If the operation proves viable, the fund’s investments in the country could reach R$1.5bn
05/29/2024
Paulo Castellari — Foto: Gabriel Reis/Valor
Appian Capital, a British investment fund focused on mining projects, is investing an additional R$350 million in Brazil to enable graphite exploration. Considered a critical mineral, graphite is essential for battery production, with 70% of the global supply currently sourced from China. If the initial operation confirms its viability, the fund’s investments in the country could reach R$1.5 billion over the next five to eight years.
With these resources, Appian will establish a demonstration unit—a pilot mineral beneficiation operation—with a production capacity of 5,500 tonnes of graphite per year at the Boa Sorte mine in Itagimirim, Bahia. Additionally, it will develop two technical studies in areas controlled by Graphcoa, a joint venture managed by the fund, which has nine mining projects spanning southern Bahia and northern Minas Gerais.
According to Paulo Castellari, CEO of Appian Capital Brazil, two of the fund’s nine global mining projects are located in Brazil. “Brazil has been an area of significant interest since 2019,” he said. At that time, Appian invested in Atlantic Nickel, which produces nickel in Bahia, and Mineração Vale Verde, a copper operation in Alagoas.
The fund is focused on materials that can aid in the energy transition, such as copper, nickel, and lithium, which are used in the positive pole (cathode) of batteries. However, they also see potential in graphite, as there is currently no economically viable substitute for this mineral used in the negative pole (anode) of batteries. “What lies ahead for graphite is fascinating,” he said.
Mr. Castellari anticipates being able to decide on the next phases of the project in Brazil, aiming for 25,500 tonnes annually, by the first half of next year after conducting tests and certifications with potential clients.
In the future, the installed capacity in the Brazilian operation could increase to 40,000 tonnes, potentially reaching 65,000 tonnes by exploring two of Graphcoa’s nine areas. “It could be the largest graphite project in the country,” said Mr. Castellari.
Currently, Brazil’s graphite production represents less than 2% of the global volume, even though the country holds deposits equivalent to a quarter of the world’s reserves. The global supply of graphite is around 1 million tonnes per year and is expected to reach 3.7 million tonnes by 2030. China’s share, which currently accounts for more than half of the production, is projected to decrease to 30%, Mr. Castellari notes.
On the demand side, a deficit is anticipated. Today, 2 million tonnes are consumed annually, with 1.4 million tonnes used for batteries. By 2030, consumption is expected to rise to 4.6 million tonnes, exceeding the projected supply.
With potential clients both domestically and internationally, the strategy is to assess the feasibility of verticalizing operations, possibly extending to battery production in the future. “The investment is not only in the use of batteries for vehicle electrification but also in general,” he said.
Neobank reached market cap of R$297bn on Tuesday, surpassing Itaú’s R$288.5bn
05/29/2024
Nubank is now the second-largest company in Brazil regarding market cap, behind Petrobras — Foto: Divulgação
Nubank has surpassed Itaú in market capitalization on the New York Stock Exchange (NYSE), claiming the title of the most valuable bank in Latin America. On the previous Friday, the digital bank had come close but did not surpass its rival. It took a 3.84% rise in Nubank’s share price on Tuesday, closing the regular session at $12.18, along with a 0.54% decline for Itaú, to make the shift official.
Nubank ended the day with a market cap of R$297 billion, according to Einar Rivero of Elos Ayta Consultoria, compared to Itaú’s R$288.5 billion. The movement makes the digital bank the second-largest company in Brazil regarding market cap, behind Petrobras.
This is not the first time Nubank has overtaken Itaú in market cap. Between January and February 2022, the two banks alternated as the most valuable. Being traded in dollars gives Nubank an edge over banks on the Brazilian stock exchange, such as Itaú, whose shares are traded in reais.
In practice, market cap is a way to measure how stock investors assess a company, including a “premium” that represents the potential for future gains and competitive presence in its market. This metric disregards aspects such as the balance of assets, cash, and liabilities.
From the perspective of the stock price relative to the bank’s book value, for instance, Nubank is being traded at a multiple of about 8.7 times. Meanwhile, Itaú is traded at around 1.7 times its book value. “The difference is that Itaú has decades of accumulated profits in its equity, whereas Nubank only started making a profit last year, in 2023; hence the difference in price to book value,” said Larissa Quaresma, an analyst at Empiricus Research.
