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Scania halts exports from Brazil to Russia

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Scania has suspended exports of trucks from the São Bernardo do Campo plant to Russia. The Brazilian subsidiary follows the decision of the parent company in Sweden, which halted sales in the Russian market after President Vladimir Putin decided to invade Ukraine last week. The company did not inform how many vehicles will no longer be sold, nor the impact on production at the plant in the São Paulo state. Scania was the only manufacturer that exported vehicles from Brazil to Russia.

After changing its internal strategy, four years ago, the company stopped disclosing production and sales figures. But it is known that the Russian market was among the company’s foreign markets a few years ago. Three years ago, the company announced an investment plan of R$1.4 billion, aimed mainly at modernizing the São Bernardo plant, which employs 4,000.

The unit was modernized to continue to be an export hub. The latest investment program includes adapting any model to the clean energy defined in each country. A statement from Scania Latin America reproduces the company’s worldwide position regarding the conflict in Ukraine.

“Scania’s values of democracy, free trade, human rights and respect for the individual guide all company decisions.” About the recent events in Ukraine and Russia, the Swedish manufacturer said that it is continuously monitoring it closely and since last week has decided to stop deliveries of trucks and spare parts to Russia. “We continue to prioritize the safety of our employees and have been in close dialogue with our customers, suppliers and other partners to assist them in any way we can at this difficult time for humankind,” Scania said.

Some auto parts manufacturers also export from Brazil to Russia. But, in their cases, Russia is a less important destination. According to data from the National Union of the Components Industry (Sindipeças), the Russian market is in 26th place, with $26 million out of a total of $6.5 billion earned by companies in the sector with foreign sales in 2021.

The Russian vehicle market is smaller than the Brazilian one. Yet it is among the 15 largest in the world, with annual sales of around 1.7 million units. This is more than the United Kingdom or French markets sell. The Russian vehicle fleet is, however, larger than that of Brazil. There are almost 52 million vehicles on Russian roads, according to data from five years ago, while the Brazilian fleet was around 46 million in 2020.

Like Brazil, Russia is an important vehicle production center. Brazil is in the eighth position among the world’s largest producers. Russia ranked 13th in 2019.

Also like Brazil, most of the automakers active in Russia are multinationals, mainly European ones. Some have alliances with local manufacturers. As foreign companies have already chosen to suspend business in the country since the beginning of the conflict in Ukraine, the activity of the automobile industry in that country tends to be quite compromised.

French Renault, German Volkswagen and Stellantis (which includes Fiat, Chrysler, Peugeot and Citroën) have the largest operations in Russia. General Motors had stopped producing in the country a few years ago as a result of a global reorganization. Some cars produced in Brazil have already been inspired by models developed in Russia.

Volvo Cars was one of the first to react to the invasion of Ukraine, suspending the shipment of cars to Russia. In the case of the brands that produce locally, there is also a lack of components that, in good part, were supplied by Ukraine.

German company BMW will halt exports and production at its plant in Kaliningrad, on the Baltic Sea, “due to the geopolitical situation,” the company said in a statement.

According to news agency reports, Honda has suspended the shipment of cars and motorcycles to the Russian market since this Thursday. The company follows decisions already taken by Mercedes-Benz, Jaguar and Land Rover. Mercedes announced the donation of one million euros to the Red Cross in Ukraine.

Source: Valor International

https://valorinternational.globo.com

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War likely to have little impact on Brazilian economy, experts say

Economists and banks, however, warn that it depends on the duration of the conflict

Brazilian economy: encouraging news from the IMF - Europartner

The Brazilian economy is little exposed to the Russia-Ukraine war and is likely to suffer little impact, at least for now. This scenario, however, will only be confirmed if the conflict does not spread to other European countries, economists and banks told Valor.

For the head of economic research in Latin America at Goldman Sachs, Alberto Ramos, the fastest impact will be seen in inflation via commodities, and not in growth. “The first quarter will still be very much influenced by the omicron dynamics, which affected activity in January and there was a small rebound in February,” he said.

“Potentially, the implication [of the Russia-Ukraine conflict] will be to backfire a bit on the inflationary process and make the Central Bank more conservative because of the impact on commodity prices,” he added.

“Brazil’s trade levels with Russia and Ukraine are quite limited. The supply of fertilizer for the agribusiness can be impacted by this channel and put more pressure on food prices and energy prices with oil above $100. It means more pressure on Petrobras. But the impact, I say it again, is more immediate on inflation than on growth. We are already in March, there is not much more to go for the first quarter,” says Mr. Ramos.

A report by Dutch bank Rabobank goes in the same vein. The economists at the financial firm note that with the exception of the fertilizer market, Brazil is little exposed to Russian supply or demand and believe that the military attack should only indirectly weigh on Brazilian activity.

The report entitled “A Russian cloud over Brazil,” says that everything depends on the duration of the conflict. The side effects of the war, says the bank, may come from energy prices and uncontrolled imported inflation, and the likelihood of higher interest rates.

