Gerdau targets electric vehicles market

Group invests R$700m to produce purer steel, reduce costs and emit less CO2

10/10/2022

To modernize its technology, obtain productivity gains, and be in line with the new demands for steel with the quality required by the electric mobility industry, Gerdau is setting in motion a R$700 million investment in its Specialty Steel unit in Pindamonhangaba (state of São Paulo).

The specialty steel, unlike the long carbon steel used in construction, has as its main destination the automotive market – in Brazil, the largest share goes to heavy vehicles (trucks and buses). But it also supplies light vehicles. This market represents 80% of sales, via auto parts, auto parts manufacturers, and assemblers. The remainder 20% goes to industrial applications and wind power.

With the investment, the company installed new steel production equipment, whose essential raw material is specialty steel scrap coming both from end-of-life material and from generating sources (leftovers from customers’ industrial lines and others).

“The company is preparing and bringing forward, the new scenario in the automotive industry, with hybrid and electric vehicles. We cannot let a steel shortage happen,” says Rubens Pereira, vice president of Gerdau’s Specialty Steel division in Brazil. Furthermore, automakers are beginning to seek local or regional sources for parts supply, in order to avoid problems such as the lack of chips.

The investment includes the construction of a new building and the installation of state-of-the-art equipment, with a high level of automation, for the production of billets and blocks. “We are now making a much purer steel [clean steel] which, in addition to lower costs and higher productivity, has lower carbon emissions,” says Mr. Pereira.

“At Gerdau, we are following the evolution of demand and the technological transformation of the automotive segment. In recent years, the company has undergone a profound cultural and digital transformation, which has made it even more people-focused, digital, innovative, diverse, and inclusive,” says Gustavo Werneck, Gerdau’s CEO.

With these investments – in Pindamonhangaba, Mogi das Cruzes (state of São Paulo), and Charqueadas (Rio Grande do Sul) – the group is modernizing its specialty steel facilities in Brazil, in a R$1 billion package. Other investments will come in the next two to three years, concluding the program in 2025. Pindamonhangaba’s technological upgrade is aligned with the future perspectives of increasing the mix of electric and hybrid vehicles in Brazil, highlights Mr. Pereira.

Mr. Pereira, an electronic engineer with a degree from ITA (Aeronautics Institute of Technology) and an MBA from MIT (Massachusetts Institute of Technology), came to Gerdau two years ago. He built part of his career in consulting firms (Booz Allen and BCG). After that, he spent 14 years at Cargill and two at BRF.

The Pindamonhangaba unit, which was founded by Aços Villares several decades ago, now has a crude steel capacity of 700,000 tonnes per year, employing 2,300 people. This investment, says the executive, reinforces Gerdau’s presence in its markets, with an optimistic vision for the country’s automotive sector. “In the medium and long term, the sector will recover its production levels recovered.”

The Specialty Steel division accounts for about 15% of Gerdau’s total revenues. In the first semester, sales of 843,000 tonnes generated revenues of R$6.87 billion, adding the operations in Brazil and the United States together. The business, in Brazil, represents almost 50% of the division. The U.S. operations, which also have three steel factories, account for a little over 50%.

According to Mr. Pereira, from 15% to 20% of the production in the three Brazilian factories is exported, mainly to Argentina (half of the shipments), where important automotive clients are located. The other part goes to the U.S., Mexico, and Europe.

*By Ivo Ribeiro — São Paulo

Source: Valor International

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

Market is cautiously optimistic about Brazilian real

Since first round of election, local investors have increased bets on the Brazilian currency

10/10/2022

High interest rates in Brazil were already in the scenario, as was the perception that key interest rate Selic will remain unchanged over the coming months. But the results of the first round of elections improved expectations of market players for the foreign exchange rate. Caution still prevails as the U.S. dollar has gained ground around the world, but local investors have once again increased their bets on the real.

Data from B3 show that since the result of the first round was known local institutional investors increased their short positions on the U.S. dollar to $58.4 billion on Thursday from $54 billion on September 30, the last trading session before the first round. In other words, they sold $4.4 billion in the period.

