Case involves five companies, eight individuals and a relevant discussion about fines for all cases of anticompetitive conduct
08/04/2022
CADE’s building in Brasília — Foto: Jefferson Rudy/Agência Senado
Antitrust regulator CADE has acknowledged the existence of a cartel in bids held for the installation of cafés in airports in São Paulo (Congonhas), Florianópolis, Recife, Campo Grande, Curitiba and Maceió. The case involves five companies, eight individuals, and a relevant discussion about fines for all cases of anticompetitive conduct.
The judgment has an important aspect for competition law: the calculation of fines imposed as a penalty on businesspeople and employees involved in cartels and other competition violations. In this case, the amount of the individual penalty for two individuals goes from R$139,000 to R$28,000, depending on the criteria used.
The bids were conducted by state-owned airport operator Infraero. The complaint of alleged anticompetitive conduct was filed with CADE by the company. According to the investigation conducted by the state-owned company, five companies and eight individuals have acted in a coordinated manner to defraud seven public tenders held by Infraero.
The companies involved are: Alimentare Serviços de Restaurante e Lanchonete, Boa Viagem Cafeteria, Confraria André, Delícias da Vovó and Ventana Manutenção e Serviços.
The rapporteur, CADE member Sérgio Costa Ravagnani, voted for the dismissal of the process in relation to one defendant who died, and for the condemnation of the others – cafés and individuals. He was defeated only on the way to calculating the penalties.
Law 12,529 of 2011 sets penalties for cases of anticompetitive conduct. Companies are fined between 0.1% and 20% of the value of gross revenues in the last fiscal year before the administrative proceeding was started. And it must not be less than the advantage gained when it is possible to estimate.
As for individuals, managers can be fined between 1% and 20% of the value defined to the company. Others, such as employees and associations, may have to pay amounts ranging from R$50,000 to R$2 billion.
CADE member Gustavo Augusto’s vote prevailed in the judgment on the fines. In his view, the economic capacity must be considered in the calculation, even if not as a determinant.
Terminals in Brazil’s North region account for a quarter of inputs from abroad
08/04/2022
As grain crops grow in the Matopiba region (bordering the states of Maranhão, Tocantins, Piauí and Bahia) and in northern Mato Grosso, the Arco Norte (North Arch) ports become increasingly attractive to logistics service providers. In the wake of the growth of soybean shipments, fertilizer imports are increasingly gaining space in the ports of the North and Northeast regions.
The main ports of the Arco Norte – Santarém and Belém (Pará), Itaqui (in São Luís, Maranhão), and Salvador (Bahia) – handled 4.4 million tonnes of fertilizers between January and June. They accounted for 25% of the total volume imported by the country, and the volume handled grew 39% year-over-year.
“The increase is directly related to the expansion of soybeans in Matopiba and northern Mato Grosso,” said Luigi Bezzon, a fertilizer and vegetable oil analyst at U.S.-based consultancy StoneX and author of the survey based on federal government data.
The larger grain cultivation in these regions has driven structural changes in roads and ports. According to Mr. Bezzon, the increase in the supply of trucks, for example, improves freight prices because farmers can send grains to the port and bring fertilizers to the interior on the return trip.
From January to June, soybean shipments through Arco Norte grew 8%, while in the South-Central region there was a 16% decrease compared to 2021, according to StoneX. The largest increases in volume handled were seen in Itaqui and Salvador.
In the first half, the arrival of fertilizers through Itaqui grew 51%, to 1.62 million tonnes, the survey shows, and the soybean shipments grew 19%, to 7.1 million tonnes. “Ports connected to railroads, such as Itaqui, make perfect sense [for expanding logistical alternatives],” says Marcos Pepe Bertoni, chief operating officer at Corredor, Logística e Infraestrutura (CLI).
CLI, which is controlled by asset management company IG4 Capital and has just acquired two terminals in Santos from Rumo (also connected to railroads), is one of four companies that make up Consórcio Tegram, charged with operating grains in the Maranhão port. Mr. Bertoni said the company is looking with interest at providing services in the fertilizer market.
