Unemployment to hit 11% by year-end

Desemprego elevado é um dos maiores desafios do Brasil após crise sanitária

Brazil will probably end 2022 with an unemployment rate of at least 11%, representing about 12 million people unemployed — and without recovering the real income from work, currently damaged by the growth of inflation. This is what specialists consulted by Valor predict.

Analysts with Tendências, XP, Ativa, LCA and Fundação Getulio Vargas (FGV) unanimously say that economic projections has deteriorated this year, and the same happened with the conditions necessary for a sustainable recovery of employment. On top of a more unfavorable macroeconomic environment, the activity is likely to suffer direct and indirect negative effects from an unexpected factor – the war between Russia and Ukraine –, such as higher inflation, economists note.

And they warn: the continued increase in the workforce and the need for families to raise income due to the loss of purchasing power with rising prices will stimulate even more people to look for a job, putting upward pressure on the unemployment rate this year.

At the beginning of 2022, the labor market gave a positive sign, with a decrease of 0.9 percentage points in the unemployment rate in the quarter to January, to 11.2%, according to the Brazilian Institute of Geography and Statistics (IBGE).

For Lucas Assis, an economist at Tendências Consultoria, this decline does not guarantee a continued improvement in employment by the end of the year. A concerning factor released by IBGE, he said, is the already significant number of people — 6.9 million —who want to work more hours to increase income but cannot. This is because the current pace of the economy does not encourage companies to increase hours worked.

Tendências projects zero economic growth in 2022. And he did not rule out still lower world growth and damage in global supply chains of inputs due to the conflict in Eastern Europe. “This [context] may restrain the intention of investments and the impetus of hiring in the country,” he said, suggesting programs to tackle unemployment, especially among young people.

Rodolfo Margato, an economist at XP, also sees zero GDP growth, and adds that any sustainable improvement of the Brazilian labor market is hindered by structural problems. “We have a high informality rate, above 40% [of the employed population], higher than the average of the emerging countries, and low average professional qualification,” he said. As a result, jobs with low qualifications pay less and, consequently, do not help to increase labor income continuously and sustainably.

“It is difficult to imagine a reversal of income trajectory in real terms [in 2022],” he added. This month, IBGE also unveiled that, even with lower unemployment, in the quarter ending in January the real usual income from work (discounting inflation) fell 1.1% compared to the previous quarter; and fell 9.7% compared to the same quarter of the previous year.

In Mr. Margato’s analysis, a solution to improve the labor market, in the long term, would be to combine continued investments in professional training within an environment with balanced macroeconomic indicators.

The importance of the economic scenario in the employment results was also mentioned by Étore Sanchez, the chief economist of Ativa Investimentos. For him, the effect of the weak economy on employment in 2022 may lead to an unemployment rate of 12.5% by the end of the year — that is, about 13 million unemployed. “The outlook is so bad for growth this year that the labor market will end up reflecting this,” he said, also projecting zero GDP this year.

In general, the labor market reacts with a lag in relation to economic activity, said Bruno Imaizumi, an economist at LCA. But he acknowledged that, today, the situation is different. “In 2022, the labor market is tied to the economic scenario, which is deteriorating.”

The analyst also does not see much room for recovery of jobs because, besides the weaker economy not favoring such action, this movement has already happened in 2021, after cuts in 2020 due to the pandemic. In February 2020, the employed population was 94.7 million, and in December 2021, 95 million, he said.

“We will continue with unemployment rate at this high level,” he said. Mr. Imaizumi also pondered that the picture could be less unfavorable with structural solutions, such as more programs focused on professional qualification.

Rodolpho Tobler, an economist at FGV, agrees. For him, “it is impossible to imagine an unemployment rate below double-digit levels” with structural problems in the labor market, such as high informality and low professional qualification. Like the other specialists, he pointed out that since 2016 the country has not seen an annual unemployment rate below 10%. This resulted in a high level of unemployed people for a long period of time without generating income from work and, thus, “curbing” robust growth in the economy.

“And the war [in Ukraine] can amplify these problems [in employment],” he said. He stressed that the conflict is a factor in raising prices, inhibiting consumption, and thus driving even weaker activity — which hinders job openings.