The election of a more conservative Congress propped up Brazilian assets soon after the first round and dissipated part of the uncertainties in relation to the direction of fiscal policy in the next administration. Some asset management companies had already adopted a more optimistic view in relation to local markets before the election, and this bias has gained steam, at least in the short term.

“We have turned a little more positive on the real. The currency has fallen behind and investors focused on emerging markets doesn’t have much of an option. Brazil is becoming one of the few alternatives with a good price,” said Reinaldo Le Grazie, founding partner of Panamby Capital and a former director of the Brazilian Central Bank. Given the lack of investment options in large emerging markets and the more positive feeling after the first round of the general elections, the local exchange rate may be favored, at least in the short run, he said.

“The market saw the election result as a very good one. There was a fear of not having a runoff vote in the presidential election, which would be considered bad due to the lack of discussion about the direction of the economy. Now this debate is emerging. Besides this, the market liked the configuration of a more conservative Congress,” said Mr. Le Grazie.

Although Brazil’s fiscal situation remains unclear, he said, the asset management company has a more optimistic view on local assets at the moment and is more concerned with global markets. “It’s a slightly better scenario in a very difficult world. That looks good for the stock market. And, if the stock market moves forward, it is likely to take the currency with it.”

Gustavo Medeiros, Ashmore’s head of global research, had a very positive perspective for Brazilian assets even before the election. Now, by commenting on investments in Latin America, he said that “politics has been the main risk in the last few years.” He recalled that former President Luiz Inácio Lula da Silva (Workers’ Party, PT) and President Jair Bolsonaro (Liberal Party, PL), who are running in the second round, were already well known by the market, so there was no great surprise as for who the next president will be. “There are uncertainties, but they do not indicate a paradigm shift.”

Mr. Medeiros saw former Minister Henrique Meirelles’s nod as a “positive” development, as he is a free-market believer, and stressed that economists such as Arminio Fraga, Pérsio Arida and Edmar Bacha support Mr. Lula da Silva. “On the other hand, Bolsonaro is expected to keep a lean government policy, which was positive for the market,” he said.

According to Exchange B3, since the end of the first round, international investors have reduced their long dollar position by $3.7 billion, to $24.9 billion.

Ashmore remains positive on Brazilian assets. “With inflation coming under control now, more sustainable growth, and terms of trade more favorable for Brazil, there would need to be a very poorly management of the economic policy to hinder the recovery of local assets,” said Mr. Medeiros.

Kinea Investimentos has a similar view, and has made allocations in Brazilian assets rather than in international ones. “The picture of Brazil today against peers and developed countries is better. We have a primary surplus this year; the fiscal situation here is better than that of [Brazil’s] peers; the current account deficit is moderate and pretty much financed; and we are well advanced in the monetary policy cycle,” said Daniela Lima, Kinea’s economist for Brazil.

“The uncertainty today stems from who the next president will be,” she said. But, regardless of who is in office, “the incentives will be, at least at the beginning of the government, to have a more moderate fiscal agenda and a positive fiscal signal.” In Kinea’s monthly live-streaming event on hedge funds, Ms. Lima emphasized that Brazilian assets, in terms of valuation, are very attractive at the moment. Not coincidentally, the manager is long on the real and Brazil’s stock market, and holds short positions on inflation.

In this month’s letter, Kinea points out that the rationale for being long on the real “is a more proactive tactical view on Brazil, due to attractive interest rates, balanced external accounts, and our expectation that the next administration will have a reasonable fiscal stance at the beginning of its term.”

Although there is greater optimism with the real and other Brazilian assets, some market players still advocate greater caution with the currency. SulAmérica Investimentos, for example, has been trading the real in a more tactical way as there is still no good definition about the fiscal framework to be in effect as of 2023, against a backdrop of strong dollar abroad.

