Steel galvanizing and annealing plant capacity increased to 2.2 million from 1.6 million tonnes
11/14/2024
With an investment of R$2 billion, ArcelorMittal inaugurated the expansion of its Vega facility in São Francisco do Sul, Santa Catarina, on Wednesday (12). The new unit will produce Magnelis, a corrosion-resistant material developed by the company, marking the first time this product will be manufactured outside of Europe. Magnelis is ideal for applications requiring high durability and low maintenance, such as solar panel structures and vineyard posts.
The new continuous galvanizing and annealing line has increased the plant’s annual production capacity from 1.6 million tonnes to 2.2 million tonnes. Jorge Adelino, vice president of operations for ArcelorMittal Flat Steel in Latin America, noted that this is the largest private sector investment in Santa Catarina.
ArcelorMittal produces 42% of Brazil’s flat and long steel, and its Brazilian operations account for 25% of the group’s EBITDA. Opened in 2003, the expanded facility will broaden its product range to support the automotive market, with new galvanized steel lines and high-strength steel coils.
Lakshmi Mittal, ArcelorMittal’s chairman and CEO, visited Brazil for the first time in eight years to inaugurate the unit. He highlighted that these investments were made despite challenges from high steel import volumes. “New investments in Brazil proceeded despite unfair competition from imported products that hinder opportunities for growth,” he said.
The group’s strategic plan allocates R$25 billion in Brazil from 2022 to 2028, covering expansion, modernization, acquisitions, and renewable energy initiatives. During a meeting with President Lula in Brasília on Tuesday, Mr. Mittal noted the federal government’s openness to dialogue. “The government understands and values our industry’s role in the country’s economic growth,” he added. President Lula shared photos of the meeting on social media, stating, “There is now confidence in foreign investment and industrial growth in Brazil.”
Eduardo Zanotti, ArcelorMittal’s vice president of flat steel sales, expressed concern over import volumes. “Despite the government’s tariff-quota measure, imports have not decreased. Predatory imports are troubling the industry,” he said. Mr. Zanotti also commented on the possible impact of policies under President-elect Donald Trump in the United States, expecting that stricter measures might redirect Chinese steel to other countries. “The Brazilian government understands the need to monitor imports. Many countries are ramping up protections for their local industries,” he added. While the primary focus of the expansion is on the domestic market, exports remain a possibility.
The reporter’s travel costs were covered by ArcelorMittal.
The second day of the Web Summit in Lisbon featured a debate on the role of artificial intelligence in society
11/13/2024
The opportunities, challenges, and especially the risks of artificial intelligence (AI) dominated discussions on the second day of the Web Summit in Lisbon, one of the world’s largest technology conferences. Beyond the giants responsible for the necessary infrastructure for applications, such as chip manufacturers, other businesses are now seeing AI as a means to enhance user interaction and rethink purchasing processes.
Brazilian Cristiano Amon, CEO of chip maker Qualcomm, believes AI will significantly impact how users interact with their mobile devices.
Qualcomm is banking on AI being closer to the user, operating on their devices, and less dependent on large data centers. “There’s a lot of investment going into data centers. What we are doing is changing that by bringing AI to where humans are. It costs differently when you run AI on your own device,” he said.
According to Mr. Amon, generative AI—using AI to create new content such as text and images—is the future of applications. “Generative AI will be the new user interface,” he stated. Mr. Amon used future banking applications as examples, where users will no longer have to follow steps to check their balance. They will simply ask AI, which will provide the information. “The apps we have today, their development will shift to an AI-first experience,” he added.
The changes brought about by AI are also on Alibaba’s radar, the retail giant that launched an AI tool to improve corporate procurement experiences. The platform is called Accio. Kuo Zhang, president of Alibaba.com, believes that AI tools can go beyond the well-known chatbots (software that responds to inquiries) and help redefine global commerce as we know it today.
“Today, it takes about 28 steps to find an item and complete a transaction. In this process, we have dozens of user experience barriers. AI is a technology to address these issues,” he explained. With Accio, a company can upload a spreadsheet with purchase items, and the AI will search for them.