Source: Valor International

https://valorinternational.globo.com

/by

Citi plans to increase revenues in Brazil by 50% in 3 years

Marcelo Marangon and Fernando Iunes — Foto: Carol Carquejeiro/Valor
Marcelo Marangon and Fernando Iunes — Foto: Carol Carquejeiro/Valor

Citi is Brazil’s ninth-largest bank by assets and the second-largest foreign one, but has outlined a plan to speed up in the country. The bank led by Marcelo Marangon has set the goal of expanding revenue by 50% in three years. To do so, it will invest more than $50 million in technology and hire 300 people – the bank now employs 1,900 people here.

Citi has also hired Fernando Iunes, a former Itaú BBA executive, as vice-chair of its investment bank. Mr. Iunes will strengthen a business in which Citi plans to advance, and foresees a very positive performance this year despite the fewer IPOs expected. Last year, the U.S.-based bank institution ranked sixth in revenue of investment banks in Brazil, according to Dealogic.

“Brazil is Citi’s seventh-largest market in wholesale banking, and we have a footprint in 95 countries. We have a growth ambition like we have never had, even in a challenging scenario, with elections, war, the transformation of the financial market, several factors,” Mr. Marangon said.

In moments of global crisis, the value of the bank’s global presence becomes even clearer, he said.

The bank has not yet released its official results for 2021, but the CEO says – without elaborating – that the profit was the highest in 10 years. The assets reached R$130 billion, up almost 30% year over year. He recalled that after the sale of the retail operation to Itaú, unveiled in 2016, the bank increased threefold its assets in the country and improved profitability. “This shows that the focus on wholesale banking made perfect sense.”

Better known for serving multinationals and large groups, Citi has decided in recent years to advance in the corporate segment, which includes companies with revenues from R$250 million to R$5 billion. This base has 1,200 clients, and the goal is to attract 1,000 companies more.

The expansion, however, does not represent greater risk taking. “We are going to increase our share of wallet and bring in new clients within the target market that has already been defined. We will not add unnecessary risk to our portfolio.” The bank’s total portfolio exceeded R$36 billion in the middle of 2021.

According to the executive, the scope has not changed, but the bank wants to attract a larger portion of a group that it estimates to have between 3,500 and 5,000 companies. He said that credit provisions dropped substantially in 2021 and does not anticipate a significant increase this year. “We are not changing the established prerequisites. And this is key for achieving resilient results,” he said.

Of the $ 50 million in planned investments in technology, a good part will be destined to cash management and treasury to improve services. Later on, the bank does not rule out using this structure to prospect smaller companies as well.

The immediate scenario is not easy, with rising inflation and interest rates, a sluggish economy, and the volatility of an election year. However, the bank sees opportunities in the country. “Despite the pandemic, the difficulties we have seen in the global supply chain and now the war, we see a positive outlook for Brazilian companies,” Mr. Iunes said.

The executive’s mission will be to strengthen the relationship with companies to capture these opportunities. With a tougher market, Citi is betting on infrastructure projects, many of them linked to recent concessions and the sanitation sector. “There is still the migration to a new low-carbon economy and we need to continue supporting clients in this regard, regardless of the macro scenario,” Mr. Iunes said.

This year, Citi took part in key secondary offerings, such as those of meatpacker BRF, power company Equatorial, Havaianas flip-flop maker Alpargatas, and the block trade of NotreDame Intermédica. Last year was already a record year for the bank, with 26 equity operations, 15 mergers and acquisitions and 46 debt issues.

Mr. Marangon acknowledged that the number of share offerings in the market as a whole is likely to be lower this year, but says that Citi wants to continue gaining market share. In addition, the number of M&A deals is expected to rise. “Obviously, there will be some slowdown, but they will continue to happen. We have a very large pipeline of deals. The long-term trend remains very positive,” Mr. Iunes said.

At the same time, Citi also expects to increase twofold, in three years, the $10 billion under management in private banking.

The elections this year pose challenges. However, according to Mr. Marangon, more important than the candidate who leads the polls is the vision about fiscal responsibility. “If we have a campaign that focuses on Brazil’s strategic plan, on the fiscal situation, on investments, we see no reason for it to avoid, postpone any type of investment, under the microeconomic standpoint. The macro is more complex.”

On the other hand, the executives’ view is that the war in Ukraine may increase the relative importance of Latin America in the portfolios of global investors. Mr. Iunes says that, besides commodities, some countries in the region, such as Brazil, have better governance standards.

With this, Citi sees the flow of foreign capital coming into the Brazilian market as lasting. “We have 67% of foreign investor custody, so we have a privileged view of the flows. There was a very strong inflow into bonds and equities, and at the moment we continue to see a strong flow into Brazil. Even long-term direct investment is likely to see a substantial increase this year. We project around $50 billion,” Mr. Marangon said.