With high inflation, Rabobank projects a Selic rate of up to 12.25% in the second quarter of this year, with a slowdown to 11.75% by the end of the year. But it warns that a prolonged conflict may delay the easing cycle.

In the evaluation of the chief economist of RPS Capital, Gabriel Leal de Barros, the prospect of increased public spending in Brazil, because of the elections, may end up offsetting the negative effect coming from the war in Russia. He recalls that states and municipalities have about R$180 billion in cash today, equivalent to 2% of GDP. “Some states are already spending more, giving salary raises for civil servants, and this move acts as a counterweight to the negative effect of the war on activity,” he said.

Source: Valor International

https://valorinternational.globo.com

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How Russia-Ukraine conflict affects Brazilian agribusiness

AGROBUSINESS

It is impossible to talk about pros and cons in the face of a war. There are only “cons”, and for Brazilian agribusiness they are multiplying with the escalation of tensions between Russia and Ukraine.

An immediate reflection of this escalation, grains prices soared on the international market. It is true that Brazil is a major exporter of soybeans and corn and can even benefit from the increases in prices of both commodities, but the country is also one of the largest importers of wheat, with prices rising the most.

Among the “soft commodities”, sugar and cotton, which are directly influenced by oil prices, are also on the rise and the curve may favor Brazilian exporters. But prices of coffee, cocoa and orange juice, equally important for the country, are falling.

In common to all agricultural products, fertilizers, which are already much more expensive since last year, will certainly increase even more, and with the expectation of increasing sanctions on Russia, one of the main exporting countries of the input in the world, the supply scenario is bleak.

It is always good to remember that, despite being the largest net exporter of agricultural products in the world, Brazil imports around 80% of the fertilizers used in crops. So, if rural producers manage to buy everything you need in the market this year without Russia — and without Belarus, also an important supplier, which is no longer able to sell because of U.S. and EU sanctions —they will have to pay much more for input.

The result of this equation points to increases in the prices of basic grains for human and animal food and sugar, essential even for the poorest population, could be more inflation. The calculation also takes into account the effects on production costs and prices of cheaper proteins such as chicken meat and eggs.

Russia and Ukraine are, respectively, the first and third largest wheat exporting countries in the world, behind only the European Union. So far, the U.S. Department of Agriculture (USDA) estimates that, together, they would ship 59 million tonnes in this 2021/22 season, almost a third of the total forecast. According to the USDA, the two countries would also be responsible for shipments of 38 million tonnes of corn, or 20% of the total volume.

In the case of fertilizers, Russia leads global exports of nutrients derived from nitrogen, is the second largest country in shipments of potassium products and the third in phosphates. The country recently suspended shipments for two months, but the flow was expected to resume by the beginning of April, which is now pending. In the fourth quarter of 2021, urea, for example, was already 245% more expensive than a year earlier.

As already reported by Valor, the import of fertilizers is at the base of the commercial relationship between Brazil and Russia. In 2021, Brazil imported 3.6 million tonnes of Russian potassium chloride ($1.3 billion). Another $1.2 billion was spent on the purchase of urea (1.3 million tonnes), ammonium nitrate (1.4 million tonnes), nitrogen, phosphorus and potassium (967,000), according to data from Comex Stat, database maintained by the Economy Ministry.

Brazil also imports agricultural products such as malt (157,300 tonnes) from Russia. The volume of wheat is small (28,000 tonnes), because in this case the bulk of purchases come from Argentina.

On the other hand, imports of products from Ukraine are not very relevant. Among the agricultural items imported by Brazil, the list contains cigarettes, frozen fruits and oats, with deals of $2 million last year.

Brazilian exports to both countries are based on agricultural products. For Ukraine, the relevance is also small. Sales are led by peanuts, with 22,200 tonnes for $29.2 million in 2021. The beef industry exported 4,600 tonnes last year, 13% more than the previous year. The values advanced 34% compared to 2020, to $15.4 million.

Sugar, soluble coffee, soy, tobacco, beef tripe, pepper and chicken meat are also on the list. In all, the sale of agricultural products to Ukraine amounted to $148.2 million in 2021.

Shipments to Russia are more significant. They include 768,200 tonnes of soybeans in 2021, or $343.2 million. The commodity is the main product exported to the Russians. Among the proteins, the highlight is the chicken meat. Last year, 105,800 tonnes were shipped, or $167.1 million.

The basket of main Brazilian agribusiness products exported to Russia also includes coffee, peanuts and sugar. Beef comes next, with 35,300 tonnes sold and revenues of $137.6 million. Brazil also resumed exporting pork (9,200 tonnes), after spending 2020 without exports, and 458 tonnes of horse meat were also shipped to Russia in 2021. Revenue from shipments exceeded $1.2 million.

Source: Valor International

https://valorinternational.globo.com

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