Alibaba aims to ride the wave created by ChatGPT—the world’s most famous chatbot, developed by OpenAI—and boost sales. According to Alibaba’s data, initial surveys showed that the purchasing intent of companies using the new tool is 40% higher than traditional search engines. The platform uses data from over 50 million companies connected to the Asian giant.
Despite all efforts to understand AI’s role in the future, it remains unclear. “Most of the time when we try to predict the future, we are wrong,” said Thomas Wolf, co-founder and chief scientist of the collaborative platform Hugging Face.
Mr. Wolf mentioned that projections about AI often lead discussions into the realm of utopia. “We need to imagine how AI will integrate into society, and I think it will be much like the internet. It will be everywhere,” he noted.
There are signs that the world will see a significant leap in robotics by 2025, Mr. Wolf suggested. “The big question is what task humans will perform in the future,” he pondered, posing a challenge to Max Tegmark, president of the Future of Life Institute, a nonprofit focused on studying technology’s impact on society.
Mr. Tegmark gave an extensive response: “I think asking what humans can do better than machines is not the right question. Our brain is a biological computer. There’s nothing we can do now that machines couldn’t do better if we want them to. But we are the ones building this future. Why would we force ourselves to compete with machines? It doesn’t make sense. We call ourselves Homo Sapiens because of our intelligence. Maybe there’s something more valuable in us than that. I don’t think everything should be handed over to machines in the future.”
Hamilton Mann, vice president of the digital branch at Thales, a French defense company, said the doubts surrounding AI in society are natural. “This is new for us too. We are also learning, just as AI is evolving in society,” he said. Within Thales, Mr. Mann explained, technological development and the use of AI center on the human. “It’s about creating a system that will equip humans, who will be responsible for making decisions,” Mr. Mann concluded.
The reporter’s travel costs were covered by the Web Summit.
Institute links sharper inflationary impact on lowest income brackets to steeper increases in food prices, electricity
11/13/2024
October inflation rose for nearly all income levels in Brazil, with lower-income households seeing the highest increases, according to the Applied Economic Research Institute (IPEA). Only households with incomes above R$21,059.92 saw a slight deceleration. For very low-income households—earning less than R$2,105.99 per month—inflation climbed from 0.58% in September to 0.75% in October. Meanwhile, inflation rose from 0.55% to 0.71% for low-income households—those earning between R$2,105.99 and R$3,158.99.
The IPEA’s Income-Based Inflation Indicator, drawing on the Extended Consumer Price Index (IPCA) data from the Brazilian Institute of Geography and Statistics (IBGE), tracks inflation trends across income levels by total household income. The IPCA, Brazil’s benchmark inflation index, increased from 0.44% in September to 0.56% in October.
For households with middle-lower incomes (R$3,158.99 to R$5,264.98), inflation climbed from 0.48% in September to 0.61% in October. Middle-income households (R$5,264.98 to R$10,529.96) experienced an increase from 0.39% to 0.54%. Meanwhile, for middle-upper-income households (R$10,529.96 to R$21,059.92), inflation rose from 0.31% to 0.49%. Households earning over R$21,059.92, the only group to experience a slight deceleration, saw inflation ease to 0.27% in October from 0.33% in September.
The IPEA attributed the sharper inflationary impact on lower-income households to the steeper increases in food prices (up 1.06% according to the IPCA) and electricity costs (a 4.74% increase). Conversely, deflation in airline fares (-11.5%) and fuel (-0.17%) provided some relief for higher-income households.
“In October, although the food and beverage and housing categories were primary inflationary pressures across all income levels, the impact from these segments was proportionally stronger for lower-income households, given the larger share of their budgets allocated to these essentials,” said Maria Andreia Parente Lameiras, author of the study.
Higher inflation rates for low-income households have not been limited to October. Over the 12 months ending in October, the very low-income segment saw the highest inflation rate at 4.99%, while high-income households experienced the lowest rate at 4.44%. The average IPCA rate over the period was 4.76%, exceeding the Central Bank’s inflation target ceiling of 4.5%.
