Outgoing minister plans to open markets for Brazilian farmers

Marcos Montes will travel to Mexico and Dominican Republic to sign agreements that will benefit pork producers

11/09/2022

Marcos Montes — Foto: Divulgação

Marcos Montes — Foto: Divulgação

Outgoing Agriculture Minister Marcos Montes wants to use the remaining two months in office to expand the number of markets open for Brazilian agribusiness products and get more funds for rural insurance.

Mr. Montes will travel to Mexico and the Dominican Republic to sign agreements to open those markets to Brazilian pork. The two countries are currently reliant on imports from the United States. He also mulls going to a business fair in the Middle East in December.

Other openings may materialize without trips. A mission from Indonesia will arrive in Brazil on November 19, two months after Mr. Montes’s visit to Jakarta. In September, Brazilian officials discussed the expansion of exports and the opening of markets for beef, bovine genetic material, and live cattle.

Despite a canceled trip to Asia last week, there are still chances to close agreements with South Korea for beef and pork exports this year, said the minister. The agreement with Japan, a country Brazil is trying to sell pork to from areas free of foot-and-mouth disease without vaccination, such as Paraná, will still depend on further talks led by the next administration.

Since 2019, 210 markets have been opened for agribusiness products and exports reached $122 billion between January and September this year. There is also great expectation with the conclusion of the United Kingdom’s technical mission, which visited plants and analyzed the Brazilian sanitary inspection system last month.

This is Britain’s first audit since the Brexit to recognize the equivalence of the agricultural defense services, which could open the doors for more beef and chicken slaughterhouses to be qualified to export there.

Although Brazilian trade with China continues to expand and the authorization given by the Chinese last week for the shipment of corn by 136 units is good news, Mr. Montes regretted that the Asians have not qualified more slaughterhouses to sell there. The latest list was approved in 2019.

“We are waiting, of course, for the opening of beef slaughterhouses. We keep talking, but it is difficult because of Covid there,” he said. “Maybe with a new administration they will change a little.” According to Mr. Montes, the pandemic blocked exports from plants that were already qualified. Seven slaughterhouses are still embargoed. Last week, two were authorized to resume sales. “I find it difficult to qualify any of them until the end of the year.”

Another mission of the minister until December 31 is to get more funds for rural insurance, but he indicated that it is up to the elected government’s negotiate the amount for 2023. He intended to get R$2 billion for next year, compared with R$990 million this year. “Our biggest concern is insurance. It has to be very robust.”

In July, the Board of Budget Execution (JEO), an advisory body of the president for the handling of the federal fiscal policy, approved an extra amount of R$200 million, then backtracked. Since early September, there are no extra funds for contracting subsided policies. “The JEO lifted the R$200 million previously approved vowing that it would release this amount until the end of the year, which would bring the budget to R$1.1 billion. But this is not enough,” he said.

The minister expects advances in the negotiations for the financing of national agriculture at the United Nations Framework Convention on Climate Change (COP27), in Egypt. Members of two secretariats of the Ministry are at the event, which started Sunday.

“COP will mix environment with hunger and food security. It will be a milestone in how the world sees sustainability. We all want to preserve the environment, but not in the way that France wanted to do, preventing Brazil from producing.”

Mr. Montes said he will support legal changes to open up even more possibilities for issuing rural producer bills (CPRs). In October, the stock of these securities reached R$204 billion. The goal is to double this number in the next four years with the new legal adjustments.

The minister also hopes to advance in a project on the traceability of production, especially beef. A working group has been created between the Ministry and the Brazilian Confederation of Agriculture (CNA).

*By Rafael Walendorff — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Ascenty invests R$1.5bn in five data centers

Company plans to expand in Brazil and Chile and enter in Colombia

11/09/2022

The data center infrastructure company Ascenty will invest R$1.5 billion in the construction of five new data centers in Brazil, Chile, and Colombia, starting at the end of 2023. “We are reinvesting 100% of our return in expansion,” CEO Chris Torto told Valor.

According to him, two thirds of the investments comes from the company’s own cash flow and contributions from controlling shareholders – the U.S.-based data center company Digital Realty and the Canadian asset manager Brookfield Infraestruture.

The remaining R$517.4 million ($100 million) come from a R$4.8 billion ($925 million) loan taken by Ascenty in March from Brazilian and international banks to expand existing data centers, increase its fiber optic network, and build new units in Brazil by 2024.

In 2023, the data center segment is expected to gross $3.8 billion in Latin America, said Luciano Ramos, research and consulting manager at IDC Brasil. “This means a growth of 9.2% compared to 2022,” he said.

This year, according to the CEO, the company will disburse R$1.4 billion for data center expansion. In 2021, R$1.5 billion were set aside to expand the structure.

The new data centers in São Paulo and Bogotá will start operating by the end of 2023. The company will activate the second facility in São Paulo, the second one in Bogotá, and one more in Santiago by the end of 2024.

With the expansion, Mr. Torto said, the company meets the demand of its three main customer profiles: cloud service providers, corporations, and telecommunications companies.

Ascenty’s focus is on the cloud computing service providers of large technology companies. “They are our flagship and are expanding worldwide,” Mr. Torto said.

In Latin America, the executive says he does not feel the impact of slower growth in cloud computing revenues of giants like Amazon, the market leader, and Microsoft in the third quarter.

