Milken Institute hosts São Paulo meetings to showcase sustainable investment opportunities
12/02/2024
Executives from the Milken Institute, an American think tank that connects philanthropists and investors globally, are holding their first major event in São Paulo this week. The gathering brings together entrepreneurs, CEOs, public officials, and environmental specialists to explore investment opportunities, particularly in climate change initiatives. Brazil’s burgeoning carbon credit market is a key focus for the institute.
The Milken Institute, a non-profit organization, hosts high-profile conferences in cities like Singapore, London, Abu Dhabi, New York, Washington, and Los Angeles to tackle global challenges with innovative ideas.
“Within the institute, there is a network of more than 400 pension funds, sovereign wealth funds, and family offices managing a collective allocation of approximately $34 trillion,” said Rodrigo Bettini, senior advisor and head of the institute’s Latin America division.
“They attend our events to meet people and learn about advancements in diverse sectors such as agribusiness, AI, finance, education, and climate.” These meetings also attract professionals seeking capital injections for their projects.
Around 150 participants are expected at the São Paulo events, including a dinner on Monday and a breakfast on Wednesday. “Our goal is to guide foreign investors toward sustainability opportunities in Brazil,” said Daniella Levy, head of the institute in Brazil. Another aim is to strengthen relationships with Brazilians who could join the institute’s flagship annual conference in Los Angeles.
The Milken Institute was founded by Mike Milken, a prominent figure in the U.S. financial market during the 1980s. Convicted of securities law violations, Mr. Milken served time in prison and was granted clemency in 2020 by then-President Donald Trump. Today, he focuses on the institute, where he serves as chairman, and on the Milken Center for Advancing the American Dream.
Ms. Levy, Mr. Bettini, and the institute’s CEO, Richard Ditizio, are spearheading this week’s discussions. Mr. Bettini highlighted Mr. Ditizio’s positive impression of Brazil during a visit in January. “He was struck by the breadth of actions and policies here addressing sustainability and ESG standards,” said Mr. Bettini. “In our opinion, Brazil is advancing in sustainability, technology, fintech, and infrastructure in innovative ways, but the world isn’t aware of these developments.”
The institute aims to expand global awareness of Brazil’s innovations, “channel more foreign investment into the country, and support these initiatives on a global scale,” said Mr. Bettini. A key focus is the carbon credit market, seen as a transformative opportunity for the nation.
“We believe Brazil will be the Saudi Arabia of the carbon credit market, and we are confident this sector will revolutionize and create significant socio-economic opportunities for Brazilians,” said Mr. Bettini.
In November, the Chamber of Deputies (Brazil’s Lower House) approved a bill establishing rules for the carbon credit market, following its earlier passage in the Senate. The formalization of these rules has been highly anticipated, with Brazil widely recognized for its immense potential in carbon projects.
The agenda for the two meetings, hosted at a São Paulo hotel, will cover themes such as sustainability, environmental preservation, economic growth, living conditions in the Amazon, and strategies to attract foreign investment. These topics are expected to gain further prominence in 2025 when Brazil hosts COP30 in Belém.
For a while, it looked like carmakers were about to give up production in the country
03/07/2024
Stellantis’s unit in Goiana: carmaker announced an investment of R$30 billion in Brazil over the next five years — Foto: Divulgação
For a while, it seemed as if carmakers were on the verge of abandoning production in Brazil. At least, that’s what some facts indicated at the beginning of the decade.
The most striking was that of Ford, which decided to close all its factories in the country between 2020 and 2021. Then Mercedes-Benz also closed the car factory it had built in the state of São Paulo, arguing that the facility could not accommodate the most modern lines of cars of a new era, that of electrification.
Also in 2020, Audi decided to stop production at its partner Volkswagen’s plant in Paraná to assess the conditions in the country and the market. At the same time, there was speculation that General Motors would also leave the country. First, following a statement by the company’s CEO, Mary Barra, who implied that the operation would not be maintained if it continued to make losses.
Other automakers limited themselves to one-time investments. Renault, for example, announced a smaller program that would run for a year until it had a clearer idea of what would happen to the market after the pandemic.
COVID-19 was partly to blame for the slump in the industry. So was the semiconductor crisis, which shut down entire factories for many days over several months in 2021, 2022, and part of 2023.
Still, it was striking to see the automotive industry announcing major investments in electric car factories in developed countries while little progress was being made here.
Some said, among those who risk analyzing the sector, that the huge park of vehicle and auto parts manufacturers in Brazil was doomed to become scrap metal.
But suddenly this scenario changed completely. It began with the Chinese brands. BYD and Great Wall Motor decided to enter the country. GWM bought Mercedes’s plant and BYD took over Ford’s former plant in Bahia. At the same time, Audi decided to take back its space and resume production in Paraná.
From the end of 2023, new cycles began to emerge for incumbent companies. Renault’s Brazilian operations were incorporated into the company’s global plan.
