectively address current economic challenges. “In contrast, central banks like those of Peru and Turkey, with floating exchange rate systems, have clearer guidance for intervention, leading to better outcomes through greater transparency,” he said.

Historical data compiled by Valor shows that the Central Bank’s actions have closely tracked the currency flow since 1999. During periods of strong dollar inflows, the bank typically intervened through purchases, while outflows led to dollar sales. However, this trend was partially broken in 2023, when the Central Bank refrained from purchasing dollars despite a positive currency flow.

Although critical of the Central Bank’s current intervention approach, Mr. Dhawan recognizes the complexities of the current environment. “Political factors, including skepticism about fiscal policy and the early onset of the 2026 political cycle, cast doubt on the appropriateness of the Central Bank’s actions. With ample market liquidity and no clear signs of dysfunction, the necessity of such interventions is debatable,” he added.

In December, during a press conference on the Inflation Report, then Central Bank Chair Roberto Campos Neto said the monetary authority should intervene whenever it detects signs of dysfunction in the exchange rate. While December typically sees significant capital outflows, the record level in 2024 was particularly striking, exceeding the second-largest December outflow on record—from 2019—by 50%.

The Central Bank identified several factors contributing to the negative flow, including larger dividend payments by companies with strong earnings and increased investments by Brazilians abroad. “We began to see a greater outflow [of capital coming] from individual investors more recently, through [digital] platforms with smaller transactions,” Mr. Campos Neto said.

Roberto Lee, CEO and co-founder of Avenue, a brokerage allowing Brazilians to invest abroad, noted a marked rise in outflows during the last quarter of 2024. “The profile shifted towards more conservative investors seeking fixed income and liquidity. This was a sentiment we didn’t observe earlier in the year when expectations for Brazil were higher,” he observed.

Mr. Lee emphasized that while this shift was not comparable in scale to corporate outflows, it was a trend mirrored across emerging markets. “This is not a new sentiment. In the past, there have been instances when Brazilians adopted a more conservative stance. The difference now lies in the relatively recent infrastructure [of digital platforms], which has been around for roughly five years. Previously, these investors would turn to the CDI [Interbank Deposit Certificate]. Now, they have the option to choose safer assets. For a ‘flight to quality’, you first need an airplane ticket.”

Mr. Goldenstein added that the outflows may also have included a reversal of foreign investor inflows seen earlier in the year. “From July to November, foreign investors increased their portfolio allocation in domestic debt. We will need to wait for December’s data to confirm, but it is likely that a ‘stop-loss’ movement and reduced allocations occurred throughout much of the second half,” he suggested.

December also witnessed heightened stress in the domestic interest rate and public bond markets. Long-term rates spiked, triggering stop-loss movements among foreign investors, particularly in long-term fixed-rate bonds. This prompted the National Treasury to step in with public bond buybacks to stabilize the market.

*By Arthur Cagliari  — São Paulo

Source: Valor International

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

Government considers stricter rules for public spending

Plan includes temporary cap on ministry budgets while awaiting congressional budget approval

01/08/2025

The Brazilian government is considering issuing a decree to impose stricter rules on public spending at the beginning of the year, as it awaits Congress’s approval of the Annual Budget Act (PLOA).

The proposed decree would limit ministries to spending no more than one-eighteenth (1/18) of their annual budgets during this period. Essential expenditures, such as pensions, retirement benefits, and public sector payrolls, would be exempt and allowed to proceed as normal.

People familiar with the matter said the measure was discussed on Monday evening by Finance Minister Fernando Haddad and Chief of Staff Rui Costa. Talks continued on Tuesday in a meeting at the Planalto Palace with President Lula and Planning and Budget Minister Simone Tebet.

The government sees the decree as a way to signal fiscal austerity, a member of the economic team told Valor. The Budget Guidelines Act (LDO) allows the government to spend one-twelfth of the 2025 PLOA per month while awaiting its approval. However, the source noted that : it would not be prudent” to follow this rule given uncertainties surrounding the budget.

Other measures are also under consideration to reassure financial markets of the government’s commitment to fiscal discipline. These additional steps, which do not require Congressional approval, aim to complement the fiscal package submitted to lawmakers at the end of last year, the person explained.

Among the complementary measures, the government is preparing decrees and orders to regulate the fiscal package approved by Congress. Officials estimate these regulations could secure savings of at least R$69 billion over two years, though they believe the potential savings could be higher, as the estimate is conservative. Economists within the government dismissed claims that Congress weakened the fiscal package.

A key regulation will focus on the Continuous Cash Benefit (BPC), a welfare program for low-income seniors over 65 and individuals with disabilities of any age. This expense has been growing at a rate exceeding 10% above inflation. Officials argue that the approved changes will be crucial in bringing this expenditure “back to normal levels.”