Source: Valor International

https://valorinternational.globo.com

/by

Brazil to join WTO’s aircraft agreement

WTO | Plurilateral agreement on trade in civil aircraft news archive

Brazil will join the World Trade Organization’s agreement on trade in civil aircraft. With this, it will cease to be the last relevant aircraft producer outside this understanding that eliminates import tariffs in the segment.

The decision to join was confirmed by Lucas Ferraz, foreign trade secretary of the Economy Ministry, who is in Geneva in meetings with partner countries. Now the mandate for the negotiation must be approved by the Commerce Strategy Council, in a cabinet meeting headed by President Jair Bolsonaro.

The agreement entered into force in 1980 and has 33 signatory countries. Most WTO agreements are multilateral, meaning that all 164 member countries participate. This understanding is part of plurilateral agreements, signed by a restricted number of countries.

It provides for the elimination of import tariffs levied on civil aircraft and products in the sector, such as aircraft engines, their parts and components, flight simulators, and so on.

Embraer always wanted Brazil’s participation in this agreement, the secretary said. In the aeronautical sector, there is a strong insertion of global value chains, as 90% of the value of an airplane is typically imported content.

Brazilian exports and imports in this sector total $40 billion, Mr. Ferraz said. The import duties involved are virtually zero in Mercosur.

“It is important for Brazil to participate because, besides having access to other markets with zero tariffs on exports, it gives legal security for the opening of its market,” Mr. Ferraz said.

On the other hand, the secretary confirmed that joining the Information Technology Agreement (ITA), which eliminates tariffs on covered products and can reduce prices for consumers, remains on the radar. Yet, this topic involves changes in Mercosur’s Common External Tariff (TEC). “The conditions are not yet given for joining, but it is in our plans,” he said.

Last year, Laos became the first least developed country to join this plurilateral agreement.

At the time, a representative of the European Union (EU), Hiddo Houben, highlighted that Laos made the right choice and used Brazil as an example in the other direction.

He cited “academic evidence that countries that join the ITA agreement increase their market share of Information Technology products.” And added: “Brazil, for example, has not joined the ITA and its share of the world market for IT products has declined since 1994, 1995. So joining the ITA is a good thing in order to become competitive in manufacturing the products that are covered by the agreement.”

Source: Valor International

https://valorinternational.globo.com

/by

Brazil to increase oil production to help stabilize energy markets

Bento Albuquerque — Foto: Divulgação/MME
Bento Albuquerque — Foto: Divulgação/MME

Brazil is expected to increase oil production this year by around 300,000 barrels a day, which will lead to a 10% increase in national production, Mines and Energy Minister Bento Albuquerque said on Wednesday at the opening of the International Energy Agency (IEA) ministerial meeting in Paris.

According to Mr. Albuquerque, the increase in crude oil production will be Brazil’s contribution to the “stabilization of global energy markets,” directly affected by the effects of the Russian invasion of Ukraine.

“This is the result of regulatory advances, modernization of the Brazilian energy market and consistent investments in the pre-salt layer,” the minister said, citing Brazil’s offshore reserves.

Two weeks ago, Valor reported that the Brazilian government had committed to the United States to expand oil and gas production as a way of helping to maintain regular supply in the world.

At Wednesday’s event, Mr. Albuquerque argued that “the energy transition must go hand in hand with energy security.” He said that Brazil has made a “significant leap” in clean and renewable sources, such as bioenergy, biofuels, solar and wind, in addition to energy efficiency.

The minister took the opportunity to talk about the launch of the Brazilian biomethane program earlier this week. According to him, the effort is in line with the commitment assumed by Brazil at COP-26, for being able to bring more energy security, reduction of CO2 emissions and replacement of fossil fuels.

“The consistency of our policies over time and stable and predictable regulatory frameworks have been crucial for the private sector to make the investment decisions necessary to increase the scale and speed of the energy transition in Brazil,” Mr. Albuquerque said.

The opening panel of the event was led by IEA’s executive director, Fatih Birol.

