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Government seeks to direct congressional earmarks for investment

The idea is to use half the money to comply with the fiscal framework requirements

03/20/2024

Vilma Pinto — Foto: Wenderson Araujo/Valor

Vilma Pinto — Foto: Wenderson Araujo/Valor

The government wants up to half of the amount designated for congressional earmarks in the budget to be used to comply with the mandatory investment floor created by the new fiscal framework. Valor has learned that the forecast should be included in the 2025 Budget Guidelines Bill (PLDO), to be sent to Congress on April 15. The idea is already in the primary text being worked on by the Ministry of Finance.

The section included states that “a maximum of half of the amounts earmarked for the reserves provided for in paragraph 5 (individual and caucus earmarks) may be considered for complying with article 10 (investment floor) of Supplementary Law 200/2023 (new framework) when drafting the 2025 Budget Guidelines Bill.”

That is a novelty compared to this year’s budget, which also included a floor for investments but without designating part of the amount of the earmarks.

According to a government analyst, the proposal is similar to a provision that already exists in the current Budget Guidelines Act for the minimum health spending requirement, in which up to half of the amount of the earmarks can be considered to meet the constitutional minimum in this area. Under the Constitution, legislators are obliged to allocate half of their individual earmarks to health.

In the case of the minimum investment requirement, the government argues that congressional earmarks are intended to finance public works and projects; hence, the suggestion is to include in the PLDO the use of part of the amount to comply with the minimum.

The measure will make room for the government to provide more resources for other discretionary spending in the Annual Budget Act (LOA).

“I believe that the measure could help the government to comply with the rule of setting the minimum for investments in the budget, which is different from spending. It is probably a palliative found to deal with the increasingly limited space for discretionary spending, given the percentage of budget rigidity and, it is worth saying, the increase in congressional earmarks,” said Felipe Salto, chief economist at Warren Investimentos and former secretary of Finance and Planning for the State of São Paulo.

Vilma Pinto, director of the Independent Fiscal Institution (IFI), a public accounts monitoring body linked to the Senate, believes that the measure will help predict the allocation of budget resources. “It is a way of opening up space in the budget by overriding the obligation of some expenses, such as the health spending minimum and the mandatory earmarks,” she explained.

The total to be set aside for investment in 2025 will depend on the GDP figure in the budget since the fiscal framework stipulates that the minimum investment requirement cannot be less than 0.6% of GDP. Mr. Warren predicts a nominal GDP of R$12.238 trillion, which would give a minimum investment of R$73.4 billion. The exact amount will only be defined when the Annual Budget Act is submitted.

Rafaela Vitória, chief economist at Banco Inter, points out that “one of the problems is that spending on congressional earmarks does not necessarily follow the planning that one needs to have for investments, which are multi-annual expenditures with a long-term focus, while earmarks are dispersed and focus on shorter-term electoral benefits.”

“The capacity for public investment continues to be limited both by the space in the budget and by the lack of management,” she said. She believes that by linking earmarks to the minimum investment spending requirement, the Executive branch avoids the burden of freezing spending.

The Ministry of Planning and Budget declined to comment on the matter.

*Por Jéssica Sant’Ana, Guilherme Pimenta — Brasília

Source: Valor International

https://valorinternational.globo.com/
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Órigo has R$1.5bn to expand solar power generation

R$460m investment comes on top of previous R$1bn injection

08/01/2022

Surya Mendonça — Foto: Silvia Zamboni/Valor

Surya Mendonça — Foto: Silvia Zamboni/Valor

Órigo Energia received an investment of R$460 million from the U.S. fund manager Augment Infrastructure with the objective of boosting distributed generation. The amount comes on top of another R$1 billion injection to reach an installed capacity of more than 250 megawatt peak by the end of 2022.

Augment became a major shareholder in the company, along with TPG ART, MOV Investimentos and Mitsui. The company does not reveal the share of the new partner but says that the U.S. fund will not take control of the company.