For Magda Chambriard, “dialogue” is key to reconciling different perspectives
05/28/2024
Magda Chambriard — Foto: Leo Pinheiro/Valor
Petrobras must be a profitable company that simultaneously serves the interests of both private and governmental shareholders, said the new CEO of the state-run company, Magda Chambriard, on Monday. In her first press conference after taking over the company, the executive noted that the plan is to align the company’s operations with shareholders’ interests while adhering to business logic. She added that “dialogue” is the key to balancing the different interests of investors.
Ms. Chambriard took office on Friday after being elected by the company’s board, replacing Jean Paul Prates, who was dismissed on May 14 by President Lula following months of public criticism and clashes with factions within the government.
The new CEO mentioned that when Mr. Lula invited her, he requested that she manage the company with respect for society. She said the company is committed to fulfilling promises with agility and accelerating efforts, can ensure returns for all shareholders, and must meet societal expectations, “understanding that we have to deliver returns.”
“If we make a profit and meet the interests of public and private shareholders, we will pay dividends,” said Ms. Chambriard, adding that changes in the company’s board, if they happen, will be driven by the need to adjust profiles. She noted that she is still getting to know the current board members.
When asked about the second half of the extraordinary dividends for 2023, which the company is expected to allocate by the end of this year, Ms. Chambriard said she still needs to study the matter: “I took over on Friday, so I need to look into this more carefully.”
Another crucial point for her is the exploration of new oil and gas frontiers, such as the Equatorial Margin and the Pelotas Basin. Ms. Chambriard stressed the importance of maintaining the company’s reserves, noting that the production peak of the pre-salt is imminent. The current challenge, she added, is ensuring energy security while managing the transition in the sector. “The company’s efforts must be accelerated,” she said.
Ms. Chambriard believes that the Ministry of the Environment (MMA) needs to understand better the country’s and the company’s need to drill wells in the Equatorial Margin. Brazil’s environmental protection agency IBAMA, linked to the MMA, denied an environmental permit for drilling a well in the Foz do Amazonas basin, and the company has appealed the decision, which is still pending.
“We need to discuss with the MMA and show that the company exceeds the legal requirements for environmental care,” she said. She added that issues like the exploration of the Equatorial Margin should be discussed in the National Energy Policy Council (CNPE), which she considers the most appropriate forum, with final arbitration by President Lula. The internationalization of the company, seeking areas in other countries for oil exploration and production, is on the table, but she said that the “priority is the Brazilian territory.”
According to Ms. Chambriard, the company’s experts will assess whether the repurchase of the Mataripe refinery is a good deal for the state-run company. “Refining interests us as a value aggregator.” The company is negotiating with Mubadala Capital to re-enter the refinery, which was sold in 2021.
Ms. Chambriard said that the oil company needs to increase the “availability” of its products in the market. “We must guarantee that the company is sustainable and continues with high production levels,” she added. She defended the current fuel pricing policy and said the company will continue with the goal of “Brazilianizing” prices. “It is undesirable to bring daily instability to fuel prices.”
Regarding the contract between Petrobras and the petrochemical company Unigel, Ms. Chambriard noted that the case is under review and that the company will address any concerns raised by the public spending watchdog TCU. “I will not override a respected institution like the TCU,” she said, adding that “no one here wants to waste money, and the company will continue with the contract with Unigel if it proves profitable.”
“We need to explain to regulatory bodies that fertilizers are a good business,” Ms. Chambriard said, adding that the company cannot have “excessive compliance” that leads to inertia and that Petrobras will discuss projects and their timeliness.
Unigel leased two fertilizer factories from Petrobras in late 2019, in Camaçari (Bahia state) and Laranjeiras (Sergipe state), which had been mothballed due to unprofitable operations. The petrochemical company resumed production at the two units but suspended activities again last year, citing a drop in international urea prices not matched by natural gas costs, making operations unviable.
In December, the companies signed a “tolling” agreement—an industrial processing contract on demand—worth R$759.2 million for Unigel to provide industrialization, storage, shipping, and post-sale services for urea, ammonia, and Arla (used to reduce emissions from diesel vehicles).