Source: Valor International

https://valorinternational.globo.com

/by

Agriculture, construction boost investments

Carlos Antonio Rocca — Foto: Silvia Zamboni/Valor
Carlos Antonio Rocca — Foto: Silvia Zamboni/Valor

Agriculture and construction have driven the growth of investments between 2019 and 2021 in the country. An exclusive study by Fipe’s Center for Capital Market Studies (Cemec-Fipe), linked to the University of São Paulo, found that the two industries accounted for two-thirds of investments in machinery and equipment between 2019 and 2021. During the period, the country faced the first year of the pandemic, the recovery after the height of the crisis and the slowdown of this recovery over the past year.

The concentration helps explain the expansion of investments even in an unfavorable macroeconomic context, said Carlos Antonio Rocca, the coordinator of Cemec-Fipe, who led the study.

“Some key factors for investment decisions are not encouraging. The recovery of the economy has lost steam, the growth expectation for the next three years is the lowest since 2006, and we also have uncertainty. But we investigated who has driven the increase in investments and we found that this came mainly from agriculture, with the good performance of commodities, and from construction, with interest rates still relatively low,” he said.

The study was motivated by the assessment that the growth of investments in the period was “somewhat surprising” since the country has high levels of idle capacity, there is a continued reduction in growth expectations for the coming years and uncertainty remains high, Mr. Rocca said.

Statistics agency IBGE detected investment rates of 15.5% in 2019, 16.6% in 2020 and 19.2% in 2021. The study by Cemec-Fipe excludes 2020 to avoid specific effects of the first year of the pandemic and directly compares the variation between 2019 and 2021, which were more typical years.

To understand the origin of this investment expansion, however, Mr. Rocca takes into account work done by economist Gilberto Borça Jr. showing that the investment rate actually achieved 18.2% in 2021, compared with 16.2% in 2019.

This finding excludes two factors that affected investments in the period. The first is the change in relative prices between the capital goods that make up the gross fixed capital formation (GFCF) and the prices of service goods that make up the GDP, due to the increase in the exchange rate, which affects imported capital goods.

The second is the impact of the value of Petrobras’s rigs. A tax change – the end of Repetro, a special customs regime that eased imports of goods for oil exploration – caused investment to be driven by imports of capital goods recently.

“Even so, it was still a big growth in investments, of two percentage points. And when we look at GFCF data between 2019 and 2021, we see that the highlight is machinery and equipment and construction. From there, we looked at the production of machinery and equipment, and we saw this great weight of those linked to the agricultural sector and construction,” Mr. Rocca said.

Considering IBGE’s index of physical production of capital goods, the segments focused on agriculture grew above 40% in real terms (43.8% in agricultural and 47.8% in agricultural parts) between 2019 and 2021. Capital goods for construction, on the other hand, advanced 40.48%, considering the same base of comparison.

Thus, by the accounts of Cemec-Fipe, the production index of capital goods rose 14.8% between 2019 and 2021. Of this increase, 6.44 percentage points came from the agricultural segment and 0.91 percentage point from agricultural parts, totaling 7.35 percentage points, or almost half (49.7%) of the growth. Capital goods for construction, meanwhile, account for 2.47 percentage points, or 16.7% of the expansion. The weight is much higher than the industrial capital goods segments (only 1.01 percentage point), for instance.

“If you consider the agricultural segment and the agricultural parts segment, virtually 50% refers to machines for the agricultural sector. If you also consider construction, there are two thirds of the investments for these two segments,” Mr. Rocca said.

In addition to evaluating the impact of these segments in the growth of investment, the study also collects investment data from 472 public companies. According to the survey, agribusiness-related companies saw a 52% expansion of the GFCF indicator in the period (considering the evolution of the value of their assets), compared to a much lower rate (24%) for the average of public companies as a whole. The investment measure in this case considers the evolution of the value of assets in the financial statements, both fixed assets (such as real estate and machinery) and intangible assets (such as systems and software, for example), in nominal values.

“Agribusiness-related companies had much stronger growth in this measure of investments than the sample average. This reinforces the data we saw about the substantial growth of agricultural machinery. Public companies have a great weight in the economy, they account for a quarter of the added value, and show a general trend,” Mr. Rocca said.

Source: Valor International

https://valorinternational.globo.com

/by

Brazilian stock market still shows after-effects of pandemic

The volatility caused by the pandemic gave rise to several small cycles in the capital markets — Foto: Silvia Zamboni/Valor
The volatility caused by the pandemic gave rise to several small cycles in the capital markets — Foto: Silvia Zamboni/Valor

Wednesday’s trading session marked the second anniversary of when Brazil’s benchmark stock index Ibovespa reached its lowest point during the Covid-19 crash. Since then, the global economy and the capital market have gone through several cycles that helped to distorted the prices of several stocks in the Brazilian stock market.