The coming and going of the top executives of the sector began in Brasília. The global heads of these companies decided to come to the country to personally deliver the news to the Brazilian government.
Since November, several high-ranking executives have visited the presidential palace, including Makoto Uchida, CEO of Nissan, Shilpan Amin, head of GM’s international division, and most recently, Carlos Tavares, CEO of Stellantis, who was in Brasília on Wednesday.
The announcement of an investment of R$30 billion in Brazil over the next five years is not only a decisive step by Stellantis to maintain its leadership in Latin America, an important region for its activity. It also confirms that Brazil will not disappear from the map of the automotive industry—at least not before the next decade.
“I’ll see you in 2030,” Mr. Tavares said in an interview on Wednesday (6). In that time, Brazil will have everything it needs to remain among the world’s top 10 vehicle producers. It was eighth in 2022. The 2023 ranking has not yet been announced.
The country’s economic environment weighed heavily on the assessments of these companies, which tend to make long-term investments. Executives also appreciated the government’s tax incentives in programs that reward innovation and emissions reductions, such as the recently launched Mover.
In the case of large companies such as Stellantis, Toyota, Volkswagen, Renault, and perhaps GM, the funds will be used to produce hybrid cars—with an electric motor and an internal combustion engine that can run on ethanol.
This solution will help put Brazil on the electrification map without causing major trauma to the current production park and without making cars unaffordable for the majority of Brazilians.
By the end of the first two months, purchases had reached only 20% of what was expected, half of what was sold in previous years
03/06/2024
Marcelo Altieri — Foto: Divulgação
Fertilizer sales in Brazil have never been so slow, according to companies in the sector, reflecting farmers fearful of crop failures and climatic problems.
By the end of the first two months of the year, the Brazilian market had bought only 20% of the volume of fertilizer expected for 2024, half the percentage sold in previous years at this time, when it was close to 40%, according to Yara, the Norwegian multinational that leads the nitrogen market in the country.
“It’s creating a lot of stress in the logistics chain. We’re expecting some hurdles,” Yara Brasil CEO Marcelo Altieri said after an event in Brasília. “We have never seen a purchasing reality so far behind the annual progress, so it could bring logistical problems.”
The company did not provide specific figures on expected fertilizer sales for 2024 but said the slower pace was a reality of the market in general.
This delay could lead to distribution and logistics problems in the country in the coming months, as when sales start to flow, orders could pile up at dealers and the fertilizer may not be delivered in time for planting of the 2024/25 crop.
A survey by StoneX shows that the volume of fertilizer sales for delivery in the first half of the year reached 51% by February. A year earlier, this percentage was 62% and by February 2022 it was 60%.
For deliveries scheduled for the second half of the year—when the agricultural calendar for the 2024/25 harvest begins—there is also a lower commercialization rate of around 20%. Compared to the last two years, the rate in this period was 30%.
According to the Israeli company ICL, which produces minerals and special fertilizers, the scenario is expected to reverse in the coming months, given the favorable conditions of the exchange ratio (an indicator that measures purchasing capacity) between fertilizers and grains.
“The resumption of the market is essential to avoid logistical problems and the consequent difficulty for producers to access technology,” said Ithamar Prada, the company’s chief marketing and innovation officer. According to him, producers are now focused on completing the harvest and assessing the conditions for commercializing soy.
Mr. Altieri said that farmers are waiting until the last moment to make a purchase decision. In 2023, the delay in purchases was due to the expectation of lower prices. Nevertheless, the chain managed to organize itself and meet demand.
“This year is different. The trends are not the same, many products are already at the [price] bottom and some are already recovering. The longer farmers wait, the more logistical problems we could face during the harvest,” Mr. Altieri added.
The doubts generated by the delays in purchases have not yet shaken the scenario of stability projected for 2024. According to Mr. Altieri, the profitability levels of the agricultural sector and the fertilizer industry have returned to pre-pandemic levels after years of historic highs and lows in the market in 2022 and 2023, respectively.
“There was a lot of suffering, a lot of pain, and a lot of price declines during this transition. There were almost 12 months of falling fertilizer prices. It was very challenging. But this year is a year of stability,” he said.
However, the executive admitted that the scenario of financial hardship in the agribusiness sector, with the rise of requests for court-supervised reorganizations by companies and farmers, is concerning.
“Farmers pay the bills of all our companies. If farmers are struggling, it’s something that concerns us and we want to work to help reverse this scenario as quickly as possible by generating more productivity for them, and higher quality and profitability,” said Mr. Altieri.
*Por Rafael Walendorff, Isadora Camargo — Brasília, São Paulo
European commission vice president says he is pleased with the promise of zero deforestation
01/23/2023
Frans Timmermans — Foto: Divulgação
“The eyes of the world are turned to Brazil”, says Frans Timmermans, Executive Vice President of the European Commission, and leader of the European Union international climate negotiations. The Dutchman, who is on a two-day visit to the country, wants to hear from the Lula administration what the plans to contain deforestation are, visit the Amazon, and initiate talks for COP28, the UN conference on climate change to be held in December in the United Arab Emirates.