“We are living in a world of much greater uncertainty than we had before the pandemic,” said Alexandre Caldas da Cunha, senior manager of hedge funds at SulAmérica. “We think that if we have a better and more positive definition about how the economic guidelines of the new administration are going to be, whoever it may be, especially because the spending cap will change, there is potential for the real to appreciate. This, however, is not clear yet.”

He sees signs of improvement in the exchange rate, such as the rally seen in the trading session after the first round of the presidential elections. In just one day, the dollar lost more than 4% against the real. “But, at the current level of the dollar, considering the global scenario and the uncertainties here in Brazil, we don’t see great opportunities in the exchange rate at this moment,” he said.

Bruno Marques, a partner and manager of hedge funds at XP Asset Management, also believes that the exchange rate is not the best way to express a more constructive view of Brazil for the time being. During his monthly live-streamed event, Mr. Marques pointed out that the equilibrium exchange rate, which ranged between R$4.8 and R$4.9 to the dollar, has been converging to R$5.15. “We don’t see much of a premium in the exchange rate.”

*By Victor Rezende, Gabriel Roca — São Paulo

Source: Valor International

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

With a stake in Vale, Cosan raises its bet on mining

Group is expected to reach 6.5% of mining company’s capital with a R$22bn investment

10/10/2022

In a move that surprised investors and analysts, Cosan bought a minority stake in Vale, one of the world’s mining giants, and made it clear that its bet in the sector is high. With a combination of direct share purchases and derivative operations, the group owned by businessman Rubens Ometto is expected to reach 6.5% of the mining company’s capital, equivalent to an investment of R$22 billion, or two-thirds of its market capitalization before the announcement of the operation, placing itself among the major shareholders of the company without defined controlling shareholder since the end of 2020.

From the start, the investment was not well received. According to market sources, Cosan’s strategic rationale was not clear, there are doubts about the financing of the operation and the risk of worsening the financial leverage of the group, which in June was at 2.4 times (measured by the net debt-to-EBITDA ratio) in 12 months. While the holding company’s shares fell 8.7% on Exchange B3 on Friday, at R$16.65, Vale’s securities were practically stable, at R$75.51, on a day in which ore prices were also stable, at US$95.30 per tonne, according to the Platts index, by S&P Global Commodity Insights.

Still, it was an ambitious move. Cosan had already been exploring the mining sector, in which Brazil has competitive advantages and tends to be a leader in the energy transition, with growing demand for metals such as copper, nickel, and cobalt, fundamental to a low-carbon economy. A little over a year ago, the group made R$720 million for the port of São Luís, in Maranhão, which belonged to the Chinese CCCC, and announced a joint venture for iron ore exploration in the state of Pará with Paulo Brito, controlling shareholder of Aura Minerals.

Luis Henrique Guimarães — Foto: Divulgação

Luis Henrique Guimarães — Foto: Divulgação

With the investment in Vale, said Cosan’s CEO Luis Henrique Guimarães to Pipeline, Valor’s business website, the holding company complements its portfolio strategy to operate in all markets in which Brazil holds differentials. Before the mining company, the conglomerate had already invested in agricultural commodities (Rumo), oil and gas (Raízen and Comgás), renewable energies (Raízen), and carbon credits (with Raízen and Radar).

According to Mr. Guimarães, Cosan’s approach at Vale will be friendly. “It is not hostile. We want to be welcome,” he said, stressing the ability to work in partnerships with several players, such as Shell (partner in Raízen) the private equity fund CVC (partner in Moove), and Mitsui. In Vale, the group now wants to approach the board, to validate the thesis that justified the investment. The mining company is an “irreplicable” asset, he stressed.

In a conference call Friday night, Marcelo Martins, Cosan’s chief strategy officer said the company sought a financial model for buying the mining company’s shares that would not impact its financial health, nor the position of its shareholders. “We bought a 4.9% stake, reaching 6.5% after the approval of [antitrust regulator] CADE. But, the way the transaction was structured, we are converting optionality into effective participation,” he said.

According to Mr. Martins, the operation will not increase the indebtedness of the group, which initially contracted R$8 billion in financing with Bradesco and Itaú, amortized with dividends from Raízen and Compass with no fixed term. And there will be no dilution of shareholders. “We will not issue shares to finance this acquisition,” he emphasized.

