Posts

China-controlled TCP plans to invest R$370m by 2023

Investments will be directed to expansion of areas for refrigerated cargo, purchase of cranes

06/21/2022


Terminal de Contêineres de Paranaguá (TCP), controlled by China Merchants Port, will start an investment plan of nearly R$370 million, which will be injected by the end of 2023. The goal is to increase capacity, both for storage and cargo handling.

Part of the funds will be used to purchase 11 RTG cranes, which are used to move containers. The investment was already part of the obligations of the concession, but the decision to acquire them at this time was due to the tax exemption window opened with the extension of Reporto, a tax regime that suspends the collection of federal taxes on imports of equipment in the industry, until the end of 2023.

The company’s goal is to expand its cargo-handling capacity by 15%.

The investment plan also includes a 43% expansion of the area destined for reefer containers, which will reach 5,178 sockets. One of TCP’s main cargoes is frozen meats – in 2021 the terminal accounted for 35.4% of Brazil’s chicken exports.

The container yard will also be expanded, by 20,000 square meters. This will be possible through the optimization of the terminal’s structures, which currently occupy 480,000 square meters.

The need for expansion emerged, in part, from the logistical chaos generated by the pandemic. In late 2019, just before the health crisis, TCP completed investments that expanded its area by 150,000 square meters. At the time, the expansion was seen as being enough to meet the demand of the next decades, said Thomas Lima, the company’s chief commercial and institutional officer. “With the pandemic, we had our capacity taken right away. All the parameters changed,” he said.

During the Covid-19 crisis, global logistics chains went through complete disorganization amid port closures, interruptions in production lines and delays in clearance. The effects seen since 2020 include clogged ports, container shortages and crammed warehouses.

In addition to the pressure generated by the pandemic, cargo handling is up. The volume of full containers handled by TCP grew 5.9% in 2021 compared with the previous year. In the first quarter of this year, it rose again – by 2.3%.

In the executive’s view, the perspectives are positive. “The Port of Paranaguá is very focused on agribusiness, which is a growing industry, despite the country’s GDP. The world is consuming more meat, and this tends to boost cargo-handling operations.”

Mr. Lima acknowledges that the pandemic still impacts operations. Recent lockdown measures in China have reduced the number of empty reefer containers coming into the country. This could create a bottleneck for meat exports, which need the equipment. “Exporters have their warehouses full because slaughtering has not stopped,” he said.

The executive considers that it is complex to foresee when the situation will be normalized. However, for him, the trade flow between Asia and Brazil is expected to normalize at the end of this year if China refrains from imposing new Covid lockdown measures.

¨*By Taís Hirata — São Paulo

Source: Valor International

https://valorinternational.globo.com/

Brazil will “dance” with U.S., China, Guedes says in Davos

Guedes met UBS CEO Colm Kelleher — Foto: Reprodução/Twitter/ME

Guedes met UBS CEO Colm Kelleher — Foto: Reprodução/Twitter/ME

Economy Minister Paulo Guedes said that “everyone is going after Brazil” at the World Economic Forum and that, with the turnaround in world geopolitics, the country will “dance” with the U.S. and China at the same time.

In a conversation with journalists, Mr. Guedes said that Brazil suffered pressure from both the United States and Europe in the wake of the war in Ukraine to stand on one side. But that now “nobody is cursing us” and Brazil is seen as a solution to energy and food crises.

As an example, he said that the new interest in Brazil with a series of bilateral meetings on Tuesday in Davos — with the CEOs of UBS, Mittal, Alibaba, Sem Merck, Claure Capital, YouTube, Canada Pension Plan Investment (CPP), as well as lunch with investors promoted by Itaú Unibanco.

“There is demand from 30 of the largest companies in the world, but we can’t supply everyone,” said the minister.

In the World Economic Forum, Brazil is almost absent from the agenda, without any specific debate. The public manifestations of most of the authorities present are about the size of a possible recession in the European Union, in the United Kingdom, and perhaps in the U.S. after next year. In other words, little is said about Brazil, except in restricted circles that know more about the country.

According to the minister, “people do not understand: the world has changed and Brazil’s position has improved.” He says that “Brazil has lost 30 years, it has not connected (with global value chains). China got out of poverty, Thailand, everyone went up, and Brazil was left hopping.”