Mr. Timmermans is also in charge of the debate on the European Green Deal at the European Commission, the executive branch of the block. The environmental agenda today is an economic agenda, and this was clear in the latest movements of the European Union, which is usually in the forefront of this issue and is concluding two legislations that affect Brazil — the one that wants to curb the importation of commodities linked to deforestation and the one that will adopt a mechanism for adjusting the carbon border.
The regulations have been viewed with anxiety by developing countries. “The climate crisis is a global crisis, and we can’t solve it by pushing emissions elsewhere,” he says, admitting that what is driving deforestation is the demand from markets like the EU for commodities like cocoa, coffee, palm oil, beef, and soy. “This new law will be holding us accountable for our consumption patterns,” he notes.
About the border tax on carbon from products, he says it is neither punitive nor protectionist. “We have done our best to design it in a way that respects global trade rules,” he says, adding that the system focuses on cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen.
“Renewable hydrogen will be an essential component of the future clean industry,” he acknowledges. Some industries such as steelmaking, chemicals, or long-distance trucks cannot become electric and need an energy carrier. That’s where hydrogen comes in. “It’s the rock star of the energy transition,” says Mr. Timmermans.
In recent years, and forcefully at recent COPs, the European Union has said it needs to broaden the donor base for climate finance. The UN Climate and Biodiversity conventions say it is the industrialized countries that are responsible for providing funds, but the Europeans argue that the world is not the same as it was 30 years ago. “Every country that is part of today’s industrial and economic elite can and must contribute to keep our planet a safe home for humanity,” argues Mr. Timmermans.
Mr. Timmermans recalls that G20 countries are responsible for 80% of emissions and “must improve their climate commitments.” In Brasilia, the European Commission vice president is expected to hold bilateral talks with Vice President Geraldo Alckmin and Ministers Marina Silva (Environment), Silvio Almeida (Human Rights), and Sonia Guajajara (Indigenous Peoples) before going to Belém. He will also visit Colombia and Mexico.
Before leaving, he gave an interview, in writing, to Valor. See below the main parts of it:
Valor:What are the goals of your visit to Brazil? How can European Union collaboration happen during Lula’s administration?
Frans Timmermans: This is the first time I will be in Brazil as executive vice president of the European Commission. I have already been here as a Dutch foreign minister and even lived in São Paulo when my father was the Dutch consul in the city. Right now, the eyes of the world are on Brazil. I was happy that I already had the opportunity to meet President Lula at the end of 2022, still as president-elect. We talked for a long time about the opportunities for the EU and Brazil to work together, including in the fight against deforestation, and about Brazil’s candidacy to host COP30. The desire to host the global climate conference in Belém and the decision to submit this candidacy soon after the inauguration say a lot about the government’s great ambitions for climate and environment.
Valor:President Lula and Minister Marina Silva are committed to zero deforestation, but Brazil will need help, especially after the Bolsonaro years. How can Europe help?
Mr. Timmermans: They have many ideas on how to stop deforestation. They know that it is in Brazil’s interest to do this. During my visit, first of all, I intend to hear what the new government is planning. The Amazon is an ecosystem of global importance, but how the forest is protected in Brazil is a sovereign decision of your country. I am happy that the government is so strongly committed to zero deforestation. You can be sure that the European Union is seriously considering how to help Brazil achieve this.
Valor:How and when the legislation of not importing goods produced by deforestation will come into operation? Although it is understood that the law goes in the right direction, not to stimulate deforestation, some people see it as protectionism and a barrier to the European market. What do you think about this?
Mr. Timmermans: Deforestation and forest degradation are important drivers of climate change and biodiversity loss. But what is driving deforestation? It’s the demand from markets like the EU for commodities like cocoa, coffee, palm oil, beef, and soy. So, this new EU law will be holding us accountable for our consumption patterns. More than 1 million European citizens have demanded that we do this so that our consumption in Europe does not cause environmental damage elsewhere. The law applies to European and non-European traders alike, and we take care to ensure that it is fully compliant with international trade rules. The goods I have mentioned, but also wood and rubber, can no longer be sold on the EU market if they are produced by deforestation. Once the law is fully adopted, there will be a year and a half to implement the new rules.
Valor:The European Parliament approved in December the first border tax in the world, the Carbon Border Adjustment Mechanism (CBAM). Will it be valid only for European companies outside Europe or for all? Will there be a test time and priority sectors? The measure is also seen as protectionist.
