Petrobras hires again suppliers targeted by Car Wash task force

SBM, Camargo Corrêa and Nova Participações were reintegrated to oil company’s base

10/20/2022

Companies that provide services to Petrobras and that were excluded, as of 2014, from the register of suppliers for involvement in cases of corruption investigated by the anti-corruption task force Car Wash are returning to have commercial relations with the oil company, although not all of them are able to close contracts for the provision of goods and services. SBM, based in Monaco, Camargo Corrêa and Nova Participações, former Engevix, are among the companies reintegrated to the Petrobras supplier base, but they are in different situations.

SBM, for example, has a contract in place with Petrobras to deliver by 2023 a platform for the Mero field, in the Santos Basin. The contract, agreed in 2019, was SBM’s first with Petrobras after the Car-Wash allegations in which the company was accused of wrongdoings by the Federal Prosecution Service and had to sign a leniency agreement with the authorities. Leniency is a kind of plea bargaining for business entities that admit wrongdoing in government contracts.

From 2014 to 2021, Car Wash investigated irregularities committed by Petrobras’ suppliers and former employees. According to the latest available data, Petrobras had been reimbursed R$6.2 billion for the damage found in the investigations. Both the state-owned company and suppliers have undergone improvements in corporate governance policies.

SBM’s CEO, Bruno Chabas, says the episodes of corruption revealed have helped the company to reinvent itself: “It was part of our history and we have learned from it. We have become a different company, we are more transparent, and we are aware of our impact on society,” he said.

Camargo Corrêa was also reinstated, in 2020, to the list of Petrobras suppliers, but has not yet signed any contracts. Nova Participações, formerly Engevix, returned to the Petrobras supplier base, but is still considered high risk, a classification that prevents it from signing contracts with the oil company.

Part of the companies authorized for contracting by Petrobras did not close new deals as a result of the reduction of investments by the state-owned company in large infrastructure projects, say sources in the construction area. The Petrobras contracts for works involves long chains of suppliers. In 2021, the company closed R$239.85 billion in supply contracts for goods and services in Brazil and abroad with 9,751 companies, including platforms and other goods. In 2020, the state-owned company closed contracts worth R$253.3 billion with 10,335 suppliers.

Despite resuming relations with companies involved in Car-Wash, there are still 76 companies on Petrobras’ list that are suspended from bidding or on precautionary blockade.

This classification appeared in 2014 to deal with those investigated in the Car Wash task-force. Not all cases, however, are related to the corruption probe. Of the total of blockades, 62 correspond to decisions made as of 2021, the year in which the task force was closed.

Salvador Dahan — Foto: Divulgação/Vivian Fernandez

Salvador Dahan — Foto: Divulgação/Vivian Fernandez

Salvador Dahan, Petrobras’ Chief Governance & Compliance Officer, told Valor that the reasons for the current suspensions are diverse and range from problems in the corporate structure to failures in the integrity programs identified by the state-owned company: “Some [companies] may not have problems [of corruption], but do not have the foundations of a compliance program,” he said.

Among the companies still blocked by Petrobras that were involved in Car-Wash are Odebrecht Ambiental and Base Engenharia, formerly Schahin. Odebrecht Ambiental had its operational assets sold to BRK in 2017 and is now a non-operational company. Novonor, formerly Odebrecht, would not have sought to remove Odebrecht Ambiental from Petrobras’ blockade list because today the company is no longer part of the group’s operational assets. Base Engenharia was declared bankrupt in 2018.

Since 2015 Petrobras assigns an integrity risk level (GRI) to all companies with which it has a business relationship. The supplier evaluation process begins with the completion of a due diligence questionnaire, known as due diligence of integrity (IDD), with questions about the suitability and internal control programs of the companies. After this internal evaluation process, Petrobras defines the risk level of each company, which can be high, medium, or low. Low- and medium-grade companies are eligible to participate in bids to sign contracts.

“We do not want to associate our name and brand with companies that are committing violations, illegalities or that do not respect the same principles that we have. The goal is to protect Petrobras and its entire value chain,” said the state-owned company’s CEO. More than 80% of the companies in Petrobras’ supplier base, says Mr. Dahan, are considered low risk, while only 2% are still high risk. He says that 40% of the companies that at some point were identified as high risk by Petrobras were able to reverse the picture and become low or medium GRI, which allow them to participate in bids.

Nova Participações is one of the companies registered with Petrobras seeking to improve its GRI. According to the Federal Prosecution Service (MPF) in the Car-Wash task-force, the company was part of a scheme to pay bribes and form a cartel. The company closed a leniency agreement in 2019, in which it committed to pay R$516 million until 2047, for the losses generated, and also needed to undergo reorganization.

Adjair dos Santos, Nova Participações’ chief compliance officer, says the company hired an external consulting firm to map integrity risks in internal processes in 2017. Since then, a compliance area was set up, responsible for measuring actions and mitigating risks. In 2019, Nova Participações’ governance management was developed into an area that monitors the processes that occur within the company, which includes hiring, payments, and contract terminations. “All of this generated a transformation of people, of processes, of risk visualization,” he said.

Despite its efforts, Nova Participações has yet to close contracts with Petrobras. Today, the company provides services to private companies in the electrical sector, in the engineering of hydroelectric and solar generation plants and transmission lines. The company recently asked Petrobras for a reassessment of its risk rating. The expectation is that the GRI will fall to low or medium, according to Mr. Santos.