The minister adds that with the crises caused by the pandemic and the war in Ukraine, other countries got into difficulties, but not Brazil. And so, in his vision, the country can redesign its production chains with new axes, such as renewable energy and semiconductors.

In this scenario, said Mr. Guedes, the pressures came on Brazil. He said that the Europeans asked Brazil if the country was on their side or on Russia’s, if it was with the Brics or with the OECD.

On the one hand, the U.S. Treasury Secretary Janet Yellen made it clear that Washington would redesign investment criteria and that the world will never be the same. In other words, the U.S. needs closer supply chains and reliable partners.

The way Brazil is going to stand, according to the minister, is to be “the guy that is going to give food and energy security to Europe. And the U.S., which Brazil is close to and a friend of, will not need to go to China.”

As for China, “the Chinese and the Americans had a synergy that lasted 30 years, then China grew and they started fighting. We are going to dance with both of them.

Furthermore, Brazil wants to accelerate its integration into the OECD. He said he has established a good relationship with Mathias Cormann, Secretary-General of the OECD, who will visit Brazil in the near future.

Source: Valor International

https://valorinternational.globo.com

Crisis in China affects logistics in Brazil

Exporters already face higher freight rates and difficulty in shipping goods on the Brazil-Asia route  — Foto: Ana Paula Paiva/Valor
Exporters already face higher freight rates and difficulty in shipping goods on the Brazil-Asia route — Foto: Ana Paula Paiva/Valor

Lockdown measures in China are beginning to affect ocean shipping in Brazil. Exporters already face higher freight rates and difficulty in shipping goods on the Brazil-Asia route – especially those reliant on refrigerated containers, such as the meat industry. As for imports, delays and trip suggest that there will be bottlenecks in the coming months.

Right now, the situation is more serious for exports due to congestion in Chinese ports, especially Shanghai, which concentrates the world’s largest container terminals. With no storage space or sockets available for containers, some shipping companies have halted orders for reefer cargo, or have diverted ships to other Chinese ports – which are also beginning to fill up, creating a cascade effect.

As a result, freight rates on the export route from Brazil to Asia, which were already high, have risen further since March. This month, the value reached $6,800 per 40-foot reefer container in the short-term market, compared with $3,000 to $4,000 before the pandemic. The price was up 58% year over year, a survey by the National Confederation of Industry (CNI) with data from consultancy Solve Shipping shows.

Freight rates of imports have not been affected yet, but prices, which had been falling, are expected to rise again in the coming months. In April, the value was $5,300 per 20-foot container, according to CNI. This is still a high level for the historical series, but well below the peaks recorded in recent months.

In the Brazilian market, the route coming from Asia was the most impacted by the logistical crisis caused by the pandemic. Prices, which were around $1,500 per container before the crisis, skyrocketed from the second half of 2020 onwards and reached record highs, above $10,000.

This rise was caused by the mismatch between supply and demand worldwide. On the one hand, consumption of goods soared from the end of 2020. On the other hand, the health crisis reduced the production capacity of industrial companies and generated logistical obstacles – with delays in the release of goods, reduction of teams due to contagion, lack of containers in the market and port congestion.

In recent months, the Brazilian market had seen a balance between supply and demand, which explains the recent reduction in the freight rates of imports on the Asia-Brazil route, said Matheus de Castro, an analyst at CNI. Now, however, the situation is expected to worsen again. “Lockdown measures in China will start to bring problems. The higher export freights are already a reflection of the difficulties, of stopover cancellations.”

Leandro Barreto, a partner at Solve Shipping, believes that the lower import freight rates seen at the beginning of the year are a one-off event, because it is a time of the year when demand is already low. Prices are expected to rise again from May on due to delays and cancelations.

In his view, the impacts of the crisis will be felt especially when the restrictions in China are lifted. “Bottlenecks are expected to emerge, and freight rates tend to rise once lockdown measures end, because there will be pent-up demand to meet. In addition, the peak season starts in June or July, when demand seasonally increases,” he said.