“Maybe the United States and Europe will feel the slowdown because they are more mature markets, but in Latin America we won’t see that, at least in the next six to 12 months,” he said. “If we have a very strong global recession, demand may fall.”

Microsoft’s revenue from its Azure cloud computing platform grew 24% to $25.7 billion in the company’s fiscal first quarter. The advance was lower than the 36% rise in the third quarter of 2021. Amazon Web Services’s (AWS) third-quarter revenue advance of 27.5%, to $20.5 billion, meanwhile, was the slowest since 2014, when Amazon began releasing the earnings results for its cloud business.

Other customer profiles in Ascenti’s sights are corporations that usually use the structure to allocate their equipment, managing cloud services remotely, and telecommunications companies, which prepare their structures for applications such as the Internet of Things (IoT), artificial intelligence, big data, and virtual reality.

Born in Boston and settled in Brazil for more than 30 years, Mr. Torno also notes that the electoral race has not slowed down the local demand either. “It is the first time in 35 years that I do not see an impact of the election in the country,” he said. “Clearly, I see a more mature country.”

Ascenty’s CEO is concerned with the global shortage of semiconductors, which has extended the delivery deadlines of high-capacity generators, which are key to ensure that data centers remain active in case of power outage. With the shortage of components, he said, the delivery time for generators coming from China, Europe, and the United States, which used to be a few months, has risen to nine to 12 months. “If the equipment comes from China, the current impact is usually greater because of the pandemic control in the country, but equipment coming from Europe and the U.S. also face a 50% increase in delivery time,” he said.

Currently, the company has 23 data centers in operation, 19 of them in Brazil, two in Chile and two in Mexico, and more 10 under construction in Latin America, considering the operations announced Tuesday by the company.

Competitors Scala, Odata and Equinix are also among the large companies in the sector expanding in Brazil and other Latin American countries.

Scala Data Centers, from the U.S.-based group DigitalBridge, is advancing in the construction of new data centers in Brazil, Chile, Colombia, Mexico and Peru. On Tuesday, the company unveiled an agreement with Brazilian power distributor Enel to guarantee a supply of more than 1 gigawatt for its operations.

In March, Equinix announced a R$17 million investment in the expansion of its fifth data center in São Paulo by the end of the year, while Brazilian Odata received a R$181 million ($35 million) loan from the World Bank in August for data center expansion in Mexico. The loan comes on top of another one, of $ 30 million, announced in January for expansion in Latin America.

*By Daniela Braun — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Iguá seeks R$3bn investment with new partner

Sanitation company has already hired Bradesco BBI and Morgan Stanley to find investors

11/08/2022

Deals will help Iguá leave behind turnaround process and consolidate itself as one of the largest players in the sector — Foto: Divulgação

Deals will help Iguá leave behind turnaround process and consolidate itself as one of the largest players in the sector — Foto: Divulgação

Sanitation company Iguá has hired Bradesco BBI and Morgan Stanley to find a new partner. According to three market sources, the mandate for private placement is already in place, aiming for a primary transaction of R$2.5 billion to R$3 billion ($500 million), in a minority position that could reach a shared control.

Banks and the company have started conversations with at least four potential investors: the U.S.-based fund Ontario Teachers Pension Plan (OTPP), Canada’s CDPQ, and the Brazilian groups Votorantim and Equatorial, sources told Pipeline, Valor’s business website.

Iguá’s shareholders are the Canadians CPPIB and Aimco, and the management company IG4, investors with cash to finance the company. BNDESPar, the Brazilian Development Bank’s equity arm, is also a shareholder. The participation of the current partners in the capitalization is not ruled out, sources say. “They are looking for this capital from a new investor as a minimum amount, but they say they can follow up,” said a source that had access to information on the capitalization process

The company set the beginning of November as the deadline for non-binding offers, sources say.

The final amount will depend on the type of opportunity Iguá finds. The goal of the capitalization is to prepare the company to compete in new concessions and potential privatizations, such as Corsan, Copasa, and Sabesp — an expectation of the sector considering the elected governments in the respective states. But the company’s interest in buying competitor BRK Ambiental is no secret.

BRK is controlled by Brookfield and FI-FGTS, the investment arm of the Workers’ Severance Fund, and had been giving preference to an IPO. There have already been two attempts to launch the offer, but with no progress given the market conditions. Brookfield seems to have changed its mind about the outcome for the asset — the fund would have authorized Itaú BBA to sound out potential buyers, according to two sources, but one of them says there is no formal mandate yet.

Some of Iguá’s shareholders prefer not to have the complexity of the FI-FGTS on the board, which means that a deal will only happen in a full transaction. Another operator that may place a bid for BRK in case the shareholders decide to follow through with a formal process is Aegea, which has Equipav, GIC, and Itaúsa as shareholders, as well as potential interest from infrastructure funds. The current management of the federal bank is sympathetic to the idea, but next year, everything can change — which also explains Iguá’s timing.

The private placement is one of three mandates Iguá is putting in place, according to market sources. The company would also have already hired BTG Pactual, Bradesco BBI, and Itaú BBA to issue R$5 billion in infrastructure debentures, a debt that will pay off part of the bridge that the concessionaire took to take a piece of the Cedae operation, in Rio de Janeiro, and lengthen its liabilities.

