Brazil will support Palestine’s bid for full UN membership

Criticized by Israel for a statement on the Iran attack, Brazil’s foreign minister is heading to the United Nations to emphasize that the conflict should not distract from the humanitarian crisis

16/04/2024

Mauro Vieira — Foto: José Cruz/Agência Brasil

Mauro Vieira — Foto: José Cruz/Agência Brasil

Brazilian Foreign Minister Mauro Vieira is expected to speak on Thursday (18) at the open discussion of the United Nations Security Council in New York, where he will advocate for Palestine’s demand to be recognized as a full member of the UN. This topic will be the focus of the meeting, which will include the foreign ministers from the 15 countries that constitute the Security Council. Brazil left the collegiate body in December, having held its presidency throughout October, during which Hamas attacked Israel, sparking the current conflict.

In his speech, the foreign minister is set to emphasize that recent developments in the conflict between Israel and Iran should not distract from the humanitarian crisis in Palestine. To date, Brazil’s only official statement on Iran’s launching of drones and missiles toward Israel was issued on Saturday (13) evening. In it, the government expressed “grave concern” about the unfolding conflict, urged the parties involved to “exercise maximum restraint,” and called for international mobilization to “avoid an escalation.”

The note was criticized by Israel’s ambassador to Brazil, Daniel Zonshine, for its failure to condemn the attacks, which, even in the United States, are being described as “choreographed” because they were forewarned three hours in advance, allowing 99% of the drones and missiles to be intercepted.

The attack occurred 12 days after the Israeli bombing of the Iranian Embassy in Damascus, the Syrian capital, which resulted in the deaths of seven people, including two commanders of Iran’s Revolutionary Guards.

Following domestic reactions to President Lula’s comments comparing Israel’s attacks on Gaza to the Holocaust, the directive is to proceed with more caution.

At a press conference with Argentine Foreign Minister Diana Mondino on Monday afternoon, Mauro Vieira was urged to condemn the attack and added, “Brazil always condemns any act of violence and always calls for understanding between the parties.”

President Lula’s upcoming trip to Colombia on Tuesday (16) will test his diplomatic stance, as Colombian President Gustavo Petro has taken strong positions on the Israel-Palestine conflict. He has aligned himself with accusations of “genocide,” made comments similar to President Lula’s regarding the Holocaust, and halted Israeli arms imports after Israeli forces fired on Gazans gathering for food. Like the Brazilian ambassador, the Colombian ambassador in Tel Aviv was summoned for consultations and has not returned to the country.

Meanwhile, Mr. Vieira has not officially confirmed his trip to the UN. However, since his return from the West Bank a month ago, the Foreign minister has been conversing with international colleagues at the behest of Palestinian Authority President Mahmoud Abbas to garner broader support for Palestine’s full membership in the United Nations, a significant step toward formal state recognition. During his visit, Mr. Vieira observed the extensive militarization of the West Bank, where there are 700 civilian checkpoints.

Brazil’s backing of Palestine traces back to the Oslo Accords of the 1990s, brokered by then-U.S. President Bill Clinton between the Israeli government and Yasser Arafat, then president of the Palestine Liberation Organization (PLO). The agreements called for the Israeli armed forces’ withdrawal from Gaza and the West Bank and the right to self-governance in areas under the Palestinian Authority. The accord garnered the Nobel Peace Prize for then-Israeli Prime Minister Yitzhak Rabin and Yasser Arafat in 1994.

Mr. Vieira, who traveled over the weekend, spoke with the foreign ministers of Spain, Belgium, Portugal, Norway, and Luxembourg. Two of these countries, Spain and Norway—along with Ireland—have already expressed their support for the Palestinian bid for full UN membership.

Palestinian diplomats are hopeful that Brazil will help secure Argentina’s support for Palestine’s full participation in the UN. That is a sensitive issue in Argentina, still marked by the bombing of the Argentine Israelite Mutual Association (AMIA) 30 years ago, which killed 85 people and remains the deadliest attack in Argentine history. Brazil is also expected to encourage Uruguay to adopt a similar stance.

The Security Council’s approval of the Palestinian request is challenging. In 2011, the council considered the issue but failed to gather the nine votes needed to move the recommendation to the General Assembly. Currently, Palestine’s bid would secure 10 of the 15 votes, but it faces opposition from two permanent members, the United States and the United Kingdom. France is poised to join Russia and China in a separate resolution supporting full Palestinian membership. In addition to the five permanent members, the Security Council is composed of Algeria, Ecuador, Guyana, Japan, Malta, Mozambique, South Korea, Sierra Leone, Slovenia, and Switzerland.

The Palestinians are counting on the potential electoral repercussions for U.S. President Joe Biden if he denies this request. Israel has already violated a ceasefire resolution in the region, with backing from U.S. Secretary of State Linda Thomas-Greenfield, who described the resolution as “non-binding.” After the violation, Israel requested an emergency Security Council meeting on Sunday afternoon.