Both Mr. Martins and Mr. Guimarães have reiterated that if the operation reaches the point of compromising the group’s health, it will not go ahead. In the extreme, Cosan could end its stake in the mining company, but this is not the option today, perceived as the “entry point” moment for Vale, which is still struggling with the damage from the dam collapse in Brumadinho (Minas Gerais). Cosan has a list of assets to sell and finance the operation, but not necessarily shares in controlled companies. If necessary, the idea is to sell a stake that does not compromise the controlling position.

Given Cosan’s possible future stake in the mining company, positions on Vale’s board of directors – now a corporation with a “poison pill” clause triggered by any shareholder raising its stake over 25% – would be a natural consequence of the approximation. The structure of the transaction also minimizes possible losses with oscillations of the mining company’s securities. The group did not disclose the average price paid for the shares – which were below the current level –, but the collar agreements signed with the banks limit the losses in case of devaluation of the asset.

“Our minds are aligned to see where Brazil has a competitive advantage and companies with unique assets. Our vision is one of association. Our portfolio was built with partners, and it will be no different with Vale,” said Mr. Guimarães, who said he had contacted Vale’s board members and had a positive reception.

“Vale doesn’t need major investments to continue generating value. Our role, with great humbleness, is to reach out to the board members and ensure that everyone has the necessary alignment for decisions that leverage opportunities,” he added.

“It was an audacious move by Cosan, because it is an operation with a lot of financial breath, and it makes sense from the economic-financial point of view,” assesses José Carlos Martins, a consultant at Neelix Consulting & Metals. “We will see how it evolves to become a strategic shareholder position. Cosan brings a more operational vision to Vale’s management,” highlights Martins.

In his evaluation, Vale needs an entrepreneur. It has excellent executives, but they are not entrepreneurs, who take risks. In this, Mr. Ometto comes to add”, he affirms. He recalls that the deal happens at a moment in which Vale’s stock is undervalued. “It has potential for appreciation. The stock is at $14 or $15, but it should be in the range of $22 to $23.

Vale, says Mr. Martins, is an asset of the mining sector that there is no other like it, it has room to grow and is one of the best quality ores in the world.

Besides Cosan, Vale’s main shareholders today are Previ, with an 8.61% stake, followed by Capital World Investor, with 6.69%; Blackrock, with 6.33%; and Mitsui, with 5.99%.

(Ivo Ribeiro contributed to this story)

*By Stella Fontes, Luiz Henrique Mendes — São Paulo

Source: Valor International

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

Analysis: State-owned banks still dominant in key sectors

Yet, general picture shows drop in share of credit, as President Bolsonaro promised in 2019

10/07/2022

Caixa Econômica Federal — Foto: Marcelo Camargo/Agência Brasil

Caixa Econômica Federal — Foto: Marcelo Camargo/Agência Brasil

President Jair Bolsonaro took office in 2019 promising to reduce the share of state-owned banks in credit. In fact, the general picture shows a drop in their share, but a more detailed analysis suggests that Caixa Econômica Federal and Banco do Brasil have grown or remained dominant in several market segments.

This is the case with housing credit. Caixa, which had been losing relevance in the segment due to lack of capital, is back in the game in recent years. As a result, the share of state-owned banks has fallen from the 2019 level, of 79.3%, but still accounts for 72.9% of housing loans, according to data from the Central Bank. Caixa leads the segment comfortably, despite the emergence of new competitors and sources of funds.

The same is true in agribusiness, with the dominance of Banco do Brasil. In farm loans, the state-owned banks held a 61.4% share at the end of last year, a stable level compared with recent years (61.6% in 2019 and 61% in 2020).

State-owned banks are also the most relevant segment in infrastructure financing: in this case, with a share of 95.6% at the end of last year, compared to 96.1% in 2019 and 95.6% in 2020.