For Rafael Dantas, head of importer Asia Shipping, the biggest impact of the current crisis will not be so much on freight rates, but on the lack of imported goods due to logistics bottlenecks. “I do not believe that we will return to the level [of freight rates] of 2021. The scenario is different. Consumer spending has dropped in Brazil, the country is no longer under lockdown measures, demand has returned to normality. But we will certainly feel the lack of products.”

The analysts point out that, besides the restrictions in China, a number of factors have influenced prices. One is the war in Ukraine, Mr. Castro said. “This has not generated logistical bottlenecks, but has put pressure on fuel prices.” In addition, problems in Chinese ports are compounded by the congestion in U.S. ports – a situation that has been dragging on since last year, as a reflection of the logistical chaos generated by the pandemic, he said.

“Worldwide, the market is at the operational limit and any event delays normalization. The situation was expected to improve throughout 2023, but it may take longer,” he said.

According to the major shipping groups, it is still early to predict when normalization of the logistics chain in China will occur. “There are several factors to be considered, especially the duration of this outbreak of the omicron variant and the measures governments will take,” trade association Centronave said.

Source: Valor International

https://valorinternational.globo.com

As Brazilian exports grow, China grabs larger share

Lia Valls — Foto: Leo Pinheiro/Valor
Lia Valls — Foto: Leo Pinheiro/Valor

Brazilian exports grew 34% year over year in value in 2021, more than offsetting the 5% loss reported in the previous year. The growth led to a record shipment of $280.6 billion last year, but had uneven distribution by destinations. The increase in shipments was almost all directed to China, which grabbed a larger share of Brazilian exports compared with before the pandemic. The Chinese share of the values shipped by Brazil rose to 31.3% last year from 28.7% in 2019. Asia as a whole advanced four percentage points in the same period, reaching 46% in 2021.

Exports to the United States, European Union and South America also grew last year compared with 2019, but at a lower rate than China’s 38,5% rise over the same period or than the average of Brazilian shipments, according to federal government data. With this, the American share in the value of Brazilian exports fell to 11.1% from 13.4%. The European Union had a small reduction, to 13% from 13.6%, but now holds the lowest share since official records began, in 1997. South America’s share shrunk to 12.1% from 12.6%. This is not the lowest share ever because last year, as the region’s economy suffered more due to the pandemic, its share was 10.8%.

The Foreign Trade Indicator (Icomex), which is surveyed by Fundação Getulio Vargas’s Brazilian Institute of Economics (FGV/Ibre) and considers the volume alone, excluding the price effect, shows growth in shipments to China. Even as there were slowdowns or even falls in some periods, the survey suggests that shipments to China are on the rise considering data since 2008, said Lia Valls, a research associate at Ibre. The volume exported by Brazil to the Asian country grew more than 360% in 2021 versus 2008, the Icomex shows. On the other hand, the volume shipped to the United States fell 18.6%, while exports to Argentina and the European Union dropped 30% and 28%, respectively, in the same comparison.

It is important to highlight the effect of volumes, Ms. Valls said, because the value shipped by Brazil last year grew predominantly by the price factor, driven by key items like agricultural and metal commodities. Iron ore had a prominent role. Still according to Icomex, the average price of exports rose 29.3% year over year in 2021. In volume, shipments increased at a much slower pace, 3.2%.

Structural and cyclical issues explain Asia’s largest share in Brazilian exports, said Livio Ribeiro, a researcher at Ibre and a partner at BRCG Economic Consultants. “The most structural issue is that we are developing an export agenda that is very complementary to the Asian value chain. This is true for China, which leads many of the region’s productive processes, but it includes other countries on the continent, such as Korea, Malaysia, Singapore and even Indonesia,” he said. That’s why the increase in export value in 2021 was not evenly distributed among the blocs, according to him. “About 90% of that margin went almost entirely to China.”

Brazil’s tariff structure for exports to the European Union, Mr. Ribeiro compares, is not very different from China, considering the prominent role of agricultural and metal commodities. “But Asia has been buying the incremental [volume], and this makes sense when you consider that China and Asia have been growing above the global average and the eurozone countries have been growing less than the United States.”