On the selling side, Itaú BBA has sought interested parties in 11 small concessions from Iguá, which wants to focus on larger operations. The assets for sale are concessions in cities with less than 500,000 inhabitants, in Santa Catarina, Mato Grosso, and São Paulo, and the bank has offered potentially interested buyers the closed package — estimated between R$500 million and R$600 million, sources told Pipeline.

On the three fronts, the company can raise between R$8 billion and R$9 billion in total for its market consolidation strategy. Iguá declined to comment.

The deals will help Iguá leave behind the legacy of a company in turnaround to consolidate itself as one of the largest in the sector. When IG4 bought CAB Ambiental from Galvão Group, the concessionaire posted an EBITDA of R$175 million.

The asset manager attracted Canadian funds to the company, including an investment last year in the competition for Cedae. An industry analyst estimates that, with the operation in Rio, the annualized EBITDA is around R$1 billion today.

*By Maria Luíza Filgueiras — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Labor income recovers unevenly among sectors

Usual real income for September quarter reached R$2,737, a monthly increase of 1.4%

11/08//2022

Labor income has been recovering unevenly. In recent months, sectors like agriculture, construction, services, and commerce have seen a sharp increase, while public administration and the industry decelerated. Even though inflation is up again in October, economists say this recovery is expected to continue driven by a nominal rise in salaries and the composition effect, which captures changes in the profiles of workers.

According to microdata from the Continuous National Household Sample Survey (Pnad Contínua), compiled by Tendências Consultoria Integrada, the usual real income for the September quarter reached R$2,737, a monthly increase of 1.4%. Comparing the moving quarter ended in September versus the April-June period, the increase reached 3.7%. In the year-over-year comparison, the usual real income is up 2.5%.

Lucas Assis, an economist with Tendências, said that this recovery in labor income is due to the higher generation of formal jobs and lower current inflation.

“From the sectorial standpoint, in the comparison with the third quarter of 2021, the positive highlight was the growth in real income in agriculture, forestry, fishing and aquaculture,” which saw a 13.2% increase, of more R$216. “Besides the impact of lower inflation, a composition effect may have happened, with the dismissal of low-wage workers.”

He added that the construction sector saw a 5.7% increase; commerce and motor vehicle repair is up 8.3%; and domestic services grew 4.6%.

“The sector of information, communication and financial, real estate, professional and administrative activities was among those that advanced the most in average income, with a 3.1% year-over-year growth, above the total average growth of 2.5%,” he said.

According to Mr. Assis, the sector is among the ones that concentrates the largest number of workers, with 11.9% of the total of occupied people, behind commerce, public administration and industry.

Six months ago, in the March quarter, the average income in the agriculture sector was R$1,685. It rose to R$1,855 in the September quarter. In the commerce sector, it went to R$2,270 from R$2,160. In the construction sector, it went to R$2,114 from R$2,111. And in information, communication and financial activities, to R$3,942 from R$3,748.

The downside was public administration, defense, social security, education, human health, and social services, which fell 3.4% year-over-year, equivalent to R$134. The main reason is the expansion of lower paid positions.

According to Daniel Duque, with the Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV), the increase in income has been driven by information and communication services, which have shown a relevant effect on wages.

“The pandemic recovery is over, but the service sector is performing better than expected. People are possibly over-consuming services after two years without doing so, but the fact is that we are seeing wage increases in services in a way that has been quite surprising this year,” said Mr. Duque.

He points out that the big drop in income in the last two years has been driven by the public sector. “It was the best-paying sector until recently, but it has fallen in terms of percentage of employed people,” he said.

“The information and communication services sector has been pulling down a lot of income because it’s overheated. The post-pandemic demand for more skilled data, information technology work, has increased a lot. And that has had relevant effects on wages.”

Claudia Jeronimo — Foto: Silvia Zamboni/Valor

Claudia Jeronimo — Foto: Silvia Zamboni/Valor

Computer scientist Cláudia Jerônimo, 43, decided to leave her job as a technology infrastructure consultant for a U.S.-based company three years ago to focus on her software development company.

At the beginning of 2019, Gestão Tecc had only Ms. Jerônimo on staff and was grossing about R$3,000 per month. Today the company has four people working on demand and has seen its expenses and gross earnings explode. Today it grosses up to 700% more than three years ago.

The big boost came with Covid-19, she said. “I have had the technology company for more than five years. But in the Covid pandemic, IT services became popular. Apps allowed a lot of people to stay home because there were delivery services. And they also helped a lot of people work remotely or without having to leave home,” she says.

Danilo Amarante — Foto: Silvia Zamboni/Valor

Danilo Amarante — Foto: Silvia Zamboni/Valor

The heating up of the sector made Danilo Amarante, 29, change jobs for better opportunities twice in the last two years. A former employee of the technology sector of a hospital chain until 2020, he joined a magazine publisher in February 2020 to work with IT support earning R$2,000 a month, 20% more than in his old job.

In February this year he was invited to work for a company that provides services for a big tech company. He works in digital marketing, ads, and merchandising, and he doubled his salary.

“I think it all came together. A better salary and also the fact that I work for a giant company, with development and microinformatics. Support is the first step on the ladder. And today I work more with code and processes than with microinformatics,” he said.

In parallel, he has with a partner the applications company Devsampa, which yields from R$500 to R$7,000. “It depends a lot on how much I invest,” he said.