Year-to-date in 2024, low-income households have faced an inflation rate of 4.17%, compared to a lower rate of 3.2% for high-income households. By comparison, the IPCA rate over the same period stands at 3.88%.
Government unlikely to push or expend political capital on approval
11/13/2024
Congressman Hugo Motta, the frontrunner to lead Brazil’s Lower House starting February, expressed concern on Tuesday regarding the constitutional amendment proposal (PEC) that seeks to end the six-day workweek followed by one day off (6×1). He emphasized the need to include business leaders in the discussions within the legislative house.
“I am very concerned, for instance, about this PEC recently introduced, the 6×1. A significant movement has emerged on social media supporting the PEC, which is a topic we need to discuss, but we must not listen to only one side,” Mr. Motta stated during a meeting with the Parliamentary Front for Entrepreneurship (FPE).
Mr. Motta stressed the importance of including employers in the debate to assess the proposal’s impacts. “We must also hear from those who employ; we need to consider both sides to avoid advancing an agenda potentially harmful to the country,” he said.
The initiative, led by Congresswoman Erika Hilton, has gained traction on social media recently. She is gathering signatures for her proposal on the subject.
The proposal aims to amend the Federal Constitution to reduce the workweek from 44 hours to 36 hours, with a maximum of four days a week and eight hours per day. Therefore, it is more comprehensive than just ending the 6×1 work schedule.
This move has sparked reactions from the entrepreneurial sector caucus, arguing that the constitutional change would increase costs, making services or goods more expensive.
Despite some support from the Lula administration, the government is not expected to make a strong effort or use political capital to push for the proposal’s approval.
Advisors to President Lula perceive that, given the current Congress composition, the proposal has almost no chance of progressing. However, the discussion is seen as beneficial for the government, as it could put the opposition in an uncomfortable position of blocking a bill ostensibly beneficial to workers.
Skepticism remains about the proposal’s advancement even within the Constitution and Justice Committee (CCJ), the first stage of the legislative process.
Vice President Geraldo Alckmin remarked that work schedule reduction “is a global trend.” He noted, however, that the topic has not been discussed within the government, leaving the debate to society and Parliament. “This hasn’t been discussed yet. But I think it’s a global trend. As technology advances, you can do more with fewer people, potentially reducing work hours. So, it’s a debate for society and Parliament.”
Mr. Motta cautioned against “extremism” in the debate. “I believe the Lower House cannot become a place where debates are hindered by personal or verbal attacks, which do not contribute to the discussion. It’s indeed the house where we can defend our viewpoints.”
Another PEC on the same topic, authored by Congressman Reginaldo Lopes, has been in the Lower House since 2019 without progress. Last year, the CCJ rejected its discussion and approved its removal from the agenda by 30 votes to 25.
Mr. Lopes’s proposal reduces the workweek to 36 hours without specifying the maximum number of days, while Ms. Hilton’s sets a four-day weekly limit.
In President Lula’s first year in office, the Workers’ Party took control of the committee, and the CCJ president, Congressman Rui Falcão, appointed Tarcísio Motta as the rapporteur. They attempted to schedule a favorable report in October 2023, but a motion by Congressman Gilson Marques removed the proposal from the agenda by a 30-25 vote.
Support for the PEC’s discussion was mainly limited to left-wing parties and the Social Democratic Party (PSD). Other parties, such as Liberal Party (PL), Progressive Party (PP), Brazil Union, and the Republicans, voted to remove the proposal from discussion, and the matter has not returned to the agenda.
Tarcísio Motta, who served as the rapporteur, left the CCJ, leaving the PEC without a rapporteur since. The committee is now led by Caroline de Toni, from the opposition.
Speaking to Valor, Mr. Lopes mentioned he would talk with the committee’s chair to request the appointment of a new rapporteur and suggested Congressman Alencar Santana Braga for the role.
Congressman Kim Kataguiri, who voted to remove the PEC from the agenda last year, released a video expressing support for ending the 6×1 workweek but opposing the PEC. “This is a circus, a farce, a setup; it’s using this for personal promotion, selling an illusion,” he criticized.
