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MURRAY ADVOGADOS

NEWSLETTER

SEPTEMBER 2025

09/04/2025

 

CHINA DOUBLES DOWN ON BRAZIL WITH ENERGY FOCUS, DIVERSIFIED INVESTMENT

After era of large-scale projects, Chinese capital shifts to innovation, energy transition

 

Chinese investments in Brazil reached $4.18 billion in 2024, up 113% from $1.97 billion the previous year. The surge far outpaced the 13.8% increase in overall foreign direct investment (FDI) in Brazil last year, according to Central Bank data.

 

Despite the rebound, flows from China remain well below the record $8.8 billion peak in 2017, when major bets were placed on large-scale oil and energy infrastructure projects. Investments are now more diversified, spread across smaller projects in information technology, manufacturing, and renewable energy. A record number of deals were confirmed in 2024, totaling 39, compared with 29 in 2023 and 28 in 2017.

 

The figures refer to projects effectively implemented last year, based on data from the Brazil-China Business Council (CEBC). The survey combines information from multiple sources to benchmark Chinese outbound investment. Potential investments in Brazil could have reached $6.2 billion in 2024, if announced projects that failed to materialize had been included.

 

Brazil was the leading emerging-market destination for Chinese productive capital last year and the third-largest globally, after the United Kingdom and Hungary. In 2023, it ranked ninth. The United States, which has steadily fallen in the rankings in recent years, placed tenth in 2024, according to data from the CEBC and the China Global Investment Tracker (CGIT), a database managed by the U.S.-based think tank American Enterprise Institute.

 

Tulio Cariello, CEBC’s director of research and content, noted that China’s initial wave of global expansion in the 2000s targeted developed economies as it sought technological upgrading. “With the geopolitical dispute between the U.S. and China, Chinese investors started looking elsewhere,” he said.

 

Amid the tariff policies adopted under the Donald Trump administration, relations between China and Brazil are likely to deepen. “Geopolitics is positioning Brazil almost directly alongside China in several economic matters,” Mr. Cariello said.

 

The report highlights that Chinese inflows accelerated at a time when the depreciation of the real made Brazilian assets cheaper in dollar terms. The average exchange rate in 2024 was R$5.39 to the dollar, the highest since the CEBC began tracking Chinese investment in 2010.

 

Over the past decade, Brazil ranked among the world’s top 10 recipients of Chinese FDI for seven years. From 2007 to 2024, cumulative Chinese investment in Brazil reached $77.5 billion across 303 confirmed projects. Between 2005 and 2024, Brazil was the fourth-largest destination by stock, trailing only the U.S., U.K., and Australia, according to CGIT.

 

Electric power attracted the largest share of Chinese investment in 2024, totaling $1.43 billion, or 34% of the total, a 115% increase over 2023. Oil followed with 25%, led by nearly $1 billion from China National Offshore Oil Corporation (CNOOC)—one of the largest single-year commitments of the past decade, second only to 2021, when Chinese oil companies poured about $5 billion into pre-salt projects. Automotive manufacturing ranked third, with $575 million (14%), and mining came next with $556 million (13%).

 

“Chinese capital is already firmly established in energy, from hydropower, solar, and wind to oil. What stood out last year was manufacturing, especially tied to electrified vehicles. That has brought investment into machinery, electronics, and equipment for energy generation and transmission,” Mr. Cariello said.

 

The shift has been accompanied by an increase in the number of projects but a decline in their average size. The average deal fell from $507 million in 2010–2014 to $313 million in 2015–2019, and to $112 million between 2020 and 2024. According to the study, this reflects a trend toward less capital-intensive projects, typically focused on innovation and the energy transition.

 

By project count, electricity continued to dominate in 2024, accounting for 56% of deals. But the remaining 44% was spread across sectors, with oil extraction at 13% and the production of electrical equipment and vehicles at 10% each.

 

In line with Brazil’s own industrial policy, Chinese investment in manufacturing has gained traction. A record eight projects were confirmed in 2024, worth a combined $637 million—the second-highest value on record, after $907 million in 2023. Beyond electrified cars, investments covered auto parts, construction machinery, household appliances, textiles, and a wide range of electrical instruments and equipment.

 

This expansion has also fueled more imports from China. Currently, China is Brazil’s leading export market, with a 29.1% share, and also the largest source of imports, at 25.9%, according to official data. “The bilateral trade relationship has grown and become more complex, which also brings challenges. Some industries, such as steel and vehicles, are under pressure from Chinese imports. While Brazil continues to post a large trade surplus with China, that margin has been narrowing, which is something to watch,” Mr. Cariello noted.

 

Sustainability and green energy accounted for 69% of Chinese projects in Brazil in 2024, compared with 72% in 2023. Last year, they were 72%.

 

Mr. Cariello also pointed to the growing Chinese appetite for strategic minerals, which featured in nearly all projects confirmed or announced last year, reflecting the country’s positioning in the global energy transition.

 

Capital flows are also spreading more evenly across Brazil. While São Paulo and Minas Gerais remain the top destinations, with 13 and six projects respectively, 14 states received new Chinese investments in 2024—six more than in 2023. The record was set in 2019, when 17 states hosted projects.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/05/2025

 

MINING PROFITS SET TO DROP AMID COST, PRICE PRESSURES

PwC’s Global Mine study points to third consecutive annual decline in operational earnings for world’s 40 largest miners

 

Global mining profits are set to drop in 2025, extending a streak of weakening operational performance, according to PwC’s 22nd edition of its Global Mine report, which tracks the financial results and outlook of the world’s 40 biggest mining companies.

 

Vale fell seven spots this year, ranking 12th, while CSN Mineração, which placed 34th in 2024, dropped out of the list altogether.

 

The study shows that earnings before interest, taxes, depreciation and amortization (EBITDA), the key measure of operating performance, slipped 5% in 2024 to $193 billion, marking the second straight year of decline. PwC forecasts another dip in 2025, with EBITDA edging down 1% to $190 billion.

 

Net income is expected to fall 4% to $88 billion, following a modest 1% gain in 2024 to $92 billion. Consolidated revenue should hold steady at about $863 billion, little changed from 2024’s $867 billion.

 

The sector has yet to recover from the broad downturn of 2023, when revenues dropped 7%, EBITDA plunged 26%, and profits fell 22%. In 2024, excluding gold, consolidated revenue slipped 3% and Ebitda fell 10%.

 

“Gold’s strong growth was so significant that we had to trace back its share of revenues to 2022 to show its impact,” said Patrícia Seoane, partner at PwC Brazil.

 

For 2025, the industry’s top four players will be BHP (Australia), China Shenhua Energy (up one spot), Rio Tinto (down one), and Freeport-McMoRan (up two).

 

According to Ms. Seoane, profit margins are being squeezed by both rising costs and falling commodity prices. Coal, for example, is under pressure from ESG-driven substitution, while iron ore prices are closely tied to China’s infrastructure cycle.

 

“China has been the main driver of demand. If it decides to invest heavily in infrastructure, iron ore demand and prices rise. If not, prices fall. We’re seeing iron ore prices decline because those major investments aren’t happening,” she said.

 

To manage costs, miners are turning to automation, robotics, and higher ore concentration technologies. Preventive maintenance is also key to extending equipment life, Ms. Seoane added. “Companies are laser-focused on cost control—because that’s what they can manage. And today, cost reduction comes through technology.”

 

PwC also flagged concentration risks, particularly for energy-transition minerals. China accounts for over 50% of production of about 18 minerals and holds over 10% of reserves of more than 35. Diversification of both production and processing locations is seen as crucial to reducing supply chain vulnerability.

 

Brazil could benefit from this shift as company seek strategic locations to mitigate supply-chain vulnerabilities and price volatility, PwC Brasil said. “We still have many undeveloped reserves of minerals beyond iron or copper,” said Ms. Seoane, citing rare-earths, the second-largest reserves after China, but accounts for less than 1% of global output, according to the U.S. Geological Survey.

 

However, Brazil’s weak mineral processing capacity remains a bottleneck, she warned. Brazil usually exports raw commodities without value-added processing. “The country loses out on a huge value gap that other economies capture,” Ms. Seoane said. Developing domestic processing also faces hurdles including high costs, political instability, and regulatory uncertainty.

 

Brazil still has a politically unstable environment, which can affect investment security. That directly impacts why the country has so little mineral processing capacity to keep the value chain here. Yet this is a crucial avenue that could generate significant value for Brazil,” said Ms. Seoane.

 

While the study does not go into detail on the domestic mining industry, an analysis by PwC Brazil shared with Valor shows that mergers and acquisitions (M&A) have been rising moderately since 2022, reaching 16 deals in 2024 compared with 12 in 2023. So far this year, five transactions have already been completed.

 

“We’ve seen a modest increase in the number of M&As in Brazil, which shows the industry remains attractive. In other words, it demonstrates that investment in the sector continues to flow,” Ms. Seoane added.

 

Source: Valor international

https://valorinternational.globo.com

 

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09/05/2025

 

BATTLE OVER ENVIRONMENTAL LICENSING PITS CONGRESS AGAINST LULA

Agribusiness bloc pushes to overturn presidential vetoes as government scrambles for votes

 

Even before Senate President Davi Alcolumbre convenes a session to review presidential vetoes, Congress is already maneuvering to use a provisional presidential decree (MP) —which creates the Special Environmental License (LAE)—to reinstate nearly the entire text of the environmental licensing bill passed by lawmakers in July.

 

At the same time, the government acknowledges difficulties in upholding the 63 vetoes issued by President Lula last month.

 

Just six days after President Lula signed the new licensing law, legislators and senators opposed to the executive’s vetoes filed 833 amendments to the MP, which originally covers only the LAE and consists of just six articles. The LAE, championed at the time by Mr. Alcolumbre, a government ally, is a new type of permit designed to speed up approvals for projects deemed strategic.

 

Lawmakers are using this as one of their tactics while Mr. Alcolumbre delays calling a joint congressional session to analyze the vetoes — expected in about two weeks, though no date has been set. Overturning Lula’s vetoes is the main goal of these lawmakers, most aligned with the powerful agribusiness caucus, which has been pressing Mr. Alcolumbre to schedule the session.

 

Congressman Pedro Lupion, head of the Congressional Agricultural Front (FPA), said the government shows no interest in advancing the MP. For now, there is not even a rapporteur or chair for the joint committee, which has yet to be formed. The MP must be voted on within four months, or it will expire.

 

“We are mobilized to overturn the vetoes. But before that, we submitted amendments to get as close as possible to the bill we approved,” Mr. Lupion told Valor, noting that he alone filed 19 amendments. “We want to force either a vote on the vetoes or on the MP. Something has to happen. The amendments reflect the text of the licensing bill. We are waiting on President Davi [Alcolumbre].”

 

Congressman Zé Vitor, also from the agribusiness bloc and rapporteur of the licensing bill in the House, noted that the proposed amendments to the MP contain “minor text adjustments that the internal rules previously did not allow.”

 

Broadly, the hundreds of amendments seek to reinsert into the general licensing law provisions that President Lula vetoed, such as: the Environmental License by Adhesion and Commitment (LAC) for medium-impact projects; exemption from licensing for rural producers whose Rural Environmental Registry (CAR) is still under review; and the removal of requirements to consult intervening agencies—such as the National Foundation for Indigenous Peoples (FUNAI)—in licensing processes affecting non-demarcated areas.

 

Randolfe Rodrigues, the government’s leader in Congress, said that proposing amendments is a legitimate part of the legislative process but warned that the executive would veto again if lawmakers tried to reinstate sections President Lula had struck down.

 

He admitted, however, that the government faces difficulty securing enough votes to block an override. The administration has not ruled out challenging the issue in court but is instead seeking a political agreement.

 

“Issues that violate the Constitution would obviously be subject to review, but we are not working with that scenario. Our focus is on maintaining the vetoes. I admit that keeping them is challenging right now. We are trying to build consensus and a majority, but it is a difficult scenario,” Mr. Rodrigues told Valor.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/08/2025

 

PETROBRAS WEIGHS ENTRY INTO CORN ETHANOL MARKET

Deal would mark oil company’s return to the sector after exit last decade

 

Petrobras is considering acquiring a corn ethanol producer this year, sources told Valor. If confirmed, the move would signal the state-controlled company’s return to the sector, which it exited in the mid-2010s with the sale of assets. The corn ethanol market has been expanding as an alternative to sugarcane-based production. Ongoing projects in the segment total R$23 billion in investments.

 

In a statement, Petrobras said it is conducting studies and analyses of potential opportunities in the bioproducts segment, which includes ethanol.

 

The company added that its current 2025-2029 business plan foresees investments in ethanol, “preferably through minority strategic partnerships or shared control with relevant sector players.” While not denying ongoing talks, Petrobras said there are no firm decisions on corn ethanol projects. “The company clarifies that there is no definition regarding the raw material to be used in ethanol production projects,” it noted.

 

The potential move comes amid Petrobras’s broader push in fuel distribution. Since the start of the Lula administration, the company has signaled interest in returning to the distribution market, fueling speculation about possible mergers and acquisitions in the sector. In August, Valor reported that Raízen shareholders Shell and Cosan were seeking a new partner.

 

Days later, O Globo reported that Petrobras was studying a stake purchase in Raízen. The company denied the claim. “There is no project or study of investment in ethanol or distribution with Raízen,” Petrobras said at the time. Sources close to the company told Valor that Petrobras is evaluating opportunities with several firms, but Raízen is not currently among them.