The current expansion of the labor market is marked by an increase in the number of self-employed workers and formal jobs, said Hélio Zylberstajn, with the University of São Paulo.

“What we are seeing is a great boost in the labor market, which is expanding differently of what was seen in the past. We have more formal workers and more business entities, which would be the self-employed ones. There is a sign that formal jobs are growing more than informal one,” he said.

Mr. Assis argues that the advance in employment is seen mostly in the formal segment, which showed the inclusion of 4.9 million people in the September quarter, up 8.8% year-over-year. Informal jobs are up 1.4 million, or 3.8%.

Mr. Zylberstajn warned, however, that this pace has slowed down. “This indicates that the effects of monetary policy may be starting to weigh,” he said. Brazil’s Central Bank has raised its key interest rate to 13.75% per year from 2% in March 2021.

Victor Candido, chief economist at RPS Capital, points out that some sectors are still not feeling the delayed effect of the interest rate hike.

“This recovery in salaries that we have seen has much more to do with the nominal income effect. It is natural that, with high inflation, salaries recover again, the employer seeks an adjustment and this puts pressure on the labor market, which is tighter,” he said.

“This has manifested itself especially in the most heated fields, such as civil construction, retail, and services. These sectors have not yet felt the effect of higher interest rates. There was not any hit yet and there is still pressure on wages,” he said.

Despite the recovery in labor income seen in recent months, Mr. Assis argued that the average usual income remains 1.9% below the level seen in the same quarter of 2019, before the pandemic.

This is because, he said, there are still characteristics such as professional reinsertion via less skilled occupations and shorter working hours, difficulty for the employed to negotiate wage replacements, and return to the labor market for lower pay than before the pandemic.

*By Marsílea Gombata — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Emerging countries drive innovation in payments, Ebanx says

Brazilian payment platform focus on African market to expand digital payment business

11/08/2022

Paula Bellizia — Foto: Silvia Zamboni/Valor

Paula Bellizia — Foto: Silvia Zamboni/Valor

Some time ago, emerging and developed economies were expected to go through the same phases in terms of payments. Today, it is clear the path is different and innovations are coming from emerging markets, said Paula Bellizia, Ebanx’s president of global payments. The Brazilian payment platform operates in 15 Latin American countries and has just arrived in Africa.

To grow in these regions, it is necessary to put alternative payment methods and local consumer preferences at the center of the discussions, she told Valor during the event Money 20/20, in Las Vegas. “To be successful in Latin America or Africa, you cannot consider only cards. In Brazil, only 40% of people have a credit card. In Nigeria, it’s 10%.”

Ms. Bellizia notes that, according to data from Americas Market Intelligence (AMI), the share of alternative payment methods in digital commerce in Latin America has grown to more than 38% now from 31% in 2020. “And it just keeps growing. The future will be instantaneous and alternative,” she said, highlighting the rapid expansion of Pix transactions in Brazil since the Central Bank launched the instant-payment system, in late 2020, as an example.

Ms. Bellizia also believes that business development in emerging countries required that companies understand users’ local preferences. “Consumer behavior in emerging markets is different, not just a matter of industry maturity. And innovation is coming from our markets.”

In her view, it is a mistake to think, for instance, that it is only a matter of time before credit card penetration in the region reaches the same level of developed countries. “It won’t be like that. The consumer habit here is going to be different.” Cards are likely to continue to grow but in parallel to the new means of payment, she said.

The executive added that the problems to be solved are different and drive the development of specific solutions. “We are still promoting bank use for part of the population. And Pix was a great financial inclusion move.” These particularities represent great business opportunities for emerging countries, she said.

Founded in Brazil in 2012, Ebanx announced in September the expansion of its operations to Africa. According to Ms. Bellizia, the choice was due to its similarities with Latin America. The challenges faced by African countries today in terms of payment are similar to those experienced by Latin America in the last decade, she said.

In addition, she points out that there are great opportunities in Africa in digital verticals such as Software as a Service (SaaS), streaming, and gaming. “The base is still being built, but Africa is growing faster than North America in gaming today. If a company misses this timing to enter Africa, it will quickly be left with a weak presence.”

Initially, the payment platform will operate in Kenya, Nigeria, and South Africa. According to the executive, the three countries were chosen because they account for more than 30% of the continent’s economy and have a strong use of smartphones. The idea is, in due time, to expand to other neighbors.

Ebanx works with global brands that want to expand their operations to Latin America, including Shein, AliExpress, and Uber. In June, the payment platform announced that it would review its operation, reinforcing the focus on international payments, which are its core business. According to the fintech, the change will discontinue projects and reduce by about 20% the group’s workforce of more than 1,700 employees.

According to the executive, Ebanx reviewed its priorities and shut down the local payment operation to focus on the core business. “We remain super focused on global expansion,” she said. “There are strong competitors in the market, but the company has a strong reputation and stands out because of the depth of partnerships, knowledge of local markets, and superior performance.”

Ebanx even filed a secret request for an IPO in the United States last year, but the plan was postponed amid the decline of technological companies. The executive did not want to comment on the subject and said that “at the right time” the company will talk about it.

As for the macroeconomic environment, she said that, although the scenario of inflation and high interest rates required attention, it also represents an opportunity for Latin America. “We also have our difficulties, but in a way, the scenario in the region, compared to the global one, brings opportunities.”