The long-term path in volumes follows similar logic, Ms. Valls said. The European Union has had much lower growth than Asia and the United States since the 2008 financial crisis, she recalled. The picture is similar to the recovery seen over the past year, after the first cycle of the pandemic, Mr. Ribeiro said, which is already the broader factor of the scenario, as Asia overcame the health crisis more quickly with the first variants of Covid-19 and resumed economic growth with more vigor.

In relation to South America, the Argentina factor weighs the most. For economists, there is no prospect of a faster recovery in the values exported to the region if there is no more sustained recovery of the Argentine economy over time. At the same time, Mr. Ribeiro said, there is also a reorganization of the automotive sector, with many factories settled in Argentina, which does not favor Brazil.

Source: Valor international

https://valorinternational.globo.com/

China lifts embargo on Brazilian beef

Importações de carne bovina da China disparam enquanto os produtores dos  EUA aguardam detalhes do acordo comercial

China authorized the resumption of Brazilian beef exports to its market on Wednesday. The embargo was in place since September 4, when two atypical cases of “mad cow disease” were identified in Minas Gerais and Mato Grosso.

The information was disclosed on the website of the General Administration of Customs of China (GACC, its acronym in English). The decision, officially communicated to Brasília, authorizes the resumption of exports of boneless beef products from Brazil under 30 months.

In a statement, the Agriculture and Foreign Affairs ministries stated that the decision is the result “of the close coordination” between them and “the fluid dialogue” with the Chinese authorities since the beginning. This “close coordination,” however, was heavily criticized by the productive sector, which expected the embargo to last at most 15 days.

The secretary of Commerce and International Relations of the Ministry of Agriculture, Orlando Ribeiro, stated that the resumption is “total” and “without additional conditions.” According to him, the “cutoff point” is the International Health Certificate. The Brazilian government was officially informed of the decision by the Chinese authorities. “Everything that is certified after December 15 will be accepted,” he told Valor.

Thus, the Ministry of Agriculture has already informed agricultural tax auditors and the Brazilian private sector about the procedures for resuming beef exports to China. Beef produced during the embargo period may also be certified and shipped to China. Companies that did not stop production and stocked the products are expected to resume shipments soon.

An official letter from the Department of Inspection of Animal Products (Dipoa) of the Ministry of Agriculture on Wednesday determined the return of production and sanitary certification of beef.

The suspension of exports was a reason for apprehension for Brazilian cattle raisers. China is the sector’s main customer and had been absorbing around 60% of Brazilian sales abroad, which amounted to $4.5 billion between January and September. Earlier this month, China authorized the entry of cargoes shipped before the embargo was determined, estimated at more than 100,000 tonnes.

Brazil voluntarily suspended exports to China after identifying two cases of mad cow disease in the country. The World Organization for Animal Health (OIE) recognized that these were atypical episodes and that the risk to the national herd was negligible. Several technical meetings between Brasília and Beijing have been held since then.

The president of the Association of Mato Grosso Breeders (Acrimat), Oswaldo Pereira Ribeiro Júnior, said that the resumption of beef purchases by China is a “Christmas gift” for Brazil.

He noted that the Chinese government could no longer maintain the embargo, which lasted more than three months, as its domestic demand is heated, stocks retreated and Brazilian exporters had been increasing sales to other markets.

“China lifted an embargo that should never have happened, proving that the issue was not sanitary, but political and economic,” he said.

With sales suspended for the main customer for three months, Brazil increased beef sales to countries in Southeast Asia and the United States. Russia also removed the suspensions of several meatpackers and may resume imports.

After starting the day sought after on B3, given the suspension of the Beijing embargo on beef and the increase in the Chinese tariff on pork imports, the stocks of the main Brazilian exporters of animal proteins (JBS, Marfrig, Minerva and BRF) started to rise.

Minerva rose 11.2% on the Ibovespa, while JBS was up 3.51% and BRF advanced 1.09%. Marfrig was also on the rise during the day before closing down 1.3%.

(José Florentino and Fernanda Pressinott contributed to this story.)

Latin America can fill space left by China in steel market

Metalshub - Global steel market - 2019 overview and 2020 foresight

China’s measures to restrict steel production in 2021 may be an opportunity for producers in Latin America in the coming years, said Máximo Vedoya, head of the Latin American Steel Association (Alacero). The executive warns, however, that to grab the space left by the Chinese, companies in the region must invest in products with greater added value and in the reduction of greenhouse gas emissions.

