Brazil poised to become the “Saudi Arabia of carbon markets”

Milken Institute hosts São Paulo meetings to showcase sustainable investment opportunities

12/02/2024

Executives from the Milken Institute, an American think tank that connects philanthropists and investors globally, are holding their first major event in São Paulo this week. The gathering brings together entrepreneurs, CEOs, public officials, and environmental specialists to explore investment opportunities, particularly in climate change initiatives. Brazil’s burgeoning carbon credit market is a key focus for the institute.

The Milken Institute, a non-profit organization, hosts high-profile conferences in cities like Singapore, London, Abu Dhabi, New York, Washington, and Los Angeles to tackle global challenges with innovative ideas.

“Within the institute, there is a network of more than 400 pension funds, sovereign wealth funds, and family offices managing a collective allocation of approximately $34 trillion,” said Rodrigo Bettini, senior advisor and head of the institute’s Latin America division.

“They attend our events to meet people and learn about advancements in diverse sectors such as agribusiness, AI, finance, education, and climate.” These meetings also attract professionals seeking capital injections for their projects.

Around 150 participants are expected at the São Paulo events, including a dinner on Monday and a breakfast on Wednesday. “Our goal is to guide foreign investors toward sustainability opportunities in Brazil,” said Daniella Levy, head of the institute in Brazil. Another aim is to strengthen relationships with Brazilians who could join the institute’s flagship annual conference in Los Angeles.

The Milken Institute was founded by Mike Milken, a prominent figure in the U.S. financial market during the 1980s. Convicted of securities law violations, Mr. Milken served time in prison and was granted clemency in 2020 by then-President Donald Trump. Today, he focuses on the institute, where he serves as chairman, and on the Milken Center for Advancing the American Dream.

Ms. Levy, Mr. Bettini, and the institute’s CEO, Richard Ditizio, are spearheading this week’s discussions. Mr. Bettini highlighted Mr. Ditizio’s positive impression of Brazil during a visit in January. “He was struck by the breadth of actions and policies here addressing sustainability and ESG standards,” said Mr. Bettini. “In our opinion, Brazil is advancing in sustainability, technology, fintech, and infrastructure in innovative ways, but the world isn’t aware of these developments.”

The institute aims to expand global awareness of Brazil’s innovations, “channel more foreign investment into the country, and support these initiatives on a global scale,” said Mr. Bettini. A key focus is the carbon credit market, seen as a transformative opportunity for the nation.

“We believe Brazil will be the Saudi Arabia of the carbon credit market, and we are confident this sector will revolutionize and create significant socio-economic opportunities for Brazilians,” said Mr. Bettini.

In November, the Chamber of Deputies (Brazil’s Lower House) approved a bill establishing rules for the carbon credit market, following its earlier passage in the Senate. The formalization of these rules has been highly anticipated, with Brazil widely recognized for its immense potential in carbon projects.

The agenda for the two meetings, hosted at a São Paulo hotel, will cover themes such as sustainability, environmental preservation, economic growth, living conditions in the Amazon, and strategies to attract foreign investment. These topics are expected to gain further prominence in 2025 when Brazil hosts COP30 in Belém.

By Marcos de Moura Souza

Source: Valor International

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

Belo Sun Mining Announces Federal Court Ruling on INCRA Agreement

Dec 2, 2024

TORONTO, Dec. 02, 2024 (GLOBE NEWSWIRE) — Belo Sun Mining Corp. (“Belo Sun” or the “Company”) (TSX: BSX, OTCQB:BSXGF) reports that the Federal Court of Altamira, has ruled on a case filed by the Federal Public Defender’s Office (DPU) and the Public Defender’s Office of the State of Pará (DPE) in 2022 contesting the agreement made between the Company and the Brazilian National Institute of Colonization and Agrarian Reform (INCRA) in November 2021 (“INCRA Agreement”). The Judge has declared the INCRA Agreement null and void on procedural grounds. The ruling stated that INCRA had not completed an ordinance required to announce the measure taken by the government on the declassification of the area from agrarian reform. However, the Judge rejected the DPU’s request to annul the Volta Grande (PVG) environmental licensing process and as requested by the Company excluded the DPE from the lawsuit. The Company will be evaluating all legal options, including a potential appeal of the decision and continuing to work with INCRA.