 

Another scenario raised in the market is a possible deal with Vibra Energia, the former BR Distribuidora privatized under former President Jair Bolsonaro. Analysts and industry executives, however, consider such a transaction unlikely, partly because Petrobras would need to launch a full takeover bid to acquire a stake.

 

There would also be potential antitrust hurdles due to the potential market concentration. As of the close of trading on B3 on Friday (Sept. 5), Vibra’s market capitalization stood at R$27.9 billion. The company declined to comment.

 

Despite these obstacles, Petrobras has criticized the privatization of BR Distribuidora, arguing that it distanced the company from end customers. It has since sought direct supply agreements with large clients for products such as diesel. With Vale, Petrobras has signed contracts for marine fuel containing 24% biodiesel (bunker B24). The company has also signaled plans to return to the cooking gas (LPG) market.

 

Industry sources say buying another distributor or building a new network from scratch may not be easy for Petrobras, given a brand agreement with Vibra that includes a non-compete clause until 2029. Until then, Vibra retains the right to use the BR brand, formerly owned by Petrobras.

 

Vibra has expanded in recent years through acquisitions aligned with the energy transition. It acquired Comerc Energia (now up for sale), at the time Brazil’s largest independent power trader, and Zeg Biogás, a biogas and biomethane producer. It also invested in the EV charging startup EZVolt and formed a joint venture with Copersucar for ethanol trading.

 

Together, Vibra, Raízen, and Ipiranga control 61.3% of the distribution market, according to Brazil’s Petroleum Agency (ANP), based on data from Sept. 3.

 

These moves come as the fuel market faces mounting challenges from irregular operators. Major distributors have been steadily losing share to companies engaging in practices such as fraud, adulteration, and tax evasion.

 

Last week, federal and state authorities stepped up enforcement against multibillion-real tax evasion and fuel fraud schemes linked to the Primeiro Comando da Capital (PCC), Brazil’s most powerful criminal organization.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/10/2025

 

ANALYSIS: JUSTICE FUX PIVOTS ON BOLSONARO CASE, DEFIES MORAES

Justice shifts from hard-line stance to defendant-friendly approach

 

Justice Luiz Fux’s vote in the Supreme Court’s First Panel on Wednesday (10) cements the more defendant-friendly approach he has adopted during the criminal proceedings over the coup plot—a departure from the tough-on-crime posture that marked his role in the Car Wash anti-corruption task force.

 

At the start of his remarks, Justice Fux questioned whether the Court had jurisdiction to try former President Jair Bolsonaro and echoed a central argument of the defense teams: that there was not enough time to review the “billions of pages” of case files.

 

Justice Fux was once known for his hard line on criminal matters, earning him the label of one of the court’s most staunch Car Wash supporters. In recent months, however, he has emerged as the main dissenting voice in the trial involving Mr. Bolsonaro and the January 8, 2023, attacks on Brazil’s halls of power.

 

When the first cases of the rioters who stormed the headquarters of the three branches of government came before the court, Justice Fux joined Justice Alexandre de Moraes in imposing harsher sentences. Now, however, he has positioned himself as Mr. Moraes’s main counterweight.

 

The turning point came in March, when Justice Fux requested more time to study the case of Débora Rodrigues dos Santos, a hairdresser who spray-painted “Game over, sucker” on the Justice statue outside the Supreme Court. When he cast his vote, Justice Fux argued for a sentence of one year and six months—far below the 14-year prison term ultimately imposed by the First Panel.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/12/2025

 

UNION TAKES ITAÚ TO COURT OVER MASS LAYOFFS

Bank workers’ representatives say about 1,000 dismissals were carried out without prior notice

 

The Bank Workers’ Union of São Paulo, Osasco and Region has filed a class-action lawsuit against Itaú Unibanco after the bank carried out a mass layoff of employees on Monday (8). According to the union, around 1,000 workers were dismissed without the union being given prior notice.

 

In a statement released Thursday evening (11), the union said: “In addition to being unjustifiable in light of the bank’s multibillion-real profits—over R$22.6 billion in the last half-year alone—the mass layoffs by Itaú disrespect employees, the Collective Bargaining Agreement (CCT) of the banking category, and Brazilian labor law, which requires prior negotiation with unions in cases like this.”

 

“We heard from the dismissed employees in a plenary session held this Thursday (11). Itaú violated basic rules protecting employment and disregarded the collective bargaining table. A bank that earns billions cannot treat its workers as disposable numbers,” said Neiva Ribeiro, the union’s president, in the statement. “We will take legal action to reverse this attack and hold Itaú accountable for its disregard for the law and for the category,” she added.

 

Itaú did not immediately reply to requests for comment.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/12/2025

 

BRAZIL WEIGHS SPLITTING CORPORATE LAW, CIRCULAR ECONOMY BILL

Government rethinks support after changes to class action rules and pushback from industry groups

 

The government may withdraw support for a bill amending Brazil’s corporate law and creating a National Circular Economy Policy, after changes introduced by the rapporteur, Congressman Luciano Vieira, in the latest draft presented on Wednesday (10). Valor has learned that the Lula administration is considering requesting that the two proposals be split, so they can proceed separately. Strong resistance from business groups and a coalition of congressional caucuses representing the productive sector is likely to complicate Mr. Vieira’s plan to put the bill to a vote next Tuesday (16).

 

The corporate law bill was sent to Congress in 2023, in the wake of the accounting scandal at retailer Americanas, and is part of the Finance Ministry’s microeconomic agenda. It had stalled until March, when it was bundled with bills on public procurement and circular economy as a strategy to speed up a floor vote. The package briefly appeared on the voting agenda earlier this month but was not considered. Mounting opposition to provisions in the combined bill has now led the government to rethink its strategy and weigh splitting the proposals.

 

One point of contention involves the mechanism for collective lawsuits against administrators, controlling shareholders, or intermediaries accused of causing losses to companies or to the capital markets by violating rules set by Brazil’s securities regulator CVM. In a previous version of his report, Mr. Vieira had endorsed an “opt-out” model, in which all shareholders of a given class are automatically included in such collective actions. That approach was supported by the Finance Ministry.

 

But in his latest draft, the rapporteur reverted to an “opt-in” model, where only investors who formally sign on would be included in collective suits. Finance Ministry officials say they will not support the bill under this framework, arguing that it renders the proposal “ineffective,” since individual investors already have the right to file claims on their own.

 

Sources close to the ministry lamented the shift, noting that the earlier draft reflected a consensus with investors and companies. The reversal was also criticized by AMEC, the Capital Markets Investors Association. “The return to the opt-in model is a technical mistake. A collective protection mechanism is incompatible with selective protection of investors, because it leaves less organized groups, such as retail investors, without adequate safeguards,” said AMEC President Fábio Coelho.

 

While the Brazilian Association of Public Companies (ABRASCA) favors the opt-in model, it also expressed concerns. “We welcome the return to opt-in, which we see as the better option. But companies have increasingly flagged issues with sector-specific provisions inserted in this bill. We will meet next week to take a position on these additions, which were surprising,” said ABRASCA President Pablo Cesário.

 

On minority shareholders, the bill establishes civil liability for administrators and controlling shareholders in cases of violations of disclosure rules. It also explicitly provides for collective civil actions to compensate investors, in a model similar to U.S.-style class actions, and expands CVM’s investigative powers.

 

The circular economy provisions, however, are proving even more contentious. Mr. Vieira added sector-specific obligations and plans covering mining, agriculture, construction and infrastructure, automotive, oil and gas, and sanitation.

 

A report obtained by Valor from the National Confederation of Industry (CNI) argued that the proposed National Circular Economy Policy “directly impacts the entire productive sector, regardless of size, nature, or scale of operations.” According to CNI, passage of the bill would subject millions of industrial and agribusiness facilities, farms, and commercial and service establishments to more than 70 new legal obligations. CNI did not comment.

 

The coalition of congressional caucuses representing business interests issued a statement saying the original bill had been “completely distorted by a regulatory maze that ignores the country’s economic reality,” and that the bundling of dozens of other unrelated proposals had created “a legislative monster of more than 100 articles imposing unrealistic obligations and disproportionate penalties on the productive sector.”

 

The statement is backed by the Congressional Entrepreneurship Caucus and others representing free markets, commerce and services, agribusiness, sustainable mining, health, competitiveness, and biodiesel, among others. They argue that “the regulatory burden, indiscriminately affecting companies of all sizes and sectors, represents a serious risk to Brazil’s competitiveness, since many firms lack the technical or financial capacity to comply with such complex and costly requirements.”

 

Mr. Vieira declined to comment.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/12/2025

 

MINISTRY OF FINANCE PROPOSES GLOBAL COALITION FOR CARBON MARKET

Plan calls for alliance with shared emissions cap that would be gradually reduced, offering more favorable criteria for poorer countries

 

The Ministry of Finance’s main proposal for COP30, to be held in Belém in November, is the creation of a coalition of countries willing to integrate their carbon markets. The alliance would operate with a shared carbon emissions cap among participants, which would be progressively reduced to encourage the decarbonization of economies. It would include fairness criteria for poorer nations and establish a permanent mechanism for channeling resources to help them adapt to climate impacts. The idea has been discussed with the European Union, China, and other countries and could become one of the major outcomes of COP30.

 

“We believe the proposal is effective because it establishes an emissions cap; fair, because it takes per capita income criteria into account; and politically viable, because it does not require agreement among 200 countries to move forward. All that is needed is a coalition strong enough to make it happen,” says Rafael Dubeux, deputy executive secretary of the Ministry of Finance. “If it manages to bring together Brazil, the European Union, and China, it may encourage others to join.”

 

The Ministry of Finance has been developing the proposal internally and in coordination with other ministries. Mr. Dubeux was invited to present the idea to a group of economists led by Brazilian José Scheinkman, who was asked to form a team to advise COP30 President André Corrêa do Lago. “We had a conversation with Scheinkman and other economists, such as MIT professor Catherine Wolfram.” Ms. Wolfram leads a group studying how to make the coalition feasible and includes several Brazilian economists.

 

The Brazilian government and the ministry headed by Fernando Haddad hope the proposal will gain traction in Belém. “We expect to have a joint declaration from countries at COP30 to establish the coalition,” says Mr. Dubeux. In a recent tweet, European Commission President Ursula von der Leyen expressed support for COP30 in Belém, writing: “With Brazil’s leadership in carbon markets, we must make Belém a true milestone for the planet.”

 

Below are the main points from Mr. Dubeux’s interview with Valor, in which he explains the proposal in detail:

 

Day 1

 

On his first day in office, Minister Fernando Haddad asked me to begin working with the ministry team on what would later become the Ecological Transformation Plan. The goal was to reorient the Brazilian economy toward a low-carbon model that is more distributive and driven by technological innovation. It is worth noting that finance ministers typically take office facing a series of fiscal emergencies, and long-term strategic planning is rarely a priority at the outset.

 

We launched a collective effort involving teams from the Ministry of Finance, the Internal Revenue Service, the Economic Policy Secretariat, the Economic Reform Secretariat, and the ministries of Environment, Mines and Energy, and Trade, Industry, and Services. We structured the agenda around three main objectives: innovation, sustainability, and income distribution.

 

The Ministry of Finance’s role

 

The Ministry of Finance’s core responsibilities include managing GDP, inflation, unemployment, and other macroeconomic indicators, as well as improving the business environment for investment through tax, insurance, and credit reform. These initiatives form the prerequisites for development. But they are not enough.

 

Minister Haddad argues that, in addition to ensuring macroeconomic balance and improving the business environment, the Ministry of Finance and the government must open a third front: developing a long-term strategy for a growth model that replaces a reliance on exporting commodities without added value with one rooted in innovation; that decouples GDP growth from environmental degradation; and that distributes income more equitably, in light of Brazil’s history of profound inequality.

 

Brazil holds historical legitimacy on this agenda. It hosted the 1992 Rio Summit, has a power generation mix primarily based on hydroelectricity, has used ethanol on a large scale since the 1970s, possesses the world’s richest biodiversity, has invested heavily in renewable energy, and has combined economic and climate policy initiatives.

 

Socio-environmental reglobalization

 

By early 2024, we were already discussing what proposals Brazil, as host of the G20 and COP30, could present to help shape a financial architecture capable of steering global economic growth toward a low-carbon model. We have a role to play in this debate.

 

The minister argues that while globalization in recent decades has brought economic efficiency to certain value chains, the time has come for “socio-environmental reglobalization.” This means adding a new layer to international governance so that, alongside economic efficiency, global integration also incorporates social and environmental considerations. The goal is not to dismantle globalization, but to create a new model of productive integration that fully accounts for these elements.

 

Fund for tropical forests

 

As we prepared proposals for COP, we realized that, alongside the key topics already under discussion—such as NDCs (countries’ climate commitments), adaptation, and climate justice—there was a gap. What was missing was a proposal with a stronger economic focus at the heart of the climate challenge.

 

We had already developed a proposal with the Ministry of the Environment for the Tropical Forest Forever Facility (TFFF), a fund for tropical forests being launched by Brazil. If successful, it will become one of the most significant contributions of the COP30 process. Concrete in its design, it aims to generate a permanent flow of billions of dollars for developing countries that preserve tropical forests—a fund even larger than the resources of many multilateral banks.

 

The TFFF is set to become one of the largest global funds ever created. Our goal is for implementation to begin at COP30, with initial contributions coming from sovereign wealth funds, governments, central bank reserves, and philanthropic organizations. Yet, as crucial as the TFFF may be, it does not directly tackle the core issue of climate change: greenhouse gas emissions.