The lenders have less weight in the segment of working capital for businesses but have been gaining ground. They held 27.2% of the market last year, compared with 25.4% in 2019. In the segment of payroll-deduction loans, they held 44.6% of the market at the end of 2021, a relatively stable portion compared to previous years.

The data comes from the Report on Banking Economics (REB), released by the Central Bank on Thursday. It presents more detailed data about Brazil’s banking market.

Overall, the share of state-owned banks in credit fell to 43.5% last year from 47.6% in 2019. One can infer that much of this is due to the Brazilian Development Bank (BNDES) model change. The share of development banks – of which it is the largest representative – in the pie fell to 6.3% from 8.1% in two years.

During the Bolsonaro administration, BNDES downsized even more its portfolio and started to focus on being a transaction facilitator. The biggest transformation in the development bank, however, had already happened under the Temer administration, when the long-term rate TLP replaced the TJLP in credit contracts. As a result, the rate was no longer subsidized and became more similar to market prices, which led large companies to seek other sources of financing.

*By Talita Moreira — São Paulo

Source: Valor International

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

Irani’s next cycle will be of capacity expansion

The substitution for more sustainable materials is a trend that is here to stay, CEO says

07/10/2022

Sérgio Ribas — Foto: Divulgação

Sérgio Ribas — Foto: Divulgação

With an investment package of R$976 million underway, Irani Papel e Embalagem is already working on its next cycle of growth. While in the current program, called Gaia Platform, the focus is on existing assets, the new plan will be directed at expanding production capacity and may include the construction of a corrugated cardboard packaging plant in São Paulo.

“We are on the crest of the wave in the sustainability issue. There is a trend to increase the demand for sustainable packaging,” said Sergio Ribas, Irani’s chief executive, in a meeting with analysts and investors at Irani’s plant in Indaiatuba, São Paulo.

According to Mr. Ribas, the substitution of plastic is already a reality in the Brazilian market and this movement, coupled with the advancement of e-commerce, provides an “extremely positive” forecast for the industry.

“The substitution for more sustainable materials is a trend that is here to stay. It is a demand from society and companies are being compelled to make this move,” said Mr. Ribas. As for e-commerce, the normalization of commercial activities, which were affected by the Covid-19 pandemic, reduced online sales but the trend is still for double-digit growth in the coming years.

The three main projects of Plataforma Gaia, Irani Papel e Embalagem’s investment program, are in their final phase and are starting to bring returns in the short term, Mr. Ribas said. Irani is investing a total of R$976 million in efficiency improvement projects and capacity expansion in the south of the country.

“The return of Gaia 2 and Gaia 3 will take place this year, and Gaia 1, which is the largest project, will take place in the middle of next year,” he said.

According to the company’s director of paper and forestry, Henrique Zugman, the objective of the Gaia Platform is to answer questions of competitiveness. “There are nine projects, directing production issues, energy sufficiency, and sustainable development,” he highlighted.

Gaia 1, the biggest one, includes the expansion of chemical recovery and will receive investments of R$581 million. At this moment, the execution rate is at almost 67%. With an expected conclusion by the end of 2023, it will allow a new round of expansion in the future.

The Gaia 2 project — which increases the production of corrugated cardboard for packaging in Santa Catarina by 53% — has already reached an execution rate of 93%, and Gaia 3, which comprises the renovation of the paper machine 2, is also on time and budget.

With the implementation of the projects, which also include the repowering of two small hydroelectric plants, Irani will stop buying power in the market and, at certain times of the year, will be able to sell the surplus generated.

*By Stella Fontes — São Paulo

Source: VAlor International

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

Brazil can exceed goals in carbon market, study shows

Country could jump to 48% from 12% share in voluntary market

10/07/2022

Brazil currently accounts for 12% of carbon credits issuance in the global voluntary market, with 45.28 million tonnes in credits offered, but has the potential to play a much larger role in the mitigation of emissions.

A study carried out by the International Chamber of Commerce (ICC Brazil) in partnership with WayCarbon consultancy indicated that in a scenario of accelerated emissions reduction in the next decade, Brazil could offer 1.5 billion to 2 billion tonnes in carbon credits in 2030, which could mean 22.3% to 48.7% of the credits in this market.