A survey carried out by Valor Data found that, two years after Ibovespa reached its lowest level, of 63,569 points, and its strong recovery – it closed at 117,457 on Wednesday – some companies are still strongly depressed, in some cases with a market capitalization below the one seen on that low point.

This is the case of retailer Magazine Luiza, which on Wednesday had a nominal market cap R$8.6 billion lower than the one seen two years ago. Or developer Eztec, which shrunk by R$2.1 billion in the period. Construction company MRV, toll road operator EcoRodovias and BR Malls have recovered from losses recently and posted a positive balance of R$728 million, R$363 million and R$675 million, respectively.

Since the index almost doubled in score, there are also clearly positive highlights, mostly blue-chip companies. Among banks, Itaú grew R$51 billion, Bradesco advanced R$58.5 billion, Santander gained R$44.8 billion and Banco do Brasil is worth R$36.6 billion more now. Oil giant Petrobras and mining company Vale, which start from a higher base given their size, gained R$279 billion and R$302 billion in market cap in the period.

But despite the snapshot, the Ibovespa could not have been in a less static way in the last two years. The volatility caused by the pandemic gave rise to several small cycles in the capital markets, making stocks gain and lose attractiveness quickly.

Alexandre Sabanai, a manager at Perfin, recalled that in March 2020, while the stock markets crashed, the market spent a few days without a reference. At that point, six circuit breakers were triggered in eight days between March 9 and 18.

“Agents price risks and returns well, but they don’t know how to deal with uncertainty. We didn’t know how lethal the virus was, how long it would take for infections to stabilize, so the start was difficult. When the initial panic passed, investors started to evaluate the sectors that would suffer the most.”

So while part of the assets showed a first sign of recovery, mainly from essential sectors such as supermarkets, pharmacies, sanitation and energy, others had a harder time, such as shopping centers, airlines, highway concessions and street retail.

Phil Soares, head of equity analysis at Órama Investimentos, recalls that the race for technology assets emerged at that point, while there was talk of the “new normal.” In the international market, the big techs emerged as natural winners, while in Brazil, with no companies on the technological front, the beneficiaries were companies that already had or accelerated their digital presence. Via Varejo rose 200% between March and September and the newcomer Locaweb jumped 450% in the period.

The market experienced a more generalized rally in late 2020, reflecting some hope with the beginning of mass vaccination, until the second wave of Covid-19, and a second lockdown, generated again a few more months of volatility in early 2021.

However, with a new reopening of the economy in April and government stimuli taking effect, economists revised activity data upward and companies again delivered great results, taking advantage of the low base of comparison of the previous year amid a buyer appetite, said Fernando Bresciani, an investment analyst at Andbank. On June 7, 2021, the index closed at 130,776 points, reaching 131,190 during the session.

China, which stimulated its economy after the crisis, also stimulated the metallic commodities, making iron ore reach the $220 level. But it was short-lived. Inflationary pressures began to trigger interest rate hikes and, in addition, the country was still dealing with a water crisis and uncertainties linked to the fiscal situation and elections. Thus, the local market suffered in the second half of 2021.

At the beginning of 2022, amid higher oil prices and the recovery of minerals, local assets started to call the attention of international investors. By March 21, R$81 billion had been invested, with a focus on blue-chip companies.

Agents expected the flow to trickle down to assets linked to the local economy, but as the Russia-Ukraine war again affected inflation, there is no longer a consensus. For now, the Ibovespa is on the rise. On Wednesday, the index gained 0.16%, to 117,457 points, its sixth consecutive advance, with local shares testing the thesis that some companies are trading at a discount here.

“We still can’t see strong growth, since there are many uncertainties around interest rates and inflation. But volatility drives these movements,” Mr. Bresciani said.

Source: Valor International

https://valorinternational.globo.com

/by

Revenue in Brazil’s tourism sector rose 23% in January

Tomaz Silva/Agência Brasil

São Paulo – The revenue of Brazilian companies in the tourism sector reached BRL 15.3 billion (USD 3.1 billion) in January, 22.9% more than in the same month of 2021. Compared to January 2020, before the COVID-19 pandemic, the result was 19.2% lower. The data, released on Tuesday (22), are from the Federation of Trade in Goods, Services and Tourism of the State of São Paulo (FecomercioSP).