Despite American pressure for Israel to claim a tactical victory by intercepting almost all missiles, the White House, according to the Wall Street Journal, hopes for a measured retaliation that allows both sides to claim victory without escalating the conflict further.

*Por Maria Cristina Fernandes — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Imazon defends “urgent” plan for the Amazon

Beto Veríssimo says public policies need to go beyond combating deforestation and land grabbing

04/15/2024

Beto Veríssimo — Foto: Divulgação

Beto Veríssimo — Foto: Divulgação

Brazil urgently needs to implement a structured socio-economic development plan for the Amazon that encourages the preservation of the forest while also enhancing the productivity of economic activities that already take place in the region, including cattle ranching. To achieve that, Beto Veríssimo, the founder of the Institute of People and the Environment in the Amazon (Imazon), suggests that certain public policies need to be implemented beyond just combating deforestation and land grabbing. He highlights land regulation that does not favor land grabbers and a carbon policy that positions Brazil as a major global player in this market as priorities.

“The relentless fight against deforestation and land grabbing is fundamental, but it’s not enough. We need to regulate land that has already been deforested in the past. By initiating a carbon policy, we can start exporting our credits and begin making forest restoration a reality,” Mr. Veríssimo told Valor during the Skoll World Forum. This event brings together social entrepreneurs from around the world in the UK.

According to the founder of Imazon, regulating land would allow the economic activities already being conducted in the Amazon to shed their illegal status and become more productive, from the extraction of native forest products such as açaí, cupuaçu, and cocoa to cattle ranching. He explains that cattle ranching in the Amazon is not problematic in itself; the critical issue that draws environmentalists’ criticism is the meager productivity rates of cattle ranchers in the region.

This occurs, Mr. Veríssimo explains, because it is common for land grabbers to invade land in the Amazon and place cattle on it to mark the territory and secure their control. “The problem is not cattle ranching per se, but rather the speculation to profit from the land. It’s a classic occupation in which cattle play a role but is not the actual activity, which is why cattle ranching in the Amazon is so unproductive,” he noted.

In this context, Mr. Veríssimo argues that land regularization, without amnesty for land grabbers, would be crucial in distinguishing legitimate producers from criminal entities and would help curb the advance of deforestation. “Cattle ranching is going to be in the Amazon. There’s no way to stop it. The important thing is to build a framework so that it becomes more productive, more profitable, and contributes more positively to the region’s economy. There are already good cases of cattle ranching in the Amazon, but they are still isolated cases.”

Mr. Veríssimo notes that livestock production in the Amazon averages about 70 to 90 kilos of meat per hectare per year. He suggests that if the activity were conducted legally and in an organized manner, production could increase fivefold. He cites the example of ranchers in the Paragominas region who produce 11 times more than that average, and this is not even considered an extraordinary performance.

He also mentions that the specter of illegality in the Amazon, in both cattle ranching and other activities such as logging, deters serious investors who fear associating their image with anything potentially wrongful, as well as dealing with criminals in the area.

“Investors are terrified of entering the Amazon today because they fear that any business they engage in could be associated with illegal activities or that they are in a region where there are real criminal activities nearby. A company undertakes a forest planting operation and suddenly faces land grabbing, deforestation, and an atmosphere of insecurity. The Amazon is becoming very violent,” he said.

Regarding the carbon market, Mr. Veríssimo believes that Congress needs to expedite the regulation of the market so that landowners are incentivized to continue preserving the forest, based on the principle that “a standing forest is more valuable.” That would occur because by preserving or restoring their land, landowners would be able to export carbon credits that reward their efforts to prevent deforestation.

“It would reinforce an important agenda with the standing forest for the services it provides,” he remarked. “Every hectare of standing forest should be compensated, regardless of whether it belongs to the farmer, the Indigenous person, the settler, the extractivist, the river dweller, or the government. The idea is for the world to pay [through the carbon market] because the Amazon provides a global benefit,” he emphasized, noting that the initiative tends to encourage forest restoration, something that needs to start happening urgently. “And this restoration industry has the potential to make an unparalleled socio-economic contribution to the region, in addition to providing climate benefits.”

For the founder of Imazon, the challenge is enormous, but he notes that the time is right for a robust plan to be structured. He mentions the current federal government’s willingness to accelerate the movement and notes that the entire political and social entrepreneurial community globally has started to take a genuine interest in the Amazon. “I’ve been coming to the Skoll World Forum since 2010, and I see that this is the first year that Brazil has taken a leading role. They’re really looking at the Amazon this time,” he said. “The Amazon needs all sectors of the economy to be able to communicate and keep the forest standing.”

The reporter traveled at the invitation of the Associated Press and the Skoll World Forum.

*Por Rafael Vazquez — Oxford

https://valorinternational.globo.com/
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Bunge invests $20m in regenerative agriculture

Company aims to expand its program area to 600,000 hectares and engage customers in Brazil

04/15/2024

Rossano de Angelis — Foto: Divulgação

Rossano de Angelis — Foto: Divulgação

Bunge is set to enhance its regenerative agriculture program in Brazil, introduced a year ago. With a $20 million investment, the Missouri-based conglomerate intends to more than double the current area under the program from 250,000 hectares to 600,000 hectares by 2026.