Mr. Timmermans: With CBAM, we want to avoid “carbon leakage.” I mean that efforts within the EU to reduce greenhouse gas emissions must not lead to Europe exporting emissions to other parts of the world. The climate crisis is global, and we cannot solve it by pushing emissions elsewhere. We also want to encourage clean industrial production in other countries. The result is simple: the less carbon that is incorporated into a product, the less CBAM will apply. CBAM is not punitive and it is not protectionist. We have done our best to design it in a way that respects global trade rules (WTO). The system focuses on products: cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. It will be introduced gradually over the next few years. In the transition phase, which will begin in October, importers of goods under CBAM will only have to report the greenhouse gas emissions incorporated in their imports; there will be no costs. Only after the transition period will they have to pay for the embedded carbon emissions. This price will be equivalent to the carbon price of products manufactured in the EU.
Valor:In the climate COPs, the EU has advocated the expansion of the number of donors to climate finance. Developing countries understand that this is rewriting the Climate Convention and even the Paris Agreement.
Mr. Timmermans: Every country that is part of today’s industrial and economic elite can and must contribute to keeping our planet a safe home. We cannot base new financing arrangements on an economic division that made sense in 1992. That would only allow countries that are now major economic powers to say, “Oh, we are part of the developing world, so we have no legal, moral or political obligation to contribute.” That is why the EU was so adamant in Sharm el-Sheikh [host of the COP27 in Egypt] to prevent the Damages Fund from being based on the same treaty article as the previous funds. This is not rewriting the convention. We are simply using other parts of the treaty. We need to do this if we want to achieve the necessary change and bring these funds to the countries that cannot cope with the climate crisis on their own. We need to bring in international and development banks and be able to attract private financing. That is the only way we can succeed.
Valor:There is a race in the world for the production of hydrogen, with more than 60 countries getting ready. Is there a demand for so much supply?
Timmermans: Absolutely. Renewable hydrogen will be an essential component of the future clean industry. Some industries such as steel, chemicals, long-distance trucks, and buses can’t go electric and need an energy carrier. Hydrogen will be critical in our industrial future. It is truly the rock star of the energy transition. Right now, we are living in the dilemma of who comes first. The industry wants to switch to hydrogen but is still reluctant to invest because they are not sure there will be enough supply. Potential producers, on the other hand, are not sure because they want to know if there will be buyers. We are developing a hydrogen bank in Europe to help fill this gap. We are also looking at cooperation with countries that are developing their renewable energy sector, to see if we can help transfer knowledge and create clean industrial value chains around the world.
Country could jump to 48% from 12% share in voluntary market
10/07/2022
Brazil currently accounts for 12% of carbon credits issuance in the global voluntary market, with 45.28 million tonnes in credits offered, but has the potential to play a much larger role in the mitigation of emissions.
A study carried out by the International Chamber of Commerce (ICC Brazil) in partnership with WayCarbon consultancy indicated that in a scenario of accelerated emissions reduction in the next decade, Brazil could offer 1.5 billion to 2 billion tonnes in carbon credits in 2030, which could mean 22.3% to 48.7% of the credits in this market.
The calculations considered a price of $100 per tonne for the carbon credit, an amount that is considered by the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) as necessary for a fast reduction in emissions.
Brazil’s current share in the global carbon market is already growing fast. In 2019, Brazil had a 3% share. A study indicated that the country would only exceed the 10% share in this market in 2030, but the country surpassed this threshold in 2021.
According to the new study, the performance reflects the higher number of credits issued by nature-based solutions (NBS) and the influence of the regulation of Article 6 of the Paris Agreement at the last UN Climate Change Conference of the Parties (COP) in Glasgow, Scotland.
The trajectory for the coming years, however, still depends on solving some hurdles. In the view of ICC and WayCarbon, after interviews with several agents in this field, it is necessary to overcome market, technical, political, regulatory, and economic barriers. In these aspects, are mentioned the lack of credibility of government commitments, high complexity of land regulation, difficulty in estimating the organic carbon of the soils, and also difficulty in obtaining sources of funding.
“Our goal is to deliver a compass that shows the way to the economic agents transparently so that they can develop, structure, and strengthen this market,” said Laura Albuquerque, WayCarbon’s general manager of consultancy and the leader of the research, in a note. According to her, it is still “necessary to strengthen the flows of the stages of carbon credit generation.”
One of the world’s leading energy consultants, he says it is good to the country to be open to the world
09/26/2022
Daniel Yergin — Foto: Divulgação
Brazil can benefit from a long-term energy outlook that can guarantee revenue even in times of crisis. Achieving this goal depends, however, on having predictable and reliable regulations and policies in order to attract investment.
The view comes from Daniel Yergin, one of the world’s leading energy consultants. Vice-chairman of S&P Global’s board, Mr. Yergin says that, regardless of the outcome of the presidential elections, it is positive for Brazil “to be open to the world.”
Mr. Yergin has published three books – “The Prize” won a Pulitzer Prize in 1992. The most recent, “The New Map”, was released in late 2020 and has not yet been translated into Portuguese. In the book, Mr. Yergin identified that Ukraine could be the issue that would lead to tensions between the West and Russia. On Monday, Mr. Yergin participates, virtually, in Rio Oil and Gas, the largest event of the sector in Latin America.