“Companies have to invest in solutions for decarbonization. We have an advantage, but other regions are betting on cleaner processes with the help of governments,” said Mr. Vedoya, who is also Ternium’s CEO. According to him, steelmakers in Latin America emit 1.6 tonnes of CO2 for each tonne of steel produced. This volume is 10% to 15% lower than that of European companies and 25% lower than that of Chinese companies.

Mr. Vedoya said that, on the other hand, governments in Europe, the United States and Canada are investing together with companies in their countries in the development of a more efficient production process. For that reason, they can take advantage of this race for the market China is leaving behind. “I’m not asking Latin American governments to invest directly in companies, but we have to find ways to move forward on this issue of decarbonization.”

According to Mr. Vedoya, support from the region’s governments could come in the form of investments in infrastructure, such as in the supply of natural gas and clear rules for attracting resources for renewable energy. “You have to facilitate these processes in Latin America. This will give us conditions to compete with other markets.”

Brazil, which has a cleaner power generation mix than others in the region, must review structures for the supply of natural gas, seen as the transition fuel to steelmakers free from CO2 emissions, he said.

“Brazil has natural gas but it is still expensive and there is no efficient distribution infrastructure. Argentina, on the other hand, has to invest in renewable energy, as does Mexico,” he said. “Each country has a different issue, but they all share the same vision: to foster a cleaner steel industry.”

Decarbonization will be one topic discussed at the Alacero Congress. Mr. Vedoya said that companies will sign a commitment to reduce emissions with targets for 2030 and 2050. “In this document, we are going to show the way for companies to achieve carbon neutrality,” he said. “In Brazil, for example, steelmakers can invest in charcoal, biomass, natural gas, biomethane and intensify the use of scrap. These are technologies that are available for implementation by 2030.”

As for estimates of apparent steel consumption in the Latin American market next year, Mr. Vedoya was more conservative and said the pace of growth would be slower, but on a high basis. In 2021, the association expects an increase in demand in the region of up to 20%, reaching 70 million tonnes of steel products.

“This year, apparent consumption has recovered a lot after the pandemic. Brazil should have a growth of 24%, compared with 12% in Mexico,” he said. “For the next year, we estimate that it will grow less, mainly because the normalization of demands in the value chains has already occurred.”

Source: Valor international

https://valorinternational.globo.com/

Solar power system prices surge driven by China, high demand

The prices of equipment for solar power generation have soared with the worsening power crisis in China, the world’s main supplier of the photovoltaic industry. According to equipment manufacturers and distributors, the prices of panels, which were already under pressure, have escalated again with occasional shutdowns in factories of silicon, a component that can represent up to 60% of the cost of the panel.

Supplying companies are not working with the possibility of a shortage of products, but say they see a troubled price scenario until at least June 2022. Despite this, the consensus is that the growth of the solar market is not threatened – demand for generation systems, whether for large developments or rooftop solar, has been so strong that the outlook remains positive.

The prices of panels and inverters started an upward trend last year, due to the disruption in the production chains caused by the Covid-19 pandemic, in addition to the increase in demand itself with the adoption of solar technology around the world. At the end of 2020, the sector even suffered from a shortage of glass, and now the big problem is silicon. In the case of Brazil, to this scenario is added the currency depreciation – the main components of photovoltaic systems are imported, and China is responsible for about 80% of the global production of panels.

In the view of the Chinese-Canadian manufacturer Canadian Solar, prices are expected to stay under pressure in the coming months.

“Shortage of material is very unlikely, but we will see a greater need for programming by customers. The uncertainties curb the commercial impetus, companies shift to the safety mode, waiting for the supply to return to normality,” said Pedro Alves, executive director for Latin America at Canadian Solar.

One of the world leaders in the photovoltaic industry, Canadian Solar produced panels in Brazil, but closed down its factory. Today, all the materials it supplies are imported. According to Mr. Alves, the company already has a local stock of 2,000 to 3,000 containers and says it is ready to meet the demand without major difficulties in the coming months.