The risks identified in the anti-corruption task force led Petrobras to institute, in 2014, a public list of suppliers with whom it could not close new deals, in addition to strengthening surveillance mechanisms. In 2015, the state-owned company created a governance board. To be able to sign contracts with Petrobras again, suppliers had to implement improvements in internal controls to prevent and combat fraud and corruption.

The companies involved in the investigations were taken off the list of suppliers blocked by Petrobras as they signed leniency agreements with the MPF. This type of agreement, considered a kind of “rehabilitation” for business entities, allows companies involved in illicit practices to collaborate with investigations and take actions so that irregularities do not recur, in exchange for the easing of sanctions. Leniency agreements also involve payment of fines.

After the leniency agreements, Petrobras allowed the companies to take part in the bids, but the reinstatement was different for each supplier. Today, among the criteria for a company to be among those qualified to participate in Petrobras’ bids is the guarantee that the senior management has no executives involved in scandals, in addition to the existence of an independent board of directors. The development of more robust governance areas is one of the factors that allowed the suppliers to return to Petrobras’ suppliers base.

Emilia Malacarne, a lawyer from law firm Souto Correa’s compliance area, states that the purpose of a compliance program is the prevention and detection of frauds, illicit acts and irregularities, as well as the remediation of a problem, when detected. She points out that it is important for the company to apply these policies in day-to-day activities. “Compliance is a culture change, done through mechanisms. But it is necessary that the company shows, on a day-to-day basis, that these values have a practical effect.”

*By Gabriela Ruddy — Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/
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Acquisitions boost stocks on B3. But is Brazil cheap?

After deals were unveiled, target companies surged 21% on average

10/20/2022

In the last five months, 10 deals caused shares of target companies to rise 21% on average — Foto: Aloisio Mauricio/Agência O Globo

In the last five months, 10 deals caused shares of target companies to rise 21% on average — Foto: Aloisio Mauricio/Agência O Globo

At a moment when the international outlook and Brazil’s economic growth numbers limit the recovery of the stock market, strategic investors take advantage of the discounted prices to acquire stakes in Brazilian companies. This move suggests that the stock market is cheap in comparison with its peers and past performance, asset managers and analysts say.

Strategic investors are those who buy stakes in companies with an eye on growth potential. This is the case for private-equity funds or companies with a significant presence in the sector in which they operate. In general, these are players with the financial strength to hold positions for a longer period.

In the last five months, 10 deals analyzed by Valor, which include purchases of control, mergers, and acquisitions of minority stakes, caused the shares of the target companies to increase by 21% on average. The market capitalization of the sample grew by about R$25 billion until Wednesday, considering as initial date when the deal was announced.

The abundance of share buybacks by strategic investors, as well as the increase in share buybacks by companies, is a phenomenon observed in down-market times, said João Luis Braga, founding partner of Encore Asset Management. “It’s a huge signal that the stock market is extremely cheap.”

Investors with a longer-term profile such as private-equity funds, who can cope with the macroeconomic risks typical of devalued stock markets, make the most of these situations. “Strategic investors flush with cash take advantage of this and provide an exit for short-term investors,” said Mr. Braga.

Last week, U.S.-based fund Apollo Global made a new proposal for Braskem, valuing the petrochemical company at R$37 billion. The stock has risen 25% since the announcement. The purchase of a stake in Vale by Cosan was another recent big-ticket deal on the stock exchange. The group, which has operations in agribusiness, energy, and logistics, is willing to pay about R$22 billion to take a 6.5% stake in the mining company, one of the world’s largest producers of iron ore.

The higher number of deals driven by strategic investors can be seen as a phenomenon opposite to the waves of IPOs, said Leonardo Rufino, a partner and equity manager at Mantaro Capital.

While strong, red-hot markets pave the way for new listings, those periods when stock prices are seen as being below their “fair price” attract the strategists, who typically seek minority stakes in good businesses at good prices, with an eye on long-term gain.

There were no IPOs in Brazil this year, compared to 74 operations in 2020 and 2021, at a time when the stock market was driven by low interest rates. As is common in phases of euphoria in the stock market, many stocks ended up debuting with overestimated prices, which intensifies setbacks in periods of decline.

There is a cycle exactly like that unfolding right now: after the wave of IPOs in 2020 and 2021, the market correction brings down even more stocks that were launched above the appropriate price, or those that were already in the portfolios and were traded at overvalued prices.

According to a survey carried out by Valor Data, of the 74 shares of companies that went public at B3 between 2020 and 2021, 49 underperformed the Ibovespa, Brazil’s benchmark stock index. This is the case of Hidrovias do Brasil, which is down 67% since its debut, on September 24, 2020, while Ibovespa has climbed 19%. CSN Mineração fell 55% since its IPO, in February 2021, while Ibovespa is down only -3.9% in the period. And Mater Dei has lost 50% since April 2021, while Ibovespa fell 3.7%.

In this group of new companies, there is potential for new investments by strategic investors. “Companies that went public in the last two years have plummeted, but many other stocks have also dropped fast. So, this is a fertile field for acquisitions, but it will be case by case,” said Mr. Rufino.