Although this expansion marks a significant leap within a year, it still represents just a fraction of the total agricultural area Bunge sources from in Brazil, with the soybean area mapped by the company in 2022 alone surpassing 19 million hectares.

The funds will be allocated to award premiums to participating farmers and supply products to Bunge. Additionally, the investment will support the provision of technical assistance, precision agriculture tools, and measurement technologies at no cost, aiming to assist producers in adopting methods that contribute to emission reduction in agriculture. This support will be offered through Orígeo, a joint venture of Bunge and UPL.

At this phase, Bunge is also keen on involving its customers from the food and biofuel sectors, proposing that these industries also offer premiums to the producers. According to Rossano de Angelis Junior, Bunge’s vice president of agribusiness for South America, there’s a growing interest within the agro-industry to establish direct connections with farmers, and some contracts with clients have already been finalized.

The program does not require producers to sell their entire harvest to Bunge unless it involves an industry client of Bunge that is financing the farm. If a producer opts to sell a portion of their harvest to Bunge, the company will compensate them with a premium for that portion, based on a fixed rate per hectare, though the specific amount has not been disclosed.

Moreover, Bunge plans to broaden the geographical reach of the program currently concentrated in the Matopiba area (the region encompassing the Brazilian states of Maranhão, Tocantins, Piauí, and Bahia) and in Mato Grosso to include producers in Pará, Goiás, São Paulo, Paraná, and Rio Grande do Sul.

In its first year, the program has attracted 34 farms from 26 producers. The most embraced regenerative technique among them is no-till farming, followed by the use of cover crops during the off-season to protect the soil, with 46% adoption. Although other regenerative practices are less common, such as bio-inputs, crop rotation, and natural fertilization, Bunge is focusing on promoting these five practices at this stage for their scalability and customer engagement potential. The program may also support additional techniques like crop-forest-pasture integration, pasture rotation, and reduced water and energy use on farms.

A specific initiative Bunge is exploring involves using oilseeds as cover crops, potentially opening new revenue streams for producers and catering to the demand from advanced biofuel industries, such as aviation biofuel (sustainable aviation fuel, SAF) and green diesel (hydrotreated vegetable oil, HVO). In collaboration with Embrapa, Orígeo, and UPL’s Advanta, the company is studying the viability of growing canola as a cover crop in the Cerrado—a vast tropical savanna region of Brazil—for these industries. “With adequate solutions and assistance, we believe there’s potential for canola cultivation in the Cerrado,” stated Mr. de Angelis. The program anticipates its first canola harvest this year, with seed selection tailored to each farm’s specific conditions, he added.

*Por Camila Souza Ramos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Analysis: Economic uncertainties escalate following Iran’s attack

In theory, Brazil could be hit in two ways: if there is an increase in oil prices and a higher risk aversion in international markets

04/15/2024

Central Bank’s building in Brasília: Few believe that Brazil’s monetary authority will rush to revise its baseline scenario for interest rate cuts — Foto: Beto Nociti/BCB

Central Bank’s building in Brasília: Few believe that Brazil’s monetary authority will rush to revise its baseline scenario for interest rate cuts — Foto: Beto Nociti/BCB

The uncertainties in the economic scenario that prompted the Central Bank to reduce its monetary policy signaling to just one meeting have heightened with Iran’s attacks on Israel.

This risk is already included in the array of uncertainties that the monetary authority cited in the release of the Inflation Report, which recommends greater caution in signaling future interest rate cuts.

It was also one of the points highlighted in a recent debate organized by the Central Bank with economists who received the Top 5 award, given annually to those who most accurately predict their projections.

In theory, Brazil could be hit in two ways. First, if there is an escalation in oil prices and, second, with increased risk aversion in international markets.

Brent oil had already been trading above $90 a barrel, and some economic analysts were already circulating their calculations regarding the lag in domestic prices. If oil prices continue to rise, it could lead to further postponements in interest rate cuts by the United States. The increase in risk aversion due to the escalation of the conflict would exacerbate this situation, prompting investors to redirect capital from emerging economies to the U.S.

Few think that, in an environment of such uncertainty, the Brazilian Central Bank will rush and revise its baseline scenario for interest rate cuts. The Selic policy rate remains high, and a 50-basis-point increase in May is well signaled, with a long way to go until the June meeting. Yet, the Central Bank is likely to exercise increased caution.

*Por Alex Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/

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Health plans to become increasingly limited as costs rise

Operators reported operating loss of R$18bn between 2021 and September 2023

04/15/2024

Paulo Rebello — Foto: Silvia Zamboni/Valor

Paulo Rebello — Foto: Silvia Zamboni/Valor

Medical insurance plans are deteriorating, with a smaller network, higher co-payment charges, a drop in reimbursement, and record increases. The number of complaints to Brazil’s National Supplementary Health Agency (ANS) has more than doubled in the last three years. This scenario is a reflection of the crisis facing operators, who have accumulated an operating loss of R$18 billion between 2021 and 2023 (until September).