Aim is to channel more external resources to finance investments for transition to a low-carbon economy
05/27/2024
Nelson Barbosa — Foto: Leo Pinheiro/Valor
Brazil aims to leverage its rotating presidency of the G20 to channel more external resources into financing the necessary investments for transitioning to a low-carbon economy in emerging countries, including itself.
According to Brazil’s Ministry of Finance, $10 billion out of $30 billion available over the next five years is not reaching those who need it most. Development banks, whether multilateral like the World Bank, national, or subnational like the Brazilian Development Bank (BNDES), are crucial in addressing this issue.
This topic links two of Brazil’s priorities for its G20 presidency: sustainable development and the reform of multilateral governance institutions, said Ivan Oliveira, undersecretary of sustainable finance at the Ministry of Finance.
The ministry has identified four main funds: the Green Climate Fund (GCF) from 2010, the Climate Investment Funds (CIF) from 2008, the Adaptation Fund from 2010, and the Global Environment Facility (GEF) from 1994.
According to Mr. Oliveira, these four funds alone have $30 billion available over the next five years. Typically, these funds are formed from government contributions and, to a lesser extent, from companies. The goal is to pool resources from developed countries to finance the necessary investments in emerging nations, particularly the poorest.
The most vulnerable nations cannot afford the investments needed, which range from building renewable electricity generation plants to transitioning truck and bus fleets, to constructing infrastructure that makes cities more resilient to climate events like floods.
Although the amounts involved fall short of the $100 billion per year estimated as necessary at the signing of the Paris Agreement during the 2015 UN Climate Change Conference, the Ministry of Finance highlights an additional problem: the difficulty in accessing these funds. Therefore, not only are the funds insufficient, but they also fail to reach their intended targets.
Mr. Oliveira suggests that discussions within the G20 could lead to recommendations for creating “country platforms,” leaving a detailed roadmap on the reform of multilateral development banks. According to Mr. Oliveira, “this roadmap is Brazil’s major contribution,” and the aim is to complete it by the end of the year, at least in terms of the governance reform of multilateral banks.
“One of the points that will be addressed is how multilateral banks need to connect more effectively with national and subnational development banks, particularly through what we call ‘country platforms,’ or vehicles created to enable international investors and other stakeholders, such as the multilateral banks themselves, to connect projects in countries and finance them,” Mr. Oliveira said.
In Brazil, BNDES often receives resources from multilateral banks. Under the leadership of Aloizio Mercadante, who took over last year with the return of the Workers’ Party to the federal government, this type of funding has advanced. In 2023, the development bank secured $3.2 billion from multilateral institutions abroad and expects another $4.6 billion between this year and 2025, Mr. Mercadante estimated earlier this month while presenting the bank’s first-quarter financial results.
In other areas, the BNDES operates the Amazon Fund, the world’s main REDD+ instrument focused on financing the reduction of deforestation, and has used the Climate Fund since last year as an alternative to expanding its funding. The National Treasury boosted the fund with $2 billion raised in November through the first issuance of green bonds in the external debt market.
“The Climate Fund has scaled up. It used to disburse R$300 million to R$400 million and now will disburse around R$10 billion per year. This will fund various initiatives: from urban transportation to the recovery of degraded areas, from the ecological transition of efficient machines to biogas production, and renewable energy sources to biofuels. This also creates opportunities for industrial policy but with a strong environmental focus,” said Nelson Barbosa, director of planning and project structuring at the BNDES, adding that the bank has already received over R$30 billion in project requests.
According to Mr. Barbosa, one of the obstacles to be overcome in the interaction between external funds and multilateral banks, on one side, and development institutions that can act as “country platforms,” on the other, is exchange rate variation, in addition to the availability of resources (funding) and guarantees.
“Brazil is now implementing a mechanism where the Treasury will reduce the cost of currency hedges for some selected projects. Globally, and I think the 2008 crisis proved this, there isn’t much of a liquidity or funding problem. The resources exist. The problem is the currency mismatch,” Mr. Barbosa said.
The Treasury mechanism Mr. Barbosa referred to is Eco Invest Brasil, launched by the Ministry of Finance in February. The program, in partnership with the Inter-American Development Bank (IDB) and the World Bank, aims to encourage foreign capital inflows into the country for energy transition investments, offering currency hedging mechanisms at lower costs than market rates.