Among the more consolidated, high-quality companies, there are also many cases where the potential payback is higher than in the past, although many of those companies are even better now. The point is that for any of those groups the current scenario is very complex and therefore there are also reasons for the discount to be higher, especially in the short term. This gives an advantage to strategic investors, who have the stomach to wait for the asset to appreciate – more than a stock fund, for example.

Ibovespa is currently traded at a multiple of 6.9 times, considering the price-to-earnings ratio, 17% cheaper than a year ago, when this multiple was 8.3 times, said Gustavo Campanhã, manager at WHG. The S&P 500 index is currently traded at 15.3 times, 26% below the multiple of a year ago. The worse performance of the U.S. stock exchange has to do with the fact that practically one-third of the index composition is of technology companies, including behemoths like Amazon and Google, which are much more sensitive to the rise in interest rates.

In Brazil, about 60% of the index is composed of banks, commodities, and energy — with Vale and Petrobras alone accounting for 25%. The appreciation of commodities, in addition to the fact that the country is already well ahead of the rest of the world in the cycle of interest rate hikes, explains the advantage of the local stock exchange compared with the U.S. one.

But when comparing the two indexes — excluding the commodities and banking sectors, which are the set of stocks that more directly reflects the performance of the domestic economy — the price-to-earnings ratio is at 14.5 times, close to the level of 15 times observed on the eve of the 2018 election, said Mr. Campanhã.

At the beginning of 2019, a year in which expectations for the Brazilian economy were very optimistic given the promise of adopting a more pro-market economic plan, this multiple reached 19 times.

For Mr. Campanhã, given the current context and the difficulties for economic growth, it is possible to say that those stocks are trading at an adequate price level. A positive change in this dynamic depends on economic growth and the reduction of country risk.

“No foreign investor will come to the country until there is a clearer political backdrop unless the asset is extremely cheap,” he said. “So, you can’t say that there will be a systematic entry of this investor.”

The prices and market conditions of some sectors suggest that more buyout moves are coming, said Sergio Goldman, manager and head of research at Esh Capital. He cites the e-commerce segment, which would not have room for so many competitors, and digital banking, whose accelerated growth in recent years may trigger a consolidation drive. The construction sector is also attractive in cases where companies are complementary, depending on the customer profile and geographic location.

Anyway, even with the discounts seen in the stock market, Mr. Goldman considers that it is not possible to say that the market is cheap just by looking at the companies’ past valuation. This is because the level of visibility on the economic growth and, consequently, of the companies today is very low. And this is a fundamental variable to define whether a company is cheap or not. “In light of this, some companies may be at the right price, even though they are well below their historical level,” he said.

*By Lucinda Pinto, Nelson Niero — São Paulo

Source: Valor International

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Natura soars driven by spin-off plans

Analysts with Citi, BTG Pactual and Santander said that the potential deal may be a way to unlock value to shareholders

10/19/2022

Natura & Co unveiled Monday that it began studies for the potential spin-off and IPO of Aesop, the company’s luxury business. The company closed the trading session on Tuesday up 9.62%, at R$14.24 – the highest intraday gain of Brazil’s benchmark stock index Ibovespa.

Itaú BBA analyst Thiago Macruz points out that most of Natura &Co’s debts do not mature in the short term and that the company does not currently have a liquidity problem. A spin-off and IPO of Aesop, therefore, could be interpreted as a measure of business expansion, not to reduce the holding company’s debt.

“Natura is giving signs of decentralization in decision-making worldwide, indicating that there are not necessarily the same synergies identified in the past,” he told Valor.

This is also the view of Antonio André Neto, the coordinator of the MBA Strategic and Economic Business Management at Fundação Getulio Vargas (FGV). “It also frees up all the costs that Natura needs to have to support this company. Despite sharing many services, you can imagine that Aesop employs many people not directly linked to Natura’s operation. They are part of these shared costs.”

Analysts with Citi, BTG Pactual and Santander said that the potential deal may be a way to unlock value for shareholders. Goldman Sachs said that the generation of value with the deal depends on its format and the value that the market would give to the separate companies. XP said that the market is in “challenging” times for such a deal and highlighted Aesop’s heavy investments to enter China, which could pressure profitability in the short term.

Alexandre Pierantoni, a specialist in mergers and acquisitions and director of corporate finance at the risk consultancy Kroll, agrees that this type of deal should wait for the most favorable moment, liquidity, and the potential for appreciation. “If this spin-off or IPO materializes, the company can benefit from the value that the asset is creating on its own. The parent company can generate value, but it depends on what the asset is, where the funds will be allocated, if there is an alternative of extracting the value and putting it in another investment,” he said.

*By Ana Luiza de Carvalho — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Azul to increase twofold operations in São Paulo’s regional airport

Airline “will be seen differently,” CEO John Rodgerson told Valor

10/19/2022

John Rodgerson — Foto: Divulgação

John Rodgerson — Foto: Divulgação

Azul will be able to increase twofold its operations in the Congonhas Airport as of March, which will make it easier for residents of the city of São Paulo, including those working in the financial industry, to start using the company’s services, CEO John Rodgerson told Valor.

The executive sees room for coexistence between business jets and airliners in Congonhas and said that the debate should focus on the need for regulatory improvements so that eventual accidents, such as the one that happened on October 9, can receive fast and efficient responses.

Currently, the company has the historical right to operate 26 slots in the airport, plus 15 it won temporarily. From March on, the number will increase to 84, according to market calculations based on the new rules of Anac, Brazil’s civil aviation agency.