The sharp slowdown in the sector began in 2021 with the resumption of medical procedures not carried out during the first year of the pandemic. In 2020, when there was social isolation and patients canceled medical procedures, operators had a record result, with an operating profit of R$18.7 billion, three times more than that recorded in 2019, of R$5.7 billion.

This year, there is an expectation of financial improvement and a lower readjustment. However, medical insurance plans are unlikely to return to the same reality as before the pandemic. In the “new normal,” medical insurance tends to be even more restrictive, especially in the adhesion and SME (small and medium-sized enterprises) modalities, products usually purchased by individuals.

In corporate medical insurance, which accounts for 60% of the market, there is still room for further downgrading and benefits, such as reimbursement covering a large part of the cost of the medical procedure and an extensive list of accredited hospitals, which should be limited to large corporate contracts or for a high-income public.

“This product model, with an extensive network, high reimbursements, and no co-payment, is not going to be long-term for retail [membership and SMEs]. You will have that in large corporate contracts, where there is a dilution of mutuality [of risk] in the same contract,” said Mauricio Lopes, CEO of Qualicorp, during a conference call with investors.

Operators are already designing and marketing leaner medical insurance plans. Last year, SulAmérica, which caters to the middle and upper classes, launched 23 types of medical insurance with reimbursement limited to the product profile. At Hapvida, aimed at the bottom of the pyramid, one of the priorities is to increase verticalization, especially in places like São Paulo and Rio, where there is a smaller network of hospitals.

“These products are being offered because this is the current demand. Medical insurance with all those benefits has become very expensive, and there’s no way of paying for them; there’s no demand. Today, the health sector has a different level of costs,” said Marcos Novais, executive superintendent of ABRAMGE, the sector’s representative body.

Since 2020, the monthly fee for corporate medical insurance has risen by almost 55%—practically double the IPCA, according to data from the consultancy Arquitetos da Saúde. Even so, medical insurance plans have been downgraded to mitigate the increase, which could be even higher, according to representatives of the sector.

This significant increase is explained by some atypical factors that occurred after the pandemic, in addition to medical inflation itself, which is historically much higher than the IPCA (Broad National Consumer Price Index). These include regulatory changes that have allowed new medical coverage to be included at shorter intervals and an unlimited number of therapy sessions. The cost of ASD (Autism Spectrum Therapy) at medical insurance companies is already higher than oncology sessions due to the high volume of treatments.

Another change was the increase in the sale of SME plans with up to five users, which soared by 75% between 2020 and 2023. This product, known as false individual, is marketed at lower prices than membership (both compete for the same audience), with strong commercial incentives for brokers to sell this modality. However, “people bought the plan to cover certain treatments. There was no dilution of risk,” said ABRAMGE’s superintendent. In an attempt to correct this distortion, operators began to apply high increases, with the average last year being 25%.

“This strategy of encouraging the SME plan at a lower cost was a shot in the foot,” said Luiz Feitoza, a partner at Arquitetos da Saúde, one of the first to criticize the operators’ policy. They were interested in switching from adhesion to SME because they gave up the cost of the loading fee from the benefits administrators.

With the depreciation of medical insurance, the number of complaints has skyrocketed. In 2020, the IGR (general complaints index) with the ANS was 21.8. Last year, it jumped to 55.3 and is now at 58.2. Many of the complaints concern the accredited network and the reimbursement amount—both of which are getting smaller and smaller.

In the last year, the most affected benefit has been the claim for reimbursement of medical care paid for by users due to the increase in the number of doctors, hospitals, and laboratories that have been de-accredited. However, there have been reports of fraud. Between 2019 and 2022, the volume of reimbursements increased by 90% to R$11.4 billion. Considering that, in the same period, medical procedures rose by 19.5% and, therefore, reimbursements should increase by a similar proportion, there is a “gap” of around R$7.4 billion that is reported by operators as fraud.

Given this scenario, Paulo Rebello, president of the ANS, believes that the current trend of medical insurance with restricted benefits is here to stay and is unlikely to return to its pre-pandemic format. “The changes have really taken place in very short timeframes and, therefore, it is understandable that users are complaining. Operators, for their part, are resizing the network in order to reduce costs, but this movement needs to be done while respecting the rules,” he said. “The sector’s model needs to be revised, with monitoring of clinical outcomes and improvement in the relationship between operators and hospitals,” added the president of the regulatory agency.

But this reality is still a long way off. “Operators are adopting an aggressive strategy of de-accreditation. They now authorize surgery but not rehabilitation. It goes against the premise that the best thing, both medically and financially, is to maintain an integrated line of care with the same medical team,” said Lígia Bahia, an associate professor at the Federal University of Rio de Janeiro (UFRJ).