Commenting on the Federal Court of Altamira ruling, Ms. Ayesha Hira, Interim President and CEO of Belo Sun, said, “We look forward to working with INCRA on the next steps following the ruling by the Federal Court in Altamira. We will also be evaluating all the legal options available to the Company. We believe PVG is well positioned to bring benefits to the surrounding communities, local farmers, landholders and the municipality. We continue to work to benefit the region and all stakeholders as we look to advance PVG.”

INCRA Agreement

A small portion of INCRA designated land in the PVG vicinity overlaps the Company’s mining concessions and will be affected by the mining operations of PVG (“impacted area”). The Company entered into the INCRA Agreement on November 26, 2021, under which INCRA was to provide the Company access to the impacted area for mining activities. Further details on the INCRA Agreement can be found in the Company’s Management, Discussion, and Analysis filed on November 6, 2024.

About the Company

Belo Sun Mining Corp. is a mineral exploration and development company with gold-focused properties in Brazil. Belo Sun’s primary focus is advancing and expanding its 100% owned Volta Grande Gold Project in Pará State, Brazil. Belo Sun trades on the TSX under the symbol “BSX” and on the OTCQB under the symbol “BSXGF.” For more information about Belo Sun, please visit www.belosun.com.

For inquiries, please contact Belo Sun Mining Corp, +1 (416) 861-2262 or info@belosun.com .

Caution regarding forward-looking information:

This press release contains “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information includes, without limitation, statements regarding the Federal Court in Altamira’s decision regarding the INCRA Agreement; the Company’s plans and next steps following the Court decision; the benefits of the PVG; and progress of the advancement of the Volta Grande Project. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including risks inherent in the mining industry and risks described in the public disclosure of the Company which is available under the profile of the Company on SEDAR at www.sedar.com and on the Company’s website at www.belosun.com . Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

*GlobeNewswire

Fonte:

https://money.tmx.com/quote/BSX/news/5483544988236818/Belo_Sun_Mining_Announces_Federal_Court_Ruling_onxA0INCRAxA0Agreement
/by

Market frustration over fiscal plan fuels new wave of deterioration

Lack of fiscal sustainability drives projections for a stronger U.S. dollar and higher interest rates

12/02/2024

The long-awaited announcement of Brazil’s fiscal measures, which had been seen as a potential stabilizer for domestic assets amid worsening conditions in global markets, has instead fueled further deterioration in local prices. Experts warn that higher levels for the U.S. dollar and a steeper Selic policy rate hike may be necessary to mitigate the impact on inflation and market expectations.

For Drausio Giacomelli, chief strategist for emerging markets at Deutsche Bank, the recent sell-off in Brazilian assets reflects concerns over fiscal measures that could worsen the country’s financial outlook, compounded by the expansion of income tax exemptions.

“It was confirmation that there is no meaningful fiscal adjustment on the horizon, with debt nearing 80% of GDP and a fiscal deficit close to 10% of GDP—figures typically seen in wartime economies,” he said. Of the R$70 billion in projected savings for 2025 and 2026, only about R$40 billion is likely to materialize, as much depends on social program audits and Congress refraining from diluting the measures, Mr. Giacomelli added.

This sentiment is echoed by Ricardo Cará Monteiro, chief investment officer at EQI Asset. “After a year of government measures focused mainly on increasing taxes, there was great expectation for a spending-focused adjustment plan,” he said. “Investors grew impatient as the government lost credibility, exacerbated by clashes between the president and the market, which raised the risk premium. Now, instead of measures addressing fiscal concerns, we got more exemptions and more taxes. It was a bucket of cold water,” he said.