“I have a thousand flights a day. Will the extra slots in Congonhas change [the environment financially]? No. But Azul will be seen differently. There are many people from São Paulo today who don’t fly with Azul. We don’t take the Faria Lima guy [São Paulo’s financial hub] who wants to go to Brasília. We have already participated in roadshows with investors who have never flown with Azul, because it is not in Congonhas. Azul was never an option. Now it will be,” he told Valor, during an event held by the Latin American and Caribbean Air Transport Association (ALTA), in Buenos Aires, Argentina.

The company’s operation at the airport will still be small if compared with leaders Gol and Latam, which have about 235 slots each. Azul offers free transportation from Congonhas to its main hub, Campinas, but the practicality of taking a taxi and boarding in Congonhas has won over São Paulo residents.

About 25% of trips in Brazil, or one in every four, are made by the state of São Paulo people. Of all the expenses made by Brazilian tourists on domestic trips, nearly 26% come from São Paulo, according to data from the state tourism office. By gaining more passengers in the capital, Azul is able to embrace a larger slice of this important market.

Before, the company operated flights from Congonhas to important cities like Porto Alegre, Brasília, and Curitiba. But after temporarily winning 15 slots from Avianca and expanding its operation at the airport, Azul decided to focus its efforts on the Rio-São Paulo route, Brazil’s most profitable one. Now, with more slots, the airline could be able to resume flights to those cities, which are also very important for São Paulo citizens in terms of demand.

On October 9, the tire of a small plane burst upon landing in Congonhas and caused controversy in the sector when the Brazilian Association of Airlines (ABEAR), which represents Gol and Latam, opposed the use of the airport by business jets. In total, about 230 flights were canceled. The CEO of Azul, however, argued that the case should stimulate debates to improve the sector’s regulation, not to prevent business jets from operating there.

Mr. Rodgerson recalled that in 2012 a Centrion cargo plane caused the Viracopos airport, in Campinas, to close for 46 hours after facing problems with the landing gear, jeopardizing 495 flights. “It’s the business risk. I can’t say that we can’t have more cargo transportation at the airport after an event like this,” he said. “We have to work to open the airport faster and manage events like this.”

One challenge today, according to the executive, is legal uncertainty. Airport operators end up at a legal crossroads when clearing the landing strip, since they can be held liable for any damage to aircraft during removal.

During ALTA’s event, Gol CEO Celso Ferrer even signaled his interest in Congonhas receiving international flights again – something that has not happened since 1985. In Mr. Ferrer’s view, the possibility would help to encourage tourism in the city of São Paulo during stopovers. International flights would be an important financial support to Aena, Congonhas Airport’s new concessionaire, since the taxes for domestic boarding total R$35, compared with R$120 for international flights.

Asked about the subject, Mr. Rodgerson said that an eventual international operation would not be Azul’s focus in Congonhas. “Our international focus is Campinas. It is more profitable for the concessionaire to do that … but it will not be our focus.”

* The reporter’s travel costs were covered by ALTA.

*By Cristian Favaro — Buenos Aires

Source: Valor International

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Darling Ingredients buys Brazilian Gelnex for $1.2bn

Two giants are little known by consumers, even though most have possibly already consumed some of their products used as inputs for the food, pharmaceutical and cosmetic industries

10/19/2022

Texas-based Darling Ingredients agreed to buy the Brazilian company Gelnex for $1.2 billion in cash. This is the biggest deal in Brazil’s consumer sector this year, stitched together by Santander on the selling end and Morgan Stanley on the buying end.

The two giants are little known by consumers, even though most have possibly already consumed some of their products used as inputs for the food, pharmaceutical and cosmetic industries.

Gelnex is one of the world’s largest manufacturers of gelatin and collagen peptides, with four plants in Brazil, one in Paraguay and another in the United States. It exports ingredients used in supplements, cereal bars, dairy beverage, candies, pills, and beauty products to over 60 countries. The company founded in Itá, Santa Catarina, has the capacity to make nearly 50,000 tonnes a year of collagen.

In the competitive process, Darling beat the proposals of international private equity funds and protein giants – Brazilians JBS and Marfrig studied the business, according to Pipeline, Valor’s business website. The relevance of Gelnex’s raw material, which are pork and beef by-products, justifies the interest of the protein companies, which saw high synergy in the operation.

JBS started betting on the segment this year. In August, the meatpacker unveiled an investment of R$400 million in its newly created Genu-In, with ambitions to compete in the market with Rousselot, Darling’s brand, and Germany’s Gelita. Marfrig does not make use of pig skin and bovine leather by-products, it only sells them, which led it to consider a transaction.

The deal has also drawn international funds due to its size since it is not so common in Brazil’s M&A environment checks over a billion dollars. Gelnex was until now controlled by three holding companies – Gel Holdings, Ibo Participações, and Itá Investors – represented by a group of directors but owned by a local businessman.

Darling also operates in other segments, transforming edible by-products and food waste into sustainable products and renewable power. It is a behemoth with 250 plants in 17 countries that reuses almost 15% of the world’s meat industry waste into products such as green energy, renewable diesel, collagen, fertilizers, and feed. Rousselot alone has 11 plants.