“There is a discussion that the IMF and the World Bank, more than providing liquidity or funding, should create a global hedge mechanism. It’s like creating a currency hedge fund for selected projects, where the interested party can obtain funding and hedge more cheaply through the IMF than in the market,” added Mr. Barbosa.
Rémy Rioux, president of the French Development Agency (AFD), believes that Eco Invest Brazil could serve as an example for other countries. He was in Rio this week for a meeting, hosted by the BNDES, of the Finance in Common (FiCS) network, of which he is the chairman.
“We launched the FiCS Financial Innovation Lab in Rio, with the support of the IDB and the Climate Policy Initiative (CPI), which is ready to receive new ideas and help develop and disseminate them,” Mr. Rioux said in a written interview.
“Based on the Brazilian example, public development banks could be asked to develop tailor-made financial arrangements to unlock green and resilient investments, addressing the main existing financial constraints identified at the national level, such as exchange rate instability, cost of capital, lack of international financing, rating limits, etc.”
Capital injections provide relief to publicly traded companies; disbursements total R$22bn in 12 months
05/25/2024
Luciano Lindemann — Foto: Ana Paula Paiva/Valor
Facing significant financial pressure, a group of publicly traded companies is turning to their controlling shareholders for capital injections to alleviate their balance sheets amid a prolonged period of high interest rates and crises in sectors like retail and healthcare. Disbursements have totaled nearly R$22 billion over 12 months, Valor’s analysis shows.
The largest capital injection, amounting to R$12 billion, will be led by Jorge Paulo Lemann, Beto Sicupira, and Marcel Telles for retail chain Americanas, mandated by the company’s creditors following the discovery of accounting fraud. In the healthcare sector, the Bueno family had to infuse capital into Dasa on two occasions due to the company’s high leverage. In the most recent injection announced this month, the family will provide R$1.5 billion to ensure the company does not breach its maximum debt covenants, through a capital injection. Concurrently, Dasa will also be selling assets.
Another healthcare company, Oncoclínicas, also initiated a capital increase of R$1.5 billion, with R$1 billion from Master Bank, which will finance the remaining amount to be provided by the company’s founder, Bruno Ferrari. This capital will help reduce the company’s leverage.
According to a survey by FTI Consulting for Valor, there have been about 30 capital injections since November, with 80% aimed at financial stabilization. Of these, 10 companies were burning cash (negative EBITDA) and 15 had leverage ratios above five times. “Many companies waited, hoping for better economic conditions to raise funds, but ultimately couldn’t wait any longer. Those with the option of capital injections are resorting to this measure,” said Luciano Lindemann of FTI. He notes a higher concentration of such companies in the retail, infrastructure, and construction sectors.
Mr. Lindemann said that companies must address the root causes of their increased leverage despite the capital injections. “Simply injecting liquidity and reducing leverage won’t solve the problem alone,” he said.
The current economic context has also contributed to this trend. “This movement is part of the current landscape in Brazil, with closed windows for initial public offerings [IPOs] and few secondary offerings,” said Eduardo Terra, a retail company advisor and president of the Brazilian Society of Retail and Consumption. “In some cases, controlling shareholders see more advantage in capitalizing the company to avoid future losses, especially if they have already profited significantly from the business and see the potential for medium to long-term returns. In other cases, however, they may choose to exit.”
With the uncertain macroeconomic environment, more companies may need additional resources to balance their books. Daniel Calori of Íntegra Associados said that corporate debt continues to grow, meaning more companies will likely undergo restructurings, possibly including capital injections from controlling shareholders. He said that beyond ensuring solvency, major shareholders may see the depreciated share prices as an entry opportunity, anticipating future appreciation.
Mr. Calori emphasizes that companies need to tackle the underlying issues alongside capital increases, or the injected capital will quickly deplete. Creditor banks negotiating extended terms often require a capital injection as a condition.
Companies without a controlling shareholder, or with controlling shareholders unwilling to inject more funds, will likely undergo more formal restructuring processes, as seen with Casas Bahia, which entered into extrajudicial restructuring after agreements with major creditors, said Mr. Calori. According to Mr. Lindemann of FTI, these companies may seek alternative solutions, potentially turning to investors accustomed to distressed assets, such as special situation managers.