Last year, 60% of medical insurance plans had some kind of co-payment or deductible, which represents an increase of 4.58 percentage points when compared to 2019. There has also been a gradual increase in plans with regional coverage (group of cities), which are cheaper and now account for 43.5% of the market. The product with national coverage, on the other hand, has been falling.

“Medical insurance has already undergone a major downgrade, the Individual Microentrepreneur (MEI) market is practically all exploited, and there is no longer any way to make adjustments justifying the pandemic. We already have a significant number of plans with co-participation, lower and lower reimbursement, and an increase in regional products to the detriment of national ones. How far are we going to go?” asked Mr. Feitoza.

Discussions about the sustainability of the sector are recurring due to the high prices charged. There are questions about how long there will be demand for a product that represents the second largest expense in a company, behind payroll, and has become inaccessible to individuals. “The performance of the medical insurance market is closely linked to the General Register of Employed and Unemployed People (CAGED)—if employment increases, it grows. However, the current model is facing major challenges, with tight margins and high adjustments. It’s not sustainable,” said Leandro Bastos, an analyst at Citi.

Antônio Britto, president of ANAHP, the association of the country’s leading hospitals, also complains that the path has been one of disqualification, pressure to extend payment deadlines, and not an effective change in the current healthcare model.

*Por Beth Koike — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Brazil expected to start ethanol shipments for SAF industry this year

Mills seek certification to qualify as suppliers of raw materials for sustainable aviation fuels

04/12/2024

Ricardo Carvalho — Foto: Divulgação/Daniela Toviansky

Ricardo Carvalho — Foto: Divulgação/Daniela Toviansky

Brazil is expected to start exporting ethanol to the sustainable aviation fuel (SAF) industry this year. The volumes will still be small because, for now, there is only one SAF plant in the world focused on this technological path. However, according to Brazilian mills’ assessment, this market is expected to pick up steam starting in 2027. In addition, industry executives expect that 20% to 30% of all SAF that will be demanded by the end of this decade will be produced from ethanol.

Bioenergy company Raízen, a joint venture between Shell and Brazilian energy company Cosan, estimates that there is potential for the global ethanol industry to supply between 9 billion and 12 billion liters per year to the SAF industry by 2030, which would meet up to 30% of expected production.

Brazil may not be the sole supplier, but it has the potential to become the primary one, given that it represents half of the global ethanol trade. In addition, the SAF industry prioritizes renewable sources, which favors Brazilian sugarcane ethanol over U.S. corn ethanol, said Raphael Nascimento, trading business development director at Raízen.

Ricardo Carvalho, BP Bunge’s commercial director, projects that Brazil will have the capacity to supply 5 billion liters of ethanol per year to the SAF industry within a decade. For comparison, he said that this projected volume of growth in national fuel consumption aligns with the expected increase in the Brazilian fleet.

The aviation industry’s primary strategy to reduce carbon emissions is the substitution of fossil fuel with sustainable fuel, which features identical molecules and does not necessitate engine modifications.

The agreement led by the International Air Transport Association (IATA) provides that airlines will have to reduce emissions from all their international flights starting in 2027. This means that the SAF industry will already have to secure the necessary supply by then. The sector, which accounts for 2% of the planet’s greenhouse gas emissions, bets that SAF will guarantee 65% of its decarbonization.

Ethanol is not the sole eligible raw material for SAF production and will face competition from seven pathways, including the more established vegetable and waste oils (HEFA) pathway in Europe. IATA studies, however, indicate that ethanol tends to be the most competitive option. A document from 2022 released by the organization indicated that, at that time, ethanol had the lowest minimum price required for sale, alongside fats, one of the HEFA options.

The first alcohol-to-jet (ATJ) SAF plant was inaugurated by LanzaJet in January in Georgia, U.S. Mr. Carvalho of BP Bunge mentioned that it may begin importing Brazilian ethanol to fulfill its demand.

The U.S. wants to produce 11 billion liters of SAF by 2030 and is likely to be the main short-term market for Brazilian ethanol for SAF. Another potential market is Japan, which last year set a goal of mixing 10% SAF with fossil kerosene by 2030. In Brazil, there haven’t been any announced investments in SAF plants using the alcohol-to-jet process yet. However, companies like Raízen and ethanol trader Copersucar are already internally discussing the possibility.

According to Mr. Carvalho, the construction of SAF plans using the ATJ process will begin to increase next year, as the concept of the LanzaJet plant is demonstrated. However, significant scale gains are expected to take place only by 2027.

Brazilian mills, such as Raízen and BP Bunge, are seeking certification to supply ethanol to this industry—all, so far, from sugarcane. São Paulo’s Zilor also wants to advance in this market and has already certified 90% of the sugarcane of two of its three units. As a result, it ensured the capacity to serve the SAF sector with up to 300 million liters of ethanol per year.

Fabiano Zillo, CEO of Zilor, suggests that the new demand from SAF could potentially fill any gap that may arise due to the transition of part of the automotive fleet from combustion vehicles to electric vehicles.