The reporter’s travel costs were covered by Nuvei.

*By Mariana Ribeiro — Las Vegas

Source: Valor International

https://valorinternational.globo.com/

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Shareholders seek banks’ financing with public offerings

To avoid dilution in capital increases, shareholders have raised funds in the market

11/08/2022

Controlling and primary shareholders of companies are being financed by banks through follow-on offerings to avoid great dilution of their stakes. “There is a perception on the part of these shareholders that shares are cheap on the stock market. They want to grow, especially through acquisitions, but they need to raise funds. On the other hand, they are sensitive in relation to dilution at current price levels,” said Gustavo Miranda, head of investment banking at Santander.

In the last few months, investment banks have started to set up operations for companies that raise funds in the market via follow-on offerings or capital increase, but do not have enough cash to move forward.

In September, Iguatemi, owned by the Jereissati family, raised R$720 million on the stock exchange to buy the remaining 36% stake in the shopping mall JK Iguatemi for R$667 million. Sources say that the controlling shareholders got a financing deal to move forward with the offering so that they would not be diluted. The controlling shareholders of Vamos, a rental business focused on heavy-duty vehicles, also agreed on the terms to get a financing deal, but then they did not need to use it to raise R$640 million in September, sources in the financial market say.

The controlling shareholders of Fras-le, Randon’s auto parts business, increased their stake through an offering launched in April. The company raised R$629 million in the follow-on offering, less than expected, and had to rely on disbursements of its primary shareholders to raise funds in the market.

Ricardo Tardelli Catelli, Bradesco BBI’s head of structured finance, said that the bank has seen a greater participation of major shareholders in companies’ offerings. “Some stocks are at discounted prices. The bank discusses the best funding opportunity strategy for the client.”

Besides typical financing, Santander has offered tools, such as derivatives, for companies to finance themselves, said Mariana Lima, the bank’s head of stock derivatives.

Pedro Juliano — Foto: Divulgação

Pedro Juliano — Foto: Divulgação

J.P. Morgan has also been offering options linked to the capital market, said Pedro Juliano, the New York-based bank’s head of investment bank in Brazil. According to him, derivatives have been a solution for this type of structure. “They have two major purposes: protection or leverage. In this case, it is leverage. You can offer a cheaper financing and the stock can be used as guarantee,” he said.

The financial market has given the benefit of the doubt to those making acquisitions, said Mr. Juliano. “The stocks of those closing M&A deals are expected to go up. Clients who want to do strategic M&A deals, want to finance deals, and doesn’t want to be diluted look for these options. This is very common in Europe and the United States, and it’s starting in Brazil.”

So far, companies have raised R$51.9 billion, including the largest one, Eletrobras, according to data from the Brazilian Financial and Capital Markets Association (Anbima). Seventeen follow-on offerings have been launched, but not a single IPO so far.

At the end of October, Casino, the French company that owns food retailer Pão de Açúcar, told the market that it intends to sell part of its stake in the cash-and-carry chain Assaí for about $500 million. In a notice to the market, the company said it intends to raise funds through a follow-on offering.

New follow-on offerings are expected to be launched later this year, as the presidential race is now defined, said Vitor Saraiva, head of equity capital markets at XP. The executive foresees IPOs early next year, especially in the infrastructure and energy fields.

In 2021, companies raised R$128 billion through 72 follow-on offerings and IPOs, according to data from Anbima.

With the victory of Luiz Inácio Lula da Silva, the investment banks are waiting for who will make up the president-elect’s economic team to make their projections for the resumption of the capital market.

Vice-President-elect Geraldo Alckmin, a former governor of São Paulo who is well-regarded by the financial market, has been chosen for the transition team, but the investment banks are still very concerned about the next administration’s economic team.

If Mr. Lula da Silva picks a politician as economy minister, as has been rumored, the resumption of capital market offerings at the beginning of 2023 may be more modest. “If a minister from the Workers’ Party’s inner circle is chosen, we don’t believe there will be an euphoria,” said a source from an investment bank.

Grupo Iguatemi’s controlling shareholders declined to comment. As for Fras-le’s offering carried out in April, Randon said in a note that the capital markets are more complex due to the global macroeconomic context, and the company saw the opportunity to expand its participation by increasing the capital of its subsidiary. “The offering met two objectives: raise funds for the company’s non-organic growth projects and improve liquidity by bringing new investment funds and institutional investors to the shareholder base.”

Simpar, parent company of Vamos, said that the offering was small in relation to the company’s market capitalization. Therefore, the dilution was not so high.

*By Mônica Scaramuzzo — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Raízen to build advanced ethanol plants after agreement with Shell

Investment of R$6bn is company’s biggest step in this segment

11/08/2022

Paulo Neves — Foto: Divulgação

Paulo Neves — Foto: Divulgação

Raízen unveiled Monday a R$6 billion investment package to build five new second-generation ethanol plants over the next five years. This is the company’s biggest step in the advanced biofuels segment. The investments were made possible after an agreement with Shell to sell the product for 10 years for €3.3 billion.

The company will have nine 2G plants in operation, under construction or announced, among the 20 it promised at the time of its IPO last year. The company raised R$6.9 billion with investors, and since the offering it has announced R$9 billion in 2G ethanol investments.

The first unit is expected to start operating next year and will join the Piracicaba unit, which has been operating for eight years. The units announced Monday will start operating between 2025 and 2027.