*By Jéssica Sant’Ana – Valor — Brasília

Source: Valor International

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

Ambev sells Do Bem juice brand to Brazilian Tial

Amount has not been disclosed; deal pending approval by antitrust regulator

01/07/2025

Ambev has decided to sell its juice brand Do Bem, acquired in 2016, to the Brazilian company Tial. According to Ambev, the agreement has been signed and is pending approval from the antitrust watchdog CADE. The amount involved in the deal has not been disclosed. It includes selling intellectual property rights and formula copies of Do Bem, which will continue to be marketed by Tial. Columnist Lauro Jardim from newspaper O Globo initially reported the news.

When acquired in 2016, the acquisition of Do Bem was part of Ambev’s strategy to expand its non-alcoholic beverage division. The company now says the sale will allow it to prioritize investments in other brands and business segments. “Over the past eight years, Do Bem has experienced significant innovations, reached more regions in Brazil, and expanded its presence to new points of sales,” Ambev noted in a statement. In the third quarter of 2024, the non-alcoholic beverage division represented 8.8% of Ambev’s total revenue.

One of Do Bem’s main competitors is Coca-Cola’s Del Valle. However, the sector is characterized by a variety of strong regional brands.

Tial, founded in 1986 in Visconde do Rio Branco (Minas Gerais), describes itself as a producer of ready-to-drink fruit-based beverages made with natural ingredients and no chemical additives. The company has an annual production capacity of 96 million liters. Currently, it offers 51 products, including nectars, 100% juices, other fruit-based beverages, and coconut water. In addition to domestic sales, the group exports to countries such as the United States, Japan, and Portugal.

Tial is owned by the food manufacturing group Pif Paf (through the holding company CRL Empreendimentos) and the investment fund Victoria Falls, which invests in various sectors such as mining, healthy foods, and administrative support services. The companies declined to comment on the deal.

Pif Paf considered going public in 2021 but now faces a complex financial situation, advancing with asset sales to reduce its leverage. The company has hired G5 Partners to develop a plan focused on debt reduction.

The request submitted by the companies to CADE requires that the deal be reviewed under a fast-track process, which applies to deals with minimal competitive harm and market concentration below 20%. In the filing submitted to the antitrust regulator, the companies indicated that the combined market share of the buyer and the target business “in all presented market scenarios was significantly below the 20% threshold,” based on data from Scanntech.

In markets such as coconut water, non-carbonated non-alcoholic beverages (like sodas), and ready-to-drink juices, the consolidated business holds a market share of less than 10%. According to the company, the low market share demonstrates that the concentration resulting from the deal would be “minimal and unlikely to raise competitive concerns.”

Zeca Berardo, a competition law expert and partner at Berardo Advogados, said the process is expected to proceed smoothly at the antitrust regulator. “It’s a major player in the beverage sector divesting a business line to a relatively small player. That should not raise any competition concerns,” he said, noting that other significant competitors in the sector, like Coca-Cola, continue to invest.

According to Mr. Berardo, CADE has taken less than 20 days to study cases like that. A third party can oppose the deal within 15 days, or for a council member to request a detailed review of the case—both scenarios are deemed unlikely by the expert.

By Cristian Favaro  e Ana Luiza de Carvalho  — São Paulo

Source: Valor International

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

Brazil’s trade surplus declines, uncertainty looms over 2025 outlook

Despite a 24.6% drop, 2024 posts second-best performance; exchange rate and U.S.-China tensions add to doubts

01/07/2025

Brazil’s trade surplus for 2024 reached $74.55 billion, a 24.6% drop from the record-breaking $98.9 billion in 2023. Despite the decline, 2024 still secured the second-highest trade surplus since official records began, in 1997, according to the Ministry of Development, Industry, Trade, and Services (MDIC). Looking ahead to 2025, experts foresee a surplus comparable to or slightly better than 2024, though still significantly below the peak achieved in 2023.

According to the Ministry’s Foreign Trade Secretariat (SECEX), 2024 saw $337 billion in exports and $262.48 billion in imports. Declining commodity prices and a rise in imports contributed to the smaller surplus.

For 2025, a slower domestic economy is expected to curb imports, while an anticipated strong agricultural harvest could boost exports. However, uncertainty persists regarding export prices, exchange rate, and the impact of renewed U.S.-China trade tensions, especially as President Donald Trump assumes office on January 20.

“Given the expected good harvest, the surplus should remain at 2024 levels or potentially reach $80 billion if the domestic slowdown materializes,” said Lucas Barbosa, an economist at AZ Quest. He projects imports will stabilize near the 2024 level of $262 billion, while exports could rise to $350 billion.