At Aldo Solar, which supplies equipment for mini and micro solar generation, the third quarter started with a promising prospect, but the crisis in the Chinese market quickly brought a change of course. One of the biggest problems has been the logistical issue.

“The shipowners don’t give shipping guarantees. We are running an average of five to eight weeks late, with containers on the floor. They are skipping the port [of Paranaguá], because there isn’t room in the ships to come to Latin America,” said Aldo Teixeira, the distribution company’s founder.

The executive said supply is guaranteed for what was scheduled in the middle of the year. “If we had the capacity to double the volumes, we would do so. Demand is very high.” Founded in Maringá, Paraná, Aldo Solar was acquired this year by Brookfield Business Partners, the asset management firm’s private equity arm.

From the investors’ side, the increasing cost of the generation systems would tend to slow down the growth of the solar market, but the market is not betting on that. Aldo Solar, for example, predicts doubling its revenue in 2021 to R$3.2 billion in the wake of the expansion of solar generation for residences and businesses.

“The electricity bill has gone up a lot with tariff adjustments and tariff flags, and this has virtually offset the increase in the cost of the solar panel. That’s why the demand continues to accelerate, it’s still a good investment. The payback of the systems has remained unchanged,” said Rodolfo Meyer, CEO at Solar Portal.

According to a survey carried out by Portal Solar, an online power marketplace, the total investment for the installation of a 2 kilowatt-peak power system, for a monthly energy bill of R$250, is R$16,700. The figure is 15% above the level seen in March 2020, before the pandemic.

“In this case, the return on investment happens in a little more than five years. For larger systems, of 52 kWp, for monthly bills of up to R$7,000, the return is in three years, it’s a great investment,” Mr. Meyer said.

The Brazilian Photovoltaic Solar Power Association (Absolar) said the sector is facing “growing pains” worldwide. The head of the entity, Rodrigo Sauaia, points out that the main manufacturers are expanding production capacity, so the supply situation tends to improve in the medium term.

In the case of large solar projects, the increase in capital expenditure can postpone projects. However, Mr. Sauaia understands that, at this moment, generation companies are looking more at other factors, such as higher demand for long-term contracts in the free energy market and the window until the end of subsidies for renewable sources. The trade group predicts that Brazil will reach 12.5 gigawatts of installed capacity of solar power this year, up 60% from 2020.

Source: Valor international

https://valorinternational.globo.com/

Meatpackers shares rise despite suspension of beef exports to China

As Coronavirus Fatalities Rise, Trump Sends Immigrant Meatpackers Back to  Work

China’s embargo on Brazilian beef went unnoticed by the market. The shares of JBS, Marfrig and Minerva, the main Brazilian meatpackers focused on the product, have risen since the suspension of exports, on September 4, partly due to the low availability of cattle in Brazil.

The first news about the two atypical cases of mad cow disease in Mato Grosso and Minas Gerais states began to circulate in the week of August 30 in farmers’ social media.

The Ministry of Agriculture kept silent for a few days until the results were confirmed, and during this period of uncertainty, Minerva felt the most. Between August 30th and September 3rd, Minerva shares fell 7.7%, to R$7.79.

JBS, global leader in animal proteins, with most of the revenue generated in the United States, saw its stocks retreat 0.3%, to R$31.10, while those of Marfrig, the second largest meat company, also strong in the American market, even rose: 1.76%, to R$20.04.

The ministry’s confirmation of the atypical cases on Saturday 4 was followed by the voluntary suspension of sales to China, as provided for in the bilateral sanitary protocol signed with the Asian country, which had been buying 60% of Brazilian beef shipments.

But the news did not affect the large meatpackers, although it has harmed the business of smaller companies in the segment. On Thursday, the shares of the three largest companies closed at higher levels than on September 3.

To calm investors, Minerva announced on September 6 logistical changes to overcome the situation. The meatpacker informed it would maintain supply to the Chinese market through three plants of its subsidiary Athena Foods, located in Uruguay and Argentina. With this, between September 3 and 30, the stocks are up 34.1%, to R$10.45.