In a statement, Congresswoman Hilton said she learned of the 2019 PEC after starting to collect signatures for her proposal. She collaborated with Movimento Vida Além do Trabalho (Movement Life Beyond Work) to draft the text and strategy, aiming to provoke Parliament on the issue and drive “concrete advances for the working world.”
*By Raphael Di Cunto, Marcelo Ribeiro, Fabio Murakawa, Valor — Brasília
Known for sustainable practices, the company’s Mato Grosso farm shifted from the largest cattle operation after property division
11/12/2024
Fazenda Roncador, located in Mato Grosso’s Araguaia Valley, once held the title of Brazil’s largest cattle ranch. That status, however, has changed: over the past three years, the three Dalla Vecchia siblings, heirs to the estate, have completed the intricate process of dividing the property.
Previously spanning 152,000 hectares—about the size of the city of São Paulo—Roncador has been in the family since 1978, when their grandfather, Pelerson Penido, founder of the CCR highway concessionaire, acquired it. Although it no longer claims the title of Brazil’s largest, Roncador remains a model of sustainable cattle ranching in the Amazon. This reputation is so well-regarded that JBS CEO Gilberto Tomazoni often references Roncador in international forums as a shining example of responsible ranching.
Following the division, Pelerson Penido Dalla Vecchia retained management of the newly defined Fazenda Roncador, transforming it from a loss-making entity into a profitable operation renowned for environmental stewardship. The property still preserves nearly 50% of its native forest cover and has used an integrated crop-livestock production system for over 15 years, with a significant reliance on biological inputs.
Mr. Dalla Vecchia has restructured the management of the 53,000-hectare “new” Roncador, forming a board of directors that includes Consultant Luiz Bouabci, Professor Wilma Bolsoni, and Zootechnician Antônio Chaker.
In addition to Fazenda Roncador in Querência, Dalla Vecchia retained a 50% stake in Fazenda Mantiqueira in São Paulo’s Pindamonhangaba, leasing the other half from his sister under a 20-year agreement. He also heads Calcário Vale do Araguaia, a mining business with operations in Cocalinho and Nova Xavantina, Mato Grosso.
“Mining is critical for us,” says Mr. Dalla Vecchia, noting that it generates profit and supplies materials for Roncador’s productivity experiments. Through mining, Roncador tests crop growth without conventional fertilizers, using only calcium silicate rock powder and cattle manure.
Though the farm’s structure and size have shifted, its commitment to innovation remains constant. Mr. Dalla Vecchia sees no contradiction in using Roncador as a research platform while pursuing profitability. “We run many tests, measure everything, but never compromise results,” he states. “And we never chase profit at any cost.”
The farm is also investing in irrigation pivots covering 4,000 hectares, with a capital outlay between R$80 million and R$90 million, providing “insurance” against climate variability. Additionally, Roncador is setting up small, modular soybean crushers to increase the amount of protein meal fed to cattle, which will, in turn, improve manure quality for crop nutrition.
Roncador’s many initiatives, most of them experimental, stand in contrast to the “simplify-and-scale” model often championed in corporate strategy. For many investment funds, startups, and economic players, simplification and the ability to easily replicate models are essential to business growth and success. However, Mr. Dalla Vecchia takes a different approach: while he scales up ideas that prove effective, his projects start with rigorous data analysis and statistics—a method uncommon in many agriculture sectors, especially livestock. “We undertake these projects because they generate [financial] results. If a concept looks good on paper but doesn’t hold up financially, it has no place here,” he states.
While Mr. Dalla Vecchia advocates for biological inputs, Roncador’s production is neither organic nor intended to be. “We use chemicals when needed,” he says. “As the harvest progresses, pests concentrate in the remaining unharvested areas, intensifying pressure in those zones. If there’s a fungal threat at that point, we apply fungicide.” To explain the approach, he draws a parallel with human healthcare: “It’s like taking antibiotics when you’re ill—you avoid it if you can, but you don’t refuse it when necessary.”