The challenging capital market has also required greater involvement from majority shareholders to ensure capital injections when needed. For instance, last year, the Pinheiro family had to contribute to the health insurance operator Hapvida in a secondary offering to address the company’s balance sheet. Similarly, in a secondary offering for Ambipar, controlling shareholder Tércio Borlenghi Junior had to inject capital due to difficult market conditions for share offerings.
At retailer Lojas Marisa, undergoing financial restructuring in recent years, the Goldfarb family plans to contribute about R$550 million, according to sources. This year, the Trajano family arranged a R$1.25 billion capital increase for retailer Magazine Luiza, with BTG possibly subscribing to R$250 million.
In a market communication, Oncoclínicas announced a goal to achieve a financial leverage ratio of two times net debt to annualized fourth-quarter EBITDA. Ambipar and Marisa declined to comment.
Hapvida said in a statement that its last capital injection in April 2023 was aimed at strengthening cash flow and optimizing the company’s capital structure. Since then, the company has been reducing leverage through robust operational cash generation and has no ongoing capital injection plans.
Magazine Luiza stated that the capital injection in January reflects the controlling shareholders’ confidence in the company and its business model. “The operation saw record participation from minority shareholders at 75%. The funds are being used to accelerate technology investments and improve capital structure.”
Dasa said that the transaction is part of operational and strategic initiatives aimed at reducing leverage, establishing a solid financial position, and enhancing investment capacity. The R$1.5 billion injection underscores the controlling shareholders’ long-term commitment.
*Por Fernanda Guimarães, Mônica Scaramuzzo — São Paulo
Codeshare does not require antitrust regulator’s approval; experts say operation tends to attract attention
05/27/2024
Partnership will combine the two carriers’ airline networks in Brazil through the codeshare system and involve both companies’ loyalty programs — Foto: Leo Pinheiro/Valor
The cooperation agreement between Azul and Gol announced on Thursday (23) agitated the market, as experts saw the approach as the start of a consolidation process between the companies. On Friday (24), Gol rose 11.9% to R$1.41 on the B3, while Azul soared 5.18% to R$10.36—the biggest appreciation of companies in the benchmark stock index Ibovespa on that day.
The partnership will combine the two carriers’ airline networks in Brazil through the codeshare system and involve both companies’ loyalty programs. Customers purchasing airline tickets included in the codeshare can choose to which program they wish to allocate the points they are entitled to. Azul and Gol carry out around 1,500 flights daily. The agreement will create more than 2,700 travel opportunities with just one connection.
The market says the deal resembles a partnership signed by Latam and Azul in 2020. The agreement was abruptly terminated a year later due to Azul’s attempt to take over Latam after the latter filed for a court-supervised reorganization under Chapter 11 in the United States.
Behind the scenes, Azul is said to be in advanced talks with Gol for a merger. At the first moment, Azul was reportedly willing to acquire Gol. Now, the prevailing view in the market is that the airlines could join forces to create a new firm that would also include Abra—the holding company controlling Gol and Colombia-based Avianca—as a shareholder. It remains unclear who would be the controlling shareholder. Azul is currently controlled by businessman David Neeleman.
The codeshare does not require approval by the Administrative Council for Economic Defense (CADE), as it is regarded as a commercial agreement. However, experts point out that it tends to be handled as a different operation and attract the antitrust regulator’s attention.
Furthermore, the deal has a relevant background, which is the behind-the-scenes’ moves by Gol and Azul toward a possible consolidation. If the agreement is regarded as preparation for a future merger, it could raise a flag at CADE. Azul and Gol declined to comment.
When Latam entered into a codeshare with Azul in the past, Gol asked CADE to apply some type of penalty against the two companies for a practice that could harm consumers. However, the request did not advance as the industry was struggling with the effects of the COVID-19 pandemic.
Experts point out that CADE has the power to request an analysis of the operation although its history shows it did not require prior notification in previous codeshare cases.
The airline industry is under heavy public scrutiny due to the increase in ticket prices and has been in constant attrition with the Brazilian Congress. On May 14, during a hearing before being reappointed as the CADE’s general superintendent, Alexandre Barreto said the antitrust regulator is preparing “a broad investigation” into ticket prices.