 

Unrealistic expectations

 

Some observers, in my view, hold unrealistic expectations that the “transition away” from fossil fuels approved at COP28 will prompt some countries to announce they will stop using or producing oil by 2030 or 2040. I do not believe that will happen.

 

What we can do is create mechanisms that enable an orderly phase-out of fossil fuels. This can occur once regulatory and financial frameworks induce the transition, either because low-carbon alternatives become more competitive or because continuing to exploit oil under current conditions becomes prohibitively expensive through carbon pricing or other regulations.

 

Four criteria

 

In the debate over decarbonization, four main criteria typically emerge. First, which producers face the highest and lowest costs? Those with the highest costs would likely be the first to halt production. Second, which producers have the highest and lowest carbon intensity per barrel? Third, per capita income: it makes sense for wealthy nations to cut emissions before poorer ones. Why should Nigeria stop producing oil while Canada continues to do so? That would not be fair. Fourth, energy security: countries must also weigh the stability of their energy supplies when planning emission reductions.

 

A global emissions cap

 

Given these criteria, how can we design an organized transition that reduces emissions quickly while ensuring fairness and equity? At the Ministry of Finance, in collaboration with the Ministry of the Environment, we developed the idea of creating a global emissions cap—one that would decline over time. Setting such a limit for the economy is fundamental to a regulated carbon market.

 

Market integration

 

Any activity that generates emissions would need to purchase allowances under this cap. As the cap decreases over time, the cost of these allowances would rise, creating a financial incentive for companies to decarbonize. We would start with a cap close to current emission levels and, ideally, reach net-zero emissions by 2050.

 

The most effective way to tackle climate change globally would be through a carbon price established by this emissions cap—a “cap-and-trade” system that gradually declines to zero by 2050. But such a system would require the approval of nearly 200 countries participating in the COPs. We already know that it is not realistic; one country even withdrew from the Paris Agreement.

 

The Open Coalition

 

We wanted to present a proposal that reflects Brazil’s ambition while remaining politically feasible. That led to the idea of creating the Open Coalition for Integrating Carbon Markets. The central goal is to bring together the world’s largest economies.

 

Three major objectives

 

In our view, the proposal must achieve three objectives at once: it must be effective in reducing emissions, fair, and politically viable. The solution we found is the Open Coalition: a group of countries sharing a common emissions cap, which would be reduced gradually over time.

 

Criteria for quotas

 

Each country’s quota would be determined using several factors. Population size is one—China and Luxembourg cannot receive equal quotas. Per capita income is another factor, ensuring social justice: higher-income countries would have stricter quotas, giving developing countries room to emit more while requiring wealthier nations to accelerate their decarbonization.

 

Finally, there must be a border adjustment mechanism—different from the European Union’s CBAM (which imposes a carbon price on emissions embedded in imported products)—to balance trade considerations fairly across coalition members.

 

Border adjustment

 

How does the EU’s proposal differ from ours? First, governance: the CBAM is unilaterally established by the EU, whereas in our coalition, all participants would share in governance. Only those unwilling to price carbon would remain outside—and they would bear the consequences. Moreover, our proposal would not create a financial flow from poorer nations to wealthier ones.

 

Money for adaptation

 

We propose directing part of the revenue collected from the carbon market and border adjustment toward climate adaptation efforts in developing countries. This would create a permanent financial flow to address the climate crisis.

 

In summary, the proposal is effective. It imposes a cap, it is fair because it incorporates a per capita income mechanism, and it is politically viable because it does not require consensus among 200 countries. All that is needed is a coalition strong enough to move forward. If it includes Brazil, the EU, and China, it could encourage others to join. Another relevant player is California, which—if it were a country—would rank as the world’s fourth-largest economy.

 

Social justice mechanisms

 

We are considering differentiated border adjustments based on per capita income—countries with lower income levels could be exempt from paying or required to pay less.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/16/2025

 

BRAZIL’S VP SEES STRONGER U.S. TIES, HIGHLIGHTS KEY MINERAL AGENDA

Geraldo Alckmin rules out retaliation and defends cautious trade stance

 

The recent tensions between Brazil and the United States are likely to ease, and dialogue and negotiations with Washington are expected to increase, Vice President Geraldo Alckmin said Monday (15). Mr. Alckmin, who also serves as Minister of Development, Industry, Trade and Services, said Brazil sees an opportunity to build a broad agenda with the U.S., especially around strategic minerals.

 

Asked about his confidence in dialogue with the U.S., Mr. Alckmin said it’s important to stay calm, adding with a laugh that he’s an anesthesiologist, drawing chuckles from the audience.

 

Mr. Alckmin said Brazil and the U.S. have a “positive agenda,” highlighting two centuries of partnership and long-standing American investors such as General Motors and Caterpillar. “The U.S. has a trade surplus with us. Among G20 countries, they only have a surplus with three: the U.K., Australia, and Brazil. This year, our exports to them rose 4.5%, while their exports to us grew 12.5%. Brazil is not the problem, Brazil is the solution.”

 

On tariffs, he noted that eight of the top ten American products exported to Brazil are subject to zero duties, and the country’s average tariff rate is 2.7%. On the non-tariff front, he added, Brazil offers abundant clean, green, renewable energy, and also sees potential to advance cooperation on strategic minerals.

 

He emphasized that private sector engagement in the U.S. is essential to negotiating changes in U.S. trade policy. The goal, he said, is to lower rates and remove the remaining 35% of items still subject to the tariff hikes.

 

Mr. Alckmin rejected any immediate application of Brazil’s reciprocity law and argued for a cautious approach that promotes free trade and multilateralism. “Let’s not forget that last week, pulp was removed from the tariff list. The rate didn’t drop to 10%, it went to zero.”

 

He pointed to other positive developments in Brazil, such as food prices improving, the exchange rate reaching R$5.32 per dollar, and gains in the stock market. His main concern, he said, is the need for strict fiscal and monetary policies.

 

“There’s nothing worse for fiscal policy than a Selic [base rate] at 15%,” he said. “A 1% increase in Selic adds R$48 billion just to roll over the debt. You cut R$200 million from healthcare, R$300 million from education, R$400 million from logistics and infrastructure, and every 1% costs R$48 billion to roll over the debt.” He added that there is no justification for Brazil having the second-highest interest rate in the world.

 

When asked about the presidential race, Mr. Alckmin replied that elections tend to make journalists and politicians anxious. “Every election is competitive, and that’s a good thing,” he said, adding that the economy will ultimately decide the outcome. “We’re in an odd-numbered year, and elections are in even-numbered years.”

 

In municipal elections, he said, voters focus on local issues like public lighting, day care, and health clinics. In national elections, the key factors are the economy, inflation, and employment. “And it’s about how people feel in the six months leading up to the election. That’s true around the world. What matters is the economy. So it’s essential to control inflation and support jobs.”

 

He concluded on a hopeful note: “The positive news is that Brazil is no longer on the hunger map,” citing a 5.8% unemployment rate as a favorable sign.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/16/2025

 

GLOBAL RACE FOR CRITICAL MINERALS COULD SPEED UP BRAZIL’S REGULATION

Push for modern legal framework comes as country seeks to align with demand for rare earths, nickel, niobium, copper, and other key metals

 

The global geopolitical race to secure access to critical minerals is creating momentum for Brazil to modernize its legal framework for resource exploration. The country has been undergoing regulatory changes since the 2019 collapse of Vale’s Córrego do Feijão tailings dam in Brumadinho, a period that saw measures such as increased fines imposed by the National Mining Agency (ANM). Still, Brazil lags in updating rules in areas such as penalties for companies that fail to develop exploration concessions within established deadlines.

 

Marcio Pereira, a partner at BMA Advogados, noted that Brazil has historically been more “reactive” in its regulatory approach but said he has “never seen” the sector so mobilized to push for improvements in the legal framework needed to advance mining in the country.

 

He emphasized that global dynamics—including pressure initially driven by the United States to secure strategic mineral supplies—have reinforced the industry’s perception that Brazil must modernize its regulations to take advantage of rising demand for critical minerals such as rare earths, nickel, niobium, and copper.

 

Since the pandemic, Brazil has enacted Law 14066/20 and decrees 10965/22 and 11197/22, which set out sanctions and procedures for mineral exploration. ANM is responsible for implementing the fines. According to Mr. Pereira, the expectation is that the agency will finalize the rules this month, a step that could help unlock investment and speed up development.

 

“Now [after regulation] there will be meaningful fines for those who ‘sit’ on concessions,” Mr. Pereira said.

 

João Raso, a BMA lawyer specializing in mining, pointed out that several factors currently hinder the development of Brazil’s mineral reserves. Data from the Brazilian Mining Institute (IBRAM) show that, among critical minerals, Brazil holds the world’s third-largest nickel reserves but ranks only eighth in production; the second-largest graphite reserves but is fourth in output; the fourth-largest titanium reserves but only 16th in production; and the second-largest rare earth reserves but 11th in output.

 

“Having all this internal and external pressure saying we need to move [on critical minerals] is what will trigger change,” Mr. Raso said, citing demand from companies and countries for inputs vital to industries such as electrification, technology, and defense.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/19/2025

 

ENERGY ACCOUNTS FOR ONE-THIRD OF M&A DEALS IN BRAZIL THIS YEAR

Transactions in the sector reach R$50bn out of R$140bn total through September

 

The energy sector has emerged as a major driver of mergers and acquisitions in Brazil this year, accounting for nearly R$50 billion in deals, or one-third of the market, despite high interest rates that have made companies more cautious. With upcoming concession renewals and a wave of asset rotation, industry giants are reshaping their portfolios through multibillion-real transactions.

 

From January to mid-September, energy represented around 35% of the total financial volume of M&A advisory transactions in Brazil, which reached roughly R$140 billion, according to data from consultancy Dealogic. That figure includes the R$12 billion acquisition announced last week by Spain’s Iberdrola of a stake in Neoenergia previously held by Previ, the pension fund for employees of Banco do Brasil, one of the largest deals in the sector this year.

 

Other major transactions include the proposed delisting of Serena by private equity firm Actis and Singapore’s sovereign wealth fund GIC, in a deal worth more than R$15 billion. Another significant deal was Equatorial’s sale of transmission assets to Canadian pension fund CDPQ.

 

More deals are underway and are expected to boost these figures in the coming months. Engie, for example, has reportedly put a minority stake in its transmission assets up for sale. People with knowledge of the deal also said Energisa is exploring a sale of its transmission lines. Meanwhile, French utility EDF is selling a thermal power plant and looking for a partner in its renewable energy business. Brookfield is close to announcing a deal involving Quantum.

 

“There’s a lot happening in the energy space,” said Felipe Mattar, managing director at Morgan Stanley in Brazil. “The backdrop is a combination of factors, including the renewal of distribution concessions and future renewals of large hydroelectric contracts. These companies need to recycle assets to make room in their portfolios.” He noted that the upcoming expiration of distribution concessions typically reduces EBITDA, which in turn drives asset turnover.

 

Energy continues to reshape Brazil’s M&A landscape. Roderick Greenlees, global head of investment banking at Itaú BBA, said the sector has always played a key role in M&A activity and remains central to the country’s largest deals this year. “In transmission, there are groups that win auctions and build the power lines, and then, because these are stable revenue assets, they naturally attract pension funds as buyers,” he said.

 

However, the trend is not uniform across the sector. The renewable energy segment is facing a supply glut, and many companies are being hit by “curtailment”—a forced reduction or halt in electricity generation imposed by Brazil’s National Electric System Operator (ONS).

 

Mr. Greenlees said that the only reason energy hasn’t had an even stronger year is that deals involving renewable energy assets are on hold. The main obstacle, he said, is the difficulty in pricing assets impacted by curtailment, which is causing losses.

 

Engie said in a statement that it is currently conducting “a thorough and strategic analysis to define the most interesting lots for participation in the October auction.” The company added that it “does not comment on market rumors.”

 

Energisa said it is “constantly analyzing opportunities, considering prudent capital allocation, a commitment to quality, and appropriate returns to shareholders.” EDF confirmed it is exploring the possibility of taking its Brazilian subsidiary public in order to bring in new partners, with the goal of recycling capital. Brookfield declined to comment.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/23/2025

 

BIOECONOMY SEEN AS OPTION TO SAVE AMAZON

Experts defend economic potential of strategy, with job and income generation, but warn it is not only solution nor will it solve problems immediately

 

The bioeconomy has significant commercial and socioeconomic development potential for Brazil, especially in areas where environmental preservation has become strategic in the face of the effects of climate change. However, according to experts and producers interviewed by Valor, there is a clear awareness that this is not a silver bullet, although it is a path to be followed not out of utopia, but out of pragmatism.

 

“When we support and promote the bioeconomy, we are not proposing an immediate substitution of food and goods production in the traditional way we have today, but a gradual transition. The bioeconomy is not the silver bullet that will solve all problems overnight, but it has enormous potential to generate jobs and income, especially for Brazil,” says Pedro Zanetti, a specialist in land use transition, food systems and bioeconomy at the Climate and Society Institute (iCS).

 

Mr. Zanetti comments that, amid global efforts to decarbonize the economy, Brazil is still behind in the competitiveness of its bioeconomy, although it is one of the countries with the greatest potential for housing approximately 12% of the world’s forest cover, including most of the Amazon.

 

“The size of the global market for forest-compatible products is approximately $175 billion. But, considering the 64 products the Amazon already exports, Brazilian participation is only 0.2% or $300 million per year. And the Amazon alone represents one-third of tropical forests in the world,” observes Mr. Zanetti, citing data from a survey by the Amazon 2030 Project, an initiative by researchers to develop an action plan for the Brazilian Amazon.