With this injection and debt raising, the company reaches R$2 billion of investments until the end of 2023 with 500 MWp. By 2024, with new funding planned, the goal is to reach R$4 billion invested and 1 GWp of installed capacity.

Órigo CEO Surya Mendonça knows that it won’t be easy, since the current backdrop of high interest rates makes it difficult to raise funds and the solar industry faces deep problems in its production chains, which have made the capital expenditure of the projects increasingly variable.

“This capital injection gives Órigo more autonomy to accelerate the construction of solar farms, continue investing in technology, and expand the service to new geographies,” says Mr. Mendonça.

He explains that the entry into force of Law 14,300/22, which establishes the legal framework for power self-generation, microgeneration, and distributed minigeneration, brought more security for new investors to invest in Brazil.

“This is a consequence of the attractiveness and predictability that the renewable sector has with the new distributed generation laws that were approved last year. So we see that in Brazil it is possible to attract foreign capital with good projects, a team, and growth plans,” he says.

The executive says that the company serves more than 50,000 customers with a current installed capacity of operational 150 MWp distributed in 40 small solar farms in Minas Gerais, Pernambuco, and São Paulo. The company wants to reach 500,000 customers in the Southeast, Central-West, and Northeast regions.

The strategy is well known and has been working well among companies focused on distributed generation, which means building small plants of up to 5 MWp, disposing of the energy on the grid, and selling quotas of the solar generation to customers. The idea is to direct 90% of the value to increase capacity. The remainder is spent on attracting customers.

In fact, this business model is what attracted the Investment Fund for Developing Countries (IFU), a Danish fund for developing countries that invests in Órigo through Augment. “IFU has made several investments in renewable energy in Brazil, and the investment in Órigo Energia represents our commitment to support the green transition in the country. Órigo has an innovative business model for the development of distributed solar generation sector in Brazil,” says IFU’s CEO Torben Huss.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Âmbar plans to invest R$6.5bn in solar power

The generation investment arm of the J&F group expects to reach 1.26 GW of installed capacity by 2025

07/11/2022

With the plan to transition from an infrastructure company to a service company in the power sector, Âmbar Energia, a subsidiary of the J&F conglomerate, has an ambitious goal to invest R$6.5 billion in solar generation in Brazil by 2025 and reach 1.26 gigawatts (GW) of installed capacity.

In distributed generation alone, R$1.3 billion of the projects in the pipeline will be invested to reach 260 MW. The kick-off will be on July 14 with the inauguration of the first 5 MW solar farm, in São Paulo, to serve Swift’s stores and other clients. By the end of the year, 20 solar farms are expected to be ready, totaling 100 MW in operation.

The sector is in a “race for the sun” this year to be free of the charge the distribution grid usage fee (TUSD) until 2045. The projects that request connection to the grid until the end of the year will continue to be exempt from the TUSD for 23 years, so the challenge for Âmbar is to validate the amount of projects that it has until the end of the year to be able to take advantage of the benefit.

Marcelo Zanatta — Foto: Carol Carquejeiro/Valor

Marcelo Zanatta — Foto: Carol Carquejeiro/Valor

The bulk of the investments will be channeled to the free power market. To reach 1 GW, the company will have to disburse R$5.2 billion. Âmbar’s CEO Marcelo Zanatta says that the company’s trading arm was born recently and already has about 2,000 customers.

In addition, the controlling group has a large portfolio of customers and suppliers that can receive customized energy services according to size and need. “Just as Friboi offers a protein solution, we can offer a power solution,” says the executive.

Mr. Zanatta explains that the solar farms will be distributed in several states, depending on the opening of new Swift stores. In the free power market, the projects are large and the idea is to take advantage of land where there is more insolation, and the company already has spaces in Mato Grosso, in the north of Minas Gerais and in the Northeast region, with projected investments of R$5,2 billion by 2025, the executive says.

The company is quite ramified: there are two transmission companies with 460 km of lines, two gas-fired thermoelectric plants (UTE Cuiabá, 529 MW, and UTE Uruguaiana, 640 MW), 645 km of gas pipeline connecting Bolivia to Cuiabá, and energy trading. It is still too soon to know whether the company will also be able to become relevant in services, but the strategy is outlined.