In Mr. Carvalho’s assessment, sugarcane ethanol has more potential to meet the demand of SAF than corn, given its proximity to ports, which facilitates exports to promising markets, and due to the greater ease of tracking biomass, which guarantees a greater volume of ethanol eligible to serve the market.

Mr. Nascimento of Raízen argues that there is room to increase the production of sugarcane ethanol to meet the new market. According to him, if the sugarcane area in Brazil (10 million hectares) doubles, the supply of ethanol would triple since the focus of the mills would not be sugar.

He also believes that sugarcane will not be the only source. Corn ethanol “still has a journey to reach the minimum of carbon capture” and meet IATA requirements, he said.

*Por Camila Souza Ramos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Atvos to build biomethane plant

Company plans to invest more than R$350m in its first biomethane plant from sugarcane waste

04/12/2024

Atvos, owned by the Arab fund Mubadala, is set to invest over R$350 million in establishing its inaugural biomethane production unit from sugarcane waste. An investment memorandum has been signed for the construction of the facility in Nova Alvorada do Sul, in the Brazilian state of Mato Grosso do Sul, the location of Usina Santa Luzia (USL).

This new unit is expected to produce 28 million cubic meters of biomethane each harvest. Currently, the plant at Nova Alvorada do Sul has the capacity to process 5.5 million tonnes of sugarcane and generate 498 million liters of ethanol annually.

Bruno Serapião, CEO of Atvos, highlighted that this initiative would signify the company’s foray into the renewable natural gas market, benefiting from large-scale production to satisfy increasing demand.

The aim is to utilize biomethane production to partially fuel the logistics fleet of Atvos and its agricultural affiliates, potentially reducing diesel usage by up to 40%. Any excess biomethane is intended for distribution to nearby municipalities.

In Brazil, most operational biomethane plants currently utilize their output for internal purposes rather than commercial sales. Out of 20 operational plants, only six are selling their produced gas, according to the Brazilian Biogas Association (ABIOGÁS). The association forecasts that in five years, there will be 90 commercially operating plants, with 42% anticipated to be within the sugar-and-ethanol sector.

The proposed biomethane facility by Atvos is undergoing engineering analysis for final approval, with construction expected to start within the year.

*Por Paulo Santos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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CDB gains more space in bank funding

Term deposits jumped again in 2023 as customers migrated from funds to lower-risk products

12/04/2024

Luiz Masagão — Foto: Divulgação

Luiz Masagão — Foto: Divulgação

The start of the fall in the Selic rate in August last year was not enough to increase investors’ appetite for risk. While investment funds withdrew R$127.9 billion in 2023, bank funding from CDBs rose again, consolidating its position as the largest source of funding for financial institutions. Meanwhile, savings continued to fall and were overtaken by bond issues, such as real estate credit bills (LCI), agribusiness credit bills (LCA), and financial bills (LF).

A Valor survey based on statements from Itaú, Caixa, Banco do Brasil, Santander, and Bradesco shows that the volume of term deposits—CDBs—rose 15.5% last year to R$2.2 trillion. Meanwhile, bills jumped 30% to R$960.6 billion, and savings fell 2.1% to R$929.1 billion. Bond issues made by the big banks abroad have been practically stable in recent years and have a much smaller share, at R$117.1 billion. Each instrument has its advantages and disadvantages. Savings accounts are cheaper than CDBs, but they must be directed towards the real estate sector. Bills, on the other hand, are more expensive than the former but are not subject to compulsory payments.

Ever since the yield on savings accounts was changed in 2012, CDBs have been gaining strength, a movement that has been reinforced since 2018 with the rise of investment platforms, which began distributing third-party securities, including those from medium-sized banks, which offer more attractive yields. During the pandemic, with the payment of emergency aid and the restriction on the movement of people, who were left without so many places to spend, there was initially a jump in bank deposits. Then, with the Selic rate at historic lows, the instrument remained competitive but had to compete for investors’ attention with multimarket funds and other asset classes with a greater chance of returns.

In 2022 and 2023, with the reversal of the scenario and rising interest rates, CDBs began to shine again. This pendulum is starting to swing again now, given that there are already signs of an influx into investment funds. Even so, deposit-taking remains strong and is fueling competition for customers’ pockets.

In addition to the big banks, medium-sized institutions—such as Inter, PagBank, ABC, and Daycoval—benefited from the demand and took the opportunity to diversify their funding. It’s common to see advertisements offering promotional rates or highlighting the yield of the securities. The coverage of the Credit Guarantee Fund (FGC)—a private entity in Brazil that protects depositors and investors in the event of a bank failure, offering R$250,000 coverage per individual—was a factor that gave investors the confidence to put money into financial institutions with which they have little familiarity.

The success of investment platforms and CDBs from medium-sized banks hasn’t affected the availability of funding for the big ones, but there are indications that it may have contributed to an increase in prices. A few years ago, it was common to see the biggest institutions paying returns well below the CDI rate. Today, the discount in relation to the spread is generally small, while medium-sized competitors often offer rates of 115% and even 130% of the CDI.