Mr. Giacomelli warns that further deterioration in Brazilian markets is still possible, even with future interest rates stabilizing around 14% and the exchange rate per U.S. dollar at R$6. “There is still room for things to get much worse. In crises, investors look to historical references. Without anchors for exchange rates and debt, the currency and interest rates lose benchmarks,” he said. “R$6.5 would not surprise me.”

Luiz Eduardo Portella, partner and manager at Novus Capital, noted that the market had hoped for signs of debt stabilization but instead saw a government already focused on the 2026 elections. “This will lead to a new, worse equilibrium for the market,” he said.

Mr. Portella said the “floor” for the dollar has risen again, increasing the likelihood of further exchange rate deterioration. “Previously, if the market calmed, the dollar could fall back to R$5. Now, seeing the dollar below R$5.80 is difficult,” he added.

Alexandre Silvério, CEO of Tenax Capital, avoided setting a ceiling for the exchange rate but said he would not bet on the real until fiscal and monetary policies align to provide clearer visibility on public debt dynamics.

The weakening real is expected to fuel inflation further, potentially requiring higher interest rates. “The Central Bank has become a passenger at this point but must remain firm in its communication, as Gabriel Galípolo has been doing,” Mr. Portella said.

Novus had maintained bullish positions on interest rates and equities, expecting the fiscal package announcement to mark a positive turning point. “But after the disappointment, we closed those positions. We are now long in U.S. equities, holding small short positions on Brazilian stocks, and betting on interest rates and the dollar,” Mr. Portella said.

For Mr. Giacomelli, of Deutsche Bank, the new scenario may require Brazil’s Central Bank to adopt a “shock treatment” to prevent inflation from spiraling out of control and posing a greater risk to financial stability. He expects the Monetary Policy Committee (COPOM) to raise the Selic rate by 75 or 100 basis points at its December meeting. “I’m leaning toward 100 basis points,” he said.

“We must prepare for a substantial increase in the neutral interest rate and inflation. It’s not an exaggeration,” Mr. Giacomelli said, referencing the term structure, which now projects a Selic rate between 14.5% and 15% by the end of the tightening cycle next year.

Congressional role

As the constitutional amendment (PEC) and related bills progress through Congress, Mr. Portella of Novus said some reversals might signal a more positive trajectory. “But Congress won’t act unless the government leads,” he said.

To reverse the sharp deterioration in domestic assets, Mr. Silvério of Tenax emphasized the need for the economic team to regain control of the fiscal adjustment process. “It’s increasingly clear that [Finance Minister Fernando] Haddad is losing influence. Both the content and presentation of the package show the political wing has dominated the economic wing,” he said.

While fiscal issues remain a major concern, Mr. Silvério highlighted the appointment of Nilton David to the Central Bank’s monetary policy board as a positive development. “Nilton reinforces the perception of the Central Bank’s strong independence. It doesn’t resolve the fiscal challenge but eliminates fears of a looser monetary policy worsening inflation expectations,” he said.

Mr. Silvério also noted that the current environment has created opportunities to increase positions in local equities, citing attractive valuations and improving microeconomic conditions for companies in terms of profit growth and business resilience, particularly in the utilities and shopping mall sectors. “Stock prices are at levels where we don’t need to take risks on highly leveraged companies,” he said.

Even if the income tax exemption is not approved, Mr. Cará Monteiro of EQI Asset doesn’t foresee an improvement in risk perception. “The market remains poorly supported. The government missed an opportunity to re-anchor fiscal credibility, and chances of reversing the exaggerated risk premium have vanished,” he said.

EQI Asset has reduced its exposure to Brazilian equities to almost zero, cut its interest rate positions to 20%, and maintained no exposure to Brazil’s real. “We have no appetite. We’re staying out and watching from the sidelines, which is likely what many are doing,” Mr. Cará Monteiro said.

*By Gabriel Roca, Gabriel Caldeira, Bruna Furlani e Arthur Cagliari— São Paulo

Source: Valor International

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

CBA to recycle Tetra Pak packaging

Facility set to reach industrial scale in early 2025

11/26/2024

The Companhia Brasileira de Alumínio (CBA) is set to establish a plant dedicated to recycling flexible and carton packaging—commonly known as Tetra Pak—made of layers of paperboard, plastic, and aluminum, used for preserving food and beverages. Swedish multinational company Tetra Pak is the first partner to join this initiative.