 

The iCS specialist highlights as an example of Brazil’s fragility in the current bioeconomy market the fact that Bolivia is the main exporter of Brazil nuts to the world, also known as Amazon nut.

 

“Despite Brazil being the largest producer of Brazil nuts, most of the processing and added value stays with neighboring countries, like Bolivia and Peru. This shows that Brazil still needs to invest in processing and industrialization to retain more value within the country,” says Mr. Zanetti.

 

When asked about the possibility that the advance of the Brazilian bioeconomy could be targeted by attacks from traditional producers or climate deniers who prefer another type of exploitation of the Amazon, Mr. Zanetti says this happens, but emphasizes the economic benefit as a powerful advantage.

 

“Climate denialism is driven by ideological or economic interests, especially those linked to illegal deforestation. But when the bioeconomy proves financially viable, even more conservative producers adopt it,” he says. “The bioeconomy is not an ideological issue, it’s a business that makes sense because it generates jobs, increases income, and improves the quality of life of entire communities. And it does all this on top of environmental protection. It’s an agenda that can unite different sectors of society,” he adds.

 

As explained by Rodrigo Spuri, conservation director of the NGO The Nature Conservancy (TNC), the bioeconomy in Brazil has different scales and it is necessary to understand that the idea is not to replace agribusiness, but rather to open a new path that brings micro and macroeconomic benefits.

 

“The growth potential of the bioeconomy cannot be compared to that of large-scale agribusiness, but it is significant and can be equivalent to sectors like cattle ranching in states like Pará,” says Mr. Spuri, emphasizing the advantages in terms of business generation and income increase for families living in forest areas.

 

The TNC director also argues that one of the main roles of the bioeconomy is to change the narrative that the forest is an obstacle to economic development, showing that it is, in fact, a value-generation mechanism.

 

“In addition to generating monetary value, the bioeconomy promotes income distribution and economic inclusion of diverse communities, generating significant value for those who live off the forest, even if it doesn’t make them big entrepreneurs,” says Mr. Spuri. “Brazil has the potential to be a leader in the sector due to its biodiversity, but needs to invest more in research and development to take advantage of forest knowledge and create new products and technologies,” he adds.

 

“The bioeconomy is not the silver bullet that will solve all environmental conservation problems alone. But it is a component and a strategy to add value to Brazil’s natural capital, such as forests and biomes, through market products,” concludes Mr. Spuri.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/24/2025

 

BRAZIL WILL NEED FISCAL ADJUSTMENT AFTER 2026, GOLDMAN SACHS SAYS

Whoever wins next year’s election will have to persuade voters that fixing public finances is necessary, says Alberto Ramos, head of Latin America economic research at the investment bank

 

Convincing Brazilians that a fiscal adjustment is necessary after the 2026 election won’t be an easy task for any incoming president, given the country’s “reasonably good” economic growth over the past three years, fueled, in the words of Goldman Sachs, by “fiscal steroids.”

 

“The essence of populism is this short-term sense of well-being achieved through mechanisms that are unsustainable over time. The bill comes later,” said Alberto Ramos, head of Latin America economic research at Goldman Sachs. “What worries me is that after the election, whoever wins will need to push for a fiscal adjustment when the population doesn’t feel there’s a problem. Growth has been good, unemployment low, wages rising. I don’t think people will buy into the idea that we need a deep fiscal adjustment.”

 

Mr. Ramos contrasted Brazil’s situation with Argentina’s, where President Javier Milei won office on a platform of tough reforms at a time when the economy was already in deep trouble, facing contraction, soaring inflation, and rapid impoverishment.

 

“He pushed through a fiscal adjustment equivalent to 6 percentage points of GDP in an economy that also had very rigid spending, and was already suffering significantly. But it was clear to most of the population that the Kirchnerist model had failed—economically, socially, and politically,” Mr. Ramos said.

 

He believes part of the recent improvement in Brazilian asset prices stems from investor expectations that a new administration will take office in 2027, and bring with it a shift in economic policy.

 

“No matter who wins, a fiscal adjustment will be inevitable, and it won’t be easy,” he said. “If President Lula is reelected, fiscal realities will impose tighter constraints, otherwise, things won’t end well. A more conservative candidate would probably be more inclined to implement that adjustment. But my question is: Is Brazil ready?,” Mr. Ramos asked, adding that he’s not fully convinced about a scenario in which the current opposition wins either.

 

Mr. Ramos said the necessary overhaul would include loosening the rigid structure of public spending: changing laws that tie budget allocations to health and education, revising the rule that mandates real increases to the minimum wage, and reviewing other legislation that hardwires spending.

 

“We already know the path to take, if there’s political will,” he said.

 

Political balance

 

One hurdle, however, is that “Congress is not exactly the guardian of fiscal orthodoxy,” Mr. Ramos added. “The real fight between Congress and the government is just about who gets credit for the spending. The political balance may not be one that allows these reforms—some of which are constitutional—to pass. In Argentina, the crisis helped get them through. That’s not our situation, thankfully, but if we keep delaying, we may hit a breaking point that forces a much more painful and destabilizing adjustment.”

 

Brazil’s fiscal issues aren’t new, but have worsened recently, leaving policymakers with less room to maneuver, he said. One example: the government has already raised taxes without improving fiscal fundamentals.

 

“A fiscal adjustment that relies on tax hikes is already a poor-quality fix, but even so, how would society react, after four years of rising taxes?” Mr. Ramos asked. “We’ve used up our ammo without defeating the enemy. We raised taxes to spend more, not to improve the primary balance.”

 

Adjusting for the economic cycle, Brazil’s fiscal picture is worse than the headline numbers suggest, he said.

 

“When the economy was booming, the government doubled down and injected even more liquidity, overheating the system. The best time to make adjustments is when the economy is doing well. Now, it’s slowing, and they want to reverse the fiscal impulse. They should’ve held back earlier, taken advantage of the revenue from growth to build a better primary result.”

 

Mr. Ramos said Brazil’s economy is now slowing because it has hit “capacity constraints.” He believes the recent GDP growth of 3% or more is above the country’s potential. On top of that, monetary policy remains tight.

 

“But if someone arrived from another planet and saw Brazil with 15% nominal interest rates and 10% real rates, they’d assume the country is in deep recession. And it’s not—it’s just slowing, because there are credit policies, quasi-fiscal programs. The effectiveness of monetary policy has been undermined by fiscal activism,” he said.

 

Letting the economy slow is necessary to bring down inflation and eventually lower both inflation and interest rates, Mr. Ramos added.

 

“If no action is taken, that’s the path we’re on—and it’s not one we should resist, because we’re not facing an economic collapse.”

 

He said he doesn’t expect a “fiscal disaster in 2026,” despite it being an election year. “But we should be running a surplus,” he said. “This government’s view, which I don’t share, that the economy only grows through fiscal stimulus, paired with an upcoming election, means that the current slowdown is probably not deep enough to allow monetary policy to shift to a neutral stance.”

 

Even if there is room for the Central Bank to begin cutting rates in December, he said, interest rates will likely remain tight through the end of 2026.

 

Mr. Ramos acknowledged some improvement in headline inflation but noted that service inflation “is still far from good.” Currency appreciation and lower prices for commodities and food have helped, he said, but given those factors, “Inflation should be around 2%.”

 

“That’s not the case. The target is 3%, and we’ve been above it for many years. The Central Bank’s projections don’t even place 3% within the relevant forecast horizon. It’s a tough battle that requires a completely different fiscal approach from what we’ve seen over the past four years.”

 

“The difference between medicine and poison is dosage,” he added. “Monetary policy is the medicine, but its dosage can become toxic because of fiscal policy. Fiscal policy needs to take over the burden that monetary policy is carrying right now.”

 

Source: Valor International

https://valorinternational.globo.com

 

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09/24/2025

 

BRAZIL MULLS HIGHER TAXES ON REAL ESTATE, AGRIBUSINESS CREDIT INSTRUMENTS

Congressional rapporteur’s plan would raise income tax to 7.5% while preserving exemptions for infrastructure, agribusiness receivables

 

 

The rapporteur of the provisional presidential decree that serves as an alternative to the Tax on Financial Transactions (IOF), Congressman Carlos Zarattini (Workers’ Party), will propose increasing the income tax (IR) rate on Agricultural Credit Bills (LCAs) and Real Estate Credit Bills (LCIs) from 5% to 7.5% starting in 2026. The change aims to preserve the exemption on infrastructure bonds, as well as Real Estate (CRIs) and Agribusiness Receivables Certificates (CRAs).

 

Mr. Zarattini also presented a proposal granting income tax exemption for real estate investment trust (REIT) and agribusiness chain investment funds (Fiagros) with at least 100 shareholders, a profile that currently represents most of the market. The government’s original proposal had set a 5% tax on these investments.

 

The agribusiness caucus, the largest in Congress, is firmly against raising taxes on agribusiness securities. “We will not accept 7.5% on LCAs,” said Congressman Pedro Lupion, president of the Parliamentary Agricultural Front (FPA).

 

The report was expected to be submitted on Tuesday (23) to the joint committee of Congress. However, at the request of Lower House Speaker Hugo Motta, its presentation was postponed so the text could first be discussed in a leaders’ meeting. Mr. Zarattini said the party leaders made suggestions, but he does not yet know which will be incorporated. He expects to release the report on Wednesday (24), with a vote at the committee likely on Tuesday (30).

 

The rapporteur said he will maintain in his report the government’s proposal to establish a fixed 17.5% income tax rate on financial investments in Brazil starting in 2026. This will end the staggered system, which charged 22.5% on investments of up to six months and 15% on those longer than two years. He also said he will maintain the increase in the tax rate on interest on net equity (JCP) from 15% to 20%.

 

The government’s proposal also granted income tax exemption to foreign investors, provided they are not based in tax havens. The rapporteur broadened this benefit to include certain over-the-counter transactions and the issuance and redemption of depositary receipts in Brazil or abroad. He also kept the 25% tax on earnings of investors domiciled in tax havens, but set the rule to take effect one year after the law is enacted.

 

Mr. Zarattini also proposed raising the tax on Guaranteed Real Estate Bills (LIG) for individuals from 5% to 7.5%. In the case of LCI, LCA, and Mortgage Bills, he suggested a 7.5% rate for individuals and 17.5% for companies. He also expanded the allocation requirement of LCAs from 65% to 80% and included an “update of the legal framework,” without giving further details.

 

Mr. Zarattini also introduced a change exempting companies and setting a 7.5% tax on individuals’ earnings from Development Credit Bills (LCDs). The government’s original plan had been 17.5% for companies and 5% for individuals.

 

The rapporteur said he will keep the provision that establishes two rates for the Social Contribution over Net Profit (CSLL), at 15% and 20%. The 9% bracket will be eliminated, meaning companies currently taxed at that rate will move to 15%. This measure only affects financial institutions, including fintechs.

 

Also preserved is the government’s proposal to reinstate the 18% tax rate on Gross Gaming Revenue (GGR) from sports betting, as originally suggested by the Finance Ministry when it submitted the sector’s regulation to Congress. Lawmakers had reduced the rate to 12%. This measure has the greatest revenue potential of the package—R$10 billion—within the broader plan to raise revenue and control spending as an alternative to increasing the IOF. The Finance Ministry expects the provisional decree to generate R$20 billion.

 

The proposal to tax LCIs and LCAs was poorly received by asset managers and market analysts. Guilherme Almeida, head of fixed income at Suno Research, said the measure is negative because these instruments are important funding sources. “The cost associated with these sources is lower and, consequently, so is the cost of credit at the end, due to today’s exemption,” he said.

 

He cited a study by real estate sector associations estimating that a 5% tax increase on LCIs could raise mortgage lending rates by 0.7 percentage points. “This increase from 5% to 7.5% will have an even greater impact,” he said.

 

In a statement, the Brazilian Association of Real Estate Credit and Savings Entities (Abecip) said the proposed taxation of LCIs is worrisome and could directly impact mortgage credit rates.

 

Renato Jerusalmi, founding partner and portfolio manager at Riza Asset, said that among the available options, taxing bank securities is the most suitable because it addresses banks’ very cheap funding, typically at 92% to 94% of the CDI (the interbank deposit rate, used as an investment benchmark in Brazil). “Since banks have access to many different sources, the consolidated impact should not be so significant.” He noted, however, that the operations backing these issuances will see funding affected. “But with a developed capital market, companies have alternatives.” Overall, he said, the measure is negative because it continues the trend of taxing the productive sectors.

 

For Octaciano Neto, former agriculture secretary of Espírito Santo and founder of agribusiness financing consultancy Zera, LCAs should remain exempt. “Compared with the OECD average, Brazilian agribusiness receives 75% less in subsidies,” he said. He argued that the taxation will drive investors toward CRAs, which will remain tax-exempt. “On the other hand, the taxation will accelerate the capital market’s overtaking of banks in financing agribusiness,” he said.

 

Source: /valor International

https://valorinternational.globo.com

 

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09/25/2025

 

ASSAÍ SUES FRENCH CASINO, SEEKS FREEZE OF BRAZILIAN RETAILER GPA SHARES

Brazilian cash&carry chain asks court to block R$475m stake amid dispute over tax liabilities of Pão de Açúcar’s parent company

 

 

Cash-and-carry chain Assaí has filed a lawsuit against French retailer Casino, requesting a freeze on all of its shares in GPA, after being notified that it could be held liable for the tax contingencies of Pão de Açúcar’s controlling shareholder.