The calculations considered a price of $100 per tonne for the carbon credit, an amount that is considered by the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) as necessary for a fast reduction in emissions.

Brazil’s current share in the global carbon market is already growing fast. In 2019, Brazil had a 3% share. A study indicated that the country would only exceed the 10% share in this market in 2030, but the country surpassed this threshold in 2021.

According to the new study, the performance reflects the higher number of credits issued by nature-based solutions (NBS) and the influence of the regulation of Article 6 of the Paris Agreement at the last UN Climate Change Conference of the Parties (COP) in Glasgow, Scotland.

The trajectory for the coming years, however, still depends on solving some hurdles. In the view of ICC and WayCarbon, after interviews with several agents in this field, it is necessary to overcome market, technical, political, regulatory, and economic barriers. In these aspects, are mentioned the lack of credibility of government commitments, high complexity of land regulation, difficulty in estimating the organic carbon of the soils, and also difficulty in obtaining sources of funding.

“Our goal is to deliver a compass that shows the way to the economic agents transparently so that they can develop, structure, and strengthen this market,” said Laura Albuquerque, WayCarbon’s general manager of consultancy and the leader of the research, in a note. According to her, it is still “necessary to strengthen the flows of the stages of carbon credit generation.”

*By Camila Souza Ramos — São Paulo

Source: Valor International

https://valorinternational.globo.com/

/by

Copel buys EDP’s wind farms for R$1.8bn

With acquisition, Paraná’s state-owned company has a total generating capacity of 6.7 GW

10/07/2022

Daniel Slaviero — Foto: Divulgação

Daniel Slaviero — Foto: Divulgação

State-run Copel (Companhia Paranaense de Energia) has acquired the wind farms Aventura and Santa Rosa & Mundo Novo from EDP Renováveis for R$1.8 billion. In all, there are nine wind farms in operation in the municipalities of Touros and São Tomé, in Rio Grande do Norte, totaling 260.4 megawatts of installed capacity.

Of the total, the amount of R$965 million is expected to be paid via equity, and the remainder can be paid through funding or with its own money. The project has long-term financing with maturities up to 2043 contracted with Banco do Nordeste (BNB) with rates of IPCA (Brazil’s benchmark inflation index) + 2.19% per year (Aventura) and IPCA + 1.98% per year (Santa Rosa & Mundo Novo).

Most of the power generated (76.5%) was sold in auctions in the regulated environment, and 13.7% of the power generated is sold in the free market. There is still 9.8% left for new contracts.

With the acquisition, the state-owned company of Paraná has a total generating capacity of 6.7 GW, including hydro, thermal, wind, and solar. The company’s goal is to have a more diversified portfolio, reducing exposure to hydrological risk. The operation will be carried out by Copel GeT, a wholly-owned subsidiary of the company.

CEO Daniel Slaviero highlighted the strategic location of the farms and the importance of acquiring an operational asset for the business. According to him, the company consolidates its presence in Rio Grande do Norte and increases its wind generation capacity by 28%, thus reaching 1.2GW of wind generation in its portfolio.

“The acquisition achieves a major strategic goal, which is to recompose the EBITDA with the sale of Copel Telecom to focus on the power business. The largest investment plan is focused on Copel Distribuição, but the company has the muscles to make those acquisitions in power generation” and “brings what matters most, which is a double-digit return,” he said.

Cássio Santana da Silva, the company’s chief business development officer, said that with the EBITDA plan the company reaches a turning point and will start to analyze closely greenfield assets, which “despite having more risks, bring higher returns.”

In the view of Marcelo Sá, a utility analyst at Itaú BBA, the management team has done an important job by improving efficiency, selling non-strategic assets, implementing governance improvements, and acquiring the Vilas wind farm in 2021.

“The company now has a clear dividend policy, in addition to control mechanisms such as investment committees, which reduce the risk of capital allocation. The growth strategy focused on M&A is the most appropriate, with much lower execution risk, since the current moment is challenging for the development of new renewable projects, given the increase in Capex costs and the drop in power prices,” he said.