“In recent years, there has been this structural migration from savings accounts to other instruments, and now, even with the fall in the Selic rate, I don’t think this will be completely reversed,” said Luiz Masagão, Santander’s treasury director. “Some investors went into funds and then back into CDBs; they didn’t like having a more volatile portfolio. It’s a question of the investor’s profile.”

Santander has a slightly different funding mix from its private rivals, more concentrated on wholesale, but in the last two years, it has been trying to increase its share of retail. To this end, the bank strengthened its investment advisory services and reformulated the high-income segment. According to Mr. Masagão, this led to a very positive result in customer fundraising last year.

Eric Altafim, director of corporate products and sales at Itaú, says that with interest rates still high and problems in the corporate credit market in 2023, there has been a migration of funds to CDBs. “This has fattened the banks’ cash flow, providing a good supply of liquidity. But you have to remember that excess liquidity is different from excess capital. And that was in 2023. In recent months, we’ve started to see signs of a certain reversal of this trend of migration to CDBs, and there’s competition for these funds again.”

The executive also recalls that although liquidity increased during the pandemic, banks’ portfolios grew rapidly during those years, with the expansion only moderating in 2023.

At Bradesco, Roberto Paris, executive director in charge of the treasury, says that the development of the financial bills market has been so strong in recent years that today banks don’t need to issue international bonds as much. At the same time, after the 2008 global financial crisis, bank liquidity requirements became much more conservative. “Before 2008, the only protective barrier in times of volatility was compulsory deposits. Now, there are a series of rules and liquidity requirements. So I think we’re in a position to have lower compulsory deposits.”

An increase in deposits doesn’t necessarily mean that banks will have more money to lend and invest. If they take in more funds on one side and don’t see much chance of investing this money in the business, they adjust their funding mix, reducing the issuance of more expensive instruments, for example. In addition, in the case of deposits, the financial institution is obliged to leave compulsory deposits with the Central Bank.

A recent change that could affect the composition of bank funding is the restriction on incentivized securities, namely those that are exempt from income tax for individuals. These securities include Real Estate Credit Bills (LCI), Agribusiness Credit Bills (LCA), Real Estate Receivables Certificates (CRI), Agribusiness Receivables Certificates (CRA), and Real Estate Investment Funds (LIG). With new limitations on what can be used as collateral announced at the beginning of February, issuance of these securities has declined. Additionally, the increase in the minimum holding period to nine months for LCA and 12 months for LCI is expected to alter the buyer profile.

Alongside these changes are the challenges facing savings accounts. Savings accounts saw their third consecutive year of withdrawals in 2023. This scenario affects real estate financing, as savings accounts are the primary funding instrument for this industry. Last year, for the first time, savings accounts lost to the capital market as the leading source of funds for housing loans, with shares of 36% and 38% of the total, respectively.

In February, the CEO of Caixa, Carlos Vieira, said that the 2024 budget had been resolved but warned that if nothing was done about savings, there would be problems in 2025. The bank is the country’s leading mortgage lender. According to the executive, there are some alternatives to be discussed, such as releasing part of the compulsory deposit.

When asked, Caixa said in a statement that since 2021, it has repositioned its funding strategy with a focus on bills, especially LCI, in order to compensate for savings outflows from the point of view of funding for housing. Asked if it is discussing a possible reduction in the compulsory deposit with the Central Bank, the institution replied only that “it has been debating alternatives for expanding funding for real estate credit with all the actors involved.”

Banco do Brasil, meanwhile, said in a statement that its commercial funding has been growing in recent periods, reaching more than R$1 trillion in December. “Banco do Brasil, like the financial system, has been experiencing a gradual reduction in the volume raised through savings, which is natural in the context of the evolution of the funding products available to clients. The bank is constantly assessing the most suitable funding alternatives.”

*Por Álvaro Campos, Mariana Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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New subsidies for wind, solar energy puts sector on alert

With a provisional presidential decree, federal government extends deadline for accessing discounts on use of power grid

04/11/2024

Alexandre Silveira — Foto: Valter Campanato/Agência Brasil

Alexandre Silveira — Foto: Valter Campanato/Agência Brasil

President Lula signed a provisional presidential decree on Tuesday that drew criticism from the power industry. The decree extends the deadline for wind and solar power projects to access subsidies on grid usage by an additional 36 months. It also aims to reduce tariffs using funds from the privatization of Eletrobras. This initiative has put the sector on alert due to concerns about potential increases in tariffs, which are seen as a significant factor contributing to high electricity costs in the country.

At the ceremony at the Planalto Palace, Alexandre Silveira, Brazil’s minister of Mines and Energy, said that the provisional presidential decree will enable over 30 gigawatts of clean and renewable energy in Brazil, with the construction of new wind and solar power generation projects. Overall, the government estimates that the resources will reach R$165 billion in investments and create over 400,000 jobs.