Brazil’s new stock exchange, now named BASE Exchange, has a logo and advanced technology and is actively seeking new partners to ensure an initial trading volume. Mubadala, the controlling shareholder, is supporting BASE in a roadshow across Brazil and the United States, working with Olimpia Partners to facilitate its liquidity partnership program.
“This is a ‘private placement’ where international and Brazilian strategic partners acquire a small percentage of the company, linked to a liquidity program. Over three years, the more trading volume partners bring to our exchange with accessible spreads, the more warrant they receive for future conversion,” explains BASE’s CEO, Cláudio Pracownik. “It’s not about raising capital. It’s about securing volume, governance, and fostering a long-term partnership.”
Although the details of the valuation and business plan have been discussed in meetings, BASE has yet to disclose the exact percentage of share capital that will be used for the program. This guaranteed volume is intended to attract other market players who will not join the shareholder base.
Mr. Pracownik, who recently held meetings in the U.S., will return in early December to continue discussions, aiming to confirm participants by early next year. Brazil’s competitor, B3, also originated from a partnership among market agents who initially held equity securities in BOVESPA, which were later converted into shares.
BASE Exchange, or BASE—an acronym for the Brazilian Stock Exchange—aims to establish itself as a national exchange, not just a local Rio institution. The name also signals a foundation of strength, as “base” in Brazilian Portuguese refers to a football club’s youth academy. “We joke about that here, too—BASE is here to play well with the home team,” says Mr. Pracownik.
The technology arm, previously known as ATG, has been rebranded as Flowa, which will serve as the exchange’s tech provider. Mr. Pracownik also chairs Flowa.
This week, BASE will publish connectivity specifications on its website, allowing participants to test connectivity and understand transaction characteristics. By December, BASE plans to release details on connecting to clearing services.
“We aim to be technologically ready by the end of this year. The regulatory processes with the Central Bank and [Brazil’s securities market authority] CVM have advanced significantly, and we hope to start regulatory testing early next year,” says Mr. Pracownik. Regulatory guidelines suggest a minimum of six months of rigorous testing, including market simulations in stress and typical scenarios with connected brokers and custodians.
Mr. Pracownik believes an in-house technology setup gives BASE the agility to respond to any adjustments requested by the Central Bank or the CVM during the testing phase.
The original story in Portuguese was first published on Valor’s business news website, Pipeline.
A view of the Porto Sudeste. Mubadala Capital and Trafigura acquired Porto Sudeste in early 2014
Abu Dhabi’s Mubadala Capital has commenced work on selling Porto Sudeste, a Brazilian private port terminal.
The port is co-owned with Singapore-based commodities trader Trafigura.
Describing Porto Sudeste as a “mature” asset, Leonardo Yamamoto, executive director of Mubadala Capital Brazil, told Reuters that the company’s role is “no longer very relevant”.
Mubadala Capital and Trafigura acquired Porto Sudeste in early 2014.
Additionally, Yamamoto said the UAE company may consider selling its iron-ore mining project, Mineracao Morro do Ipe.
The move could offer investors an integrated operation by bundling the port and the mining asset, he said.
However, no precise time frame was given for the sale.
Mineracao Morro do Ipe produces around 3.5 million tonnes of iron ore per year, the report said, adding an investment of 1.3 billion reais ($230 million) will expand total production to about nine million tonnes annually.
In August, Mubadala Capital made early-stage investments into three US biotech startups, taking advantage of a broader decline in company valuations to buy into the fast-growing sector.
Mubadala Capital launched in 2011 with a remit to invest primarily in private equity and public markets in North America and Europe. In 2017 it became one of the first sovereign wealth funds to manage the money of third-party investors.
Post-U.S. election relief fades as currency, interest rates, and stocks remain pressured; Finance Ministry’s fiscal package in spotlight
11/11/2024
The post-U.S. election relief that buoyed Brazilian assets last week has now faded. As the government delays announcing the spending cuts promised by the Ministry of Finance, concerns about fiscal risk continue to mount, compounded by an increasingly challenging global backdrop. Early signs indicate that the Trump administration may adopt more protectionist trade policies, which, alongside recent disappointments in Chinese stimulus, is creating a harsher environment for emerging markets, pushing Brazilian assets to maintain high risk premiums.