 

The case was filed on Wednesday (24) at São Paulo’s Business and Arbitration-Related Disputes Court.

 

Currently, only part of the tax liabilities is being pursued by the Treasury—about R$36 million. However, the risk of further claims prompted Assaí to request a remedy to block 22.5% of Casino’s stake in GPA, valued at roughly R$475 million.

 

According to people familiar with the matter, Assaí fears Casino could sell the remaining 110 million common shares it still holds in GPA and transfer the proceeds to France. Casino already has a plan to monetize the stake and is seeking buyers. If new tax claims arise, with the capital moved abroad, Assaí argues it would be left exposed.

 

In its financial statements, Casino already classifies its Brazilian operations as discontinued.

 

An arbitration proceeding is expected to be opened within 30 days at the Brazil-Canada Chamber of Commerce Arbitration and Mediation Center. But such cases take an average of three years, which led Assaí to file an application for injunctive relief.

 

Assaí was a GPA subsidiary until 2020, when Casino took over GPA’s control. Currently, the French retailer is GPA’s second-largest shareholder, behind the Coelho Diniz family.

 

Last week, Brazil’s Attorney General’s Office of the National Treasury (PGFN) notified Assaí of the opening of an Administrative Liability Recognition Proceeding (PARR). The Treasury considers Assaí jointly liable for debts incurred while it was part of the same economic group as GPA (2007–2020). GPA disputes this, as it publicly stated in October 2024.

 

Under Brazil’s National Tax Code, however, companies can be held jointly responsible for contingencies related to acts and events that occurred before a corporate spin-off. These could involve disputes over social taxes PIS and Cofins or Tax on Financial Transactions (IOF).

 

Assaí could also face liability for other GPA-related obligations. According to a person with access to transaction documents, GPA has around R$17 billion in total contingencies and 5,000 municipal, state, and federal tax assessments. Assaí could be exposed to a portion of these related to the pre-2020 period.

 

In GPA’s second-quarter balance sheet, legal proceedings with guarantees and surety bonds totaled R$13.5 billion.

 

In its filing, Assaí argues that GPA’s owners acted abusively by selling assets in Brazil and distributing dividends to shareholders in Europe despite billions in contingencies.

 

Part of those dividends helped Casino pay foreign creditors during its debt restructuring proceedings in France after 2018.

 

A former Pão de Açúcar executive recalled that independent members had seats on the board of directors before the spin-off, as did Casino, which led the board at the time when these contingencies were growing. He added that there was widespread concern within the company that the amounts could escalate.

 

“However, there wasn’t much to be done since Casino, through Arnaud Strasser and others such as Ronaldo Iabrudi, had the decision-making power,” the person said.

 

In September last year, the Federal Revenue listed R$1.3 billion in Assaí’s assets as collateral for potential GPA debts. In October, however, GPA successfully appealed, and the measure was lifted.

 

At the time, GPA acknowledged responsibility for Assaí’s legal cases, which totaled R$36 million—R$4 million tax-related, R$15 million labor, and R$17 million civil.

 

The issue resurfaced because, according to people close to the matter, the Treasury is exploring alternative ways to hold Assaí accountable.

 

The chain argues it could only act now, after being formally notified of the PARR. The company is represented by the law firm Mattos Filho.

 

The Federal Revenue monitors whether companies maintain at least 30% of their assets to cover contingencies. Alerts are triggered when asset levels fall below that threshold.

 

Assaí’s advisers believe GPA’s asset sales, including the Colombian Éxito chain, reduced this ratio and drew the Treasury’s attention. That led the PGFN to look to Assaí, once part of GPA, as a potential source of recovery.

 

Following the PGFN notification, Assaí has 15 days to submit its administrative defense. The process may require deposits in court or guarantees.

 

Market participants expect GPA shares to respond to the development in Thursday’s (25) session, as Casino considers selling the stake to meet financial covenants with foreign creditors, a move Valor reported earlier. A decline in share value could affect those plans. Casino declined to comment.

 

This marks the first time Assaí has taken legal action against Casino. The cash-and-carry chain still carries debts left behind by the French group.

 

When Assaí was separated from GPA five years ago, it inherited about R$8.5 billion in debts from Colombian unit Éxito, a decision imposed by Casino. At the time, Assaí was GPA’s main cash generator.

 

Roughly 90% of Assaí’s current liabilities stem from that legacy debt burden, compounded by high interest rates. The company became fully independent in 2021 after its spin-off from GPA and is now a publicly traded corporation with no controlling shareholder.

 

“This story seems endless,” said a longtime observer. “Assaí was saddled with Éxito’s debt at Casino’s insistence, and suffered governance-related share discounts while Casino was still a shareholder. Then Casino left, and the problems continued to follow Assaí.”

 

Source: Valor International

https://valorinternational.globo.com

 

 

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09/25/2025

 

CENTRAL BANK SETS CONDITIONS TO LIFT PIX, TED TRANSFER CAP

Financial institutions must boost cybersecurity and capital to remove limits on Brazil’s instant payment and wire systems

 

Brazil’s Central Bank has detailed the requirements for financial institutions using third-party technology providers to request a waiver from the R$15,000 limit per instant payment (Pix) or same-day wire transfer (TED) transaction, announced earlier this month. Among the conditions, firms must implement real-time transaction monitoring and maintain a capital buffer as collateral.

 

Earlier in the month, the Central Bank had indicated that financial institutions using IT Service Providers (PSTIs) to connect to Brazil’s National Financial System Network (RSFN) could apply for a 90-day exemption from the cap if certain security controls were in place. The regulation, now published in the Official Gazette, defines what those controls are.

 

PSTIs are tech firms that enable smaller firms to connect to the RSFN, allowing them to operate services like Pix for clients. Two of these providers were recently hit by cyberattacks that compromised millions of accounts managed by institutions using Central Bank infrastructure. In response, the regulator tightened rules for both the providers and their client institutions to strengthen cybersecurity.

 

The new regulation outlines the conditions under which the Central Bank may authorize a temporary waiver of transaction limits. To obtain permanent exemption, both institutions and their PSTIs must comply with the more comprehensive security controls published on September 5.

 

Kenneth Ferreira, a partner at law firm Lefosse specializing in banking and financial services, said the exemption is not “broad,” but an “exception contingent on technical robustness and control,” aimed at increasing the safety of institutions using PSTIs.

 

The waiver applies only on weekdays between 6:30 a.m. and 6:30 p.m. in the case of Pix transactions. For both Pix and TED, the waiver can be renewed for additional 90-day periods, provided the firm has not experienced “serious operational deficiencies or failures.”

 

Rodrigo Caldas de Carvalho Borges, a partner at law firm CBA Advogados, said the time-bound nature of the waiver enhances security, as the limited timeframe increases oversight, potentially allowing for quicker detection and response to incidents.

 

To qualify for the waiver, financial institutions must maintain a capital reserve equal to 100% of the highest daily interbank transfer volume processed through their Instant Payment Account (Conta PI) in August, in the case of Pix. For TED, the reserve is based on the highest daily transaction volume made from their Reserve Account or Settlement Account.

 

Mr. Borges noted that this requirement serves as a financial cushion. “The institution must prove it has unencumbered capital equivalent to its peak transfer day in August. The goal is to ensure that, in the event of large-scale fraud, the institution can absorb the losses on its own, avoiding collapse and systemic risk,” he said.

 

Firms must also meet governance criteria, including not sharing or storing private keys used to sign RSFN messages within PSTI environments—one of the vulnerabilities exploited in recent cyberattacks.

 

They must also use distinct digital certificates for different systems and regularly update access permissions, especially for third-party contractors with access to core systems or reserve operations.

 

Mr. Ferreira said that while the new rules will likely improve security and reduce vulnerabilities, they won’t eliminate the risk of hacking. “Security depends not just on regulations, but also on technical excellence in implementation, audits, penetration testing, corporate governance, incident response, continuity planning, and constant review,” he noted.

 

To be eligible for the waiver, financial institutions must demonstrate real-time monitoring of atypical or fraudulent transactions. The regulation also requires mechanisms to suspend transaction processing in the event of a suspected severe compromise of their own systems or those of the contracted PSTI.

 

“We’re seeing an escalation in cyberattacks, and recent events have taught us important lessons,” said Ailton de Aquino Santos, the Central Bank’s director of supervision, during an event in São Paulo. “Criminal activity is migrating from the physical to the virtual world, and financial stability increasingly depends on cybersecurity.”

 

Source: Valor International

https://valorinternational.globo.com

 

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09/26/2025

 

BRAZILIAN FIRMS LOBBY U.S. TO EASE TARIFFS IMPOSED BY TRUMP

Lobbying by JBS, EMS, Suzano, and Embraer highlights U.S. political divisions over trade with Brazil

 

Brazilian executives and business leaders from major companies affected by Donald Trump’s tariff surge have been lobbying intensively in Washington to reverse the impact of the trade measures imposed by the U.S. president since August.

 

Embraer successfully negotiated, setting an example for other powerful entrepreneurs—such as the Batista brothers, owners of JBS, Carlos Sanchez of pharmaceutical giant EMS, and companies from other industries like Suzano—to pursue tariff reductions or eliminations.

 

Sources indicate a division within the U.S. government regarding Mr. Trump’s heavy-handed tariff policy toward Brazil. On one side, a more hardline faction supports the surcharges; on the other, a pragmatic group of lawmakers believes the decision is “pushing Brazil into China’s arms” and bolstering President Lula’s narrative.

 

“Moderate lawmakers understand that Brazil exports products not produced in the U.S., and many American companies are being harmed,” said one source. “There is also concern about inflation.”

 

Brazilian companies have been holding regular meetings with White House officials to negotiate inclusion on the list of exemptions—about 700 items were added last month. Pulp was removed from the list, but paper remains subject to U.S. tariffs.

 

Carlos Sanchez of EMS told Valor that he hired a lobbying firm in the U.S. The businessman was in Washington about two weeks ago to defend his company’s interests. While pharmaceuticals were not directly affected by the U.S. measures, EMS imports raw materials from the U.S. and operates a factory in Atlanta. “Trump signaled that he is reviewing the pharmaceutical sector because drugs are expensive in the U.S., and much of the supply comes from Europe,” Mr. Sanchez said.

 

“Many [lawmakers] have no idea what is happening in Brazil. We explained that we are a democratic country,” Mr. Sanchez added. About two weeks ago, Mr. Sanchez said that he had also met with representatives of JBS in Washington.

 

Joesley Batista of the J&F group, the holding company controlled by the Batista family and owner of JBS, known for his close ties with President Lula, was among those who gained direct access to Mr. Trump.

 

The meeting, held at the White House in early September, may have helped persuade the American leader to consider reopening negotiations with Brazil, whose tariffs have severely impacted beef exports.

 

Valor has learned that the meeting between Joesley Batista and Mr. Trump was not initially aimed at discussing the surcharge on Brazilian animal protein. Instead, it was arranged as part of an institutional agenda due to J&F’s size and importance in the U.S., where the group employs 75,000 people and accounts for half of its revenue.

 

Against this backdrop, the conversation started with J&F’s investments in the U.S., but Mr. Batista took the opportunity to raise concerns about the effect of tariffs on Brazilian products and on consumer prices in the American market.

 

According to people familiar with the meeting, Mr. Batista told President Trump that the 50% tariff would directly affect hamburger prices in the U.S. He argued that without Brazilian beef, U.S. processors would be forced to use more expensive meat to produce burgers.

 

Mr. Batista also reportedly warned Mr. Trump of similar consequences in coffee and orange juice—two other major Brazilian exports to the U.S.

 

Attention now turns to the upcoming meeting between presidents Lula and Trump, scheduled for next week.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/29/2025

 

COMPANIES TURN TO “REVERSE IPOS” TO GAIN STOCK EXCHANGE ACCESS

Private-sector investors acquire listed firms in Brazil as traditional IPOs remain scarce

 

With Brazil’s initial public offering market in a prolonged drought—more than four years without a wave of listings and no clear signs of recovery—some private companies are considering a backdoor route to go public: acquiring firms already listed on the B3, Brazil’s main stock exchange. The strategy is known as a reverse IPO.

 

These targets are often small-cap companies with very low trading volumes. Many of them went public during the IPO boom at the height of the pandemic but have since become minor players in the market, with little prospect of regaining relevance among investors.

 

Valor has learned that some of these listed companies are working with investment banks to signal their openness to being acquired for a reverse IPO. One such candidate is Westwing, a home décor e-commerce company currently valued at R$58 million on the B3.

 

People familiar with upcoming deals said the next reverse IPO may involve Oranje, a newly launched bitcoin treasury operation that acquired Intergraus, a college prep course provider, from Bioma. The deal, announced in May, was conditional on Intergraus registering as a public company and being listed on the B3. Last week, Oranje confirmed its intention to carry out a reverse IPO in October.

 

Another case is real estate developer BRZ, which had been pursuing a traditional IPO for years but ultimately opted to merge with Fica, a listed company in the same sector that has long been forgotten by the market.

 

Reag, a fund manager recently caught up in the “Hidden Carbon” police operation, also executed a controversial acquisition when it took over Getninjas, a services marketplace. Sources who requested anonymity said Getninjas had attracted interest from other companies looking to list via a reverse IPO. The appeal, in that case, was that the company had more cash on hand than its market cap, due to a steep decline in its share price.

 

An investment banking executive specializing in equities said several companies are exploring this route, although the cases remain isolated. He noted that any buyer would likely need to carry out a follow-on share offering once market conditions improve to restore liquidity.