In a report, Bradesco BBI analysts pointed out that the current agreement seems to be more robust than the one signed between Azul and Latam in August 2020. The previous agreement did not involve frequent-flyer programs and was limited to 64 domestic flights. The bank also emphasizes that the partnership appears to be the first step to a possible merger.
Itaú BBA expects the deal will benefit Azul as it gives the company access to a larger network connected to its regional operations.
Recent assessments rank Porto Alegre among cities in Rio Grande do Sul with a “very high” capability to manage hydrological disasters
27/05/2024
Pelotas on May 26: city impacted by floods in Brazil’s southern state is among those with “very high” capacity to manage hydrological disasters — Foto: Eduardo Rodrigues/Agência Pixel Press/Folhapress
Nearly a month after being devastated by floods, cities like Porto Alegre, Rio Grande, and Pelotas are classified as having a “very high” capacity to manage hydrological disasters, including floods, flash floods, and inundations, according to “Adapta Brasil.” This mapping, orchestrated by the Ministry of Science and Technology, assesses the readiness of regions to confront the impacts of climate change.
Prompted by the calamity in Rio Grande do Sul, the federal government is expediting the development of a robust strategy for both mitigation and adaptation to extreme weather events. This initiative, spearheaded by the Department of Climate Change of the Ministry of the Environment, is expected to be unveiled in the coming weeks, potentially introducing a new dedicated agency, although its ministerial affiliation remains undecided.
The findings from Adapta Brasil underscore the critical need for this policy. Even areas deemed highly capable of adaptation have experienced prolonged flooding, signaling dire consequences for regions classified with lower adaptive capacities. The North and Northeast of Brazil, along with the states of Mato Grosso, Goiás, and Minas Gerais, are labeled as having “low” adaptive capacity. Particularly concerning are Maranhão, Piauí, and Paraíba, each marked with a “very low” index.
In contrast, the Southern states, along with São Paulo and Mato Grosso do Sul, hold a “medium” adaptive index, while Rio de Janeiro and Espírito Santo enjoy a “high” rating. Brasília stands out with a “very high” level, with the study considering factors such as the capacity for municipal public investment and income, governance, disaster risk management, and municipal capabilities in citizenship and sectoral policies.
The municipal data from Adapta Brasil shows “very high” adaptive capacity indices in Porto Alegre and the principal cities surrounding Lagoa dos Patos, with the capital of Rio Grande do Sul achieving the highest score on the adaptive capacity index, which ranges from 0 to 1.
Suely Araújo, former president of the Brazilian Environmental Protection Agency (IBAMA) and a specialist in public policies at the Climate Observatory, emphasizes the challenges and expenses involved in preparing Brazilian municipalities for adverse climatic events. She highlights the financial constraints faced by two-thirds of Brazilian municipalities, each with populations under 20,000, which struggle to fund the necessary infrastructure to respond to disasters.
“Adaptation involves significant funding,” Ms. Araújo explains. “While some measures like restoring native vegetation or enhancing urban drainage are straightforward, implementing them becomes challenging without financial resources.” Ms. Araújo advocates for “a robust federal role in supporting states and municipalities through non-repayable funds,” pointing out that “municipalities that frequently experience flooding each year lack the capacity to incur more debt.”
Additionally, despite the severe impacts observed in Rio Grande do Sul, Guilherme Syrkis, the executive director of the Brazil Climate Center, indicates that the situation could have been even more catastrophic in Santa Catarina. He notes that due to its geography and urban layout, Santa Catarina’s cities are far more vulnerable to such disasters than those in Rio Grande do Sul.
According to Mr. Syrkis, developing a comprehensive adaptation plan requires analyzing local vulnerabilities and identifying key risks. Engaging civil society, businesses, and local populations is crucial to tailor strategies effectively to each area’s needs.
In addition to flooding, Mr. Syrkis emphasizes the increasing threat posed by heatwaves, which need greater attention due to their severe but often overlooked impact. “Heatwaves are particularly deadly, causing silent deaths, such as heat-induced heart attacks,” he notes. Mr. Syrkis suggests that regions like the Northeast and Rio de Janeiro should implement early warning systems to alert the public about impending heat waves.