According to him, grain exports in Itaqui are advancing rapidly, so “it will inevitably” be necessary to think about return cargo to improve costs for the client. “It is necessary to ‘tie up’ the logistics to improve effectiveness,” he adds. CLI expects to handle 4 million tonnes of grain in 2022.
The biggest local player for fertilizer imports is the Companhia Portuária Operadora do Itaqui (Copi), owned by the Fertipar and Rocha groups. Copi is charged with handling 80% of the volume of fertilizers received in Itaqui, and wants to expand its services. In 2021, Itaqui handled 3.2 million tonnes of the input.
According to association of securities firms, class accounts for 61.3% of investments volume in first half
08/03/2022
Investments by individuals in retail, high income, and private banking reached R$4.65tn in the first half of the year, Anbima says — Foto: Silvia Zamboni/Valor
The giant flow of individuals into fixed income is more related to the rising interest rates than to the inadequate supply of riskier options during the era of ultra-low interest rates in Brazil, says Ademir Correa, head of the distribution forum of the Brazilian Financial and Capital Markets Association (Anbima).
“What we actually see is that even clients with a bold profile are scared with the movement, with the prolongation of this scenario that has affected even the seasoned ones. It doesn’t have much to do with whether the profile is right or if [funds] are correctly allocated,” said Mr. Correa, during the virtual press conference with the presentation of the individual investments data for the first half of the year.
Investment funds lost 3.5% of their stock in the first half, to R$1.42 trillion. Hedge funds had a decrease of 5.1%, or R$35.2 billion, despite the good performance of asset managers in the period. Stocks portfolios have also shrunk, with a loss of R$38.6 billion from January to June, a decline of 18%. In the same period, fixed-income portfolios grew R$20.3 billion, up 4.5% year-over-year.
Overall, fixed income now accounts for 61.3% of the investment volume of the traditional retail, high-income, and private-banking audiences combined, compared to 57.1% in December.
Savings accounts are still the main retail product, with a 32.9% share, followed by certificates of bank deposit (CDBs), with 19.9%.
Mr. Correa, also an executive with Bradesco, said he sees great demand from clients for fixed-income products as a safer haven. “The scenario for variable income is still very troubled worldwide with the inflationary environment and stock markets down. We don’t see a recovery yet, it’s a moment of great mistrust of investors with the market. They are waiting for the next steps.”
A potential recession amid rising interest rates in developed countries, the Russia-Ukraine war, and the elections in Brazil are all ingredients of this uncertainty.
For Mr. Correa, the movement towards diversification is not exhausted, however, with rising interest rates and the Selic back to double-digit levels, at 13.25% per year. “The falling interest rates [in the past] has forced people to explore new investment opportunities with higher returns and this has brought a greater knowledge of the customer of this market,” he says. “What we notice is that high-income investors generate more demand for diversification, which is a healthy movement.”
Anbima has been working on an agenda to improve suitability, or the correct fitting of the offer to the risk tolerance profile. “With falling interest rates, we have seen a strong movement of clients looking for options with higher volatility and financial firms placing more and more products available for smaller ticket sizes.”
Within Anbima, the idea is to update self-regulation, standardizing the financial firms’ policies and establishing minimum risk levels for the products.
Another work that the distribution forum is expected to develop this year is to establish some regulation for financial firms that hire digital influencers. These professionals would be subject to the same requirements as those who serve the customer directly when recommending investments.
In the first half of the year, investments by individuals in retail, high income, and private banking reached R$4.65 trillion, up 2.8% year-over-year.
In the more affluent customer segment, more exposed to the international classes and to higher risk alternatives, assets shrank 1.7%, to R$1.75 trillion, while high income retail had an increase of 5.4%, with R$1.29 trillion. In the base, the traditional retail totaled R$1.61 trillion, with a high of 5.9% in the first half.
Mr. Correa avoided qualifying the low growth of 2.8% in the volumes of the individuals, but with Brazil’s benchmark inflation index IPCA at 5.49% until June, portfolios failed to grow above the official inflation rate. “It shows the volume drop in private banking. It has to do with the drop in the stock market, a product that has a higher concentration of this type of investor.”
In periods of greater uncertainty such as the electoral period, he said, there may still be a migration of wealthier audience for investments abroad. Anbima’s data do not include, however, the positions of private-banking clients in international accounts.