Located within CBA’s facilities in the city of Alumínio, São Paulo, the project aims to reduce the disposal of aluminum and plastic, promoting greater sustainability in the sector. The unit is entering the commissioning phase and is expected to reach industrial scale in the first quarter of 2025, with the capacity to recycle up to 1.3 billion packages annually.

The company has not disclosed the investment amount but notes that the technology development is part of a R$243 million investment in recycling since CBA’s IPO in 2021. Named ReAl Technology (Recycling Aluminium), the company’s patented system claims to revolutionize the Brazilian recycling market. Previously, only the paper component of Tetra Pak packaging was easily recycled, while the laminated aluminum and plastic were either discarded or used in a limited capacity, without complete reintegration into the production cycle.

CBA CEO Luciano Alves explained that the project was conceived before the IPO and took several years to complete due to the technical complexity of separating the plastic and aluminum in carton packaging. “We decided to embark on this endeavor to increase production volume by recycling a product we currently do not recycle, generating less waste and social impact, and strengthening a collection network that heavily relies on recycling, creating a positive effect throughout the entire chain,” he said.

The plant aims to produce alumina, a substance extracted from bauxite, which will be converted into liquid aluminum in smelting rooms. Tetra Pak has not revealed its market share but has said it produces 17 billion packages annually for domestic consumption and export.

Tetra Pak CEO Marco Dorna pointed out that the recycling process in Brazil faces significant challenges related to selective collection and environmental awareness. Therefore, he considers the volume of equivalent packages recycled by the plant to be relevant at the start of operations. He noted that the company uses plant-based plastic, such as sugarcane, in its packaging, making about 90% of its composition renewable.

From an environmental perspective, the benefits are evident and align with the companies’ decarbonization goals. Economically, Tetra Pak has not yet set a price, as this will depend on the project’s progress throughout 2025.

CBA will be supplied by an existing scrap collection network in Brazil, composed of waste pickers, cooperatives, and traditional recyclers, in addition to paper mills that extract paper fibers for producing recycled items like books, notebooks, and bags. The remaining waste, consisting of plastic and aluminum, will then be sent to CBA’s facility.

Robson Rodrigues Supervised the reporting of Clarissa Freiberger.

*By Clarissa Freiberger* e Robson Rodrigues — São Paulo

Source: Valor International

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

Carrefour apologizes, reaffirms commitment to Brazilian agriculture

French group highlights Brazil’s strict standards, high-quality beef, and longstanding partnership

11/26/2024

Carrefour Brasil released a letter on Tuesday (26) clarifying that its recent “statement of support for the French agricultural sector,” issued last Wednesday in the context of the EU-Mercosur trade agreement, was never intended to pit French agriculture against its Brazilian counterpart.

The letter, issued nearly a week after Carrefour CEO Alexandre Bompard’s initial remarks, expressed regret over any interpretation of the statement as a critique of Brazilian agriculture. The company reiterated its pride in being “a leading partner and historic promoter of agriculture in Brazil,” acknowledging the “strict standards and exceptional quality and flavor” of Brazilian beef.

Carrefour also sent a letter to Brazil’s Agriculture Minister Carlos Fávaro, signed by Mr. Bompard, apologizing if its communication was perceived as questioning its partnership with Brazilian agriculture. The letter emphasized Carrefour Brasil’s deep connection to the country, its commitment to local production, and its ongoing support for Brazil’s economy.

In both letters, the company affirmed that it sources almost all its Brazilian beef locally and intends to continue doing so. Carrefour also highlighted its 50-year relationship with Brazil’s agricultural sector, noting its appreciation for the professionalism and dedication of the nation’s farmers and ranchers.

Regarding its operations in France, Carrefour clarified that the decision made by its French unit does not intend to alter the existing structure of the French market, which is primarily supplied by local producers. “This measure ensures continued support and purchases from French farmers,” the company stated.