While acknowledging the constraints imposed by budgetary concerns, Mr. Syrkis points out that some adaptive measures can be both cost-effective and impactful. He references a government initiative from India, where houses are painted white to reduce heat absorption—a strategy that could be beneficial if applied in economically disadvantaged communities across Brazil. “Implementing such a simple measure could significantly mitigate the effects of high temperatures in Brazil’s poorer areas,” he explains.
Recently, Environment Minister Marina Silva confirmed plans to establish a dedicated authority to oversee adaptation policies, though she did not specify if this would be part of the previously announced but unrealized federal climate authority.
Suely Araújo advocates for this new structure to be integrated within the Ministry of the Environment and stresses the necessity for a dedicated budget, not only for this new body but also for other ministries involved in specific adaptation projects.
“Adaptation involves assessing risks and vulnerabilities and implementing measures such as reinforcing dykes and embracing the ‘sponge cities’ concept, which absorbs and reuses rainwater,” explains Mr. Syrkis. “It also means leveraging nature-based solutions and rethinking infrastructure design.” He emphasizes the need for public officials to adopt a climate resilience perspective in their planning. “Construction secretaries, for instance, must no longer design bridges at heights susceptible to flooding.”
Measure is one of the main agendas of the Brazilian presidency in the G20
05/24/2024
One of the key agendas of the Brazilian presidency in the G20, the taxation of the super-rich at a global level, will only be feasible through international cooperation, said Felipe Antunes, coordinator of the International Financial Architecture Working Group, on Thursday. Before him, Finance Minister Fernando Haddad said that Brazil’s proposal “has gained traction” within the group.
Minister Haddad participated in the G20 International Taxation Symposium in Brasília. The event brought together representatives from various countries to discuss improvements in tax collection and the allocation of these resources. Another Brazilian initiative is for taxation to help combat social inequality and climate change.
Felipe Antunes noted that the wealthiest 0.1% of the world pays less tax proportionally and that “correcting this distortion is a challenge even for rich countries.”
The coordinator explained that only effective international cooperation, with the exchange of information between countries, will allow more effective control over transactions made to evade taxation. He also noted that the super-rich are “very mobile,” meaning they can efficiently move resources between countries.
The need for more equitable taxation on this demographic is one of the points of consensus among G20 members, both at the governmental level and within civil society. The challenge, however, will be finding a convergence point on how to operationalize higher tax collection.
Mr. Antunes also noted that tax autonomy is an important attribute of national sovereignty and that any changes require extensive debate. “It’s difficult to advance, hence the importance of international cooperation,” the coordinator emphasized.
Another Brazilian initiative during its presidency of the group, the reform of multilateral organizations, was addressed by Mr. Haddad. “We will need to rethink institutions, multilateral organizations, and multilateral banks, as well as international relations,” he said. “From there, we will rethink the financing of this equation, which is difficult,” the minister added.
Brazil, the minister said, needs to contribute “because inequality is a hallmark of our history.” “To this day, we face the challenge of reducing inequality. At times, we have managed to make some progress with great effort, but the results have been modest so far. There is still much to be done,” he argued.
The topic of global taxation will be discussed again in person at the G20 Finance Ministers’ meeting, scheduled for July in Rio.
Meeting could risk members elected by unbundled vote; board elected Magda Chambriard as new CEO
05/24/2024
Investors’ move is motivated by concerns around the oil giant’s future following the dismissal of CEO Jean Paul Prates — Foto: Leo Pinheiro/Valor
Foreign shareholders are joining forces to gather 1% of Petrobras’s capital stock to ask the state-owned company’s general secretariat to call an extraordinary general meeting. By the end of the afternoon on Thursday (23), the required percentage of the capital had not been reached. The move is motivated by concerns around the oil giant’s future following the dismissal of CEO Jean Paul Prates and threats to the company’s governance due to internal changes in the composition of advisory committees to the board of directors, largely occupied by members linked to Minister of Mines and Energy Alexandre Silveira.
The Petrobras board met on Friday (24) and elected Magda Chambriard as a director and the company’s new CEO.