Similarly, Gabriela Faria, an economist at Tendências Consultoria, forecasts a $77.6 billion surplus for 2025. She expects a 1.6% drop in export values due to declining prices but notes potential gains in volume, particularly from minerals, oil, and grains. Domestic grain production is projected to grow 8.2% over the 2023/24 cycle, with soybeans poised to reach record levels, according to estimates from Brazil’s National Supply Company (CONAB).

On the import side, Tendências projects a 3.1% decline in 2025 due to weaker domestic activity. Tightened financial conditions, increased internal uncertainties, slower global growth, and reduced fiscal stimulus form the basis for Tendências’s GDP growth estimate of 1.9% for this year, down from 3.4% in 2024, according to Ms. Faria.

Mr. Barbosa of AZ Quest cautioned that the exchange rate remains a significant challenge. “A dollar trading above R$6 favors exports, especially of goods that might otherwise be consumed domestically. For example, animal protein becomes increasingly attractive for export,” he said.

Herlon Brandão, director of foreign trade statistics at the MDIC, anticipates imports in 2025 will remain at or exceed 2024 levels, supported by Brazil’s projected economic growth. He also noted that there are no significant indications of large commodity price fluctuations.

On the export side, Mr. Brandão expects global economic growth to increase demand for Brazilian goods, particularly food products like soybeans and meat. “As the agricultural harvest recovers”, he said, soybeans should reclaim their position as the top export product, replacing oil. SECEX forecasts a trade surplus for 2025 ranging from $60 billion to $80 billion.

Industry concerns

The wide range in SECEX’s projections reflects the unpredictable nature of 2025, said José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB). His preliminary estimate points to a $93 billion surplus, assuming moderate price increases and volume growth. Commodity prices, he said, are sensitive and can react to any external events. “AEB’s projections come with many caveats,” he noted. Mr. Castro also highlighted uncertainties surrounding U.S.-China trade relations and their potential impact on global markets, alongside concerns about the exchange rate.

Tatiana Prazeres, foreign trade secretary at the MDIC, described 2024’s trade performance as positive, highlighting the “sustained high level of exports.” The decline in export value, she said, resulted from lower product prices, despite a 3% increase in export volumes. SECEX data showed a 0.8% drop in export value for 2024, driven by a 3.6% fall in prices.

Mr. Barbosa of AZ Quest highlighted notable export products in 2024, including beef, pork, sugar, molasses, and coffee. While many of these goods suffered price declines, increased export volumes more than offset the impact.

Welber Barral, a partner at BMJ consulting, noted that the price drop in 2024 was primarily driven by commodities. “Imports, particularly capital goods, increased—a positive sign. Although the surplus fell by nearly 25%, it’s still impressive given Brazil’s historical performance. “A similar pattern could emerge in 2025, with imports expected to continue rising despite the strong dollar,” he said, citing anticipated GDP growth of around 2% even amid an economic slowdown.

Mr. Barbosa of AZ Quest added that 2024’s trade surplus aligned with initial expectations, but the resilience of imports was surprising. SECEX data showed import volumes grew 17.2% in 2024, while prices declined by 7.4%. “The volume data reflects robust domestic demand, which continues to flow outward via imports, particularly of capital goods and consumer goods,” he explained.

Capital goods imports were particularly strong, aided by lower prices, Mr. Castro of AEB noted. Government data showed that capital goods imports rose 20.6% in value in 2024, driven by a 25.6% increase in volume and a 4.7% price decline.

*By Estevão Taiar  e Marta Watanabe  — Brasília, São Paulo

Source: Valor International

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

Brazilian reserves lost $33.3bn in December with Central Bank auctions

Monetary authority sold $21.574bn in the spot market and $11bn in line auctions

01/06/2025

Currency interventions conducted by Brazil’s Central Bank in December decreased international reserves by $33.3 billion in one month, bringing the total to $329.7 billion by the end of 2024. At the end of November, the reserves level was $363 billion. Despite this decline, experts say the volume is still comfortable.

The level reached at the end of last year is lower than the $355 billion recorded at the end of 2023 but higher than the $324.7 billion in 2022. These are nominal values. Silvio Campos Neto, senior economist and partner at Tendências Consultoria, described December’s drop as “significant,” noting that reserves remain healthy. However, he cautioned that the rapid decline is a warning for the coming months.

“There was a strong intervention in the foreign exchange market in December, and it was not enough to reverse the pressure, indicating that the source of this movement is not entirely related to market dysfunction or a temporary dollar scarcity; it is more structurally linked to increased risk perception about Brazil,” he explained.

In December, the monetary authority held nine spot dollar auctions and five “line” auctions (with a repurchase agreement), totaling $32.574 billion. That included $21.574 billion in spot sales and $11 billion in line auctions. Looking at the volume of reserves, Danilo Igliori, chief economist at Nomad, also emphasized the level is comfortable. He noted that concerns could arise if the crisis seen in December escalates in 2025. “I don’t think that’s the scenario. It was an evident moment of stress, and the Central Bank responded well.”