In a notice of material fact also published Tuesday, Carrefour Brasil acknowledged disruptions in beef deliveries to its stores since last Thursday (21). The shortages have affected some Atacadão locations, but the company noted that “there has been no significant impact on overall merchandise sales.” Beef accounts for less than 5% of Carrefour Brasil’s gross sales.

Sources within the meat industry indicated that the company’s letter should suffice to restore normal business operations.

(Rafael Walendorff contributed reporting from São Paulo.)

*By Gabriella Weiss , Globo Rural — São Paulo

Source: Valor International

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

Brazil powers AWS with renewable energy, CEO says

Amazon’s cloud computing giant, now under new leadership since June, continues to dominate the market

11/21/2024

The global cloud computing market reached $84 billion in the third quarter, driven by companies storing and transferring vast amounts of data—a trend attracting billions of dollars in investments. These investments are not only for building data centers but also for securing the energy needed to power these facilities and their vast computing infrastructures. Amazon Web Services (AWS), the industry leader, is among the big tech companies with billion-dollar expansion plans and views Brazil as a critical source of renewable energy for its projects.

In an online interview with Valor from AWS’s Seattle headquarters, CEO Matt Garman emphasized Brazil’s importance in the company’s renewable energy-driven data center strategy. “Brazil is 100% part of our data center expansion strategy with renewable energy generation,” said Mr. Garman, who became CEO in June after serving as vice president of global sales, marketing, and services. A founding member of AWS, Mr. Garman joined the company as a trainee in 2006.

Mr. Garman highlighted Brazil’s role in Amazon’s commitment to achieving net-zero carbon emissions by 2040. “Our strategy isn’t just about buying credits but about investing in new projects to add renewable energy to the grid. We believe that makes a real difference for the world, rather than simply purchasing offsets,” he explained.

Of the 500 renewable energy projects AWS has initiated globally over the last five years, two are in Brazil. One is a 122-megawatt solar farm in São Paulo, which began operations in October, and the other is a 49.5 MW wind farm inaugurated in Rio Grande do Norte earlier this year.

Data centers, major consumers of energy, face increasing demand due to the rise of generative artificial intelligence (AI). According to the International Energy Agency, energy consumption by data centers will more than double between 2022 and 2026, reaching 1,000 terawatt hours (TWh)—equivalent to Japan’s entire electricity consumption.

AWS’s energy strategy also includes nuclear power, which Mr. Garman views as essential for meeting global energy demands. “We’re making significant investments in nuclear energy because, over the next five to ten years, it will be a critical component of addressing the world’s carbon and energy needs,” he said. “Solar and wind alone won’t suffice. Increasing nuclear power capacity will also be part of the solution.” In October, AWS signed three agreements in the U.S. to develop small modular nuclear reactors.

With “less than 20% of workloads [applications, services, and resources] migrated to the cloud so far,” Mr. Garman projects significant growth in data center construction in the coming years to accommodate increasing demand.

AWS has operated data centers in Brazil since 2011, and in September, the company announced a significant investment of R$10 billion over the next decade to expand its local infrastructure. Meanwhile, its competitor Microsoft revealed plans in October to invest R$14.7 billion in the country over the next three years.

According to consultancy Synergy Research Group, AWS dominated the global cloud services infrastructure market in the third quarter, holding a 31% share. Microsoft ranked second with 20%, followed by Google at 13%. Together, the three tech giants accounted for 64% of the $84 billion invested in the cloud market during the third quarter of this year.

For Mr. Garman, one of the key factors behind AWS’s continued leadership is its focus on helping customers reduce costs. “In 2023, many customers were worried about the economy and looking for ways to optimize costs,” he says. “We took a proactive approach and helped them reduce their bills.”

This cost-saving strategy has paved the way for new cloud and AI projects, according to Mr. Garman. “What we’re seeing now is that many of these customers, after tightening their belts in their core businesses, are reinvesting those savings into building AI applications on the AWS cloud.”