*By Robson Rodrigues — São Paulo

Source: Valor International

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

Judge may force Bracell to sell land in Brazil

Pulp producer allegedly acquired properties above limits imposed by law

10/06/2022

A court in São Paulo forced Bracell, the pulp maker owned by the Asian group Royal Golden Eagle (RGE), to comply with the legal limits for the acquisition and exploitation of land in Brazil, and may later order the sale of areas or the termination of lease agreements that exceed the provisions of a law that restricts the purchase of land in the country by foreigners.

The preliminary injunction favored the Brazilian Agribusiness Association (Abag) and the Association of Cane Planters of the Mid Tietê (Ascana), which filed a suit accusing the group of land grabbing – the acquisition of agricultural land in a predatory way, with social, economic and environmental damage.

The associations filed a public civil action against the group, accusing it of wrongdoings in the purchase and leasing of agricultural land, violation of national sovereignty, and of putting food security in Brazil at risk.

Bracell may appeal the injunction granted by Judge Valdeci Mendes de Oliveira, of the 4th Civil Court of Marília, São Paulo.

In the lawsuit, Abag and Ascana also requested that the Asian group be forced to sell or terminate the leases in the municipalities where the limit of 10% of the total area, provided for in the legislation, has not been observed.

In at least three cities in São Paulo — Oriente, Álvaro de Carvalho and Vera Cruz — the areas leased by Bracell, 32.7%, 11.8% and 10.9%, respectively, exceeded the legal limit.

The associations accuse the group of using corporate structures that break the law and camouflage its majority participation in Brazilian companies. And they attached to the lawsuit a technical evaluation from the Program for Continuing Education in Economics and Business Management (Pecege), linked to the Luiz de Queiroz School of Agriculture (Esalq/USP), which associates Bracell’s operations with the reduction of arable land, the lower supply of food, and the weakening of the local economy in the municipalities where the group is present.

Bracell’s activities, according to the lawsuit, have also resulted in overpricing of rural properties in the areas where it operates and in the loss of purchasing power of the population on agribusiness production. Abag and Ascana are represented in the lawsuit by the law firms Modesto Carvalhosa Advogados and Chiarottino & Nicoletti Advogados.

Bracell has pulp mills in Camaçari (Bahia) and Lençóis Paulista (São Paulo). The group has invested about R$15 billion in recent years in São Paulo, according to market estimates, to increase production capacity to up to 3 million tonnes per year of eucalyptus pulp or 1.5 million tonnes per year of dissolving pulp.

In a statement, Bracell said its business in Brazil “is in accordance with all legal regulations in force” and adds that “the company is aware of the public civil action and is preparing all the necessary legal clarifications,” it added.

*By Stella Fontes — São Paulo

Source: Valor International

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

Hailstorm in Minas Gerais causes coffee to rise in New York

Arabica future contracts rose 1.57% on Tuesday and 1.92% on Wednesday

10/06/2022

Hailstorms damaged not only coffee crops, but also beans, vegetable and other plantations — Foto: Emater-MG/Divulgação

Hailstorms damaged not only coffee crops, but also beans, vegetable and other plantations — Foto: Emater-MG/Divulgação

The strong hailstorms that hit Minas Gerais state in recent days again made the prices of arabica coffee rise Wednesday in the New York Stock Exchange. The problem affects the southern region of the state, one of the most important producing poles of the commodity in the country, which leads the harvest and world exports.

The futures contracts maturing in March, which currently occupy the second delivery position – and had already risen 1.57% on Tuesday – advanced another 1.92% and closed at $2.1465 per pound. According to Valor Data, the negative variation in the year fell to less than 5%, and in the last 12 months the second position bonds started to see a high of approximately 10%.

According to the Company of Technical Assistance and Rural Extension of the State of Minas Gerais (Emater-MG), the hailstorms on Tuesday and Wednesday damaged not only coffee crops, but also beans, vegetable, citrus, persimmon, peach, plum, and avocado plantations. Rural producers in the south of Minas Gerais even reported that the hail even killed a cow.