With this measure, the government reopens the deadline for owners of wind and solar plants to access discounts on the use of the power grid. The original deadline had already ended during the Bolsonaro administration but had been extended by him at the time with the signing of the provisional presidential decree 998/20. It triggered an avalanche of requests for new projects with benefits at the Brazilian Electricity Regulatory Agency (ANEEL).

Members of the government itself complained about the weight of the new wave of subsidies on the account that centralizes tariff charges, the Power Development Account (CDE). This is a point that displeases this group of experts and is classified as “absurd” by a source consulted by Valor. The source calculates that the benefit will increase the cost of charges borne by consumers via tariffs by R$4 billion annually. “Those who pay the CDE are the middle class, industry, and commerce, which are not in the free market and necessarily consume power from distribution companies,” they said.

The provisional presidential decree signed Tuesday includes two compensatory mechanisms to alleviate high tariffs in the country. The first provides for the use of funds from the privatization of Eletrobras to prepay loans contracted by distributors during the COVID-19 pandemic and the 2021 hydrological crisis, thus reducing tariffs by 3.5% to 5% nationwide.

“We will pay off loans from the Covid Account and Hydrological Scarcity Account. There will be R$11 billion less in Brazilians’ pockets,” said the minister of Mines and Energy. He added that both financing contracts were signed “irresponsibly” by the previous government and “should never have been passed on to consumers.”

The second mechanism, with a local focus, aims to secure funding for the distribution company of the state of Amapá. This initiative seeks to mitigate the extraordinary tariff revision requested by the local concessionaire last year, which was estimated to be around 44%. Initially planned as a separate measure, it was eventually included in the proposal for benefits to renewable energy generation projects, as previously reported by Valor.

Minister Silveira and Chief of Staff Rui Costa said on Tuesday that the debate with sector members will be deepened to seek a structural solution to the problem of expensive electricity in Brazil. At the Presidential Palace, Mr. Costa said that a meeting will be held this Wednesday to discuss how to “harmonize the world’s cheapest production with the bill that should be one of the cheapest in the world for the poor and the middle class” in the country.

Mr. Silveira also said that a “permanent discussion forum” has already been established with the sector. “Tomorrow [Wednesday], we will have a slightly broader meeting,” he said, referring to the participation of representatives of entities and experts. According to Mr. Silveira, the government has the ongoing challenge of correcting distortions in the electricity sector, which result in higher tariffs. He said that after listening to the sector, a solution will be presented to Mr. Lula.

Following the government event, the National Front of Energy Consumers criticized the proposal, labeling it as “inconsistent and harmful.” They argue that the rules increase the charges within the tariff and anticipate future resources, thereby creating an additional expense that will ultimately burden consumers in the years ahead. The organization highlighted that subsidies currently constitute 16% of the Brazilian electricity bill. “With the new presidential measure, this cost will escalate further and immediately.”

The Brazilian Association of Energy Consumers (Abrace Energia), which represents industrial consumers, calculated that the extension of subsidies for renewable energy will represent a future increase that could reach R$4.5 billion per year in the tariff. “Therefore, it considers it important that these measures be evaluated together with several others that could structurally reduce the price of power,” the statement said.

*Por Rafael Bitencourt, Mariana Assis, Estevão Taiar — Brasília

Source: Valor International

https://valorinternational.globo.com/
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U.S. agriculture secretary says China favors Brazil

Tom Vilsack suggested that this was taking place in retaliation against recent restrictions on foreign ownership of farmland in the country

04/11/2024

Tom Vilsack — Foto: Yuri Gripas/Bloomberg

Tom Vilsack — Foto: Yuri Gripas/Bloomberg

U.S. Agriculture Secretary Tom Vilsack suggested that China could be favoring Brazil’s soybeans and corn partly in retaliation against recent restrictions on foreign ownership of farmland in the country, according to Bloomberg News.

Recently, the Republican-led state of Arkansas forced Syngenta Ag, controlled by Chinese state-owned group ChemChina, to sell 160 acres (64 hectares). The move was made possible with a new law in the state that restricts ownership of local lands by certain foreign groups. The area had been owned by Syngenta since 1988, when it was not controlled by the Chinese.

According to the secretary, the U.S. saw a trade deficit of $6 billion in the first quarter. “Why would that be? Is it just Brazil, or was there a reason why the Chinese ag minister asked me about Syngenta?” Mr. Vilsack told the news agency.

The U.S. secretary said China’s agriculture minister had questioned him about Syngenta in recent conversations, which would have been a “signal.”

With China buying fewer crops from the U.S., Brazil has overtaken America as the world’s top corn shipper after already doing so with soybeans. Mr. Vilsack advocated that the U.S. diversify its exports to countries other than China, but maintain trade relations with the country.

Bloomberg said it reached out to the Chinese embassy in Washington but received no response. China’s commerce and agriculture ministries were also approached by the agency but did not respond.

*Por Globo Rural — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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