Looking ahead to 2025, even with Republican Donald Trump potentially returning to the White House, Garman doesn’t foresee any changes to AWS’s business operations. “We’ve supported the U.S. government through both Republican and Democratic administrations,” he says. “I’ve worked closely with both, including during the first Trump administration. We’ve been strong partners and have developed business with federal agencies.” U.S. government entities are among AWS’s cloud customers.

AWS’s revenue in the third quarter increased by 19%, reaching $27.4 billion, in line with analysts’ forecasts. However, Wall Street continues to raise its expectations for cloud revenue and the spending strategies of “big techs,” especially as they ramp up investments in AI tools. Mr. Garman remains unfazed by these pressures. “The analysts’ job is to have high expectations,” he says. AWS’s operating profit for the quarter rose by 49.8% year-on-year, reaching $10.45 billion. Operating expenses grew by 5.7%, totaling $17 billion between July and September.

*By Daniela Braun — São Paulo

Source: Valor International

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

Carbon tax poses limited impact on financial system, Central Bank says

Study model assesses additional emission costs through sector-specific tax imposition

11/21/2024

The Financial Stability Report (FSR) for the first half of the year indicated that a simulation measuring the effects of implementing a carbon tax to address climate risk shows a “limited impact” on Brazil’s National Financial System. The FSR was released by the Central Bank on Thursday (21).

“The results suggest the impact on the capital of institutions is limited, due to a moderate increase in Non-Performing Assets in sectors most affected by the carbon tax.”

The study evaluated gross greenhouse gas emissions, sector exposure relative to added value, and dependency on international markets. The model incorporates an additional cost for emissions by imposing a tax on economic sectors.

Two scenarios were considered, with gradually increasing costs starting in 2025, reaching $50 per tonne emitted by 2030 in one scenario, and $100 per tonne in the other. According to the FSR, financial institutions experienced losses concentrated in the manufacturing, construction, and transportation sectors “due to the rise in non-performing assets.”

The study highlighted that sectors such as agriculture and transportation show “the largest reductions in added value compared to a scenario without a carbon tax.” This reduction “results from increased production costs within the sector and the cost of inputs used in production sourced from other sectors.”

In the agricultural sector, the study noted, the proportion of non-performing assets is low, despite high exposure, “which explains the lesser impact compared to other sectors.”

Floods

The FSR also reported that the impact of the floods faced by the Rio Grande do Sul state earlier this year on the National Financial System was “less than initially expected.” According to the report, no “systematically relevant changes” were observed in deposits, liquidity, or credit risk of supervised entities operating in the state. “Regarding the agricultural sector, losses from Proagro [Agricultural Activity Guarantee Program] coverage payments were significantly lower than losses caused by the droughts of 2022 and 2023.”

The document noted that the floods occurred after most of the harvest had been completed. The FSR also highlighted a “slight increase” in deposits in the state, “possibly due to the lack of alternative allocations for clients.” Few physical structures of institutions were significantly affected, according to the report.

Regarding portfolio impact, the FSR emphasized that some entities renegotiated “substantial” installments, but the issues remained limited in scope.

“The volume of restructured credit operations with borrowers in Rio Grande do Sul increased significantly, especially for individuals and in rural credit. However, the volume of renegotiations is small compared to the portfolio as a whole.”

The document noted that initiatives by the National Monetary Council and the Central Bank protected service provision and avoided “unnecessary burdens” on individuals and businesses. “The measures aimed to preserve financial stability and protect consumers. The Central Bank continues to monitor financial intermediation in the region, with less emphasis, due to the perceived reduction in risks.”

*By Gabriel Shinohara, Valor — Brasília

Source: Valor International

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

Adverse weather drives demand for rural insurance in low-adoption areas

In the Central West, insured soybean acreage rose by 500,000 hectares

11/22/2024

The rising frequency of extreme weather events in Brazil and the increasing difficulty of predicting adverse conditions and their impacts on agriculture have driven greater demand for rural insurance, particularly in regions that have historically avoided such protections.