According to Âmbar’s calculations, with the creation of the solar farms, 12,000 tonnes of CO2 equivalent emissions are avoided per month, proportional to the monthly planting of 4 million trees. If everything goes right on this horizon, J&F’s energy arm is expected to more than double its installed capacity, jumping to almost 2.5 GW from the current 1.2 GW of power.

Besides the challenge of deploying a huge scale of power in a short time, there is the pressure of the production chains. The company says it is taking advantage of the capillarity of the multinational and has five strategic suppliers in Asia. The equipment price increase of 10% to 15% in the last 12 months is a point of attention, but Mr. Zanatta says he believes the prices can slow down by 2025.

Another line of business is generation from natural gas. The investments underway in 2022 add up to more than R$1.2 billion and include improvements in the thermal plants and the construction of four more plants, which together give 344 MW of power. The investment is the result of the 2021 emergency auction in which the company acquired the four plants.

In the bidding, Âmbar proposed the transfer of the obligations of the thermal plants contracted to the UTE Cuiabá thermal plant, but there is an impasse in the Brazilian Electricity Regulatory Agency (Aneel) whether to accept the proposal or not.

*By Robson Rodrigues — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Nexa starts zinc operation in Mato Grosso

Project received $625m investment, can produce 120,000 tonnes per year

07/08/2022

Nexa, a mining company of zinc and other metals controlled by Votorantim, started this week the operations of a new mine, Aripuanã, in the namesake city, in Mato Grosso. This is one of the largest zinc projects in installation in the world and received investments of $625 million.

In a statement, the company said full production is planned for the second quarter of 2023. Nominal capacity is 120,000 tonnes of zinc equivalent per year, from the processing of 2.2 million tonnes of raw ore.

The new mine is expected to reach commercial production by the fourth quarter of 2022. It is expected to produce between 14,000 and 23,000 tonnes of zinc, 1,600 to 2,300 tonnes of copper, 5,000 to 7,700 tonnes of lead, and 300 to 500 ounces of silver this year. The volumes are subject to the inherent risks of a mine start-up.

The Aripuanã project consists of three main mineralized zones in the region, with an estimated average annual production of 70,000 tonnes of zinc, 24,000 tonnes of lead, 4,000 tonnes of copper, 1,800 ounces of silver and 14,500 ounces of gold. The lifespan of the mine is expected to be 11 years, considering currently estimated mineral reserves.

“Aripuanã is Nexa’s largest investment project in Brazil, which contributes to the social and economic development of the region,” Nexa’s CEO Ignacio Rosado said in the note. “It is also one of the few zinc projects in the world and we are confident that it will be a low-cost mine with a long operating life.”

According to the executive, this is the third major mine in Nexa’s asset portfolio, which strengthens its unique position to meet the growing demand for zinc worldwide. Mr. Rosado took over as CEO of Nexa on January 1st, 2022.

The venture – with underground extraction – is one of the most sustainable mineral projects in the country, says Nexa. According to the company, it has almost 100% water recirculation and the use of dry stacking and cemented paste filling for tailings.

Nexa, which was previously Votorantim Mineração and currently has more than 60% of its capital in the hands of group, has been operating for more than 60 years in the mining and metallurgy segments. The company has operations in Brazil and Peru, headquarters in São Paulo and an office in Luxembourg. Since 2017, its shares have been traded on the New York Stock Exchange. Nexa reported net revenues of $2.6 billion in 2021.

*By Ivo Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Investment boom driven by private sector

Carlos Antonio Rocca — Foto: Silvia Zamboni/Valor

Carlos Antonio Rocca — Foto: Silvia Zamboni/Valor

The surge in Brazil’s investment rate between 2016 and 2021, to 19.2% from 15.5% of the GDP, is due entirely to the increase in the private sector’s slice, whose rate rose to 17.5% from 13.6% of the GDP in the period, while public investments shrunk to 1.64% from 1.93%, the same level as the previous two years. The estimates for 2020 and 2021 are from the Center for Capital Market Studies at the Economic Research Institute Foundation (Cemec-Fipe), based on data from the Applied Economics Research Institute (IPEA), the National Accounts of the Brazilian Institute of Geography and Statistics (IBGE) and the National Treasury.