The company’s origin can be traced back to a family business in Chicago, but its current headquarters are in Irving, Texas. This is Darling’s second acquisition in Brazil this year alone. South America’s largest country is considered a strategic market by CEO and chairman Randall C. Stuewe. In May, the company unveiled the purchase of the Fasa group for $542.6 million in cash.

“Brazil will play a big role in feeding a growing world population, which makes it a premier location to grow our specialty ingredients business,” he said earlier this year. This time, Mr. Stuewe reinforced the bet on the specific demand for collagen. “Driven by strong growth in demand for collagen products in the global health and nutrition market, we anticipate the collagen peptides market to double in the next five years,” he said in a statement.

With shares traded in the U.S., Darling is valued at $12 billion. The proclaimed sustainability in the company’s business has been reflected in the market: the stock jumped 340% in five years. The size of the acquisition put pressure on the stock on Tuesday, and the company fell by 4%. Even so, they are up 6% this year, compared with S&P500’s 23% drop and Dow Jones’s 17% decline.

Gelnex communicated the operation to employees on Tuesday, Pipeline has learned. The company did not return requests for comment

The deal is expected to be closed early next year, after regulatory approvals

*By Maria Luíza Filgueiras — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Pix is main mean of payment used by small businesses

Central Bank’s instant-payment system is the main form of receiving payment for 40% of firms, shows survey

10/19/2022

Pix, the Central Bank’s instant-payment system, has become the main mean of payment accepted by small businesses and has helped small entrepreneurs, according to an unprecedented survey conducted by Sebrae (small-business support service) and the Brazilian Institute of Geography and Statistics (IBGE).

The digital system is the main form of receiving payment for 42% of small entrepreneurs. The survey heard, between the end of August and the first two weeks of September, more than 6,000 thousand entrepreneurs from all Brazilian states and the Federal District. The survey is divided into individual microentrepreneurs (MEI), micro and small companies (MPE) and small businesses.

Pix has its best performance among those who are MEI: 51% of them state that this is the main payment method used in their sales. Among micro and small businesses, Pix is the main method of payment for 28% of respondents – in this segment, the use of credit cards is still higher, with 30%. For small businesses in general, the system is the main type of payment in 42% of the transactions.

Like individuals, MEIs do not pay a fee to use Pix to make a transfer or a purchase, nor to receive a transfer.

Pix was already widely accepted by large retailers and in e-commerce, where it is second only to credit cards. Now, the data also shows advancement among small companies.

Sebrae’s president Carlos Mello points out that this growth of Pix as a payment method was already noticed in previous surveys. “Now we see that the digital system is increasingly occupying a prominent place among the payment methods used by entrepreneurs.”

For him, the main advantage of the system for the small entrepreneur is that it allows instant payment, “which helps maintain the company’s cash flow and have better financial control. “The immediate availability of the funds for the entrepreneur can also help to reduce the need for credit and help with the factoring of receivables,” he said.

Data from the Central Bank shows growth of Pix in Brazil in virtually all categories since November 2020, when it was made available by the monetary authority. In September, there were already 22.9 million keys registered by business entities.

Carol Mello — Foto: Silvia Zamboni/Valor

Carol Mello — Foto: Silvia Zamboni/Valor

Carol Mello, 46, is an individual microentrepreneur. Since 2015, she makes cookies, cakes and sweets under the label Caramello Doceria. She said that, until recently, using TED or DOC protocols for payment was the customer’s first choice. “Now almost everyone just pays by Pix,” she said, estimating that 80% of her sales are made via Pix.

“The first facility is that the payment comes in on the spot. And allied to that, there’s the fact that it’s free, which has attracted people,” Ms. Mello explained.

In her day-to-day business, she also uses the system to buy inputs from suppliers. “I don’t like to work with credit cards. Before I had to go after a payment slip, it was more confusing,” she said.

Each month, the entrepreneur sells, on average, 60 decorated cakes. In addition, she produces sweets daily on demand. After a lot of time producing at home, as of May 2022 she started to share a studio in São Paulo with another entrepreneur.

In the assessment of Boanerges Ramos Freire, head of Boanerges & Cia Consultoria, specialized in financial services, the fact that Pix is accessible and less complex when compared to other alternatives is a way to unlock sales. “Cards are more expensive, given the fees charged. Thus, adopting Pix is interesting and some sellers even give a discount at a payment using it,” he said.

He ponders, however, that there is still room for improvement, especially in bank apps. “The use of QR Code makes it much easier, but it is still not being used as widely as it could be,” said Mr. Freire.

*By Guilherme Pimenta — Brasília

Source: Valor International

https://valorinternational.globo.com/
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FSC eases management of ‘intact’ forests

Forest Stewardship Council will ease rules for handling of land in the Amazon

10/18/2022

The general assembly of the Forest Stewardship Council (FSC), held in Bali, made a decision that makes the management of so-called “intact forests” viable. The immediate impact for Brazil is that the measure will avoid, in the next two years, the loss of the “green label” on products originating from 2.7 million hectares in the Amazon.

Forest certification labels certify that the management is environmentally correct, socially just, and economically viable. In 2014, NGO Greenpeace managed to approve at the FSC general assembly that this green label would only be given to those who put 80% of their land as “intact forest” — that is, absolute protection in almost the entire area, without roads, production, or any activity.

When the mapping of forests began, however, the realization came that the requirement was too harsh and made the forestry business economically unviable. In 2017, a new FSC assembly softened the situation. It established that, until the issue was resolved, certification could be offered to those who kept at least 50% of the area as “intact forest.”