He said that Brazil needs to pay attention to another issue that he also highlights in “The New Map”: the increased power competition between the United States and China. According to him, the energy market has become more divided and risky after Russia’s invasion of Ukraine and sanctions against Russian energy. “The world will still need oil for a while.”
See below the main excerpts of Mr. Yergin’s interview to Valor.
Valor:What are your conclusions about the current energy crisis?
Daniel Yergin: The global energy crisis started a year ago when markets became tight quickly, and now this crisis has joined a global geopolitical crisis. But it is important to note that there was already a global energy crisis before Russia invaded Ukraine. Prices today are high and what was a globalized market has now become a divided market with more risks. Europe, which was the largest market for Russia’s energy exports, is determined to close the door. Another change is how LNG (liquefied natural gas) has come to be seen as a major strategic asset.
Valor:How does this scenario impact Brazil’s position in the market?
Mr. Yergin: Brazil is an important oil producer, with a location that contributes to global diversification and can benefit from the continuing global demand for oil. But it is important to remember that there will be global competition for attracting investment. Being competitive and reliable will benefit Brazil in the years to come. The world will still need oil for some time to come.
Valor:What does Brazil need to discuss in the energy sector at this time of presidential elections?
Mr. Yergin: I hesitate to give advice in the midst of presidential elections. But I would say that ensuring that Brazil is seen as a predictable and reliable country in terms of regulation and policies will continue to attract investment to the country and keep it competitive. Being “open” to the world is positive. Whoever the president is, Brazil will benefit from establishing itself as a country that looks to the future and thus secures revenues to meet needs even during the inevitable oil market crises.
Valor:What Russia’s role in the energy market will be?
Mr. Yergin: Russia is an energy superpower, but it is wasting political capital and, having lost its most important market, may cease to be one. The country is lacking access to Western technology and investment. And it will still be a superproducer, but production is expected to start to decline. Let’s see what the disruption in the oil market will look like in early December, when sanctions against Russian crude oil go into effect. Where will that oil go? And at what price?
Valor:What has the increased focus on energy security meant for the oil market since the war in Ukraine began?
Mr. Yergin: People had forgotten about energy security. In Europe, it means paying more attention to oil and gas and also to coal. Hydrocarbons supply 82% of global energy.
Valor:What about the effect on renewable energy?
Mr. Yergin: Governments are looking to ensure reliable supply. Renewables will grow fast, which will be a contribution to energy security, but they are also intermittent sources, and reliability is an important requirement. The growth of renewables and electric cars raises new questions about the scale of the minerals that will be needed to serve these markets.
Valor:How important is hydrogen as an energy source?
Mr. Yergin: Hydrogen was barely an industry topic three or four years ago. Now it is being talked about everywhere, both with the aim of using it as a gas in power generation and for heating. Companies are working on it. The European Union says it can have 25% of its energy consumption met by hydrogen by 2050. But it will take three to four years before the dimensions that hydrogen can take as an energy source become clearer. Scale ability still needs to be demonstrated.
Valor:Can hydrogen replace oil and gas in the future?
Mr. Yergin: I think it is less likely that hydrogen will replace oil in the transportation sector. Development funds are focused on electric vehicles. If all plans and scenarios come to fruition, hydrogen could become a major gas for energy purposes. But there is also the possibility of producing hydrogen via natural gas.
Banks intensify aircraft financing; it reached R$4.1bn by the end of 2021
07/19/2022
Sérgio Granado and Vitor Ohtsuki — Foto: Carol Carquejeiro/Valor
If car sales rose during the pandemic, with the middle class trying to escape the crowds in public transportation, in the more exclusive segment this movement has also been observed. Sales of executive jets have soared in recent years in Brazil, leading banks to take a closer look at this niche. Although it is a small market, as the ticket prices are high – between US$ 3 million and US$ 60 million – it guarantees multimillion portfolios for financial institutions.
According to data from the Brazilian Association of Leasing Companies (Abel), the main form of financing for aircraft, the value of fixed assets leases in this segment was R$4.1 billion by the end of 2021. Bradesco for many years led this market and, last year, had a 42.1% share, with R$1.7 billion. However, Santander created a specific area two years ago and has been growing strongly, with R$1.5 billion in fixed assets leases at the end of last year, or a market share of 36.8%. Other relevant players are Alfa, Citi, and Daycoval.
Brazil is the second-largest executive aviation market in the world, behind only the United States, with more than 16,000 aircraft. The head of Santander Private Banking, Vitor Ohtsuki, says that the bank saw an opportunity to enter this segment in 2020, with the increase in demand due to the pandemic and the strong movement of IPOs. These “liquidity events”, as they are called, have collaborated with the emergence of many millionaires in Brazil in recent years. Since then, the bank has financed 31 aircraft and expects to double this volume in the next 12 months. “There are clients who buy for leisure, but there are also many who use them for business. With a small jet, the time they save compared to a normal flight is often worth it.”