Cemec recalls that, since 2018, investment rates reflect the impacts of oil rig accounting criteria, in addition to changes in relative prices of gross fixed capital formation (GFCF) and the GDP in the period. “Cleaning up” the data from these effects, based also on a paper by economist Gilberto Borça published in Valor, Cemec estimates that the private investment rate, in relation to GDP, rose 2.9 percentage points between 2016 and 2021, above the 2.7 points growth of the total rate.

Three-quarters of this increase occurred between 2019 and 2021, when the private investment rate, with adjustment, advanced two percentage points of the GDP. At that time, Cemec notes, the growth rate of the GFCF index reached 8% per year, almost double of what was seen in the entire period from 2016 to 2021 (4.5% per year), despite a sharp drop in 2020. “My interpretation is that this is an investment recovery cycle that began after the recession started in 2014, in 2016-2017, was interrupted by the pandemic shock in 2020, but then recovered strongly,” Cemec’s coordinator Carlos Antonio Rocca said.

The study suggests that the increase in private investment has been concentrated in agribusiness and the construction industry. In the period from 2016 to 2021, the physical production of agricultural capital goods and their parts grew 3.9% and 7.3% per year, respectively, only below the capital goods for the construction industry, whose production advanced 11% per year.

This performance was strengthened in the 2019 to 2021 period, rising to more than 18% per year in the case of agricultural capital goods and parts, and to 16.6% among construction capital goods. The housing industry was favored recently by household spending on renovation and maintenance in the pandemic and, mainly, by falling interest rates and the drop in financing costs for construction and selling of residential properties. The production and investments in agriculture had a strong incentive from the increases in prices of agricultural commodities and the exchange rate, says Cemec.

Mr. Rocca – who, at Cemec, closely follows public companies in Brazil – also notes that since 2018 the rate of return on total capital invested by these companies was very close to the weighted average cost of capital, but in 2021, this rate of return has improved a lot. “The relevance of these data is that one of the important elements for making the decision to invest is to knowing how the return on this invested capital will be,” explains Mr. Rocca.

Given the financial constraints on public investment, there has indeed been an effort by the government to adopt a privatization and concessions agenda as an alternative, said Manoel Pires, coordinator of the Fiscal Policy Observatory at Fundação Getulio Vargas’s Brazilian Institute of Economics (Ibre-FGV). But there are also, he says, some statistical and/or temporary effects that help explain the recent boost in private investment.

Besides the internalization of the oil rigs, which do not present new investments, Mr. Pires notes that the inflation of investment goods was higher than that of the GDP. “When you take the value of investment and divide it by the GDP, the investment rate goes up, but the price effect is not exactly new investment,” he says.

Looking ahead, Mr. Pires says that with the rise in interest rates, the trend is that construction, for example, will no longer be such a strong factor in the growth of private investment. Another element that may have helped explain the higher rates, according to him, is that many businesses needed to invest to adapt to the pandemic and continue producing, what could tend to create a temporary effect of increased investment. “We will have to wait a bit to better evaluate the trend, but these questions serve to say that it is difficult to see we are living a new cycle of investments with the information we have now, that can raise the growth of the economy,” he ponders.

In a recent report, Inter B. Consultoria, headed by economist Claudio Frischtak, said that Brazil still invests little in infrastructure specifically. “In recent years, less than 2% of the GDP – and we have not gone beyond 1.73% in 2021,” he said, projecting 1.71% for 2022. Inter B. sees room for more public investment in infrastructure – which is expected to decline to 0.57% of the GDP in 2022 from 0.59% of GDP in 2021, the consulting firm estimated – provided it is based on a government reform that creates fiscal space for a responsible expansion of resources, with “a new governance, with better planning, and less discretion.”