Companies reportedly facing losses are preparing class action
08/03/2022
Brazilian businesspeople from some traditional families that allegedly rented U.S. aircraft through leasing offered by Bank of America (BofA) plan to go to the courts in New York to ask for compensation for losses resulting from the operation. Since they have already lost or are in danger of losing their luxury jets, they are preparing a class action against the bank. The combined loss is estimated at $1 billion.
Lawyers are preparing to convince the U.S. courts that when seeking financing BofA offered them an “off-the-shelf product,” which the businesspeople believed to be lawful and bought without knowing potential tax contingencies.
But such operation has consequences in Brazil. If the Secretariat of Federal Revenue finds out that the aircraft is American but flies more on Brazilian routes than abroad, it can understand that the aircraft was imported, not leased. Brazil’s customs legislation considers imports without payment of taxes as contraband or smuggling, the penalty for which is the loss of the good.
Representatives of these businesspeople call the practice illegal tax shelter. BofA allegedly bought the planes in the United States through a trustee and leased them to businesspeople in Brazil. However, the bank reduced the depreciation resulting from the use of the aircraft from the tax base to be paid in the U.S.
Experts in international taxation, however, highlight another aspect: these businesspeople did not sign a contract directly with BofA, but through a company in a tax haven. Thus, in addition to avoiding the payment of Import Tax and social taxes PIS and Cofins, they also avoided paying withholding income tax (15% or 25%).
The operation led to an investigation by the U.S. authorities, which has already resulted in a first trial by the New York Supreme Court. On that occasion, whose session is available on YouTube, BofA was ordered to disclose the bank records of the aircraft lessors.
The court decision reportedly revealed operations involving 27 aircraft. Sources involved in the case say that 24 families of well-known Brazilian businesspeople are involved. Clans cited in the 2012 Federal Police report on Operation Pouso Forçado (Forced Landing), such as Esteves and Auriemo, are among them.
Based on the U.S. court decision, which determined the disclosure of bank records, a group of businesspeople is preparing to file a mass action in the U.S. This is a class action that allows the individualization of damages of each person involved.
Leonardo Antonelli — Foto: Divulgação
But each case is a case. According to the lawyer Leonardo Antonelli, who represents some of the Brazilian businesspeople involved in the imbroglio, one client took the aircraft to the United States for revision and, the next day, the bank reportedly seized it. “It was worth $20 million and was auctioned for $7 million. The difference is the loss,” he said.
Another four clients, according to Mr. Antonelli, were required to make deposits averaging $4 million to collateralize the transaction. The lawyer says the bank converted the funds into income for itself. “Brazil’s Secretariat of Federal Revenue confiscated the aircraft of another client because it considered the transaction an illegal import,” the lawyer said.
The issue must be discussed in the New York Court because all contracts with BofA were signed there. The New York law allegedly takes such claims based on the theory of unjust enrichment and/or fraud.
“The theory of unjust enrichment, on a first analysis, resembles the institute of unjust enrichment in the Brazilian Civil Code,” Mr. Antonelli says.
The goal is the reimbursement of all tax losses (fines, interest, confiscation of aircraft), in addition to other financial losses (return of the aircraft, retention of deposits, structuring costs) resulting from the operation with the bank.
Currently, federal environmental agency Ibama has 55 processes for environmental licenses under analysis; in 2021 there were 23
08/03/2022
The federal government hints at establishing guidelines for offshore wind projects was the trigger for companies and investors to enter the segment more willingly. The federal environmental agency Ibama is analyzing 55 environmental permit processes totaling 133 gigawatts. A year ago, there were only 23.
However, only two submitted the Environmental Impact Assessment (EIA) and the Environmental Impact Report (RIMA). Both were rejected for being in disagreement with the standard terms of reference (TR). The other projects are in the initial project phase and the agency is waiting for their work plans.
The fear is that the backlog of feasibility studies may delay the development of the sector. By law, Ibama has deadline from 6 to 12 months to analyze an EIA/Rima after submission. The analysis can take 12 to 36 months to be elaborated since the planning phase.