 

Closed window

 

BRZ’s Chief Financial Officer and Head of Investor Relations Fabiano Valese said the lack of visibility on when the IPO market might reopen weighed heavily on the decision. He also pointed to synergies with Fica’s landbank. “This move shortens our path to becoming a listed company, and we’ll have a significant landbank,” he said.

 

Mr. Valese recalled that BRZ maintained internal plans for an IPO even after the initial attempt was derailed by rising volatility and interest rates. The company already operates day to day as if it were publicly traded, he said. More recently, BRZ began holding talks with investors. The merger with Fica is expected to close in the coming months, which will mark BRZ’s official debut on the B3.

 

Conrado Stievani, a partner in capital markets at law firm BMA, said his office has received inquiries about reverse IPOs. He noted that some companies are doing the math to decide whether to buy a listed company and carry out a future follow-on, or simply wait for IPO windows to reopen.

 

“There are companies looking at this option,” Mr. Stievani said, but he emphasized that any company pursuing this path must prepare for the operational complexities and due diligence involved in such acquisitions.

 

Henrique Ferreira Antunes, a capital markets partner at law firm Mattos Filho, said some buyers are also eyeing reverse IPOs as a way to make use of tax losses accumulated by the target company. “But they must consider any hidden liabilities tied to that corporate registration,” he warned.

 

Another issue, Mr. Antunes noted, is the post-transaction challenge of repositioning the company under a new brand. This typically involves an “educational” effort and “non-deal roadshows”—investor meetings not tied to a specific transaction.

 

Mr. Antunes also stressed that any firm going public via a reverse IPO must be ready for life as a listed company, which includes regular earnings reports and constant market communication.

 

Gustavo Rugani, a partner at law firm Machado Meyer, said that in practical terms, a reverse IPO is essentially a merger and acquisition deal between a private company and a public one. “And in a market like this, where conditions are unfavorable for traditional IPOs, it works as a shortcut,” he said. “It’s about seizing the moment. In 20 years working in this field, I’ve never seen such a long dry spell for IPOs.”

 

Contacted by Valor, Westwing said it is currently focused on profitability and growth, and that “a reverse IPO is not in the company’s short-term plans.”

 

Oranje said it would limit its comments to the material fact disclosure already made to the market. In it, the company said the acquisition of Intergraus “is aligned with its strategy of building an educational platform based on non-degree courses” and that Intergraus “has a strong brand and valuable intangible assets that will support growth” in its operating markets.

 

Fund manager Reag did not respond to requests for comment.

 

Source: Valor International

https://valorinternational.globo.com

 

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09/29/2025

 

REGENERA CERRADO ENTERS NEW PHASE WITH FOCUS ON CARBON EMISSIONS

Program to measure impact of bio-inputs on soybean and corn farming

 

Regenera Cerrado—a regenerative agriculture program backed by Cargill and run by the BioSistêmico Institute (IBS) in partnership with 11 organizations—is entering a new stage focused on deepening research into the impact of regenerative techniques on soybean and corn production in Brazil’s Cerrado biome. The new phase will require $3 million in funding, of which $600,000 has already been secured by Cargill. The rest is still being raised.

 

“In the first phase, we focused on productivity, costs, and the crops’ resilience to climate challenges,” said Letícia Kawanami, Cargill’s director of agricultural business sustainability for South America. Now, the program will assess metrics such as carbon fixation and emissions reduction, the effects of bio-inputs, biodiversity improvements, and soil health. More workshops and field days will also be held to bring knowledge to more producers.

 

Ms. Kawanami noted that many of Cargill’s clients—including companies like Unilever, PepsiCo, and Nestlé—have their own environmental targets for reducing carbon emissions and protecting ecosystems, which also extend to their suppliers. Regenerative agriculture programs like this one help meet those goals. “These companies are increasingly interested in sourcing sustainably produced raw materials,” she said.

 

Launched in 2022, Regenera Cerrado was created to study and promote regenerative agriculture on soybean and corn farms in Brazil’s Cerrado. The initiative currently monitors 12 farms in southwestern Goiás, covering 7,841 hectares.

 

Each farmer adopts the practices best suited to their own property, such as no-till farming, crop rotation, cover crops, and the use of biological inputs. “These farms contributed all of their empirical knowledge so that researchers could scientifically validate it,” said Priscila Calegari, agriculture director at the BioSistêmico Institute.

 

A team of 35 researchers collected and analyzed data from the 2022/23 and 2023/24 crop seasons. Results from the first phase showed that in the 2023/24 harvest, average soybean yields in fields using regenerative practices reached 69 60-kilo bags per hectare. In areas using conventional methods, average yields were 66 bags per hectare. The average in Goiás, affected by drought, was 56 bags per hectare.

 

Marion Kompier, from Fazenda Brasilanda in Montividiu, Goiás, is among the program participants. Her family grows 6,600 hectares of soybeans each year. She said that by adopting regenerative agriculture, they were able to cut costs on fungicides, herbicides, and fertilizers by 50%. The average cost of soybean farming in Goiás is about 60 bags per hectare, but at Brasilanda, it dropped to 45 bags, she said.

 

Ms. Kompier also reported improved productivity. Some fields yielded up to 79 bags per hectare. On average, soybean yields in the 2024/25 season reached 70 bags per hectare in Goiás, compared to a national average of 60, according to Brazil’s National Supply Company (CONAB). “Improvement is gradual. Regenerative agriculture is a journey; you don’t flip the switch overnight,” she said.

 

Practices adopted at Brasilanda include crop rotation, cover crops, crop-livestock integration, organic fertilizers, and biofertilizers. Insect control is done with traps.

 

“We use homeopathy in soybeans and corn to reduce herbicide use, and we apply Bordeaux mixture [a copper sulfate- and lime-based fungicide used in organic farming]. Now we’ve started using bees to pollinate the soy,” Ms. Kompier said.

 

Source: Valor International

https://valorinternational.globo.com

 

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NEWSLETTER

MURRAY ADVOGADOS

JULY 2025

 

07/01/2025

BRAZIL WANTS TO INCLUDE CARS AND SUGAR IN MERCOSUR

The Lula administration aims to give strategic sectors preferential treatment during its presidency of the bloc

 

Brazil plans to use its upcoming six-month presidency of Mercosur to push for the inclusion of the automotive and sugar industries in the bloc’s common trade regime, according to the country’s Foreign Ministry, known as Itamaraty. The initiative is expected to be one of President Lula’s top priorities for the regional group in 2025.

 

The effort is tied to the economic significance of these sectors within intra-bloc trade. Roughly half of all trade between Brazil and Argentina, for example, is concentrated in the auto industry. Yet despite its central role, the sector has remained outside Mercosur’s common trade framework since the bloc was created 34 years ago.

 

“Our goal is to include the automotive sector in Mercosur, and we will continue working toward a regional agreement in this area,” said Ambassador Gisela Maria Figueiredo Padovan, secretary for Latin America and the Caribbean at Brazil’s Ministry of Foreign Affairs, who is leading the negotiations.

 

Ms. Padovan said the Brazilian government has already drafted a proposal outlining a new common industrial policy for the regional auto sector. “We’ve submitted a draft agreement aimed at establishing a shared industrial policy. Just between Brazil and Argentina, autos account for 50% of bilateral trade—that’s highly significant. We’re pursuing a deal that will be mutually beneficial,” she said.

 

Negotiations on the sugar industry are still at an earlier stage, with no formal text under discussion. Even so, talks are moving forward, according to Ambassador Francisco Pessanha Cannabrava, director of the Mercosur Department at Brazil’s foreign ministry.

 

“In the case of sugar, we’re aware of the sensitivities among our Mercosur partners, but our goal is not to harm local agriculture. Our focus is on aligning production chains. Countries like Uruguay and Paraguay have domestic industries that rely on sugar, so we need to find ways to integrate it into the bloc,” Mr. Cannabrava said.

 

As part of this process, Brazil is considering working with the Inter-American Development Bank (IDB) to help develop technical benchmarks for sugar sector integration. “We’re working on terms of reference to figure out how sugar can be included in Mercosur in a way that’s a win-win for everyone. These terms could be developed by respected institutions like the IDB,” he added.

 

Brazil’s Foreign Ministry also expressed optimism about reaching an agreement with Argentina on a new version of the Common External Tariff Exception List. The current discussion stems from a proposal made during Argentina’s previous Mercosur presidency, which secured exemptions for 50 new products.

 

According to Brazilian officials, a final agreement could be reached during the next Mercosur summit, scheduled for July 2–3 in Buenos Aires. The exception list allows member countries to apply different external tariffs to specific goods, giving them more flexibility within the bloc’s broader trade structure.

 

Source: Valor International

https://valorinternational.globo.com

 

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07/02/2025

 

DEVELOPMENT LENDERS TEST NEW FUNDING STRATEGY FOR AI, DATA CENTERS

BNDES and Finep sign agreement aiming to turn Rio into high-capacity data hub; exploring R$1bn AI investment fund

 

Brazil’s leading development institutions are ramping up efforts to attract artificial intelligence (AI) investments and boost the country’s data center infrastructure. On Tuesday (1), the Brazilian Development Bank (BNDES) and the Studies and Projects Financing Agency (Finep) signed a memorandum of understanding to develop Rio de Janeiro as a strategic data center hub. The agreement also includes the federal government, the city of Rio, and power utility Eletrobras.

 

The memorandum—focused on developing, financing, and installing high-capacity data centers in the city—is the first of its kind and could serve as a model for other states and municipalities.

 

Speaking at the Governance and Public Strategies in Artificial Intelligence forum, held in parallel with the BRICS summit at BNDES headquarters in Rio, the development lender’s Planning and Project Structuring Director, Nelson Barbosa, said the bank is evaluating the creation of a dedicated investment fund for data centers and AI.

 

Mr. Barbosa said BNDES plans to commit between R$500 million and R$1 billion to the fund as part of its renewed strategy for equity investments via BNDESPar, the bank’s equity investment arm. Last week, BNDES President Aloizio Mercadante announced that the bank will allocate R$10 billion to stock investments—half through direct stakes and half via private equity-style investment funds (FIPs).

 

“Of the R$5 billion allocated to funds, we’re evaluating a fund focused on data centers and AI, with a potential BNDES commitment of between R$500 million and R$1 billion,” Mr. Barbosa said.

 

Including potential private co-investment, the total size of the fund could reach between R$2.5 billion and R$5 billion. It would support various segments of the IT and AI ecosystem—from different data center models to algorithm development, applications, AI solutions, and hardware such as gaming technologies and creative industry tools.

 

Mr. Barbosa said BNDES has already deployed R$1.7 billion in the sector since 2023 through direct financing and investment fund participation. That includes R$1 billion in nine transactions involving hardware, data centers, and IT products; R$63 million in equity investments in two tech firms via BNDESPar; and R$700 million across seven investment funds focused on AI-enabled business models. The bank expects these funds to mobilize another R$2.3 billion in private capital, Mr. Barbosa said.

 

Finep President Luiz Antonio Elias said Brazil has a significant opportunity to position itself competitively in the global technology market by creating a “positive financing environment.” He highlighted the strategic nature of the new protocol.

 

“The memorandum offers a differentiated financing model involving Finep, BNDES, and Eletrobras, recognizing Rio’s unique opportunity. The city becomes more attractive for investment thanks to its existing connectivity infrastructure,” Mr. Elias told Valor, referring to the international submarine cables established during the 2016 Olympics.

 

The initiative aligns with Brazil’s National Artificial Intelligence Strategy, launched by the federal government last year. “[This agreement] represents a strategic initiative with significant economic, scientific, and technological impact,” Mr. Elias added.

 

Source: Valor International

https://valorinternational.globo.com

 

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07/04/2025

 

MERCOSUR SUMMIT SHOWCASES BRAZIL-ARGENTINA DIVISIONS

Lula promotes integration; Milei warns against economic rigidity

 

On the day Brazil assumed the rotating presidency of Mercosur, President Lula said the South American bloc serves as “a refuge where we feel safe” and shields its members from “foreign trade wars.” Speaking in Buenos Aires during the handover ceremony from Argentina, President Lula’s remarks stood in stark contrast to those of Argentine President Javier Milei, who warned against the bloc becoming an “iron curtain” for its members.

 

It was Mr. Lula’s first visit to Argentina since Mr. Milei took office. The two leaders did not hold a bilateral meeting, although President Lula visited former Argentine President Cristina Kirchner, signaling his political alignment.

 

“When the world becomes unstable and threatening, it’s natural to seek refuge where we feel secure. For Brazil, Mercosur is that place,” President Lula said during the 66th Mercosur Summit. “Over more than three decades, we’ve built a house with solid foundations, capable of withstanding storms. We’ve established a network of agreements that now includes associate states. All of South America has become a free trade area, grounded in clear and balanced rules.”

 

According to President Lula, the bloc’s Common External Tariff serves as protection against external trade conflicts. “Being part of Mercosur protects us,” he said, adding that member states must work together to preserve their autonomy in an increasingly polarized global context.

 

For its six-month presidency, Brazil has outlined five main priorities: strengthening trade within the bloc and with external partners, addressing climate change and promoting energy transition, advancing technological development, combating organized crime, and promoting citizens’ rights. President Lula said Brazil’s leadership will be a chance to reflect on “the place we aim to occupy on the new global chessboard.”

 

Standing beside Mr. Milei, President Lula renewed his support for deeper economic integration and reducing the bloc’s dependence on the U.S. dollar. He advocated for a payment system using local currencies to facilitate digital transactions, lower costs, and reduce exchange rate risks.