Source: Valor International

https://valorinternational.globo.com

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Investment plan to bolster Renault in Brazil

Ricardo Gondo — Foto: Silvia Zamboni/Valor
Ricardo Gondo — Foto: Silvia Zamboni/Valor

Renault’s factory in São José dos Pinhais (state of Paraná) stopped 41 days throughout 2021 because of semiconductors shortage. For the same reason, between Monday and Friday the unit’s line work will be interrupted again. To the impossibility of working at full speed, which has become routine in the automotive industry, is added, currently, a strong pressure of costs. Despite the challenging environment, Renault’s global management is about to announce the value of a new investment plan, necessary to develop and produce, in Brazil, a future family of vehicles.

A little less than a month ago, the automaker announced that the Brazilian plant would be prepared to produce a new vehicle platform. This platform will serve as the basis for different new models. It is an important renovation, for several reasons. It is the first major change in platforms for the brand since 2007.

In addition, this new base also bears the signature of the Renault-Nissan-Mitsubishi alliance, which for more than one occasion seemed doomed to failure. The initiative also provides an opportunity for Brazil to be included in the transportation transformation process, since the new platform will also be used to produce electric cars.

The size of the new investment has yet to be defined. But, according to the CEO of Renault Brazil, Ricardo Gondo, the plan is bold. Besides the new platform, it includes a new engine. Therefore, it will require a large amount.

The executive is optimistic about the willingness of the parent company to invest in Brazil. A year ago, the company seemed more hesitant. In March 2021 an investment plan shorter than usual was announced – covering the period between 2021 and 2022 and totaling R$1.1 billion; resources already practically all used in the modernization of products already known.

Despite the plans for an electrification-oriented platform, for Mr. Gondo the production of 100% electric cars in Brazil will still take a long time. “Unlike Europe and the United States, this type of vehicle is still expensive for the Brazilian consumer in general,” he says. The executive recalls that the European consumer also receives tax incentives from governments to exchange the car for an electric model.

Even so, Renault intends to be recognized by the Brazilian public for the electrification of its line. In addition to the two 100% electric models already sold in the country – the Zoe compact model and the Kangoo SUV – next week, the company will introduce the Kwid compact SUV in an electric version. In Brazil, the 100% electric cars are all imported.

The French automaker is also studying the return of the Megàne to Brazil – the name is the same as one of the first models sold by the company in the country, but the Megàne that has just been launched in Europe is different. It has a pickup body and an electric engine.

Despite the high prices of electric cars serving, for now, a niche of the Brazilian market, Renault has plans, in the future, to popularize this type of model through sharing services. The mode is part of Mobilize, a company of the group launched in Brazil in the middle of last year. Sharing and long-term rental are among the new products offered by Mobilize and have helped to increase the company’s revenues.

Renault’s electric vehicles also continue to run on Fernando de Noronha. The project, part of the archipelago’s decarbonization plan, began three years ago. With the delivery of ten more vehicles a few days ago, the electric fleet in Noronha now totals 46 units. In a partnership with Neoenergia, the project includes solar panels for the installation of two clean energy plants.

“Renault was one of the first to enter electric mobility,” says Mr. Gondo, a mechanical engineer who, before taking over the automaker’s command in Brazil three years ago, held different positions in the local operation and also in Europe. According to him, there is no prediction when the supply of components will be resumed. Meanwhile, he says, the brand is working to establish its identity.

Electrification is the group’s global focus. In January, the Renault-Nissan-Mitsubishi alliance announced a $25.8 billion investment program over the next five years focused entirely on electric cars.

Source: Valor International

https://valorinternational.globo.com

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Lula defends investment in refineries

Refineries to integrate with petrochemicals due to weak fuel demand

Former President Luiz Inácio Lula da Silva (Workers’ Party, PT) has suggested changes to Petrobras’s business plan, such as reversing the divestment policy started in 2016, after the impeachment of Dilma Rousseff. He also criticized again the state-owned company’s price policy and defended new investments in refineries.