In the same period, Marfrig rose 28%, to R$25.66. The meatpacker also saw investors raise their bets on the merger with BRF, in which Marcos Molina’s company bought a stake of almost 32%

And, if JBS almost did not feel the turmoil of the “mad cow” disease, its shares rose less than its competitors’ stocks— and even so the rise was 19.2%, to R$37.07.

Source: Valor international

https://valorinternational.globo.com/

Brazil among most exposed to China’s slowdown

Explosivo usado no ataque ao Consulado da China é caseiro, diz Polícia do  Rio | CNN Brasil

The concern that a possible default by the Chinese real estate giant Evergrande could result in an abrupt financial contraction in China and cause a sort of repeat of the 2008 financial crisis resulted in a strong wave of risk aversion in Monday’s trading session. In a week making investors anxious already because of interest rate decisions by the U.S. Federal Reserve and other central banks, including the Brazilian one, these fears led to a generalized drop in stock markets and commodity prices around the world, as well as a jump in demand for the dollar and other currencies considered “safe havens,” such as yen and Swiss franc.

In Brazil, where the local scenario already left investors wary, the bias brought in from abroad was enough to bring the benchmark stock index Ibovespa down 2.33% to 108,844 points, the lowest since November 23, 2020. The foreign exchange rate, meanwhile, rose 0.87%, to R$5.33 to the dollar, after reaching R$5.3772 during the trading session, a level not seen since August 20.

The concerns of investors around the world seem to have condensed into one expression: the fear of a “Lehman event,” in reference to the bankruptcy of the U.S.-based bank Lehman Brothers in September 2008, which effectively started the global financial crisis that year.

One of the largest real estate developers in the world, China’s Evergrande has debts of more than $300 billion, and without the Chinese government bailout, it may not be able to honor its commitments. According to the consultancy Capital Economics, the company is not the only highly leveraged Chinese real estate developer, but because of its heavy dependence on short-term debt, it is especially vulnerable to a tightening of credit conditions.

Since the Chinese economy is highly regulated, analysts warn that much of the consequences for the world economy of a possible default by the developer depends on how Beijing will handle the situation.

Alberto Bernal, head of global strategy at XP Investments, believes that it is not in the Chinese government’s interest to let the situation escalate too much. “I doubt that even a Evergrande failing would lead to a Lehman event because that would be too dangerous,” the strategist said. The professional recalled that under the Chinese system, interventions can be put in place “almost immediately” and that for this reason, letting a Lehman event happen would be a deliberate choice by the Chinese government, which has the necessary capacity to contain contagion.

To assess the effects of a firmer slowdown in China on other countries, Wells Fargo ran a regression analysis with data back to 2016. The exercise suggests that Brazil is among the most exposed economies, along with Singapore, South Africa, South Korea, Chile and Russia. “Our analysis indicates that countries heavily reliant on exports, high commodity prices, and which are tightly integrated into China’s financial system should come under the most pressure,” Wells Fargo economists Brendan McKenna and Jessica Guo said.

The study divided the effects into three categories: sensitivity of the local currency, the stock market and exports. Regarding the first one, the Brazilian real is among the most exposed assets, along with the South African rand, the Russian ruble, the Polish zloty and the Mexican and Colombian pesos. These currencies would have sensitivity equal or higher than 0.9 to variations in the yuan – that is, a 1% devaluation of the Chinese currency would result in a depreciation of at least 0.9% of these currencies.

As for the stock market, Wells Fargo found only a “moderate” correlation between Brazil and China. In this case, countries most at risk are Singapore, South Africa and South Korea.

In relation to exports, Wells Fargo places Brazil as a country of moderate sensitivity, since it exports between 2% and 6% of its GDP to China.

Source: Valor international

https://valorinternational.globo.com/

China promises more raw material for vaccine

Foreign Affairs Minister Carlos França said Wednesday he has received from Chinese officials the promise that Brazil will receive a larger quota of active pharmaceutical ingredient (API) for the production of Oxford-AstraZeneca vaccines in May and June. Sworn in three weeks ago, after the fall of Ernesto Araújo, the new minister informed the Foreign Relations Commission of the Chamber of Deputies that he had a telephone conversation with his Chinese counterpart, Wang Yi, who said China will help Brazil as soon as possible.

Source: Valor international

https://www.valor.com.br/international/briefs