According to the agency, about 90% of delays in the progress of environmental permits are related to the quality of environmental studies, which do not provide enough information to attest to the feasibility of the project.
The Brazilian Wind Power Association (Abeeólica) believes that the first contracting of projects could be made in 2023 with an auction. However, this depends on a clearer definition of the rules for the cession of use of surface water, which are expected to be published by December.
Elbia Gannoum, head of Abeeólica, says that the growth of requests occurred from the moment that the regulation started to be discussed, in decree 10,946. “The agents identified potential areas and filed the process with Ibama to secure a place in line. However, there is clearly no rule about how this cession of use is going to be,” she said.
Divulgação — Foto: Ben Backwell
Global Wind Energy Council’s CEO Ben Backwell believes it is key for the industry that a regulatory and legal framework is defined and put in place. “This will provide a long-term vision and demonstrate to the market that there is a viable route. It will give the industry and investors the certainty that they need to make the huge investments required.”
Large companies in the sector, such as Neoenergia, are interested. The segment has attracted even large oil companies such as Shell, Equinor and new companies in Brazil such as Ocean Winds, a joint venture between EDP Renováveis and Engie, with the advantage that it already has experience in open sea drilling.
But Ibama has signaled that it will not grant any permit before the rule is established. In this context, all that is left for the companies is to wait.
“Doing studies at sea is very expensive, and the companies that have filed for a permit have a place in the queue, but they won’t go ahead and spend money if they are not entitled to the cession of use,” Ms. Gannoum said.
Nicole Oliveira, Arayara International Institute’s executive director, sees it as a new frontier in energy, to expand the generation capacity in renewable sources, but demands seriousness and rigor in the environmental impact studies and social prominence in decision-making, because it is a new technology for the country.
“Unlike onshore generation farms, whose environmental impacts are to some extent more easily manageable, offshore wind farms require greater care because it is an extremely sensitive environment, rich in biodiversity, which is already being threatened by climate change.”
Participants in the sector say changes are needed to make this type offinancing take off
08/03/2022
Microcredit grew 53.1% in the pandemic – more than credit in general, which advanced 38.1% – and surpassed the R$10 billion threshold for the first time.
With dozens of millions of informal microentrepreneurs without income due to the restrictions imposed by the coronavirus pandemic, demand has skyrocketed, although banks have somewhat restricted the supply of the modality due to fears of default.
Even so, participants in the sector say changes are needed to make this type of financing take off, including in regulation, and that there are historical and cultural barriers. Microloans account for only 0.2% of the total volume of credit in the financial system.
The 53.1% expansion took place between February 2019 and April this year, the most recent data from the Central Bank show.
Microcredit is not simply a low-value loan. The concept involves a number of factors, especially proximity to the customer – including financial orientation – and the provision of collaterals. As this credit is aimed at low-income people – some of which does not have bank accounts – the collateral is usually a guarantor, or the so-called solidarity groups. These are groups created to honor a debt when one member fails to pay.
The largest microcredit operator in Brazil is Banco do Nordeste (BNB), with a portfolio of R$7.3 billion. Next comes Santander, with R$2.2 billion, considering loans included in the National Program for Productive-Oriented Microcredit (PNMPO). According to the rules, banks must set aside 2% of cash deposits for oriented microcredit. The vast majority of banks do not meet this target and end up transferring their quotas to other lenders or leaving the funds at the Central Bank, without any remuneration.
The problem is that it is expensive to operate in the microcredit segment. As it is necessary to make on-site visits and to be very close to the client, banks have to hire credit officers. BNB alone has an army of more than 3,300 officers, while Santander has 1,600. As the average ticket is low, close to R$3,000, the average term is about seven months and the interest rate must be of up to 4% a month, it takes time to assemble a considerable portfolio and banks prefer to invest in lines with better margins.
In recent years, the government and Central Bank have discussed several changes to try and boost microcredit, such as raising funding to 3% of cash deposits from 2%, punishing banks that do not meet their quotas, establishing a system of shared guarantees, facilitating portability, and establishing clearer rules for the Civil Society Organizations of Public Interest (Oscip) that operate the programs on behalf of the banks. Some measures were partially included in provisional measures, but, besides the fact that they did not meet the sector’s demands, they lost their validity.