According to Mr. Ohtsuki, the bank started working with the top of the pyramid, that is, clients with R$40 million, R$50 million investment portfolios. Thus, it created a swift process that helps the client from the beginning to the end of the aircraft purchase, including tax, legal, and import issues. Now it is moving down the pyramid, including the agribusiness segment, aiming jets for farm owners (not those small aircraft used for spraying). The tickets are smaller, but the market potential is huge.
“It is a large volume of lower value aircraft. We have already talked to the 100 largest agribusiness producers, and now we are going to expand to other producers who are clients of the bank, but who are not necessarily in private banking,” says Sérgio Granado, superintendent of Products at Santander Private Banking.
At Bradesco, the financed amounts increased 134% in 2021 compared to the previous year, while the number of aircraft increased 130%. Júlio Paixão, chief loans and financing officer, says that 2020 had a bad result, due to problems in the aircraft production lines, but that 2021 was much better and this year, even in a scenario of economic slowdown, and the next should benefit from orders that are still being held up. “Last year we had a high demand for used aircraft. We even brought units that were flying in the U.S. to be sold here”, he says.
Unlike Santander, Bradesco works in partnership with the largest trading companies in the market. Mr. Paixão says that because of supply issues aircraft prices rose 47% last year, which also helped boost financed volumes, and with waiting lines until 2024, he doesn’t foresee a drop in prices any time soon. “With the pandemic, many private clients ended up showing a willingness to stop using commercial flights,” recalls Bruno Vilarinho, manager of the Loans and Financing department.
At Alfa, Ana Portela, national financing superintendent, says that the bank does not work only with leasing, but ends up using other lines of financing. According to her, the portfolio grew 50% last year and, in the first half of this year, it expanded 20%. As the second semester is historically better, the expectation is to close 2022 with an increase of 25% to 30%. “In the pandemic, with the cancellation of many flights, businesspersons found themselves without options and many ended up bringing forward the planning they already had of buying an aircraft, to be able to continue their business.”
According to her, there is no full correlation between this segment and the performance of the economic activity, but the increase in depreciation of the real affects the financing since all the costs of the sector are in U.S. currency. “There is a concern with the moment to acquire the good because everything is dollarized, but clients with this profile have programmed themselves for this, they have been following the market. They won’t go back on this decision, so I don’t see a step-back movement in the aircraft market.”
As in leasing, the asset belongs to the bank, and the default on aircraft financing is low. Not least because, as the borrower is most often a private banking client, the financial institution has a lot of information about his or her assets and payment capacity. The “know your client” processes are very robust, which makes it virtually impossible that the financed aircraft is diverted and used in illicit activities, such as drugs and weapons trafficking. In addition, the bank usually insures the vehicle.
The financing of business aircraft also includes helicopters. Even so, the possibility of expanding this credit to manned drones, the so-called “flying cars”, is still seen as something remote by executives in the sector. “Since leasing the property belongs to the bank, there is a great deal of rigor about the type of aircraft we finance. We need to have insurance available for them, for example. I think that drone financing may even happen in the future, but through corporate credit, for companies that operate with this type of aircraft. It takes longer to get to executive aviation,” says Vilarinho. “This is a market for 5, 10 years from now. You have to wait for the regulation and the creation of a logistic air network. When this happens, and the market evolves into a private means of transportation, we will follow this market”, remarks Mr. Paixão.
Credit rating agency also affirmed country’s BB- rating
07/15/2022
Fitch says revision reflects better-than-expected evolution in public finances amid successive shocks in recent years — Foto: Matt Lloyd/Bloomberg
Fitch has revised Brazil’s outlook to stable from negative and affirmed the country’s long-term foreign currency rating at BB-.
According to Fitch, the revision of Brazil’s outlook reflects the better-than-expected evolution in public finances amid successive shocks in recent years since the firm assigned a negative outlook in May 2020.
“Last year, Brazil recorded its first primary fiscal surplus since 2013, highlighting revenue outperformance and the authorities’ commitment to withdraw stimulus implemented during the pandemic,” the agency says. “A sharp reduction in the public debt ratio in 2021 is projected to be followed by another mild fall in 2022, considerably improving the starting point before a gradual projected rise in 2023 and beyond.”
According to the agency, “near-term growth dynamics have outperformed Fitch’s prior expectations, and incremental progress on reforms could benefit medium-term investment prospects.”
“The central bank’s decisive monetary policy tightening, supported by its new formal autonomy, highlights its commitment to addressing inflation,” the agency added.
The agency stresses in the statement that fiscal and growth challenges persist, and the October elections pose uncertainty around how these will be addressed.
“Nevertheless, these challenges are already captured in Brazil’s BB- ratings, and Fitch expects broad macroeconomic policy continuity after elections.”
Fitch added that Brazil’s ratings are supported by its large and diverse economy, relatively high per-capita income, and capacity to absorb external shocks underpinned by its flexible exchange rate, robust international reserves, sovereign net external creditor status and deep local debt market.