Holding a shareholders’ meeting in the short term would put at risk the terms of all board members elected by the unbundled voting system in the April 25 election, including all those representing the majority shareholder—the federal government—including Ms. Chambriard.
The Brazilian Corporation Act (6404/76) provides that a meeting may be called by shareholders representing at least 5% of a company’s capital stock. However, in 2020, the Securities and Exchange Commission of Brazil (CVM) made the quorum more flexible. In the case of companies as large as Petrobras, it reduced the minimum percentage to 1% of capital stock, facilitating minority shareholders’ moves. This rule is set under CVM’s resolution 70.
In practice, if shareholders comply with the legal requirement, the company cannot prevent the meeting from taking place. If it attempts to do so, the CVM could order that a meeting be called, a person familiar with the matter said.
The possibility of names appointed by the federal government being vetoed in a new election was opened by a recent decision by the Federal Supreme Court (STF) confirming the constitutionality of the State-Owned Companies Act. According to the law, some of the members appointed by the federal government could be barred due to a conflict of interest as they hold concurrent positions in ministries and at Petrobras.
Some names that could be barred in a possible new election include chairman Pietro Mendes, Renato Galuppo, Bruno Moretti, Rafael Dubeaux, and Vitor Saback, in addition to two minority directors, Marcelo Gasparino and Juca Abdalla. It is also uncertain whether Ms. Chambriard would pass the scrutiny of the law. Soon after Mr. Prates was dismissed by President Lula, last week, Petrobras hastened to say that the executive’s resignation as a board member would not require calling an extraordinary general meeting. It would likely wait until the next shareholders meeting, possibly the April 2025 Ordinary General Meeting. The decision was interpreted at the time as a maneuver by the government to avert questioning of its candidates.
A financial market analyst pointed out that the request if confirmed, could create concerns in the government, as its members could be barred from being re-elected under the State-Owned Companies Act. A possible new election would allow for a change of conflicting board members, which could improve the state-owned company’s governance and reveal the strength of minority shareholders, the source said.
“In the event of a new meeting, the Supreme Court rule applies,” says a lawyer familiar with Petrobras-related matters. “With a new election, there is no reason to protect the rights of those who the Supreme Court said is incorrect. There is no doubt that the State-Owned Companies Act must apply,” he adds.
The Petrobras case is an opportunity to assess the practical effects arising from the Supreme Court’s decision, said Leonardo Ugatti Peres, a lawyer at Azeredo Santos & Ugatti Peres Advogados. While there will be arguments that the law will apply in the case of a new election, on the other, it may be questioned whether, in the case of re-election, the changes made by the STF should prevail. These adaptations ensured that the rules would not apply in cases where positions were previously occupied. “The issue will be debated. Those who are in office will claim they should stay.”
Lawyer Maurício Moreira Menezes, partner at Moreira Menezes, Martins Advogados, emphasizes that the law establishes that minority shareholders must have at least 5% of the capital to request a meeting, while CVM resolution 70 reduced this share to 1% for large companies, such as Petrobras: “These shareholders can request a meeting with duly substantiated reasons and, if the management fails to call it, due to inaction or refusal, shareholders can call it on their own,” Mr. Moreira explains. He says there is no penalty provided for managers if they fail to call the meeting following a request from minority shareholders.
Regarding the specific Petrobras case, Mr. Menezes says members appointed by the federal government who may be in a conflict of interest will no longer be protected by the preliminary injunction issued by then Justice Ricardo Lewandovski suspending sections of the State-Owned Companies Act. A recent decision by the Supreme Court overturned this protection. “In the event of a new election, the federal government will have to appoint names that comply with the legal requirements,” the lawyer said.
Alexandre Calmon, partner and co-leader of the energy sector at Campos Mello Advogados, points out that, in theory, a new extraordinary general meeting would not be required to re-elect the entire board, just Ms. Chambriard, as she succeeds Mr. Prates in a seat that represents the government as controlling shareholder. “I don’t see a violation of the unbundled vote,” Mr. Calmon says. As for the call intended by the shareholders, if Petrobras refuses to call an extraordinary general meeting, the shareholders could go to court.
*Por Maria Cristina Fernandes, Juliana Schincariol, Rafael Rosas, Fábio Couto, Kariny Leal — São Paulo and Rio de Janeiro
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