In a debate organized by his party and the oil workers federation (FUP) in Rio, Mr. Lula da Silva avoided any reckoning of his government. Refineries planned by Petrobras during the Lula da Silva administration were at the center of scandals about embezzlement of state funds that shook the administration of his successor, Ms. Rousseff, and contributed to impeaching her in 2016.

The Abreu e Lima refinery (Rnest), in Pernambuco, was the target of investigations not only of Operation Car Wash, but also of lawsuits in the Securities and Exchange Commission of Brazil (CVM). The unit is now operational and is likely to be finished by Petrobras itself, which was unable to sell the facility. Another project investigated for irregularities under Car Wash was Comperj, a complex of refineries and the current Polo Gaslub, which got off the drawing board with only a fraction of the size initially imagined and today is focused on receiving and processing natural gas from offshore wells.

Encouraged by the fuel crisis that destabilized the command of the company, Mr. Lula da Silva signaled he could expand the oil company’s refining policy again. “This country needs to have new refineries. Or renovate the old, scrapped ones, as we have already done in Paraná and Rio Grande do Sul,” he said. “We need to produce more and improve the quality of the fuel. Brazil needs to be an exporter of oil products,” he added.

Mr. Lula da Silva also said Petrobras must be profitable, and that he never accepted a deficit in the company’s earnings reports when he was the president. He said, however, that profits “must be shared with those who are responsible for the state-owned company” — the population, through affordable prices.

Under the Rousseff administration, Petrobras announced losses of R$23.6 billion in 2014 and R$34.8 billion in 2015 as it had to write off losses caused by corruption.

Mr. Lula da Silva said he preferred not to speak ill of the consultant for not knowing him. But he did not spare him any criticism. “I don’t know this person [Mr. Pires], so I’m not going to speak badly of him. But the two snippets that I read out of the news today say that he is a lobbyist. And that he is much more connected to foreign companies than to ours.” He then indirectly criticized Mr. Pires’s preference for the privatization of assets. He defended “using what is happening today in Petrobras” in the electoral campaign. Mr. Lula da Silva, the leader in the polls, seeks to associate the high prices of gasoline, diesel oil and cooking gas to President Jair Bolsonaro.

With the exception of the governor of São Paulo, João Doria (Social Democratic Party, PSDB), who has made no public comments, the front runners for the presidency have also spoken out about Petrobras. Former minister Ciro Gomes (Democratic Labor Party, PDT) preferred to record a video to say that “the corporate governance of the thievery that Lula implanted in Petrobras” cannot return.

About the subject, former Justice Minister Sérgio Moro (Podemos) said that “our goal is to privatize, as much as possible, all state-owned companies. Petrobras is one of them,” he said. “How do you solve the question of price and product and reduce inflation? It is market competition. So you have a public monopoly, as is practically the case with Petrobras, or you have a private monopoly if you privatize in the wrong way, it won’t solve the problem,” he said.

(Julianna Granjeia contributed to this story.)

Source: Valor International

https://valorinternational.globo.com

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BTG mulls investment in Braskem through debt

Braskem tried to tap market through secondary offering of shares held by Novonor and Petrobras, without success — Foto: Edilson Dantas/Agência O Globo
Braskem tried to tap market through secondary offering of shares held by Novonor and Petrobras, without success — Foto: Edilson Dantas/Agência O Globo

After the failed attempt to sell Braskem and the suspension of a secondary offering of shares in the Brazilian stock exchange B3, Novonor (formerly Odebrecht) is again studying alternatives to sell its stake in the petrochemical company.

BTG Pactual is said to be interested in buying the holding’s debts from creditor banks, which have Braskem shares as collateral. At the same time, talks with investment funds and rival companies for the sale or some of its assets have resumed, sources say.

BTG Pactual and funds focused on distressed debts once again spoke with Novonor, which seeks to generate liquidity for its securities. The “special situation” team of André Esteves’s bank is interested in buying debts in hands of Banco do Brasil, Bradesco, Itaú and Santander, as long as the financial firms agree to grant a hefty discount, a source familiar with the matter said.