The currency’s volatility illustrates the recent market instability. Last week alone, the exchange rate ranged between R$5.63 and R$5.83 per dollar, closing Friday in the middle of that band. Now that the post-Trump-election technical adjustment has passed, the market faces an adverse external outlook. Paired with Brazil’s unresolved fiscal issues, these factors are driving higher risk premiums for domestic assets.
The delayed release of Finance Minister Fernando Haddad’s fiscal plan, aimed at maintaining the country’s fiscal framework over the coming years, has fueled market uncertainty. Expectations that some previously expected programs may be dropped from the package add to investor unease.
“The government must understand that the current debt-to-GDP trajectory is completely unsustainable. A primary deficit that appears small but is maintained through temporary measures will only lead to a massive nominal deficit,” said Bruno Marques, partner and co-manager of XP Asset Management’s multimarket funds. For Mr. Marques, the government should focus on more structural solutions to reduce debt levels. The external backdrop, marked by a strengthening dollar and rising interest rates, complicates matters further.
The potential for the Trump administration to adopt a protectionist stance is already affecting financial markets. The possibility of Robert Lighthizer’s return as U.S. trade representative has raised concerns that the threat of tariffs, a hallmark of Donald Trump’s first term, could once again become reality.
“If tariffs are imposed on Europe, China, and Mexico, this will strengthen the dollar and impact currencies worldwide,” said Fernando Fenolio, chief economist at WHG. He added that rising external pressure calls for a reduction in the domestic risk premium, which is currently a primary factor in the Brazilian real’s depreciation.
“If we don’t see improvement locally while global risks rise, the exchange rate will continue to depreciate, pushing beyond recent highs,” Mr. Fenolio warned. “With the global environment under stress, investors will demand clearer and more stable local policy,” he said, noting that even an increased interest rate differential between Brazil and the U.S. may not be enough to sustainably support the real.
Last week, expectations were high for an announcement on the spending cuts package. Despite numerous meetings, the government failed to reach an agreement between the economic team and ministers from social sectors, who have resisted cuts to their budgets. Market concerns are growing over the likelihood of a watered-down spending reduction plan.
“We’re entering a phase where fiscal dominance is becoming a concern. In such cases, no interest rate can stabilize the currency because market players start doubting the government’s ability to repay its debt,” Mr. Fenolio explained. Typically, an interest rate hike would lead to currency appreciation, but in times of crisis, this relationship can reverse, as seen in 2014 and 2015. “Since March, we’ve seen this reversed correlation, with interest rates rising alongside a depreciating currency,” he said.
By the end of last week, Brazilian assets reflected high risk premiums across the board, even with expectations of an increased interest rate differential. The exchange rate hovered around R$5.73 per dollar, mid- and long-term interest rates neared 13%, and long-term inflation-linked bonds (NTN-Bs) remained above 6.5%.
“We hope the package is announced soon. Overall, we expect the government to aim for the original fiscal framework’s intent by implementing rules and restrictions to limit government spending growth to around 2.5%,” said Tiago Berriel, chief strategist at BTG Pactual Asset Management and a former Central Bank director.
In his monthly scenario review, Mr. Berriel noted that some elements being discussed are politically difficult to implement, such as changes to social spending. “The initiative is good, but we’ll need to see if Congress will back it and if it’s politically sustainable. It’s quite challenging,” he added.
A favorable fiscal package could trigger a relief rally in Brazilian assets, “but any rally is likely to be temporary,” said Paulo Clini, chief investment officer at Western Asset in Brazil. He noted that the strength of the U.S. economy and the outlook for higher long-term rates dampen foreign appetite for emerging markets, including Brazil. Without foreign investors, a sustained domestic rally seems unlikely.
“Global investors are holding back, and they typically drive the yield curve term structure. This trend isn’t exclusive to Brazil but is impacting emerging markets broadly, including Mexico, Colombia, Chile, parts of Southeast Asia, and Eastern Europe,” Mr. Clini said. Mr. Trump’s policies, which could increase inflation and interest rates in the U.S., reinforce the concept of “American exceptionalism,” he added.