 

Strengthening trade within the bloc and with external partners will be a top priority, he said, citing the need to integrate the automotive and sugar sectors into the customs union. “Delaying this task means sacrificing the bloc’s strategic potential in the production of electric vehicles and biofuels,” President Lula said.

 

He also announced plans to advance trade negotiations with Canada and the United Arab Emirates. Within the region, he emphasized the need to engage with Panama and the Dominican Republic, as well as update existing agreements with Colombia and Ecuador. He also called for Mercosur to turn its attention to Asia, which he described as “the dynamic center of the global economy.”

 

In contrast, Mr. Milei emphasized that Argentina’s top interest in the bloc is opening new markets for its exports. In his closing speech as outgoing chair of Mercosur, the Argentine president called for greater economic freedom within the bloc and more flexible internal rules. He insisted that Mercosur cannot remain “an iron curtain” for its members.

 

“We urgently need more freedom. We’ve left behind decades of stagnation. Mercosur’s partners must decide whether they want to support the path we’ve embarked on. Either we move forward together or alone,” Mr. Milei said. In his view, the bloc should no longer be seen as “a shield that protects us from the world, but a spear that allows us to enter global markets.”

 

While neither leader directly criticized the other, the distance between them was evident. After the summit, President Lula visited Ms. Kirchner and posted a photo of them holding hands, wishing her strength in her “fight for justice.”

 

President Lula said his bond with Ms. Kirchner extends beyond formal relations. “It’s a friendship rooted in mutual affection, shared political ideals, and a common commitment to social justice and fighting inequality,” he wrote. Ms. Kirchner is currently under house arrest, serving a six-year sentence for corruption.

 

Source: Valor International

https://valorinternational.globo.com

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07/04/2025

 

SUPREME COURT SUSPENDS IOF DECREES, CALLS CONCILIATION HEARING

Justice Moraes questions legitimacy of tax hike while urging better dialogue between branches of government

 

Supreme Federal Court (STF) Justice Alexandre de Moraes on Friday (4) suspended both the executive and legislative decrees related to Brazil’s Financial Transactions Tax (IOF) and summoned representatives from the Presidency, Senate, Chamber of Deputies, and Office of the Prosecutor General (PGR) for a conciliation hearing on July 15.

 

The decision stems from cases filed by the Liberal Party (PL) and Socialism and Freedom Party (PSOL), as well as the Attorney General’s Office (AGU), regarding the legality of the IOF hike. While Mr. Moraes acknowledged the executive branch’s authority to adjust tax rates, he expressed concern over the “nature” of the recent increase.

 

“There is a serious and well-founded doubt about whether the presidential decree was used to adjust the IOF for purely fiscal purposes. In a preliminary assessment, this is enough to consider a potential abuse of power. If the president’s autonomous decrees are driven by a deviation of purpose, they may violate the principle of proportionality,” Mr. Moraes wrote.

 

He granted a preliminary injunction suspending Executive Decrees 12.466/2025, 12.467/2025, and 12.499/2025, as well as Legislative Decree 176/2025. The decision will now be sent to the full court for review, though no date has been set.

 

Allies with ministries also filed suit

 

In addition to the actions brought by the PL, PSOL, and AGU, a fourth case was filed Thursday night (3) by parties that hold ministerial positions in the Lula administration. These parties are asking the STF to declare constitutional the legislative decree that overturned the IOF increase.

 

Among the parties behind this request are Brazil Union, Progressives, and Republicans, which together control five ministries, including Tourism, Communications, Social Development, Sports, and Ports and Airports. Also joining the suite are Brazilian Social Democracy Party (PSDB), Solidarity, Democratic Renewal Party (PRD), Podemos, and Avante. They argue that “Congress acted properly in blocking measures that raised taxes without following the legislative process.”

 

Court battle deepens political crisis

 

The AGU’s move to file a case with the STF on Tuesday (1) to restore the IOF hike further strained relations between the Lula government and Congress. Lawmakers, particularly congressional leaders, were already upset over aggressive messaging on social media by the Workers’ Party (PT), which included AI-generated videos portraying Congress as “the enemy of the people.”

 

These attacks, part of a broader “rich vs. poor” narrative pushed by the government, specifically targeted Chamber Speaker Hugo Motta (Republicans of Paraíba). The polarization strategy had already drawn criticism from lawmakers and is expected to further deteriorate relations with the Legislature. In response, the Brazil Union-Progressives federation released its own video rebutting the campaign over the weekend.

 

Yesterday, before his party filed its own case against the executive, Congressman Arthur Lira (Progressive Party, PP, Alagoas), speaking at an event in Lisbon, called for de-escalation among all branches of government. “Everyone needs to take a step back—the Legislative, Judiciary, and Executive. They need to sit at the table and resolve this without letting tensions get this high,” said Mr. Lira, who previously served as Speaker of the Chamber.

 

According to him, both the Executive and Legislative were within their rights in the IOF dispute. “This will only be resolved through dialogue—and that’s what we’ve been working around the clock to make happen,” he said.

 

Source: Valor International

https://valorinternational.globo.com

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07/10/2025

 

BRAZIL’S INFLATION EXCEEDS TARGET CEILING FOR FIRST TIME UNDER NEW RULES

IPCA rose 0.24% in June and 5.35% over 12 months, breaching continuous target system of 4.5%

 

Brazil’s official inflation, as measured by the Extended Consumer Price Index (IPCA), rose 0.24% in June, slightly down from 0.26% in May, according to data released by the national statistics agency IBGE. While modest, it was the highest rate for the month of June since 2022, when inflation reached 0.67%.

 

The June figure came in above the median forecast of 0.19% from 33 financial institutions and consulting firms surveyed by Valor Data, Valor’s financial data provider. Forecasts ranged from 0.11% to 0.26%.

 

In the 12 months through June, inflation reached 5.35%, exceeding the upper limit of the Central Bank’s inflation target range for the first time since a new framework came into effect earlier this year. The current system sets a continuous target of 3%, with a tolerance band of 1.5% to 4.5%. If the 12-month IPCA remains outside this range for six consecutive months, the target is considered to have been breached.

 

Since January 2025, 12-month inflation has remained above the 4.5% ceiling. The June result marks the sixth consecutive month above the range, triggering a formal breach under the new rules set by the National Monetary Council (CMN).

 

Under the new framework, the Central Bank must now publish a semiannual open letter to the finance minister explaining the reasons for missing the target, the steps being taken to bring inflation back within the range, and the expected timeframe. The institution must also include a written explanation in its Monetary Policy Report, which replaces the previous Inflation Report published every quarter.

 

The inflation target system was revised to enhance predictability in monetary policy. Previously, the Central Bank aimed to meet an annual target based on end-of-year inflation. The shift to a continuous target requires the institution to manage inflation expectations more consistently over time.

 

For the 12-month figure, the median market expectation was 5.3%, according to Valor Data, with estimates ranging from 5.22% to 5.37%.

 

IBGE calculates the IPCA based on the consumption basket of households earning between one and 40 minimum wages, covering 10 metropolitan areas along with the cities of Goiânia, Campo Grande, Rio Branco, São Luís, Aracaju, and Brasília.

 

Price behavior by category

 

Of the nine spending categories used to calculate the index, five showed slower price increases in June compared to May. Food and beverages saw deflation of 0.18% in June after rising 0.17% the previous month. Slower inflation was also observed in housing (from 1.19% to 0.99%), health and personal care (from 0.54% to 0.07%), personal expenses (from 0.35% to 0.23%), and education (from 0.05% to zero).

 

On the other hand, price increases accelerated in household goods (from -0.27% to 0.08%), clothing (from 0.41% to 0.75%), transportation (from -0.37% to 0.27%), and communication (from 0.07% to 0.11%).

 

Diffusion and core inflation

 

Inflation became less widespread in June. The diffusion index, which tracks the share of goods and services with price increases, fell to 53.6% from 59.7% in May, according to Valor Data. Excluding food, which is among the most volatile categories, the index remained stable at 59.8%.

 

The average of the five core inflation measures tracked by the Central Bank slowed slightly to 0.29% in June from 0.30% in May, according to MCM Consultores. Over the 12-month period, the average of the core indexes rose to 5.23% from 5.17%.

 

Source: Valor International

https://valorinternational.globo.com

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07/11/2025

 

TRUMP’S TARIFF THREAT SEEN AS BIGGER RISK FOR INFLATION THAN GROWTH

Economists warn of secondary effects from currency, trade tensions

 

The 50% tariff announced by U.S. President Donald Trump on Brazilian exports is expected to have a limited direct impact on Brazil’s economy, but economists warn that the damage could escalate depending on how negotiations unfold.

 

Most analysts agree that the effects will be concentrated in specific sectors and companies. As a relatively closed economy, exports make up a modest share of Brazil’s GDP, and the United States, though Brazil’s second-largest buyer, accounts for just 12% of exports.

 

However, potential secondary effects warrant attention. Currency volatility, especially driven by heightened risk perception, could push up the exchange rate and reignite inflation. Foreign investment could also be affected if tensions with the U.S. escalate

 

Preliminary estimates from Bradesco BBI suggest the tariffs could cut $15 billion from exports this year, or 0.6% of GDP. BTG Pactual sees losses of $7 billion in 2025 and $13 billion in 2026, equal to 0.3% and 0.6% of GDP, respectively.

 

In a report, economists Iana Ferrão and Luiza Paparounis said the effective average tariff on Brazilian goods exported to the U.S. would jump from 1.3% in 2024 to 37.2% in 2025.

 

“Because the price elasticity of Brazil’s imports relative to the exchange rate is below 1 in the short term, an initial depreciation of the real does little to offset the external shock. This means both the trade surplus and current account are likely to deteriorate by roughly the same amount as the drop in exports,” they wrote.

 

XP Investimentos forecasts a 0.3 percentage point reduction in GDP growth in 2025 and 0.5 pp in 2026 if the tariffs take effect, with a drop in exports of $6.5 billion and $16.5 billion, respectively. The firm also expects tighter financial conditions. Oxford Economics, in contrast, projects a smaller loss—below 0.05 pp in both GDP and exports in 2026—and sees foreign direct investment (FDI) declining by 0.2 pp.

 

If Brazil enacts reciprocal measures, the impact would be greater. GDP could shrink by 0.1 pp, and FDI could fall as much as 0.5 pp.

 

“Trump’s letter may open the door to negotiations and reduce the final tariff. But we’re skeptical: Trump’s threat is unlikely to influence domestic Brazilian politics,” said Felipe Camargo, global chief economist at Oxford Economics.

 

Inflation impact

 

The inflation outlook remains more uncertain. Brazil’s price dynamics had been improving, helped by a stronger real, which had also influenced market expectations. But the exchange rate per U.S. dollar rose 1.79% in two days, halting that trend.

 

If the exchange rate stabilizes, some economists believe the tariff hike might temporarily ease inflation by boosting domestic supply of products usually shipped to the U.S., such as meat, coffee, and orange juice.

 

“There’s talk that beef prices could rise in the second half of the year, but these developments could cancel that out,” said Warren’s inflation strategist, Andréa Angelo. In her view, the exchange rate would only start affecting inflation if it reverses the gains of the first half and exceeds R$6 per dollar.

 

Santander shares a similar view. “We might see some downward pressure in the first two months. After that, it depends on the dollar’s path. If it stays around current levels, our inflation forecast doesn’t change much,” Adriano Valladão said. A worsening inflation scenario driven by the exchange rate would require the dollar to rise above R$5.80. On Thursday, the commercial rate closed at R$5.54.

 

XP does not expect a meaningful inflation impact if Brazil refrains from retaliation. But escalation could hit Brazil’s import basket, which includes fuel, chemicals, pharmaceuticals, and auto and aerospace components.

 

“For fuels, around 3% of gasoline and 5% of diesel consumed in Brazil come from the U.S. Substitution wouldn’t be easy, but it’s possible. The most critical area, however, is air travel: between 10% and 15% of aviation kerosene used in Brazil is imported from the U.S.,” the firm said. A 50% Brazilian tariff on these goods could add 0.05 pp to inflation through higher airfare.

 

No retreat expected from Trump

 

For UBS BB chief economist, Alexandre de Ázara, the 50% tariff on Brazilian products is unlikely to be rolled back. He argued that Mr. Trump’s grievances clash directly with the Brazilian government and judiciary: the legal situation of former president Jair Bolsonaro, Mr. Lula’s pro-Iran rhetoric and support for a BRICS currency alternative to the dollar, and what the American president sees as persecution of U.S. tech companies by Brazil’s Supreme Court.

 

“The Brazilian government needs to stop escalating first. What we’ve seen so far is that if a country retaliates, Trump always retaliates back,” Mr. Ázara said. He does not believe Mr. Trump will compromise on these issues.

 

The greater risk, he warned, lies in further escalation. “From an economic standpoint, de-escalation would be wiser. But that doesn’t seem to be the government’s path. If Brazil imposes a 50% tariff across the board, we might stop producing medicine, for instance, because a large share of the pharmaceutical industry’s inputs come from the U.S. And Trump could strike back again.”

 

Mr. Ázara does not rule out more drastic U.S. measures, such as restrictions on American investment in Brazil. “That could be very damaging and could severely impact the exchange rate,” he said.