According to a source, BTG’s most recent proposal was presented indirectly to Novonor through Braskem’s executives. There is no formal offer on the table yet. For the negotiations to move forward, it is necessary to have an alignment of the company’s shareholders with the banks. None of these players could sell their shares individually.

It is not the first time that funds and banks specialized in “special situations” have tried to purchase debt from Novonor, which owns 38.3% of the petrochemical company’s total capital. Braskem currently has a market capitalization of R$35 billion and is the main business of the group, which went into judicial reorganization in June 2019, with R$100 billion in debt.

The challenge in this transaction is to convince the banks to negotiate discounts. Novonor’s debts with Banco do Brasil, Bradesco, Itaú, Santander and the Brazilian Development Bank (BNDES) totals nearly R$15 billion. These banks have Braskem shares as collateral. “The value of the shares no longer covers that debt,” a person familiar with the matter said, justifying the request for a discount on the debts.

People familiar with the creditors told Valor that this proposal has not yet reached the banks and that there is no willingness of financial firms to grant discounts.

On another front, Novonor is said to be in talks with rival companies and investment funds to discuss the sale of Braskem again. Groups such as Unipar and the holding company J&F Investimentos, which owns JBS, were sought for talks. U.S-based fund Apollo was also approached, another person familiar with the matter said.

There is no firm proposal so far, but interested parties are said to have presented different structures for a potential deal. In 2018, LyondellBasell came very close to buying the petrochemical company before giving up due to environmental problems in Alagoas.

In January, the petrochemical company tried to tap the market through a secondary offering of shares held by Novonor and Petrobras, without success. Although there was demand for the shares, investors were asking for a discount.

Given the uncertainties in the market, worsened in recent weeks by the war in Ukraine, analysts believe that this is not the time for the company to resume the secondary offering.

Braskem has been preparing to migrate to the Novo Mercado, a section of the B3 exchange with stricter governance rules, which should bring gains for the shares. The original idea is to sell common shares held by Novonor after the migration. Two weeks ago, shareholders holding PNB shares in the company rejected the conversion of these shares into PNAs, a step that is preparatory to the unification of the different classes of shares into common stocks.

Apollo, BB, BTG, BNDES, Bradesco, Braskem, Novonor, J&F, Santander and Unipar declined to comment. Itaú and Petrobras did not immediately reply to a request for comment.

Source: Valor International

https://valorinternational.globo.com

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Machinery industry expects higher investment this year

Intelligent construction machinery industry is imminent - 深圳市菲莱克电子有限公司

The machinery and equipment industry is likely to increase investments in Brazil this year, with injections estimated at R$15.45 billion. José Velloso, head of the Brazilian Machine and Equipment Industry Association (Abimaq), said the funds are needed to support revenue growth in 2022, estimated at 6%.

“Last year, we invested R$14.52 billion, an amount 68% higher than we expected. Not one sector in Brazil has invested and invests as much as machinery and equipment,” said Mr. Velloso.

Most of the resources – 38.2% – will go to technological modernization to increase productivity in factories, according to Mr. Velloso. “Even with market growth, companies are unlikely to prioritize increasing capacity. They seek more efficiency,” he said.

According to Abimaq’s estimates, total net revenue will grow 6% this year. In 2021, the indicator reached R$222.44 billion, up 21.6% year over year. According to the organization, apparent consumption reached R$308.91 billion, up 14.8% from 2020. Internal net revenue, according to Abimaq, grew by 25.3%, reaching R$168.08 billion.

“It was the best year for the sector ever in the country. And we estimate that by 2022 we will grow even more, on a very high base of comparison. And we have several factors that are likely to support this evolution, especially sectors such as infrastructure and construction,” said Mr. Velloso. “Production is expected to grow 4.5% and exports 15.6%. We are very optimistic for this year.”

Last year, machine makers closed with a backlog of 10.8 weeks, up 21.3%. According to Abimaq, with this performance of the Brazilian market, the level of utilization of the installed capacity was 79.2%.