“With the ‘Republican wave,’ checks and balances are diminished. Trump holds considerable power, and a Republican Congress is unlikely to counterbalance his agenda,” Mr. Clini explained. Given local investor concerns over fiscal policy and limited foreign interest in emerging markets, “it’s hard to believe that the market will recognize any excess in the risk premium soon,” he concluded.
There’s also the chance that the government’s fiscal package may disappoint, cautioned Fernando Rocha, chief economist at JGP. “The market will scrutinize the details. If we see R$50 billion in cuts, but only through superficial adjustments, the reception may not be favorable.”
*By Arthur Cagliari, Bruna Furlani, Gabriel Caldeira, Maria Fernanda Salinet, Victor Rezende — São Paulo
Deals account for 35% of M&A activity this year through October, up from 6% in 2021
11/11/2024
With the Brazilian stock market closed to new listings for over three years, a group of companies is resorting to selling minority stakes to raise funds for expansion. As of October this year, minority transactions accounted for 35% of mergers and acquisitions (M&As), compared to 23% in 2023 and 16% in 2022.
In 2020 and 2021, when the market was fully open due to ample liquidity, even for smaller deals, the percentage was 7% and 6%, respectively, according to a study carried out by Seneca Evercore for Valor.
According to experts, some companies are also seeking a preliminary valuation before going public, anticipating a reopening of initial public offerings (IPOs), which is currently projected for 2025. Others aim to improve their capital structure, as was the case with steel maker CSN, which decided to sell a stake in its subsidiary CSN Mineração.
Among the cases in progress, pharmaceutical company Cimed has hired J.P. Morgan to find a buyer for a minority stake, expected to attract private equity funds, according to market sources. Brazilian chocolate brand Trento, owned by Peccin, has appointed UBS BB to facilitate the sale of a stake, as reported by Valor. The companies declined to comment.
Another notable case is Compass, the gas division of sugar and energy company Cosan, which was in line for a public offering and also plans to sell a minority stake. Rubens Ometto, founder and chairman of the conglomerate, told Valor there is investor interest.
The trend is also seen among fintechs. Act Digital is seeking a partner for expansion. Contabilizei sold a stake to Warburg Pincus, and MeuTudo is also looking for an investor with a bank involved in the process, according to sources. Agibank, waiting for a market window for an IPO, is working with Goldman Sachs on a minority sale. The companies declined to comment.
Daniel Wainstein, a partner at Seneca Evercore, noted that the rise in minority transactions is also due to shareholders deciding to sell their companies. However, with asset values down, they are currently opting to sell only a stake. “The current market perspective is that transactions initially considered for full control have shifted to minority stake sales, partially meeting shareholder desires and reserving a 100% sale for a more favorable market moment.”
Anderson Brito, director at UBS BB, said that the bank currently has about 10 transactions involving minority stake sales in its pipeline, including fintechs, consumer sector companies, software companies, data centers, and firms related to energy transition. “We also see companies that could enter the capital markets now needing to scale up. Others need to see a recovery in multiples and are conducting pre-IPO rounds,” he said.
Mr. Brito noted that companies are also seeking funds to continue expansion plans. In other cases, minority stake sales involve funds that have reached the maturity stage of their investments and need to divest.
Private equity funds and foreign groups are traditionally viewed as investors for companies seeking partners to grow their businesses, said Guilherme Monteiro, a capital markets partner at law firm Pinheiro Neto Advogados.
“Without IPOs, private placements, common in the U.S., gain traction in this scenario. Companies strengthen by bringing a significant partner into their shareholder base,” Mr. Monteiro said. With these private placements, he adds, companies tend to be seen as having a more sophisticated capital structure, even for future IPOs.
For Guilherme Bueno Malouf, an M&A partner at Machado Meyer, private equity funds are the most obvious route, as this format allows for primary investment—capital directed to the company. “These resources enable companies to prepare for larger ventures,” Mr. Malouf said.