All new plants will have the capacity to produce 82 million liters of 2G ethanol per year and will use sugarcane waste that is currently unused, such as straw and bagasse. The five units will deliver 3.3 billion liters of biofuel to Shell over 10 years and will also have the capacity to produce and sell to more customers.

The volumes delivered to Shell will go to foreign markets, a priority destination for Brazil’s cellulosic ethanol. Unlike the domestic market, the international markets pay more for 2G ethanol because of its smaller carbon footprint compared to other biofuels and because it does not use additional agricultural lands for production.

“It doesn’t compete with food, which solves the ‘food-versus-fuel’ equation,” which is valued abroad, said Paulo Neves, Raízen’s vice president of trading.

The preferred market is Europe, but other destinations are also in the sights, such as Japan and California, which offer a premium to low-carbon intensity biofuels.

Almost all the cellulosic ethanol produced today by Raízen is exported, exception for a small portion that is sold to O Boticário for a perfume line.

The contract with Shell provides security for the company to build the units because it secures the return on investment. Other companies taking the first steps in advanced biofuels have adopted the same model. One example is ECB Group, which has a green diesel project.

Once the investment is paid off, 2G ethanol will be more competitive than first-generation ethanol, made from agricultural feedstock, since its production cost is much lower because it uses residues from the field. “In first-generation ethanol, you have the land, the cost of the inputs. In 2G ethanol, after capex, there is only opex, which is lower,” he said.

The company foresees an EBITDA margin of nearly 50%, with maintenance investments of R$50 million per plant per year.

The contract foresees a minimum price for the delivery of 2G ethanol to Shell, but the effective amount will be adjusted monthly according to market prices, currently at €1,400 per cubic meter. The additional value will be “shared” between the parties.

Raízen’s product will be able to meet both the demand to supply light vehicles, replacing gasoline and the production of aviation biokerosene or other uses. “We will deliver to the industrial companies that offer the best value,” said Mr. Neves.

*By Camila Souza Ramos, Fernanda Pressinott — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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5G technology advances fast, but older networks still survive

Almost one in five mobile phone connections in the country use second or third generation technology

11/07/2022

5G wireless technology is advancing faster in Brazil than its predecessor 4G, driven not only by promises of ultrafast mobile broadband but also by future innovations in industry (Internet of Things), transportation (self-driving cars), and medicine (robotic surgery). However, basic data services – such as vehicle tracking and payment with point-of-sale terminals – give survival to the 2G and 3G networks launched decades ago.

Almost one in five mobile phone connections in the country use second- or third-generation technology, according to the most recent data released by the Brazilian Telecommunications Regulatory Agency (Anatel). In August, 51.2 million 2G and 3G terminals were in operation in the country. The number of 5G accesses totaled 3.6 million at the time – less than 2% of the total number of active mobile lines in the country.

Despite being implemented later, 3G networks tend to disappear before 2G networks, said Leonardo Capdeville, chief technology officer at Telecom Italia’s TIM. “3G devices work on 2G networks, but the opposite does not happen,” he said. The deactivation of the third-generation networks is already happening in the United States, where the telecom heavyweight AT&T “retired” the technology early this year and T-Mobile did the same in mid-2022.

In Brazil, Anatel’s figures for each mobile technology include data terminals, which means that they do not necessarily reflect the use of 2G and 3G cell phones. These are mostly mobile connections used in the provision of vehicle telemetry and payment services. The maximum data transmission speed in 2G technology is 144 kilobits per second (kbps), a little less than three times the speed of a dial-up Internet connection (56 kbps).

Ismael Carlos do Nacimento — Foto: Leo Pinheiro/Valor

Ismael Carlos do Nacimento — Foto: Leo Pinheiro/Valor

For more basic telemetry services, such as fleet tracking, for example, 2G is sufficient. The same is true for the older point-of-sale terminals for card payments. “Between 80% and 90% of customers pay by card,” said Ismael Carlos do Nascimento Carvalho, 33, who works at an Ipiranga gas station in downtown Rio de Janeiro. Communication failures in POS terminals are not common, he said. If a carrier’s network fails, the gas station still has wi-fi connection. Asked about 5G, Mr. Carvalho said he is not familiar with the new technology. “I only know that it is an evolution of 4G,” he said.

The use of 2G for communication between machines partly explains the resilience of the technology in the country – in August, there were 24.9 million second-generation connections in operation. In the same month, the number of 3G accesses was 26.3 million.

In the comparison between August 2022 and the same month last year, Anatel’s numbers show a greater retreat of the 3G base (-12.2%) compared to 2G (-7.1%). “There is a trend of migration from the 3G base to 4G,” said Mr. Capdeville. “It is impossible, for example, to access video content with quality having 3G service.”

Within TIM’s mobile telephony strategy, one priority is to extend 4G coverage to all 5,568 municipalities in the country by the end of 2023. Today, there are more than 5,400 cities with fourth-generation technology. In parallel, the operator is investing in the fifth generation – more than half of the 5G antennas in operation in Brazil are TIM’s.

Even so, among the cities served by the operator, there are still 198 with only 2G service. In another 112, 3G is the most advanced technology available. In TIM’s mobile network, the estimated percentage of 2G and 3G devices is around 5%.