According to Emater-MG, the rural producers affected should be cautious for the moment. “The plants are expected to present lesions caused by the hailstones, which are gateways for fungal and bacterial diseases. We recommend that they seek technical assistance from Emater for guidance on how best to reduce the problem,” said Sérgio Brás Regina, Emater’s technical coordinator of crops, in a statement.

“Don’t rush into pruning, which is sometimes unnecessary, or use ‘miracle’ products. Don’t do anything without a technical follow-up,” he emphasizes. Emater-MG technicians are currently in the field investigating the most affected areas and the losses. “A preliminary survey indicates that only in the south of Minas Gerais, the region with the highest losses, more than 20 municipalities were affected, especially São Gonçalo do Sapucaí, Três Corações, Cambuquira, Campanha, Turvolândia, and Careaçu.”

“We are providing a task force to do all the mapping of the extension of the effect of this hailstorm. Just as it happened at times of frost and floods, we will prepare free reports for family farmers served by Emater,” says Otávio Maia, president of Emater-MG, in the statement released.

*By José Florentino, Fernando Lopes, Fernanda Pressinott — São Paulo

Source: Valor International

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

Services drive employment indicator up

IAEmp rose 1.5 points in September compared to August, strongest rise since April

10/06/2022

Rodolpho Tobler — Foto: Leo Pinheiro/Valor

Rodolpho Tobler — Foto: Leo Pinheiro/Valor

Influenced by good results in services, the largest employer in the economy, the employment leading indicator (IAEmp) rose 1.5 points in September compared to August, to 83.8 points. It was the strongest rise since April 2022 (4.5 points) and took the indicator to the highest level since October last year (87.1 points), said Fundação Getulio Vargas (FGV) on Wednesday.

When detailing the result, Rodolpho Tobler, the FGV economist in charge of the indicator, recalled that services are currently undergoing a process of recovery – after the “thump” suffered by the sector during the most acute period of the pandemic, which began in 2020. However, when questioned about the continuity of the IAEmp’s high, he was cautious. In practice, the sustainability of greater openings, as well as the positive balance of the indicator, will depend on the trajectory of the economy, which still has many uncertainties for the future, especially for 2023, he noted.

When detailing the behavior of the September indicator, Mr. Tobler pondered that, in his understanding, the good performance of the IAEmp reflects what has been happening in employment, and in the economy, in recent months. There has been an improvement in the health outlook related to the pandemic, with an advance in vaccination against Covid-19 and, consequently, a reduction in the rate of cases and deaths. This has pushed more consumers to face-to-face activities, which were heavily restricted during the pandemic.

This aspect, he noted, has mainly benefited the services economy, which has a higher “face-to-face” profile, such as bars, hotels, restaurants, and tourism, among other activities. Therefore, this sector has been recovering month by month, which boosted the economy as a whole. On the supply side, the services activity represents more than 70% of the Brazilian GDP, reminded Mr. Tobler

At the same time, the outlook of recovery in services favors employment, since the sector generates many jobs, acknowledged Mr. Tobler. “In the IAEmp, we had a total high of 8.8 points in six months [until September],” he says, while illustrating the impact that services had on the indicator in recent months. “The economy has shown resilience,” he said. “And the services sector has been stronger [in pace of activity] than expected.”

However, when talking about the future, the same statements cannot be repeated, according to him. Mr. Tobler recalled that there is consensus, among analysts, of a weaker economy in 2023. This is because there are signs of a continuing environment of higher basic interest rates, a way to tackle inflationary advances. This curbs greater consumption power, as well as the cadence of economic activity, with an impact on different activities in the economy, including services, he says.

For Mr. Tobler, whether employment remains in a favorable scenario will depend mainly on the future trajectory of the economy. “The labor market is fine. But as good as it is, it still has a long way to go,” he added.

*By Alessandra Saraiva — Rio de Janeiro

Source: Valor International

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