Today, the microcredit limit is R$21,000 per client in the same lender, and R$80,000 considering all their credits.
In the pandemic, the government even eased the rules about face-to-face visits to customers, allowing this relationship to be made by digital means. However, as the close link is key in microcredit, in some situations, especially during the initial credit analysis, face-to-face visits are still necessary.
Aliança Empreendedora, an organization focused on supporting microentrepreneurs in situations of economic vulnerability, especially women, says it is discussing with the Central Bank the regulation of the destination of PNMPO funds.
The organization proposes that the portion of the deposits that remains idle be more easily directed to other players operating in this market, such as Oscips. “There is money sitting idle that could be invested in the institutions that already operate at the end and that have a hard time raising funds at a fair price. Banks would then stop paying fines and could even receive some return,” says Lina Useche, cofounder of Aliança Empreendedora.
The organization has already had meetings with Central Bank President Roberto Campos Neto and other members of the monetary authority, who showed interest in the proposed regulation and are open to creating a working group to discuss the topic, she said. There have also been conversations with the Economy Ministry.
“Microcredit can be a great business, but it is costly to make it happen. It has a high operational cost, and it has to have a large scale to be profitable,” Ms. Useche says, adding that, for this reason, the operation with Oscips may end up being more interesting for those who already work more directly with microentrepreneurs, and not for large institutions.
On another front, Aliança Empreendedora has just launched a platform that brings together microcredit proposals. This hub is still in the testing phase and, for now, includes four aggregated institutions and 1,000 users. A new stage is expected to begin in September, with the inclusion of more providers.
Maurício de Almeida Prado, executive director of Plano CDE, a research and impact evaluation company specializing in lower-class families, explains that among the factors that hinder the release of funds for microcredit is the fact that the segment is usually separated from others of the bank.
In other words, the microcredit officer, which works offering this credit to the client, is not the same person who offers other credit products – the bank manager. “We have already done research on microcredit in all the large banks, and the area is somewhat separated; the lenders still haven’t managed to combine both things.” He added that, despite this backdrop, he notices a greater interest from banks to grow in this segment.
The classic microcredit, with proximity to the client and the possibility of a group guarantee, was created by Bangladeshi economist Muhammad Yunus – who received later the Nobel Prize for this work. Lauro Gonzalez, coordinator of the Center for Microfinance and Financial Inclusion Studies at FGV/EAESP, says that the financial system and technology have advanced a lot since then and, in this sense, he believes that visits to borrowers no longer need to be compulsorily face-to-face. “There is the possibility of discussing new technologies that can contribute to improving this proximity.”
Even so, he says that there is no definitive solution to eliminate all the obstacles to the growth of microcredit in Brazil. For him, it might not even be necessary to set aside 2% of cash deposits if state-owned banks like Caixa Econômica Federal operated with classical microcredit. Open banking, he says, is one innovation that can help unlock this type of line. “Even so, microcredit is only one part of microfinance. It is one more mechanism that, along with several other things, can be used. But that’s not what will lift a nation out of poverty,” he says.
While the group guarantee is very strong in the Northeast, where the BNB operates, it is almost non-existent in the Southeast and South regions. Isabel Baggio, head of the Brazilian Association of Microcredit and Microfinance Operating Entities (ABCred), says there is a cultural issue and the people from these regions do not feel comfortable with solidarity lending. She also runs Banco da Família, an Oscip that has helped more than 341,000 people in the South region. “Solidarity lending is not working here. We have insisted on it for a long time, but people don’t feel comfortable acting as a guarantor of others.”
Mr. Gonzalez also explains that there are some historical factors for microcredit never having really reached a substantial slice of credit in Brazil. First, because we are a middle-income country, not as low as Bangladesh and other places where this line has expanded. Second, with the history of high interest rates and spreads, banks have always been able to find very attractive margins in other segments, thus trying to leave the lower classes aside. “Regulation, by earmarking funds, may also have been a shot in the foot, scaring away some lenders, which preferred not to take part,” he says.