“Although the sector was harmed by the Omicron variant, the movement of tourists due to the traditional period of school holidays helped to boost the result of the month, in addition to the weakened basis of comparison,” says the text of the explanatory note of the entity.

According to the FecomercioSP survey, the January result was mainly influenced by aviation, which grew 60.6% in the first month of the year, year on year. However, the revenue of the air sector was 13.6% lower than the pre-pandemic level.

The room and board services group posted the second highest growth in January, up 14.7% year on year, but 19.2% below the pre-pandemic revenue level. Cultural, recreational and sports activities registered an annual growth of 10.4%, but a decrease of 21.6% compared to January 2020.

Translated by Guilherme Miranda

Source: NewsNow

https://www.newsnow.co.uk/h/Business+&+Finance/Economy/International/Brazil

/by

Minister under pressure to explain role of evangelical pastors

Milton Ribeiro — Foto: Luis Fortes/MEC
Milton Ribeiro — Foto: Luis Fortes/MEC

Education Minister Milton Ribeiro was recorded admitting to give priority to the release of funds through the intermediation of evangelical pastors with no connection to the government. As a result, he has been under pressure, even by the governing coalition in Congress, to explain the news, and is likely to be summoned by the Senate Education Committee. The case has eroded his reputation with part of the evangelical caucus, which supported his name for the position.

Mr. Ribeiro was caught on audio released by newspaper Folha de S.Paulo saying that he favors, at the request of President Jair Bolsonaro (Liberal Party, PL), the release of works intermediated by two pastors who, without having a position in the government, act to obtain funds. In exchange for the funds, the minister says in the recording that “the support we ask for is no secret.” “It is support for the construction of churches.”

The head of the Senate Education Commission (CE), Marcelo Castro (Brazilian Democratic Movement, MDB, of Piauí), announced that senators are likely to approve this week the order for the minister to provide an explanation. “If this is not influence peddling, I don’t know what influence peddling is,” he said. The request, if approved, forces the minister to appear, under penalty of incurring a crime of responsibility. “If this government were honest, with the story that we have today [in the newspapers], with the recording, he would no longer be a minister,” Senator Omar Aziz (Social Democratic Party, PSD, of Amazonas) said.

Lawmakers from opposite ends in the political spectrum asked the Federal Supreme Court (STF), the Federal Court of Accounts (TCU), the Prosecutor General’s Office (PGR) and Federal Prosecution Service to act against President Jair Bolsonaro, Minister Ribeiro and the evangelical pastors. The presidents of the Senate, Rodrigo Pacheco (PSD of Minas Gerais), and of the Chamber of Deputies, Arthur Lira (Progressive Party, PP, of Alagoas), called for clarification from the minister.

According to the newspaper “O Estado de S. Paulo”, the pastors are at the head of a parallel office within the Ministry of Education and participate in Mr. Ribeiro’s agendas that define the ministry’s priorities and the use of funds destined to education in the country. The funds are managed by the National Fund for the Development of Education (FNDE), an agency of the ministry controlled by politicians from the so-called Centrão (a cluster of right and center-right parties). Mr. Santos and Mr. Moura have no ties to the public administration.

The newspaper “Folha de S.Paulo” obtained an audio recording in which Mr. Ribeiro admits, in a private meeting, that the government prioritizes municipalities whose requests for release of funds were negotiated by the pastors. The minister claims that he meets the demands of the religious leaders at the request of President Bolsonaro. “It was a special request the president of the Republic made to me on the issue of [pastor] Gilmar”, says Mr. Ribeiro in conversation with mayors and the pastors.

“Why these two pastors, who do not have a position in the federal government and do not hold public office, would be legitimized by President Bolsonaro as interlocutors of mayors in the office of the Minister of Education, which is also headed by a pastor? We have the right to know the real story behind this free transit and direct impact on public money. The ‘parallel education office’, created by the Bolsonaro administration, directly affects the distribution of FNDE resources. We are filing representations to investigate evidence of high crimes and misdemeanors and administrative impropriety,” said the PSOL leader in the Chamber, Sâmia Bomfim (São Paulo), in a statement sent to the press.

Considered one of the most active lawmakers in the education field, deputy Tabata Amaral (Brazilian Socialist Party, PSB, of São Paulo) also went to Twitter to criticize the existence of the parallel cabinet and raised a hashtag for the departure of Mr. Ribeiro.