Now, in Bali, a motion by the International Tropical Timber Technical Association (Atib), developed by FSC members from the Congo Basin and Latin America, proposed a definitive solution. After negotiations, the general assembly decided to allow the establishment at the national level of how much absolute reserve it will be possible to make. The percentage will probably be between 20% and 30% of the total area.

For the Swiss group Precious Woods, which operates in Brazil, the decision was a relief. Without the measure, its subsidiary Mil Madeiras, located in Itacoatiara (Amazonas), would have lost FSC certification for 493,000 hectares in two years, or 18.2% of the total in the Amazon, according to its estimates.

“This would have made our operations in Brazil unviable because we could not manage much of the forest,” said Markus Pfannkuch, the company’s head of sustainability.

Precious Woods works with native forests, not plantation forests. According to the executive, the maximum used is two or three trees per hectare every 35 years — after felling, this area is no longer managed for 35 years. The group performs the transformation in its sawmill and exports about 40 different types of certified wood to Europe, the United States, and Asia. Mil Madeiras has 755 employees.

When asked about the controversy abroad regarding the image of the current Brazilian government on the environmental front, Mr. Pfannkuch answered that his clients have known the company for a long time and that it only works with certified wood. On its website, Precious Woods says it was created to prove that it is possible to invest in sustainable projects, with economic viability and social and environmental responsibility. In 2017, it was the first forest management company in Brazil to obtain the forest certification label.

For the executive, the new FSC decision that makes the management of “intact forests” viable may attract “green” investments to Amazon. The certification, which was not possible before, now opens the way for more forestry companies to operate in that biome.

“Forest concessions in the Amazon demand certification and the rule didn’t allow it,” said Lineu Siqueira Junior, co-founder of FSC and a member of its Policies and Standards Committee. “What has no value becomes fire and pasture, illegal timber theft, mining, everything bad that can be thought of, as is happening in some places in the Amazon.”

For Mr. Siqueira Junior, “when you add value to the forest — and, at the same time, have control over how it is exploited— it is possible to keep it forever.”

During the assembly in Indonesia, the FSC also changed a “golden rule” for new forests. Previously, the council would not give certification for forests in areas cleared after 1994. Now, it will allow certification of areas that were converted (deforested) between 1994 and the end of 2020, provided that strict compensation criteria are met.

*By Assis Moreira — Geneva

Source: Valor International

https://valorinternational.globo.com/
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Santander partners with BYD to offer electric car financing

Bank will also extend revolving credit line to the Chinese group’s dealerships

10/18/2022

André Novaes — Foto: Silvia Zamboni/Valor

André Novaes — Foto: Silvia Zamboni/Valor

Santander’s Brazilian subsidiary made an agreement with automaker BYD, known for its electric vehicles, and will finance the Chinese group’s cars and dealerships. BYD’s goal is to sell 10,000 units in 2023 and 20,000 in 2024. In the future, Santander and BYD may enter into a joint venture to create an automaker bank itself, as the institution already has with Renault, Peugeot, and Hyundai.

With this initiative, all the stages of financing the car – from analysis to credit approval, including payment plan options – will be carried out in Santander Financiamentos’ 100% digital network. The bank will also meet the needs of the BYD dealership network through “floor plan,” a revolving credit line with attractive conditions for the acquisition of vehicles.

“We chose a financial institution with significant participation, great market experience, and solid partnership with the main automakers in the country,” said Henrique Antunes, BYD’s chief sales officer in Brazil.

According to André Novaes, head of Santander Financiamentos, consumers will have access to Santander’s special conditions for the acquisition of electric models, as well as additional advantages, such as the possibility of contracting insurance by diluting the value in the installments of the contract.

In addition to the cars, the brand’s dealerships will offer a complete solution for the generation of clean energy by photovoltaic modules made by BYD itself, which can also be financed by Santander.

“We want to position ourselves very well in this world of electric cars. It still has a higher value, but if you do the math, over the years, with the savings in maintenance and fuel, it ends up having a more favorable dynamic. And the customer profile is one that also has a more sustainable behavior in relation to credit itself, so the default rate ends up being even lower,” said Mr. Novaes.

He says that electric cars still represent less than 1% of the bank’s automotive financing portfolio, but that the trend is for strong growth in the coming years. “It was like this with photovoltaic generation equipment, which seven years ago had a share of almost zero and today are already a relevant share.”

Currently, BYD has nine stores and representations in 31 Brazilian cities. By the end of the year, the forecast is to be in 45 cities and reach 100 venues in the country by the end of 2023. In Brazil, the automaker sells the models Tan EV (starting price at R$529,000), Han EV (R$529,000), and is in the pre-sale phase for the Song (R$270,000). The Yuan Plus model is expected to arrive soon.

“We arrived in Brazil’s retail this year, not yet a full year. In 2023, we expected to see bigger growth. Who knows, maybe in a few years we will be able to bring production here and have a critical mass to assemble an automaker’s bank, perhaps with Santander. We are still taking the first steps of a marathon,” said Mr. Antunes.