“This is counterbalanced by high government financing needs and indebtedness, a rigid fiscal structure, weak growth potential and a difficult political landscape hampering policy predictability and timely progress on reforms.”
The Economy Ministry said in a note that it “affirms its commitment to the fiscal consolidation necessary for the continuity of the economic recovery scenario.”
Santiago Chamorro rejects hybrid car idea, says country’s turn will come when cost falls
07/05/2022
Santiago Chamorro — Foto: Ana Paula Paiva/Valor
Some automakers are preparing to produce hybrid cars in Brazil. This group understands that the vehicle with two engines (one combustion and one electric) is the best way for Brazil to join the global transition to electrification. And to also save its large industrial park, since fully electric cars, which require plug-in charging, are not yet manufactured in the country due to the high cost of this technology. This is not, however, what the management of General Motors thinks. For Santiago Chamorro, GM’s CEO for South America, Brazil does not need an intermediate phase and can, when the technology is more accessible, have an electric car industry of its own.
Mr. Chamorro says he is convinced, from what global studies show, that the fully electric car is superior to the hybrid one in terms of environmental gain. “The other technologies become transient, temporary,” he said.
Fully electric vehicles still represent a very small portion of vehicle sales in Brazil. And they are all imported. The share of this type of car represented 0.1% of sales in 2021 and 0.3% until May this year. Although still small, the share of hybrids in sales was larger – 1.6% and 2%, respectively.
“Volumes are still low; but everything starts this way,” Mr. Chamorro said. The executive points to the premium category, with more expensive models and where sales of fully electric cars are concentrated today, as the gateway to transformation. Consumers in this range, the “early adopters,” as they are called in the United States, are willing to pay for technology that allows driving to be “more fun” and quieter, among other things, the executive said.
“But in the future, cars will be electric in all segments where we have a presence,” he said. When will this be? He replies, with good humor, that this is a topic “for a future conversation.” GM also does not breaks down its electrification schedule per region to achieve the global goal of being carbon neutral by 2040. In Brazil alone, the company has three vehicle plants and one engine plant.
“We produce where we sell,” Mr. Chamorro said, highlighting the vocation of Brazil, ninth largest producer of vehicles in the world and seventh largest market, besides other countries with car assembling in the region, such as Colombia and Ecuador.
With the electric car, the processes will change. “There will be a manufacturing transformation; our employees will have other skills and use other tools,” he said. “The transition will not be immediate, and by then we will have combustion cars with less polluting engines.”
To those who ask him if the electric car technology is not too expensive to be produced in the region, Mr. Chamorro replies with some facts. Besides Brazil being a source of renewable energies in expansion, such as solar and wind power, he recalled that South America offers mineral reserves, such as cobalt and nickel, which favor the development of the vehicles of the future.
Furthermore, he says, the cost of the technology tends to fall. GM has developed a modular platform, with battery packs that can be assembled in various formats for use in different types of vehicles. The flexibility of this platform, called Ultium, allows to meet the needs of those who seek a more affordable car and also of those who want a more luxurious one, with battery packs for longer or shorter range.
Recently, GM and Honda signed a global agreement that will use new generations of this platform to develop economical cars. The companies expect that, in the next generations of electric cars, the cost will be the same of a combustion car.
Mr. Chamorro points out that in the urban environment, the owner of a car used for day-to-day routine travels on average 45 kilometers a day. One charge a week, in this case, would be enough. And for those who think that no farmer is interested in an electric pickup truck, Mr. Chamorro says that today farmers invest in solar and wind power sources. “Many report difficulties in getting to a gas station,” he said.
For Mr. Chamorro, there is no reason to be afraid of the electric car. “If we asked anyone a century ago if they would like to exchange their horse for an automobile, surely many would say they would rather have a second horse. Big changes involve strong emotions.”
Mr. Chamorro points to the expansion of private investment in public charging stations. For him, this market will continue to attract investors as the demand for electric cars grows.
GM plans to invest $35 billion to launch 30 new electric vehicles by 2025. Three of them will come to the Brazilian market. The three models – Bolt EUV, Blazer EV, and Equinoix EV – were presented a few weeks ago on Youtube by Mr. Chamorro. The audience, he says, has already hit 6 million people. “The consumer is curious,” he said.
Mr. Chamorro does not directly criticize competitors that show interest in hybrid cars and defend the use of ethanol in these engines. But he indicates that the subject generates dissent in the sector. “While other companies see this as a small matter, we see it as a central issue,” he says in relation to fully electric cars.
GM’s direct competitors, such as Volkswagen and Stellantis, intend to go this way. Toyota already produces this type of vehicle, and two Chinese brands – CAOA Chery and Great Wall – have already announced they will produce ethanol hybrids in Brazil.
The electric car is, however, only a part of the vehicle transformation process. Mr. Chamorro talks about GM’s autonomous car tests in San Francisco and says that taking the driver out of the wheel will be one of the ways to put an end to traffic accidents.