Sought by Valor to detail the number of cities covered only with 2G and those where 3G is the most modern technology available, Claro and Telefónica declined to disclose these data.

In a statement sent by e-mail, Telefónica only highlighted the total number of cities covered with each technology: 4,607 cities with 4G; 4,886 with 3G; and 3,757 with 2G.

“The technologies are maintained to serve B2C and B2B clients, and we do refarming [reuse frequency bands for new technologies] without loss of coverage in the places where the activation of the new frequencies is made,” said Elmo Matos, head of network planning at Telefónica’s Vivo.

A survey by consultancy Teleco shows that the adoption of 5G in Brazil – measured by the number of handsets compatible with the technology – is happening faster than what happened with 4G. In the first 12 months in which the fourth-generation service became available, the number of compatible cell phones grew almost 24 times, jumping to 2.5 million from 105,000.

In the 12 months after the debut of 5G in the country, the jump was greater – to 3.4 million from 100,000, according to the consultancy. This figure refers to the total number of devices in July 2022.

*By Rodrigo Carro — Rio de Janeiro

Source: Valor International

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Renewable power has potential to create 2 million jobs in 5 years

Brazil accounts for 10% of the world’s green jobs, mainly in hydropower and biofuels

11/07/2022

Ronaldo Ribeiro de Freitas Filho, 34, has always liked renewable power. A trained electrotechnician and engineer, he was 23 when he decided to “migrate” to the “green job” field. And, on his own initiative, he decided to search for qualification. The opportunity came when he joined Enel, an Italian multinational company that generates and distributes electricity and gas, in 2011. The company was signaling that it would join the renewable segment with the foundation of Enel Green Power, which manages and develops energy production activities from renewable sources, in 2008.

Over the years, the company offered him opportunities to specialize in this field, and Mr. Freitas Filho took the opportunity. “I was lining up both opportunities that Enel gave me, and those I sought out on my own,” he said. Today he is the manager of Enel Green Power’s operations center in Brazil, and is studying at the Politecnico di Milano university through a program offered by the company. “We have options in the market to seek [qualification],” he said. “But I feel that partnerships could be explored more [to raise supply in training in this field], between companies and universities.”

His feeling is shared by other experts in renewable power generation. They say Brazil has the potential to generate at least 2 million jobs in renewable projects over the next five years, nearly two times the current number of jobs: in the country, there are about 1.2 million workers in this field. And there is not enough training to qualify for such a future volume of new workers.

Brazil accounts for 10% of the world’s green jobs, mainly in hydropower and biofuels, according to the International Renewable Energy Agency (Irena). Experts say the country will strongly accelerate the pace of job generation.

The wave will be more directed to solar and wind power in the coming years, a perceptible conclusion in view of projects in these areas contracted in auctions. In practice, however, there is insufficient availability of training for new entrants to the sector’s job market, according to the ClimaInfo Institute, a non-profit organization focused on climate change studies; the Brazilian Association of Solar Power (Absolar); and the Brazilian Wind Power Association (Abeeólica).

These associations advocate partnerships between government, companies, and universities to increase qualification in renewable power. This would prevent a possible future hurdle in the expansion of the sector’s labor market.

In the country, there are about 1.2 million workers in renewable energy, said Aurélio Souza, an adviser with the ClimaInfo Institute, citing data from Irena. The engineer, CEO of Usinazul consultancy, and a researcher at the Photovoltaic Systems Laboratory of the Institute of Energy and Environment of the University of São Paulo, also helped to prepare a study on the Northeast region. Launched this year by Centro Brasil no Clima, Fundo Casa Socioambiental, Grupo Ambientalista da Bahia and ClimaInfo Institute, the work includes projections of power generation and jobs in the Northeast region through green projects.

The study estimates 2 million jobs more in five years. The calculations take into account concessions already granted for 66 gigawatts, more than 90% of which are solar and wind power. This is because, with well-consolidated biofuels and hydropower plants, there is more room for growth in generation and employment in these two other power sources. One gigawatt is equivalent to 1,000 megawatts. “Each megawatt installed [generates] 30 job positions per year in solar power and 15 in wind power,” he said.

The employment estimates in the study include only the Northeast region, he said. Thus, the pace of job openings may be even higher considering ventures in other regions. “Today, we have a lag in qualification according to what [future] demand needs,” he said.

As for solar power, there is no exact calculation of labor shortage at the moment, said Pedro Drumond, Absolar’s coordinator and a specialist in people management in the renewable power segment. Mr. Drumond said that, in the last 10 years, the offer of undergraduate and doctorate degrees related to energy has grown, as well as courses for panel builders, in the private and public sectors. “But the labor force is not yet qualified in the way we need,” he said.

Mr. Drumond suggested greater partnerships between companies and universities to meet the need for more and better qualification. In recent years, he said, companies have trained their own personnel – which would not be enough, he noted.

José Renato Colaferro — Foto: Divulgação

José Renato Colaferro — Foto: Divulgação

Blue Sol Energia Solar, which operates in the photovoltaic sector for 13 years, was one of them. José Renato Colaferro, the company’s founding partner, said that more than 18,000 students were trained in the so-called “Blue Sul University” launched in 2017.

Mr. Colaferro emphasized that it is not an easy task to train professionals for solar. This requires training in three pillars of knowledge. The first is regulatory knowledge of the power sector; the second is to understand the market, suppliers, and production costs; and the third is the technical part, to understand how the solar panel structure works.