Provisional measure allows companies to decide rules directly with workers; proposal will now be sent to Senate
03/08/2022
The Chamber of Deputies passed Wednesday a provisional measure that allows companies to decide the rules of remote work directly with the worker, without the need for collective bargaining, and changes rules on the payment of food vouchers for employees. The proposal will be sent to the Senate.
The provisional measure was criticized by opposition parties. Deputy Afonso Florence (Workers’ Party, PT, of Bahia) says the measure brings important points, but the possibility of individual negotiation to establish a working-from-home regime opens the door to the “deepening of the logic of labor exploitation.” “It is a fact that hybrid and remote work is here to stay and is one consequence of the pandemic, but workers’ rights cannot be undermined,” he said.
The rapporteur of the provisional measure, Deputy Paulo Pereira da Silva (Solidarity of São Paulo), one of the leaders of the union organization Força Sindical, said he agreed that the negotiation should be collective and bring rules for hybrid work, not remote work. Yet, he cut a deal with the government to keep the rules proposed by the Executive branch. “There is some nonsense [rules] here. We are passing a law that, in a few days, we will have to correct because I think we are making a mistake,” he said.
On the other hand, the deputy government leader Ubiratan Sanderson (Liberal Party, PL, of Rio Grande do Sul) advocate the rule because, in his view, it prioritizes the individual opinion of workers over the position of unions that “many times do not represent the specific will of each worker.” “There is not the slightest possibility of damage to the worker. And if there is, this can be reversed in court. In fact, we are giving more attention individually, which is what people want, than talking to the union. And the opposition doesn’t want this, because they always want to put the union to speak on behalf of people who, many times, don’t even know what is being discussed.”
The lower house also rejected, by a 325-63 vote, the payment of food vouchers in cash. The New Party (Novo), the author of the amendment, argued that this would give autonomy to employees to decide where and how to spend the money. “Some parties have workers voting against workers,” said the party’s leader in the Chamber, Deputy Tiago Mitraud (Minas Gerais).
The proposal was rejected by the governing coalition and caused divergence in the opposition. According to the Brazilian Socialist Party’s (PSB) leader, Deputy Bira do Pindaré (MA), workers prefer to receive in cash rather than in a card. “The problem with receiving in cash is that all the labor charges can be levied on top of it. We need to make an adjustment so that this doesn’t happen,” he said.
Mubadala wants to increase stake in Burger King chain in Brazil to 50.1% — Foto: Divulgação
The Arab investment fund Mubadala Capital has made a proposal to buy the control of Burger King in Brazil, a company currently called Zamp, in a deal that could reach R$938.6 million. Through a voluntary public offering of shares, Mubadala wants to increase its stake in the chain to 50.1% from 4.95% by paying R$7.55 per share. The amount represents a premium of 21.6% over the closing price last Friday, and 31% over the average share price of the last 30 days.
As Valor previously reported, the fund had already been analyzing an offer for the company within the strategy of moving forward on assets with growth potential, but which have lost value on the stock exchange since the pandemic crisis. In 12 months, the stock had declined 49% until last Friday. In the offering, the proposal is for payment in cash on the settlement date, according to a letter from a Mubadala subsidiary sent to the chain, which offers details on the conditions.
On Monday, after the disclosure of the interest to the market, the stock closed the day up 18.81% at R$7.39, a price close to the level offered by investors. The chain’s board of directors – composed mostly of independent members – is expected to release within 15 days a preliminary opinion on the offer, but the initial signals from shareholders are negative.
*By Adriana Mattos, Luiza Ferraz, Maria Luíza Filgueiras — São Paulo
Faster advance in releasing network expected to allow launch as early as Tuesday
08/02/2022
5G antenna in Rondonópolis, Mato Grosso — Foto: Divulgação
The faster advance in the release of the fifth-generation mobile phone (5G) network in the city of São Paulo is expected to allow the launch of the most sophisticated version of the new technology – known as standalone 5G – as early as next Thursday. The information was taken to the command of telecoms regulator Anatel last Saturday by EAF, formed after the auction of the new technology.
The Entidade Administradora da Faixa (EAF) is made up of representatives from the telcos, broadcasters, and satellite operators. Initially, the definition of the 5G start date in São Paulo was to be discussed on August 10. However, now the decision is expected to be confirmed on Tuesday, in an extraordinary meeting of the 3.5 GHz band monitoring group, known as Gaispi. The collegiate is led by Anatel.