International trade also performed well in 2021. Exports grew 34.2% in 2021, to $9.37 billion, and imports reached $21.16 billion in 2021, up 23.4%.

The level of employment also followed the positive moment of the sector. The manufacturers ended the year with a payroll of 367,500 people, 42,000 more jobs than in 2020. “Our expectation is a 5% increase in the number of jobs this year,” he said.

Source: Valor international

https://valorinternational.globo.com/

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Investment in retail to stabilize, analysts point out

Varejo pós-pandemia: 80% das compras serão feitas em lojas físicas - Mercado&Consumo

The investment scenario for retail this year is likely to remain stable in the face of a possible new slowdown in brick-and-mortar commerce, balanced by the development of ecommerce, say analysts with investment banks and rating agencies consulted by Valor.

Market sources point out that the opening of new stores is related to heated consumption and a fast return on investments, which weighs against short-term expansion movements.

The retail analyst at Banco do Brasil Georgia Jorge says that the explosion of cases of the H3N2 virus and the omicron variant of the coronavirus have led to a deterioration in expectations. “Companies focused on physical commerce will probably remain under more pressure as long as those uncertainties persist,” she says.

According to the analyst, the outlook for the first quarter of 2022 is for “still pressured” sales overall, while pharmaceutical retailers may raise their forecasts amid the influenza and Covid-19 epidemics.

S&P analyst Diogo Ocampo reminds that sales in brick-and-mortar stores in early 2021 were heavily affected due to the pandemic. According to him, demand was not fully shifted to the online operation, which resulted in a drop in sales.

“It was a very difficult year, with falling Ebitda and demand moving to the online channel. All these companies have online channels, but they have lost revenue in this scenario,” he says.

Mr. Ocampo says that the consumption retreat impacted the cash generation of the companies, triggering warnings in relation to the level of indebtedness.

According to Fitch’s CFO Ricardo Carvalho, the macroeconomic uncertainties also impact the level of retail investments because of the dependence on shorter terms of return. The expected, according to the analyst, is that the opening of new stores will slow down in the coming months.

“There is an expectation of lower demand and retailers have to look at what will happen in 2022. They can’t make plans looking at two or three years. If demand doesn’t come, it will be a period of losses. So it’s an investment decision different from than sanitation or railroads,” he says.

Itaú BBA, however, points out that the brick and mortar stores also act as logistical support for ecommerce, which is likely to mitigate the overall more difficult scenario. Retail analyst Helena Villares warns that this does not mean that companies should not revise their estimates downward.

“We already knew it would be a more uncertain macro scenario, with a natural slowdown for retail as a whole. Physical stores are suffering, but there is also the role of ecommerce, to bring inventory together and reduce costs,” she says.

The scenario for more essential segments, such as food, also presents difficulties linked to the macro environment. Fitch says that the performance of companies once boosted during the pandemic has been affected by unemployment and inflation.

“The purchasing power of families today is much lower than it was six months ago. There is a higher level of uncertainty and a weakening trend,” says Mr. Carvalho.

This is also the view of Banco do Brasil, which highlights the resilience of the cash-and-carry due to the lower prices policy.

“Even though food retail has a more essential profile — which does give it some degree of protection — the fact is that food inflation has been weighing heavily on the pockets of Brazilian consumers, reducing their consumption to basic and effectively essential items in the food basket,” says analyst Georgia Jorge.

Considering the lower elasticity of the food market, Itaú BBA highlights that the segment is one of the preferences.

“Retail is likely to suffer —¬ at least in the first half of the year — but the decline in food retail is approaching a limit,” says Ms. Villares.

Another factor expected to continue to weigh against retail securities, according to Itaú BBA, is the movement of investment funds away from the sector.

The analyst says that, due to the high interest rate and the weak performance of Ibovespa, many fund managers have preferred to increase the composition of other sectors in their portfolios.

“In the past, exposure to retail used to be 15% to 25%, but many funds can reach 5% exposure because of this portfolio adjustment,” she explains.

Source: Valor international

https://valorinternational.globo.com/

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