“The most incompetent MEC in history is also a hotbed of corruption, administrative impropriety and influence peddling. The audios in which the minister himself shows that his objective was never education are scandalous. We will demand measures from the Prosecutor General’s Office (PGR). One more minister will fall,” wrote Ms. Amaral.

Mr. Ribeiro denied on Tuesday that he has benefited evangelical pastors and churches in the distribution of ministry resources, as suggested by an audio released by Folha de S.Paulo. In a press release, the minister denied any irregularity or favoritism in the transfer of funds, without citing the record of the meeting.

“Unlike what was reported, the allocation of federal resources follows the budget legislation, as well as the technical criteria of the National Fund for the Development of Education (FNDE),” Mr. Ribeiro said.

In the press release, the minister also denies that Mr. Bolsonaro ordered pastor Gilmar Santos to indicate the distribution of the ministry’s funds. “I also say that the president of the Republic did not ask anyone for preferential assistance, he only asked that he could receive everyone who came to us, including the people mentioned in the report,” says the minister’s statement.

According to Mr. Ribeiro, all requests for resources are sent for evaluation in the respective technical departments, “in accordance with legislation and based on the principles of legality and impersonality.”

At the head of MEC since July 2020, Mr. Ribeiro is a pastor of the Presbyterian Church and, in the press release, stated that his religious background does not influence his management.

“I reaffirm my commitment to the secularity of the State, a commitment I signed on the occasion of my inaugural speech at the head of the Ministry of Education. I emphasize that there is no hypothesis and no budget forecast that makes it possible to allocate resources to churches of any religious denomination,” he added.

Source: Valor International

https://valorinternational.globo.com

/by

Braskem said to plan spin-off, IPO of biopolymer business

Geração de caixa da Braskem bate recorde de R$ 7,1 bilhões em 2018

Braskem plans to spin off its biopolymer (green plastic) business into an independent company that will have other partners and shares traded on the stock exchange in Brazil or the United States, sources say. As a result, the Brazilian petrochemical company, which still have fossil raw material as its main source, seeks to go global and unlock market capitalization.

Braskem, which is controlled by Novonor (formerly Odebrecht) and Petrobras, hired Citi to draw strategic and financial investors to the project. The deal is valued at around $2 billion — the company plans to raise around $500 million, two sources familiar with the matter said.

According to another source, the format of the operation, which will finance the expansion of the production capacity of bioethylene and plastic resins from renewable sources, like ethylene glycol, is expected to be defined in two or three months.

Braskem intends to reach an installed capacity of 1 million tonnes of green plastic in the world by 2030, compared to the current 200,000 tonnes per year. Investments are estimated at $1 billion to $1.5 billion in this period.

To accelerate the project, the petrochemical company has been talking to potential financial partners, holders of innovative technology and suppliers of renewable raw materials. Fund Advent was one of the possible investors approached by the company. The manager, which has businesses in the chemical segment, was not interested because it would have a minority stake, sources say.

Two sources said that Braskem does not rule out running the project through a “special purpose acquisition company” (SPAC), taking advantage of environmental, social and governance (ESG) elements. In practice, SPAC is a listed company that does not have any asset.

In Brazil, Embraer resorted to a similar operation to enable the growth of its urban air mobility company. Eve is on its way to being listed on the New York Stock Exchange (NYSE) through Zanite, a U.S.-based SPAC founded by Kenn Ricci, co-owner of Directional Aviation, one of the largest executive jets operators in the world, and Steve Rosen, with Resilience Capital Partners.

According to sources, Braskem is also in initial talks with Cosan, which already supplies ethanol for the production of green ethylene by the petrochemical company in Triunfo (Rio Grande do Sul). According to a source familiar with the matter, Cosan is not interested in equity participation at this first moment.

The spin-off of the green ethylene business could drive Braskem shares, despite being a small operation compared with others in the company “This is a business that generates value, but that is not yet included in the price of the company as a whole,” said a source in the financial market, who asked not to be named.

In January, Braskem tried, without success, to carry out a secondary offering. It was not for lack of interest in the shares, but because investors were asking for discounts to take part in the operation.

Currently the largest biopolymers maker in the world, Braskem is investing $90 million to expand the production of green ethylene in Triunfo, which will start operating in December this year. With the contribution, the production of green ethylene will rise to 260,000 tonnes per year from 200,000 tonnes per year.

The second factory is expected to be installed in Thailand and the plan is to build two other production units, totaling four. There is no new expansion project in Triunfo so far, but the Rio Grande do Sul complex could be a candidate for future investments.