Connectivity is another part of the transformation. Mr. Chamorro envisions the expansion of the car’s communication with people’s lives. GM is already collecting picturesque moments with its Onstar, a subscription-based communication service for navigation and emergencies. This service has helped, for example, in the rescue of stolen vehicles.
But one of the cases that moved Mr. Chamorro happened in the U.S. The emergency service was called by the mother of a woman about to give birth inside the vehicle. Trained for this too, the operators assisted in bringing the baby into the world. “There is a wave of possibilities coming,” says Mr. Chamorro.
Chinese company wants to turn country into gateway for neighbors in South, Central America
07/04/2022
Marcelo Barella — Foto: Divulgação
Brazilians going to Qatar to watch the FIFA World Cup in November have a good chance of going to and from the stadiums in one of the 1,800 electric buses that China’s Higer sent to the host country to transport the fans of the 32 national teams. Those who will stay in Brazil, on the other hand, may also have the opportunity to know the vehicle — if government programs to electrify bus fleets move forward. This is expected to materialize quickly in some cities, especially in São Paulo.
The Chinese manufacturer has set up a business plan to hit the streets in Brazil and make the country the gateway to its neighbors in South and Central America, such as Peru and Colombia. The company intends to compete for space with big brands that dominate the Brazilian market, some of which have been operating in the country for more than 60 years.
Founded in 1998, Higer has four plants in China and grossed $5.5 billion last year. It is a young company when compared to competitors, especially the European ones. “We already have 50,000 electric buses in the streets – mostly in China, but also in Europe,” said Marcelo Barella, Higer’s head for Latin America. In Brazil, the Chinese company will operate with TEVx Motors, which will import and distribute the vehicles.
The company has put together a business plan where the operators of the transportation system, whether private or public, will not need to buy the vehicles nor worry about the charging infrastructure. Everything will be leased. The electric bus is 2.5 times more expensive than a diesel-powered one. “A combustion bus costs around R$900,000. The electric one reaches R$2.6 million,” Mr. Barella said.
Higer signed an agreement with Enel in order to compete for the supply of electric buses in São Paulo, which is Brazil’s largest market – and the perfect place to debut in the country, in the Chinese company’s view. The Italian power company holds the power distribution concession in São Paulo’s capital city and 22 other cities in the metropolitan region around it. Enel will compete in biddings for the supply of the vehicles. If it wins, Enel will buy the vehicles from Higer, assemble the charging infrastructure, and lease the whole package to the operators. Higer will run bus maintenance and driver training, which includes having its own personnel inside the operators’ garages.
“The rental system allows the fleet to be changed as quickly as possible. If operators had to buy an electric bus, I’m not sure if they would get the credit for that,” Mr. Barella said. He recalled that São Paulo has 14,000 buses and plans to reach 12,000 electric buses by 2028. Of this total, 2,600 would be running by 2024 and 600 between 2022 and 2023.
The company plans to gain space in São Paulo, as it is one of the most complex urban transportation systems in the world. If it is able to meet the standards of SPTrans, which manages the city’s system, the company will be able to serve any other city in the country, in the executive’s view. Higer invested $10 million to adapt the buses to Brazilian standards. “We have all the tooling ready. If I have an order for a thousand buses, I am able to meet the demand.”
If Higer’s plans go as expected, the company estimates to have 300 employees in 2023 and 500 by 2024. There would be eight to 10 employees in each garage.
At first, the battery-powered vehicles will be imported in one piece, but the company is negotiating with the government of Ceará an area in the port of Suape to install an assembly line, with an estimated investment of $20 million. With the local unit, the idea is to import the buses in a PKD (Partial Knock-Down) system. “The structure of the car comes ready and here we put the windows, seats and engine,” the executive said.
In a second moment, the SKD (Semi Knock-Down) system would be adopted, with higher added value. Mr. Barella explains that a good part of the vehicle maker’s suppliers in China are already in Brazil and could meet Higer’s needs in Ceará. They are global suppliers, such as Siemens and Dana, for engines; ZF for suspension; Bosch for steering gears; or Wabco for brakes. The batteries are from CATL, which has signed an agreement with the Brazilian battery manufacturer Moura for post-sale services. The unit in Ceará will also be the export base for the region.
The choice of Ceará reveals the next step in the automaker’s strategy for Brazil: hydrogen buses. The state has a large supply of clean energy and several projects for green hydrogen production in the medium term. Higer already has 400 hydrogen buses running in China. But it is a longer-term project in Brazil.
Well before the use of hydrogen, the Asian group plans to enter the segment of passenger and cargo electric vans and trucks in Brazil. The vans are expected to arrive later this year and will require a dealer network. On the other hand, Mr. Barella acknowledged that competition for trucks is likely to be fierce. The executive, who has worked for Higer since 2004 in several countries, knows that the heavy truck segment has its leaders, but as seen in the 2018 World Cup, when underdog Korea disqualified world champion Germany, favoritism is only confirmed at the end of the game.
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