To qualify such a worker, especially for future demand, more investment in training is needed today, said Mr. Colaferro. A qualified professional is not formed overnight, he noted.

In the wind power segment, there are qualified workers currently on the market to meet the demand, said Elbia Gannoum, head of Abeeólica. “Today we don’t have a lack of professionals,” she said. “But it is not enough for future demand. Every real invested in the wind sector generates 1.9 jobs in the sector’s production chain,” she said.

Abeeólica is aware of this, she said, and has held meetings with market players; and talked to research institutions and training professionals to expand courses and training. There are successful cases in this field, such as the Renewable Energy Engineering course at the Federal University of Ceará, she said.

But she acknowledged that it is necessary to expand more qualification supply. “What happens today is that those who want to enter the renewable segment seek training. They take courses, they adapt,” she said. “What I am seeing is an adaptation. But there is no coordinated action to focus on this [in professional qualification].”

By October 2022, solar energy had an installed capacity of 21 GW, in centralized generation (large plants) and in distributed generation (micro and mini plants), and generated 630,000 jobs, according to Absolar. The centralized solar generation alone is expected to reach 10.3 GW in 2026, the Brazilian grid operator ONS says. Wind power has 24 GW of installed capacity, according to Abeeólica, and, with contracts already closed so far, the forecast is to reach almost 40 GW by 2026.

*By Alessandra Saraiva — Rio de Janeiro

Source: Valor International

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Vivo mulls over acquisition in fiber assets

Opposite to the world’s movements, Telefônica in Brazil plans to expand its fiber network business

11/07/2022

Christian Gebara — Foto: Silvia Costanti / Valor

Christian Gebara — Foto: Silvia Costanti / Valor

The Spanish group Telefónica has been intensifying a series of sales of towers and participation in its fiber optic networks through the subsidiaries it owns in countries in Europe and Latin America. In the Brazilian market, where it controls Telefônica Brasil, owner of Vivo, the fiber business tends to go in the opposite direction. Instead of selling, the operator is willing to buy fiber assets that cross its path.

“The natural trend is to reduce network overlap, and we will see how it will be done,” Christian Gebara, CEO of Telefônica Brasil, told Valor. The CEO agrees with the sector expert’s forecast that the expansion of optical fiber infrastructure will reach a depletion among the largest operators. But for the executive, this is likely to happen in the short term. This means that the mergers and acquisitions that have been stirring up the more than 10,000 small internet access providers are already starting to “knock on the door” of the big players. And Telefonica is not on the selling end, warns the executive.

“Our strategy is well defined. The consolidation opportunity for us has to be very positive and cannot overlap with my network,” said Mr. Gebara about possible acquisition targets. “I can’t speak for other players, but I believe that some of them may be interested [in selling], because competing with Vivo, with a network of this size, with a channel and a brand with the strength that we have, with the possibility of convergence, with the whole portfolio of digital services, may not be easy.”

In the global market, dominant operators first separated services from infrastructure, creating independent or neutral networks – totally isonomic – to operate wholesale. Then they attracted investors.

“Each group company has a fiber strategy, the one in Brazil is different,” explains Mr. Gebara. “If you look today at the ‘picture’ of 2024, a network of ours reaching 29 million homes, 22 million will be Vivo’s own network and the rest through a neutral network. So, much of our network will continue. Right now, the plan is for it to be 100% Vivo-owned.”

By separating its infrastructure, and creating FiBrasil, Telefônica guaranteed its presence in the fiber market on different fronts. It invests through FiBrasil, a partnership between Telefônica Brasil and Telefonica Infra, from Spain, with 25% each; and the Canadian fund CDPQ, with 50%. In addition, it invests directly with Vivo. Finally, it has a partnership with American Tower in Minas Gerais.

From the total number of homes where Telefônica has already made fiber available to be hired by providers and sell the FTTH service (fiber to the home) to consumers, 6.4 million are operations through FiBrasil and the rest through Vivo, while the agreement with American Tower includes 1 million homes.

A leader in its partnerships, Vivo determines the expansion strategy and still has an exclusivity period before the network capacity is sold to competitors. “It’s hard to see an operator like ours that has control as we do,” says Mr. Gebara, comparing its strategy not only with local rivals but also with peers in the group.

Local competition also accelerates. IHS is TIM Brasil’s partner in the neutral network company I-Systems. Oi sold control of its fiber asset, V.tal, to funds from BTG Pactual and GlobeNet Cabos Submarinos. Compared to the other incumbents Grupo Claro Brasil is the one that is the furthest behind in fiber deployment, besides not having admitted partners so far.

Selling a slice of the network was a way for the companies to raise the necessary funds for the heavy investments in the expansion of the fiber and 5G networks, as well as to reduce the high debts. In the earnings report for January to September 2022, released on Thursday, Telefónica group reported net debt of 28.9billion euros. In Brazil, the net debt was at R$13.5 billion, including the leasing effect.

When presenting Vivo’s group earnings reports in a teleconference for investors on Friday, the head of operations, Ángel Vilá, highlighted an “excellent set of results, growing two digits in accesses and main financial indicators.” He added: “In Brazil, our unmatched operational and financial performance has helped us strengthen our leadership position in the market.”

*By Ivone Santana — São Paulo

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