In Thailand, Braskem signed a letter of understanding with one of the largest local petrochemical companies, SCG Chemicals, to evaluate a joint investment in a new bioethanol dehydration plant to obtain green ethylene and produce biopolyethylene.

Braskem, Advent and Citi declined to comment. Cosan denied that it is in talks with Braskem.

Source: Valor International

https://valorinternational.globo.com

/by

Judges pressure Senate to reinstate wage bonuses

Renata Gil — Foto: Divulgação
Renata Gil — Foto: Divulgação

The presentation of three amendments to the constitutional amendment proposal PEC 63 — which had been stalled for eight years — generated expectations in the Senate that the bill will soon be put on the agenda. This proposal reinstates an additional 5% to the salary of judges and public prosecutors every five years — hence the name quinquennium. It was outlawed in 2005.

If the expenses foreseen for the two careers included in the original bill (judiciary and federal and state prosecutor’s office) are computed, the annual budget impact is R$3.6 billion. There are amendments that extend the bonus to public lawyers, federal prosecutors, public defenders and chief police officers. This would add R$900 million to this bill, without taking into account state employees in those categories. These estimates refer to active servers. The inclusion of retirees at least doubles these figures.

The president of the Association of Judges of Brazil (AMB), Renata Gil, says she has received the support of the Federal Supreme Court Chief Justice Luiz Fux. All his predecessors in office in recent years, she says, have supported AMB’s request. When contacted by Valor, Justice Fux did not return the call. Senate President Rodrigo Pacheco (Social Democratic Party, PSD, of Minas Gerais) denied that the PEC will be put on the agenda this week.

This is not the first time that a legislative proposal ignores the article 114 of the Constitution, which conditions the increase in expenses to the indication of the relevant source of revenues. The uniqueness of this PEC is the support it receives from the state careers whose mission is to ensure compliance with the Constitution.

The proposal, authored by former Senator Gim Argello, has been in the Senate since 2013. As of March 10 this year, it received two amendments from the Workers Party (PT) and one from the União Brasil (UB).

The Constitution, however, was not enough to prevent PEC 63 from being rescued during this legislature. The sign that it might be put on the agenda was given by the presentation of three amendments between March 10th and 16th, after eight years frozen in the Senate. Two of those amendments are from PT senators Humberto Costa (Pernambuco) and Rogério Carvalho (Sergipe), and one from União Brasil Senator Soraya Thronicke (Mato Grosso do Sul). All of the amendments add categories to be benefited by the reintegration of the five-year term to the public service.

Ms. Gil says that the PEC does not bring a hike, but a “restructuring” of the careers, as it happened recently with the military and public defenders. The judges also felt hindered in comparison to the careers of the Federal Attorney General’s Office (AGU), federal prosecutors who began to earn attorney’s fees borne by the loser as of 2016. Of the 12,253 employees of these careers (including retirees who are also contemplated), 62% receive R$10,000 in those fees per month in addition to their salaries (the minimum wage of the segment is R$21,000).

The head of AMB says that the funds must be sought in the budget itself from an adjustment of accounts of each court. She defends that the restructuring is a way to avoid that the outgoing salary of the judges is similar to the incoming one, but it does so without reducing the former and, instead, by increasing the remuneration along the career with quinquennia that are not subject to the remuneration ceiling of the Federal Supreme Court.

Ms. Gil says that the Brazilian Judiciary system, one of the most expensive in the world, is not so costly because of the judges’ salaries, but because of the free access to justice guaranteed by the Constitution. According to AMB, there are 75 million cases being tried in Brazil, which gives an average of 4,000 cases for each of the 18,000 active judges. This is due to the free costs of lawsuits, which also explains why there are 1.3 million lawyers in the country. In Portugal, she says, the restriction in access means that there are only 400 cases per judge.

The pressure for the return of the quinquennia grew with the accumulation of three years without salary increases for the judiciary. It is a movement to get around the fiscal limitations, like the one that happened in 2000, with the creation of the housing allowance. The difference is that now the circumvention of the cap seeks shelter in the Constitution. The categories to be contemplated have a floor of R$21,000 (AGU and Public Defense) and a ceiling of R$39,300 (Supreme Court).

If the bill is passed, it will lead to a cascade of claims throughout the federal civil service. Judges and prosecutors claim 20% losses since 2019 while half of federal servants have no salary increases since 2017, accumulating losses of 28.5%.

Source: Valor International

https://valorinternational.globo.com

/by