The insured soybean area—the primary product covered under the Rural Insurance Premium Subsidy Program (PSR)—has already surpassed 2023 levels. According to Glaucio Toyama, president of the Rural Insurance Commission of the National Federation of General Insurance (FenSeg), 3.8 million hectares of soybeans have been insured for the 2024/25 harvest, up from 3.1 million hectares in the previous cycle.

Soybean producers in Mato Grosso, Mato Grosso do Sul, Goiás, and the Federal District have insured 1.6 million hectares this season, compared to 1.1 million hectares in 2023/24.

Among them is Dieicson Siqueira Serpa, who planted 1,500 hectares of soybeans across Goiatuba, Morrinhos, and Panamá in the southwest of Goiás. After the soy harvest, the land will be used for corn and sorghum. Part of these crops are insured. “Insurance is a way of staying in the market. With the climate, relying solely on personal or financed resources without protection is too risky. Everything is at risk: rain, drought, hail,” he said.

Mr. Serpa noted occasional losses and claims, particularly for the second sorghum crop, but cited the cost of insurance as a significant barrier to broader adoption. “When producers have their own resources, they often skip insurance because it’s too expensive and makes the business unviable,” he explained.

Brasilseg, a leader in Brazil’s rural insurance segment, reported notable growth in forest and livestock insurance policies between January and August 2023. Forest insurance saw a 719% increase, with the insured area expanding from 52,000 to over 426,000 hectares. Livestock insurance rose 134%, covering 10,000 hectares of pasture compared to 4,000 the previous year.

Despite this increase in coverage, insurers have faced a challenging year. Rural insurance revenue fell by 3.2% to R$9.6 billion by August, according to Superintendence of Private Insurance (Susep) data compiled by the National Insurance Confederation (CNseg). These figures also include life insurance and rural pledges.

In September, CNseg revised its growth forecast for the rural insurance market, cutting expectations from 7.9% to just 1%. By year-end, the projection had been further reduced to 23.1%, primarily due to delays in disbursing PSR subsidies.

Another contributing factor is the decline in the average rural insurance premium, which fell from 7.47% to 6.86%. This decrease reflects the growing uptake of policies outside Rio Grande do Sul and Paraná—historically the main consumers of rural insurance—resulting in a more diversified distribution of risk. FenSeg’s data, however, focuses exclusively on crop insurance.

The results remain below industry expectations. According to Mr. Toyama, the market had anticipated greater expansion due to increased interest from farmers.

The exhaustion of the PSR budget, albeit later than usual, has tempered hopes for a stronger recovery in the rural insurance market. Following budget cuts and freezes, nearly R$890 million was invested in 2023—the lowest level since 2020—excluding the R$210.8 million earmarked for policyholders in Rio Grande do Sul, set to be released soon.

In late October, the FenSeg commission sent a letter to the Ministries of Agriculture, Finance, Planning, and Budget, urging the release of R$52.9 million from the PSR budget and requesting an additional R$197.8 million to cover the backlog of unsubsidized policies and projected demand through the end of the year.

However, the chances of this request being granted are slim amid ongoing government discussions on spending cuts. The Secretary for Agricultural Policy at the Ministry of Agriculture, Guilherme Campos, highlighted the challenges of securing additional funds in the current fiscal environment. “The resources are too limited. They help, but they don’t solve the issue. With the government’s financial constraints, it’s all about cutting back,” said Mr. Campos, noting that the blocked R$52.8 million is expected to be restored to the Ministry’s budget by December.

Insurers are increasingly concerned about the outlook for the next winter crop in 2025, which carries the highest climatic risks. While demand for rural insurance policies is accelerating, uncertainty about the 2024 budget looms large.

Although the 2025 budget proposal allocates R$1.06 billion to the PSR, the sharp rise in the Agricultural Activity Guarantee Program (PROAGRO, a 50-year-old agricultural insurance program designed to protect farmers against uncontrollable natural losses) rates could drive producers toward rural insurance, intensifying competition for these funds. Mr. Toyama of FenSeg warned that resource shortages are likely, especially during the winter harvest.