“EAF accelerated work in São Paulo. On Friday, I was informed that the filter installations were practically ready,” said Anatel’s director Moisés Vieira, referring to the installation of equipment to inhibit interference in the 5G service, which will operate in the 3.5 gigahertz band, in satellite and free-to-air TV services that operate in the same frequency range. He chairs the Gaispi.
“On Saturday, they did tests until dawn. On Sunday, I met with my team and the coordinators and verified that it would be possible to start. There would be no point in holding up São Paulo, the largest city in Latin America, until August 10, when the ordinary meeting [of Gaispi] will take place. I decided, then, that it would be justified to schedule an extraordinary meeting for Wednesday at 9 AM, to release the signal on Thursday,” Mr. Moreira said. According to him, the decision surprised even the telcos.
The minimum requirement for São Paulo is the installation of 462 antennas by the three operators (TIM, Claro and Vivo) by the end of September. But last weekend, 892 stations were already ready to be connected.
The number has been increasing ever since. On Monday afternoon, a total of 1,200 antennas were expected to be put into operation in the São Paulo capital. By the end of the day, the number of requests had risen to 1,800. The detail: this amount already takes into account the goal of installing new antennas by July 2023, which 924 antennas (a ratio of one 5G station for every group of 50,000 inhabitants in the city).
“The new licensing requests are still being processed. The number of stations may reach 25% of the current base,” Mr. Moreira said.
Currently, the city of São Paulo has 4,592 active antennas of previous generations (2G, 3G and 4G). Mr. Moreira pointed out that the 3.5 GHz network has a smaller range and, for this reason, the coverage of the new service will not reach the proportion of 25% over the current technologies.
In the other capitals, standalone 5G signal is spread over a portion equivalent to only 15% of the existing structure. It is concentrated where there is a higher concentration of people. The new network was launched on July 6 in Brasília and has been operating in João Pessoa, Belo Horizonte, and Porto Alegre since Friday.
In addition to a faster internet connection, the implementation of the new technology is expected to increase productivity in the industrial and service sectors. 5G is expected to enhance the use of augmented reality, artificial intelligence, and the intensified use of the Internet of Things.
However, as published by Valor, Anatel’s management team has warned that less than 5% of cell phones are prepared for standalone 5G. The cost of the device is another obstacle: basic models cost around R$2,000 and the most sophisticated ones exceed R$5,000.
There is a lack of consensus among telcos about the need to change the chip to enjoy the full potential of 5G SA. None of them is yet replacing the so-called SIM card.
For Marcos Ferrari, head of Conexis Brasil Digital, which represents the large operators, the industry is prepared to “release 5G in any capital city the day after the release by Gaisp.” According to him, “the faster the schedule advances, the better.”
Alberto Boaventura, senior manager of Telecommunications, Media, and Technology Industry at Deloitte, says that the arrival of 5G in São Paulo is a way for telcos to guarantee a return on the investments already made in the new generation of mobile networks.
The installation of a new 5G signal propagation point can cost between R$600 and R$1 million, including antennas, a signal transmission center, and a transmission tower.
“São Paulo has the best ratio of high-value subscribers compared to other states, and providing better quality mobile services is a way to keep these subscribers,” says Mr. Boaventura. “In an important market, the operators’ coverage goes beyond Anatel’s obligation of one antenna for every 100,000 inhabitants,” he adds.
Mr. Boaventura notes, however, that the 5G leap does not stop at the consumer market. “The technology brings in tow a set of low-latency applications that is quite important for industries.”
Mr. Ferrari says the 5G debut schedule in other capitals depends on the reality of each one.
The cleaning of the 3.5 GHz band, also used to transmit the analogical open satellite TV signal, captured by old satellite dishes, is necessary for 5G transmission, says Euclides Lourenço Chuma, senior member of the Institute of Electrical and Electronics Engineers (IEEE) and researcher at the State University of Campinas (Unicamp). He recalls that Gaisp will meet on August 10 to verify the reports of signal interference.