He noted, however, that private equity funds have reduced these types of transactions due to the ongoing high-interest rates and geopolitical tensions. “In this context, investments become more conservative, with shifts towards fixed income.”
“There’s also a challenging scenario for companies seeking these investments, with the domestic environment still fraught with fiscal uncertainties,” he added.
Ricardo Thomazinho, a partner at Urbano Vitalino Advogados, confirms that such transactions are reaching the firm, often involving funds as buyers since strategic investors mostly prefer acquiring control.
He noted that strategic investors might initially acquire a minority stake but often with a pre-arranged agreement for future control purchase.
Currently, Mr. Thomazinho said, minority stake sales are also being pursued by companies needing to balance their books. “Many companies are seeking solutions after enduring high interest rates for an extended period,” he said.
Maintaining control of these deals is also crucial for business owners. Renato Stuart, a partner at RGS, said that when a company goes public, one of the goals is to retain control. “That’s why, when they opt against an IPO, they generally prefer selling to a minority fund,” he said.
*By Fernanda Guimarães, Mônica Scaramuzzo — São Paulo
Item 1 of 2 Yanomami indigenous people play football at Surucucu village, in Yanomami indigenous land, Roraima state, Brazil August 26 2024. REUTERS/Amanda Perobelli
[1/2]Yanomami indigenous people play football at Surucucu village, in Yanomami indigenous land, Roraima state, Brazil August 26 2024. REUTERS/Amanda Perobelli Purchase Licensing Rights, opens new tab
SURUCUCU, Brazil, Sept 14 (Reuters) – Brazil has almost squashed the illegal gold rush that led thousands of wildcat miners into the Yanomami reservation in the Amazon rainforest and caused a humanitarian crisis of disease and malnutrition, the man in charge of operations said.
The Yanomami, South America’s largest Indigenous group living in isolation, have returned to a normal way of life, cultivating crops and hunting game, Nilton Tubino told Reuters in an interview on Friday.
Tubino runs the government office set up by President Luiz Inacio Lula da Silva to coordinate action by police and military forces, environmental agents and health workers on the reservation the size of Portugal in the remote Amazon, where 27,000 Yanomami live.
“We are seeing many of them bathing in the rivers and out hunting again, and clearings being planted for food,” he said.
In hundreds of operations since March, army and navy troops, backed up by environmental and Indigenous protection agencies, have destroyed mining camps and gold prospects.
They have dynamited 42 clandestine airstrips used by the miners in the rainforest, set fire to 18 aircraft, seized 92,000 liters of diesel, sunk 45 dredging barges, destroyed 700 pumps, and dismantled 90 Starlink dishes that allowed the miners to warn each other about enforcement teams, Tubino said. A radar has been set up in the reservation to monitor clandestine planes.
Tubino said deaths from malaria brought by the miners were down, and malnutrition had been controlled with government food parcels. The government has reopened medical outposts and is planning to build a
A Reuters photographer in Surucucu earlier this month saw evidence of illegal miners inside the reservation still, but with the situation improved from last year.
Junior Hekurari, head of the Yanomami health council Condisi, said the government had evicted the miners and overcome the health crisis, but that the mining had affected their ability to obtain food, with river waters polluted by mercury.
“The waters are poisoned and there are no fish,” he said. “Our people believe the earth has been contaminated and that is why the crops are not growing.”
Shortly after taking office, Lula launched a massive enforcement operation in February 2023 to evict some 25,000 gold miners from the Yanomami territory. With backing from the armed forces, the government action succeeded in expelling 80% of the miners.
But once the military withdrew, miners started to return, joining others who had hidden in the forest.
Tubino said the number of miners remaining is unknown, but this year’s operations had significantly reduced their presence and eliminated more than half the gold prospecting areas.
Work is still needed to shut down the supply line that keeps the miners in business, from fuel and food to the buying of their gold nuggets, Tubino added.
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Reporting by Amanda Perobelli in Surucucu and Anthony Boadle and Ricardo Brito in Brasilia; Editing by Rosalba O’Brien