Mr. Novaes recalled that, like this agreement with BYD, Santander’s partnership also began as a white-label agreement and later evolved into the creation of a joint bank between the two companies. “In terms of product offering, there isn’t much difference, but we are taking the first steps, learning how this reality is, and setting up financing for the dealerships. These are the first steps in a long horizon, but maybe in the future it may evolve to create an automaker bank,” he said. Santander and BYD are also negotiating partnerships in other countries, especially in Europe.

Santander said it always studies lines from multilateral lenders aimed at financing electric cars. But for now, the partnership with BYD does not tap funds from this type of program.

*By Álvaro Campos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Paper Excellence hires former São Paulo governor as “advisor”

Company has been fighting legal dispute with partner J&F for control of pulp producer Eldorado

10/18/2022

Paper Excellence has been fighting a legal dispute with partner J&F Investimentos for the control of pulp producer Eldorado — Foto: Divulgação

Paper Excellence has been fighting a legal dispute with partner J&F Investimentos for the control of pulp producer Eldorado — Foto: Divulgação

After having called the former president Michel Temer (Brazilian Democratic Movement (MDB) to advise it legally, Paper Excellence (PE), which for four years has been fighting a legal dispute with partner J&F Investimentos for the control of pulp producer Eldorado, has now hired the former governor of São Paulo João Doria as an “advisor”. Mr. Doria was also São Paulo’s city mayor and won the Brazilian Social Democracy Party’s (PSDB) primaries in November to choose the party’s presidential candidate, but later resigned after internal disputes.

According to sources close to PE, owned by Indonesian businessman Jackson Wijaya, the contract signed with D. Advisors Ltda, which has Mr. Doria and his son as partners, has the objective of prospecting new businesses. The mission would be to search for pulp and paper assets available for purchase in the country. PE has grown through acquisitions. In July, it agreed to buy the Canadian Resolute Forest Products, the third acquisition since it signed a contract with J&F in 2017.

On the other hand, the former-governor’s team, when asked about the possibility of the company having been hired to seek an agreement between PE and brothers Joesley and Wesley Batista, owners of J&F, said that Mr. Doria was hired to “evaluate and guide Paper Excellence,” but not necessarily “to make any kind of agreement.”

According to the registration with the Secretariat of Federal Revenue, D. Advisors was formally established ten days ago. The information about the hiring of Mr. Doria by PE was published by columnist Lauro Jardim, with newspaper “O Globo”, and confirmed by Valor.

According to two sources heard by Valor, Mr. Doria sought out Wesley Batista, with whom he has a long-standing friendship, to inform him about providing services to PE, which owns a 49.41% stake in Eldorado through CA Investment (Brazil).

Sources, however, say that a deal seems unlikely. On one side, the Batista brothers refuse to talk to any interlocutor other than Jackson Wijaya himself about an armistice. On the other, PE has been saying that it has already won an arbitration and there is no proposal from J&F to end the conflict – the Indonesian businessman, in turn, rejects another meeting with the brothers.

J&F and PE initiated in September 2018 the largest ongoing business conflict in the country, worth R$15 billion, over control of the pulp producer. PE won the arbitration unanimously, but J&F is trying to overturn the ruling, under allegations of conflict of interest of one of the arbitrators and that the partner would be behind a hacker attack on its email servers.

In the most recent development, about two weeks ago, the Civil Police of São Paulo included two PE executives in an investigation taking place in Diadema (Greater São Paulo) in connection with the hacker attacks.

The Prosecution Service is yet to decide whether there will be criminal prosecution. In a statement, the PE said it received the news with perplexity and recalled that an investigation with the same content, in São Paulo, has already been filed, also by recommendation of the São Paulo State Attorney General’s Office

Also in late September, the judge José Benedito Franco de Godoi, from the 1st Reserved Chamber of Business Law of the São Paulo State Appellate Court (TJ-SP), suspended a decision that could finally culminate in the immediate transfer of control of Eldorado to PE.

Both the funds for payment for the control of Eldorado – more than R$ 5 billion – and the shares held by J&F, or 50.59% of the pulp producer, are deposited in a court-held account. PE and J&F declined to comment.

*By Stella Fontes, André Guilherme Vieira — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Solar generation grows in Brazil driven by tax break

Data show that there are 1.67 million consumer units of power generated by their own photovoltaic systems

10/18/2022

Silvio Inada — Foto: Silvia Zamboni/Valor

Silvio Inada — Foto: Silvia Zamboni/Valor

In November 2021, when the water scarcity flag weighed on electricity bills and contributed to raising double-digit inflation, shop owner Silvio Inada was experiencing a different situation. Newly installed photovoltaic panels had already begun to capture the sunlight that poured onto the roof of his children’s clothing store in São Paulo. Today, the panels allow Mr. Inada to virtually reduce to zero the store’s electricity bill and cut his home’s bill by half.

Two or three years ago, the man said, he wanted to stop being a hostage, at least in electric power, of tariff increases, determined by the government or not, of exchange rate impacts, water issues, and the higher cost of thermoelectric plants. “I wanted to get away from that and have a more secure source of power.”

Mr. Inada’s store and home are part of the 1.67 million consumer units of power generated by their own solar photovoltaic systems, according to the Brazilian Photovoltaic Solar Energy Association (Absolar). Solar panels have been taking over roofs, facades, and terrains of homes, businesses, industries, rural producers, and public buildings in the country almost at the speed of light if compared to the evolution of the country’s total electric power capacity.