“The high density of accesses in commercial points in the capital of São Paulo can generate interference from technologies such as microwave internet access,” says Mr. Chuma. According to him, the 5G debut in the 3.5 GHz frequency “is an action to start the system, without having to wait for the state of the art.”
*By Rafael Bitencourt, Daniela Braun — Brasília, São Paulo
Less than 5% of cell phones in operation in Brazil are ready to receive the standalone 5G signal, which was launched Friday in Porto Alegre, João Pessoa and Belo Horizonte. The warning has been repeated by Moisés Moreira, the director of the Brazilian Telecommunications Regulatory Agency (Anatel), in an attempt to lower expectations at this first moment.
In Mr. Moreira’s view, phone companies must make it clear to their clients if the devices in use are prepared for standalone 5G, the most sophisticated version of the new technology, and if it will be necessary to change the chip. “Don’t expect 5G technology to arrive in a big way right now. On the contrary, it demands a certain amount of time,” he told Valor.
Brasília has had standalone 5G since July 6. The signal is offered over the 3.5 gigahertz (GHz) band. Anatel has received reports of frustrated users who have had an experience not very different from that of 4G, in addition to encountering many “shadow” areas (without 5G signal).
“Operators are not changing the chip yet, nor are they marketing exclusive plans for 5G. So far, they only have the obligation to effectively turn on the signal by the end of September. So Anatel still can’t fine them for not meeting quality standards,” he said.
Days after the 5G debut in Brasília, Vinicius Caram, one of Anatel’s technicians involved in the implementation, told Valor that users would now only have a “tasting.” He said that the moment is for “fine tuning” or network “optimization.”
Mr. Moisés reinforced that, among the capital cities that are yet to receive standalone 5G, São Paulo, Rio de Janeiro, Curitiba, Goiânia and Salvador are the ones with “more advanced” work to prevent interference. However, he stated that there is still no defined date.
Regarding the monitoring of the quality, Gustavo Borges, Anatel’s head of control of regulatory obligations, told Valor that, besides checking the number of antennas, the “coverage map” of telecom companies will be evaluated.
“The number of antennas is an objective commitment in the call for bids. By observing the map, we will know if in fact there is signal where availability is declared,” said Mr. Borges. He said that after September 29, the agency will start measuring technical parameters to verify network performance: speed, latency, jitter and packet loss. This involves comparison with international standards.
Mr. Borges said that, even without the commercial launch of 5G plans, Anatel already monitors consumer complaints. The collection of indicators will result in the production of the quality seal A, B, C, D or E for each provider, in each municipality, to be unveiled in 2023.
Most 5G handsets available on the market already offer access to networks that simulate 5G by dynamic spectrum sharing (DSS). With the arrival of 5G networks in new capital cities, users will be able to automatically use the 5G NSA networks, without changing chips or plans, operators and manufacturers told Valor. This option uses the 3.5 GHz network with the pre-existing network structure already used by phone carriers, without the performance of the very low latency offered by 5G SA.
The pure 5G networks require the use of a specific chip and plan, according to information from América Móvil’s Claro, and compatible phones. Currently, this is the case for six Motorola and three Samsung models. The iPhones 12 and 13, launched in November 2020 and 2021, respectively, by Apple, are not prepared for standalone 5G networks in the country.
For the consumer, the difference in latency, or response time, between a device with 5G NSA and with 5G SA is not significant, says Thiago Masuchette, head of product at Motorola.
“You will have a latency difference of 10 milliseconds, on a 5G DSS or NSA, to 1 millisecond on 5G SA,” he explains. Tests done by the manufacturer indicate that the speed does not change between a standalone 5G and a 5G NSA, but the indicator will vary depending on the network quality of the carrier.
In practice, “the frequency and bandwidth that each carrier won in the bidding will interfere with the maximum speed that the consumer can have in the plan,” says Mr. Masuchette.
Today, 60% of Motorola’s portfolio is compatible with 5G networks, according to the executive. Among the six devices that are also compatible with SA networks, currently, the average price ranges from R$2,000 for the Moto G62 model, to R$5,000 for the Edge 30 model, top of the line of the brand.
*By Rafael Bitencourt, Daniela Braun — Brasília, São Paulo
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