Silvio Campos Neto from Tendências explained that the interventions were the main reason for the reserve reduction but also highlighted the impact of rising market interest rates in the United States. “That also affects the value as it reduces prices, especially U.S. bonds, which make up most of the reserves.”

The Central Bank stated that there is no consensus on the best metric to define the “optimal level” of reserves but indicated that periodic internal evaluations show Brazil is aligned with practices of similar countries.

In a press conference on December 19, the then-Central Bank president, Roberto Campos Neto, said the monetary authority was operating in the foreign exchange market as usual. He pointed out that the monetary authority intervenes whenever it perceives market dysfunction. Mr. Campos Neto also noted an unusually large flow at the end of 2024, with an above-average outflow of dividends as one of the reasons.

Fiscal concerns also influenced the exchange rate’s movement. At the end of November, the government announced measures that were poorly received by the market. The package was unveiled alongside a proposal to exempt those earning up to R$5,000 from income tax, which raised concerns and impacted interest rates and the exchange rate.

The National Congress approved the fiscal project in December, while the income tax proposal has yet to be submitted by the government to Parliament. The real continued to decline, closing 2024 with a 27.3% depreciation, at R$6.18 to the dollar.

Mr. Igliori from Nomad pointed out that December typically sees a higher dollar outflow, but the scale of the reserve drop is linked to stress regarding fiscal policy. “The auctions were significant, and yet the exchange rate moved considerably. It became clear that during December, we experienced a mini credibility crisis, and the impact on reserves was a consequence of the Central Bank’s management during this period through auctions,” he said.

Another factor in the end-of-year scenario was the tone of criticism from Workers’ Party’s (PT) members regarding the monetary authority’s actions. On the same day as Mr. Campos Neto’s press conference, PT President Gleisi Hoffmann posted on social media that the real’s depreciation in those weeks was a “speculative attack.”

In the press conference, the then director of monetary policy and current Central Bank president, Gabriel Galípolo, was asked about that possibility. He argued that the idea of a “coordinated speculative attack” did not represent market movements. Mr. Galípolo stated that “it’s not correct” to treat the market as a “monolithic block.”

The chief economist at Nomad said there is always pressure on the monetary authority and no reason to believe the new leadership will act unprofessionally. “I don’t see an inclination to introduce significant institutional uncertainty around the Central Bank’s autonomy, which has been hard-won.”

*By Gabriel Sinohara

Source: Valor International

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

Foreign investors record largest stock market outflow since 2020

Institutional investors follow suit, ending the year with net withdrawals on the secondary market

01/06/2025

The turbulence triggered by the government’s unveiling of weaker-than-expected fiscal measures, anticipation of aggressive protectionist policies from Donald Trump, and rising Selic rates kept foreign investors at bay from Brazil’s stock market throughout 2024.

Data from B3, the Brazilian stock exchange, reveals that foreign investors pulled R$32.1 billion from the secondary market (trading of already-listed shares) last year. This marked the largest annual outflow since 2020, the first year of the pandemic, when the segment saw a R$40.1 billion deficit, according to a Valor Data analysis. The figures exclude IPOs and public offerings.

Institutional investors also ended 2024 with net withdrawals, recording a R$37.5 billion deficit in the secondary market. By contrast, only individual investors finished the year with a positive balance, contributing R$30.8 billion.

Michel Frankfurt, head of Scotiabank’s brokerage in Brazil, casts doubt on the prospect of significant foreign inflows in the near term. “We won’t see substantial flows. There might be some activity to capitalize on stock market bargains, but we lack a strong ‘narrative’ to create momentum. It’ll just be a ripple,” he explained.

Mr. Frankfurt added that Brazil appears to have been “abandoned” by global investors, hindered by its failure to differentiate itself on the global stage and internal woes like worsening government accounts and disappointment over the spending cut package.

HSBC analysts echoed this sentiment, expressing concern over the vicious cycle stemming from fiscal policy frustrations. Last week, they downgraded their recommendation for Brazilian equities from neutral to “underweight,” citing growing pessimism about the country’s outlook.

“Brazil fits the profile of a ‘classic value trap,’” wrote analysts Alastair Pinder, Nicole Inui, and Herald van der Linde in their report.

While acknowledging that Brazilian equities are currently undervalued—trading at a projected 12-month price-to-earnings ratio of 6.6 times—they argue that asset revaluation is “unlikely” until the Selic benchmark interest rate falls or fixed-income returns decrease, a shift they do not anticipate before the second half of 2025.

*By Bruno Furlani

Source: Valor International

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