“This impacts everything. If a clear plan isn’t in place, producers face tough choices: go without insurance and compromise their margins, take Proagro coverage at rates of 20% to 30%, or buy insurance at 10% to 15% without subsidies. In the absence of subsidies, they may lower their technological investment in crops, ultimately affecting productivity,” he explained.

“We are working to make the government aware of the need to raise the allocation to at least R$2 billion, but we’ve yet to receive a positive response,” said Esteves Colnago, CNseg’s director of institutional affairs.

The broader issue, as noted by Mr. James Hodge, director of agribusiness and construction at WTW, is the low uptake of rural insurance in Brazil. “Even with rising participation, the country remains at the same levels seen a decade ago, far from the 2021 peak. Only 10% to 15% of producers are insured,” he pointed out.

This year, sporadic spikes in interest were observed following fires in August and September, “particularly for citrus crops and drought-related risks,” Mr. Hodge added. However, with the anticipated arrival of La Niña and increased rainfall, demand has since returned to typical levels.

*By Rafael Walendorff, Rita Azevedo, Globo Rural — Brasília and São Paulo

Source: Valor International

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

Vale, government discuss future of Carajás and Vitória-Minas railways

Meeting with the mining company’s leadership allowed federal government to explore Vale’s interest in other railway projects

11/20/2024

Brazil’s Transportation Minister Renan Filho met with executives from Vale on Tuesday (19) to advance negotiations over the revised terms of the renewed contracts for the Carajás (EFC) and Vitória-Minas (EFVM) railways. The two-hour meeting included Daniel André Stieler, Vale’s chairman.

According to sources, the meeting also served as an opportunity for the federal government to gauge Vale’s interest in other strategic railway projects.

Discussions on revising the concession fees for the railways have been contentious at times. Mr. Renan Filho previously threatened legal action to hold executives and public officials accountable for the original contract renewals, which he claims were unfavorable to the federal government.

At this stage, the minister is pushing for Vale to commit R$15 billion in investments, though the final amount has not been settled and may be spread over several years. This figure is already significantly lower than the R$27 billion initially demanded by the government earlier this year.

The Ministry of Transportation is under pressure from the economic team to finalize negotiations with Vale to secure revenue for federal coffers. Renan Filho’s aides have emphasized that the funds would be allocated to future investments, enabling the construction of new railways in Brazil.

Notably absent from the meeting was Vale CEO Gustavo Pimenta, who took over the company recently. However, the meeting was attended by Fábio Ferraz, Vale’s business director, and Marcelo Sampaio, the company’s regulatory affairs director. Mr. Sampaio previously served as executive secretary of the Ministry of Infrastructure and briefly led the ministry under the previous administration.

Representing the federal government were Dario Durigan, executive secretary of the Ministry of Finance, and George Santoro, executive secretary of the Ministry of Transportation.

Another topic reportedly discussed during the meeting was Section 1 of the Oeste Leste (West-East) Railway (Fiol 1), connecting Ilhéus and Caetité in Bahia. Vale has been linked to speculation about acquiring Bahia Mineração S.A. (Bamin), the company holding the Fiol 1 subconcession, which is struggling financially. Rumors suggest the government has pressured Vale to take over its competitor’s operations.

Since taking office, Renan Filho has focused on raising funds to expand Brazil’s railway network by renegotiating concession fees established during the Bolsonaro administration. In addition to Vale’s railways, the government is also seeking higher concession fees from Rumo (Malha Oeste) and MRS Logística (Malha Sudeste).

Government estimates initially suggested that R$30 billion could be raised for railway expansion, though recent projections have been revised to a more conservative R$20 billion.

When asked for comment, Vale stated it is in “advanced discussions with the Ministry of Transportation regarding general terms for optimizing the investment plans for the EFC and EFVM concession contracts, which are currently being executed in accordance with the terms established and disclosed to the market in December 2020.”

Bamin declined to comment on speculation regarding potential talks with Vale.

By Rafael Bitencourt — Brasília

Source: Valor International

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