The power installed on rooftops totaled 13.7 gigawatts by October 15, a 48% growth in comparison to the 9.21 GW of production capacity that existed at the end of 2021. Installed power is projected to reach 18 GW by the end of this year, said Barbara Rubim, Absolar’s vice president of distributed energy. According to the 10-year power expansion plan of Empresa de Pesquisa Energética (EPE), this installed capacity is expected to reach 37.2 GW by the end of 2031. Today, photovoltaic power represents 98.1% of this type of generation.

The “power produced on the roof” is like the work of “little ants,” with their own generation of solar power spread throughout the country, said Daniel Pansarella, national manager in Brazil of Trina, a Chinese manufacturer of photovoltaic modules and cells for plants and residential systems.

He recalled that in 2017, just five years ago, solar power was predominantly coming from centralized production from large plants. At the time, distributed generation — power production for self-consumption — was still in its infancy. Today, there is growth on both sides, and the “ants” power is leading, said Matheus Rodrigues, product manager at Trina.

According to data from Absolar, the installed capacity of solar power in 2017 was 1.16 GW, with 84% in a centralized generation. By 2020, this outlook was inverted, and today distributed generation represents 68% of all installed solar PV capacity. The advance of distributed generation resulted in investments of R$25.9 billion from January to October, and totaled R$73.9 billion in amounts invested since 2012. The result is 54% higher than the investment in the decade ended in 2021.

The solar source, including power centralized in large plants, reached 20.25 GW in installed capacity in October, which represents almost a tenth of the country’s power generation mix. The share was 7.4% at the end of last year and 4.5% in December 2020, according to Absolar and the Brazilian Electricity Regulatory Agency (Aneel).

The fast growth of the “ant” projects is credited by consumers and companies in the sector to factors such as the expensive electricity bills, a perception intensified by the recent water crisis that Brazil went through, and Law 14.300, which was signed in January and is considered the legal framework of micro and mini generation.

According to this law, Ms. Rubim says, consumers who request access to the grid for their own solar systems until January 6 of next year will be free of the so-called “solar tax” until 2045. Because of this, she said, people are bringing forward the decision to install the systems.

Rodolfo Meyer, a partner of Portal do Sol, a company that installs photovoltaic equipment, says that the deadline for more beneficial taxation is expected to still make a difference until the end of this year, although from April to mid-September he has noticed less enthusiasm in the demand for solar power. In his view, this is due to the uncertainty concerning the presidential elections and also to the high key interest rate, which makes credit more expensive.

According to Mr. Meyer, more than half of acquisitions are financed. Photovoltaic equipment has become more affordable over time, but there is also the exchange rate effect since the main components are imported, said Ms. Rubim.

Even though the sunlight still comes for free, the decision to produce one’s own photovoltaic power took a while to get off the drawing board because “the costs were prohibitive,” said Mr. Inada. The shop owner decided to make the investment last year. The R$40,000 invested in the installation of the 800 kW photovoltaic equipment still cannot be considered a low price. “The equipment is still expensive, but the cost of electricity has become too high as well.”

Mr. Inada did not take out a loan to bet on solar power, but he calculates that the credit terms he would get at the time would result in a monthly obligation with amortization and interest close to the discount he sees today on his electricity bills.

Brazil’s key interest rate Selic at 13.75% per year changes this equation a little, but, according to Mr. Meyer, part of this impact seems to have been absorbed by consumers, who have already made the calculations with the new interest rate and are studying photovoltaic projects again since September. Regardless of this scenario, he says, the company expects to more than double its revenues this year in comparison to 2021, and also double the number of franchisees.

In his view, the change in tax generated by Law 14,300 may bring a hiatus to the market next year, for a few months, but in the long term, the sector is likely to remain heated. According to him, the effect of the change in tariff collection for the recovery of investment is “marginal” and depends on how much of what is generated of power will be consumed simultaneously and how much will be injected into the network.

The effect of inflation on the electricity bill also needs to be factored into the bill and ends up offsetting this, said Mr. Meyer. “This market is growing because it makes financial sense. It is a green economy with gains.” It must also be remembered, he says, that the ongoing technological change points to an ever-increasing demand for electricity. He exemplifies the market evolution of electric cars and batteries.

Technological evolution also allows for payback in shorter timeframes today, Mr. Pansarella says. “In 2012 or 2013 the payback was in 10 years. Today, payback is already possible in five years.”

Data from Absolar show that the energy from the roof is led by homes, which represent 48.5% of the installed power. Commerce and services come right after, with 30.1%.

About 70% of the residential public demands a system capable of generating between 500 kW and 700 kW monthly, with an investment between R$25,000 and R$30,000, generating savings of R$6,000 to R$7,000 annually. If it is a place in Minas Gerais, the payback is faster. If it is in a rainier region, like Santa Catarina, for example, it takes longer.

In his store, Mr. Inada does the math. By virtually reducing to zero the electricity bill, he cut the costs of his business, and the possibility of compensating for the surplus in his home’s bill also helps to make ends meet. He expects to recover the investment in four years. The seasonality of solar power generation is already priced. At the current moment of the year, with cloudy days and rain, he said, his system has been generating something like 60% of the installed power.

If the equipment were more affordable, he could also install solar panels on the roof of his house, he said. But for now, the shop owner is waiting for the thermometers to indicate warmer days in the coming summer when his own power generation will probably peak.

*By Marta Watanabe — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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