 

Souce: Valor International

https://valorinternational.globo.com

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07/11/2025

 

AGRICULTURAL BONDS TO REMAIN TOP RURAL CREDIT SOURCE DESPITE NEW TAX

Bonds known as LCA expected to exceed R$700bn by 2026 under Crop Plan

 

Agribusiness Credit Bnds (LCAs) are set to remain the leading funding instrument for Brazil’s rural credit programs in the 2025/26 season, even with a proposed income tax on their returns. According to government projections, the outstanding volume of LCAs is expected to reach R$728 billion by May 2026, up from the current R$651 billion. Of this total, about 60% is earmarked for financing the agricultural sector.

 

The 2025/26 Crop Plan outlines R$594.4 billion in total rural credit, with LCAs accounting for R$328 billion, or 55% of the funding. In the 2024/25 cycle, they represented 43% of the total.

 

Currently, income earned from LCAs is exempt from taxation. However, the Ministry of Finance has proposed a 5% tax on earnings, included in Provisional Presidential Decree 1,303/2025, which still requires Congressional approval. If passed, the new rule would take effect in 2026. Despite the tax, Gilson Bittencourt, deputy secretary for agricultural policy and agro-environmental business at the Ministry of Finance, believes LCAs will remain attractive to investors.

 

“The Finance Ministry’s proposal to impose a 5% tax maintains LCAs’ advantage over other fixed-income instruments while also helping to fund interest rate subsidies in rural credit,” said Mr. Bittencourt.

 

He noted that high interest rates, particularly the current Selic level near 15% per year, made it unfeasible to keep loan interest rates unchanged in the new Crop Plan. “We wanted to avoid raising rates, but the numbers had to add up,” Mr. Bittencourt said during a media briefing after the plan’s release earlier this month. “In agriculture, the lower the rate, the better. But worse than a slightly higher rate is having no funds at all. That was the government’s main concern.”

 

Mr. Bittencourt also acknowledged that a drop in the Selic rate could reduce demand for LCAs, which are currently among the most profitable investment options. Nonetheless, investor familiarity with LCAs may help sustain demand even in a lower-rate environment.

 

Looking ahead, Mr. Bittencourt said the “ideal scenario” for agricultural policy would be a Selic rate of 8.5%—a projection that was common among economists and the government earlier in 2024. In such a scenario, LCAs could be issued at 90% of the benchmark rate plus a spread of up to 3%, resulting in single-digit loan interest rates for market-based credit lines. This would also increase the incentive for banks to use their own funds in rural lending, further easing the fiscal burden of subsidies.

 

However, Ivan Wedekin, a consultant and former secretary of agricultural policy at the Ministry of Agriculture, warned that taxing LCAs could hurt their competitiveness relative to other instruments, such as bank-issued CDBs, which are already taxed. He also voiced concerns about market confidence.

 

“Taxing one type of instrument sets a precedent. There’s now a risk that the government could raise the tax from 5% to 10% or even revoke exemptions altogether. That creates uncertainty across the market,” Mr. Wedekin told Valor.

 

The Agricultural Parliamentary Front (FPA) has also criticized the proposed taxation, echoing concerns that it could undermine trust in rural credit mechanisms.

 

Source: Valor International

https://valorinternational.globo.com

________________________________________

07/14/2025

 

CHINA EXPANDS IN CONSUMER GOODS, NOW SUPPLIES 26% OF BRAZIL’S IMPORTS

Cars, electronics and home appliances drive Chinese dominance as U.S. loses share

 

Brazil’s reliance on American goods has dropped to near the lowest level in a decade, as China strengthens its dominance across a wide range of imports, including consumer products like cars, motorcycles, freezers, and stoves.

 

From January to June, Brazil imported $21.7 billion from the United States, up 11.5% from the same period in 2024. But this only accounted for 16% of total imports, the second-lowest share in the last ten years, just above the 15.5% in the first half of last year. In 2022, the U.S. share was 19.3%.

 

Amid China’s search for new markets under the threat of U.S. President Donald Trump’s tariffs, the country exported $35.7 billion to Brazil in the first six months of this year: 26.3% of Brazil’s total imports, a record high and up 22.2%.

 

China became Brazil’s top car exporter last year, even after Brazil imposed tariffs on electric vehicles. Chinese dominance has also expanded into small appliances and electronics, growing in strategic importance for Beijing.

 

Despite the introduction of import tariffs last year—starting at 10% in early 2024 and rising to 18% now—pure electric vehicles from China remain Brazil’s most imported cars.

 

In the first half of this year, Brazil imported $2.05 billion worth of vehicles from China, down from $2.58 billion in the same months of 2024 but up 713% from 2023. Argentina, once a key supplier, trailed far behind at $844 million.

 

Between 2022 and 2025, Brazil rose from China’s 17th to its sixth-largest vehicle export market, now representing 5.6% of the total.

 

This trend is mirrored in household appliances. During the second-hottest summer in Brazil’s history—second only to 2024—air conditioner imports from China jumped 67% to $498.5 million in the first half of 2025, after already surging 64% in the same period of 2024. Brazil moved from the 15th to the seventh-largest buyer of Chinese air conditioners from 2022 to 2025.

 

Imports of Chinese-made vacuum cleaners hit $51 million, up 26% from a year earlier.

 

Even when values declined, China remained the leading supplier. Imports of electric stoves, grills, and baking pans totaled $98.2 million—down from $113.7 million in 2024—but Germany, the second-largest supplier, shipped just $2.3 million.

 

Brazil imported $65.6 million in fully assembled televisions from China in the first half. Hong Kong ranked second at $7.1 million. Mobile phone imports from China, including parts and components, totaled $650.6 million, with Vietnam in second place at $291.5 million.

 

Chinese government trade data confirms Brazil’s growing importance. Between 2022 and 2025, Brazil climbed from 17th to sixth among China’s TV buyers, and from 19th to sixth in irons. It also rose from 16th to 12th in electric stoves and grills.

 

Brazil’s appetite

 

Lia Valls, professor at Rio de Janeiro State University (UERJ) and researcher at the Brazilian Institute of Economics of Getulio Vargas Foundation (FGV Ibre), said Brazilian purchases of Chinese goods are rising much faster than total imports. Volume growth, she explained, is especially striking.

 

In the 12 months through May, Brazilian imports from China rose 25.7% in value, data from the Foreign Trade Secretariat (SECEX) show. The FGV Ibre’s Foreign Trade Indicator (Icomex) puts volume growth at 37.2%.

 

By comparison, total Brazilian imports rose 12.2% in value and 16.7% in volume. From China alone, volumes jumped 35% in the first five months of 2025, versus a 12.4% increase in total imported volume.

 

Yet average prices of Chinese goods are falling. Icomex shows a drop of 8.1% in average import prices from China between January and May. Total import prices fell just 2.6%.

 

U.S. imports, on the other hand, rose 13% in volume over the same period, while prices were nearly flat, edging up just 0.2%. The U.S. remains Brazil’s second-largest supplier.

 

In February, Brazil imported a large offshore oil platform from China, classified as a non-recurring item. But Icomex data show the surge in Chinese import volumes is a long-term trend.

 

Between 2015 and 2024, Brazilian imports of Chinese goods by volume rose 146.2%. U.S. volumes increased just 1.1%, and imports from Argentina rose 21.9%. Meanwhile, average prices of Chinese imports fell 14.4%, while U.S. prices rose 50.9% and Argentine prices 7.3%.

 

Since 2006, China’s import volume to Brazil has multiplied by seven, while its average export price rose just 14%.

 

Trade surge

 

José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB), said imports have proven more resilient than expected this year, partly due to China’s role.

 

The import surge had a negative impact on Brazil’s GDP in the first quarter, despite a record grain harvest, said Livio Ribeiro, partner at BRCG and researcher at FGV Ibre. “It was very unusual. Even with the bumper crop, net trade dragged down GDP, which was unexpected.”

 

Data from Brazil’s national statistics agency IBGE show that exports of goods and services rose 2.9% in the first quarter versus the previous three months (seasonally adjusted), but imports climbed 5.9%.

 

SECEX figures show that China’s share of Brazilian imports rose from 23.3% in the first half of 2024 to 26.3% in the same period this year.

 

Regardless of the direction of Mr. Trump’s tariff policies, Mr. Castro said, China will continue expanding its export markets. “The world is adapting to this new China, a country that produces everything, competes in everything, and offers competitive prices in everything.”

 

Mr. Ribeiro said the future of Chinese imports in Brazil will depend less on the U.S. president’s policies and more on the strength of domestic lobbying efforts. “Brazil’s lobbies are stronger than average. Chinese oversupply could flood other countries like Chile or Colombia more than Brazil, where local lobbies are less organized. So Brazil is unlikely to face a full-blown flood of Chinese goods.”

 

The global tariff debate, he said, has thrown “some sand in the gears of global trade.” China is also struggling to boost domestic consumption and is seeking new markets for its industrial surplus.

 

Chinese carmakers gain ground

 

Tulio Cariello, research director at the Brazil-China Business Council, said China’s lead in car exports to Brazil is unsurprising. He noted that import tariffs for electric and hybrid vehicles will continue to rise through next year.

 

In 2025, electric cars without combustion engines were taxed at 18% through June. The rate rose to 25% this July and is scheduled to reach 35% in July 2026.

 

New Chinese brands such as GAC, Zeekr, Omoda & Jaecoo, and Leapmotor have followed BYD and GWM into the Brazilian market. “They realized there’s a market for EVs in Brazil. BYD created a positive image for Chinese cars, which are now almost synonymous with electric vehicles,” Mr. Cariello said.

 

Mr. Ribeiro said higher tariffs haven’t significantly curbed demand for Chinese EVs, which tend to be more expensive and less sensitive to price increases. “Tariffs reduced margins, but that wasn’t fully passed on to consumers. And even if it were, they’d still be cheaper than German or Swedish models.”

 

Chinese dominance extends to appliances and production chains

 

In appliances and white goods, Mr. Cariello noted that China’s dominance reflects years of industrial investment. When China opened to foreign investment, many U.S., European, and Japanese firms set up production there. “The Chinese learned, began making their own products, and started competing with global brands. In some cases, like air conditioners, they’re already ahead.”

 

He added that fierce competition among Chinese manufacturers helps keep prices low.

 

Chinese companies, said Mr. Castro of AEB, are quick to develop new products and win over markets. Data from SECEX illustrate this: Italy remains Brazil’s top dishwasher supplier, with shipments rising from $42 million in the first half of 2022 to $83 million in the same period this year. But China is catching up fast, doubling its exports to Brazil from $16.6 million to $51.6 million in the same period.

 

Mr. Cariello pointed out that while China leads in many categories, Southeast Asian countries are gaining ground as Chinese companies shift production for cost savings. In cell phones and parts, for instance, Vietnam and Malaysia follow China. For air conditioners, Thailand and Singapore are next.

 

“Each case is different, but there’s no doubt China will remain the dominant supplier in many sectors,” he said. “Chinese companies not only ship final products, they also produce key components. Smartphones and computers are good examples. China is involved in every step of the value chain, from critical minerals to components and design. One way or another, China is always present.”

 

Source: Valor International

https://valorinternational.globo.com

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07/15/2025

 

PREVI EXITS BRF, REJECTING MARFRIG OFFER

Pension of Banco do Brasil workers sheds stake after 30 years as investors, citing better price from market

 

One of BRF’s longest-standing shareholders, the pension fund for Banco do Brasil employees, has opted not to wait for the outcome of the merger with Marfrig. Previ closed its historic position last Friday (July 11), selling off its remaining shares, according to Pipeline and confirmed by the fund.

 

Previ had been a shareholder since the 1990s, originally through an investment in Perdigão, and remained in the company after its 2009 merger with Sadia. The fund was among the investors dissatisfied with the share swap terms proposed by Marfrig for the merger with BRF, arguing that it secured a better price for its beneficiaries by selling on the open market.

 

“The shares were sold at a price higher than what would have been offered to minority shareholders through the appraisal rights process if the BRF-Marfrig merger were finalized,” Previ said in a statement, emphasizing its more than 30-year history with the company.

 

“Previ believes the proposed exchange ratio in the merger does not adequately reflect BRF’s value, potentially leading to losses for minority shareholders and, by extension, for our members. By exiting before the merger’s completion, Previ protects participants’ assets and reaffirms its commitment to technical, well-founded decisions aligned with the best interests of the pension plan,” the statement added.

 

Previ’s exit rattled investors, with BRF shares dropping 4.55% on B3.

 

The fund’s departure may weaken the push by minority shareholders seeking better merger terms. Previ, along with asset manager Latache and a member of the Fontana family, had appealed to the Securities and Exchange Commission of Brazil (CVM), successfully delaying the shareholder meeting to vote on the merger twice—the latest postponement, granted last Friday, extended the process by another 21 days.

 

They are demanding further disclosure of the valuation study underpinning the share price and have also raised concerns about the involvement of Marfrig’s controlling shareholder, Marcos Molina, in the merger vote.

 

Meanwhile, Marfrig and Mr. Molina continue to buy up BRF shares. The company disclosed that its combined stake, together with Molina’s MAMS fund, has reached 58.87%. When the merger was announced in May, Marfrig held 50.5% of BRF. This increased stake means the merger could be approved even without minority shareholder support.

 

BTG Pactual has also been purchasing BRF shares in recent days. The bank disclosed it now holds a 7.79% stake in BRF and has derivatives involving call and put options on the stock. BTG did not specify whether the position is proprietary or on behalf of a client.

 

Source: Valor International

https://valorinternational.globo.com

 

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07/17/2025

 

BRAZIL FACES HURDLES REPLACING RUSSIAN DIESEL SUPPLY

Russia became top supplier in 2023, offering discounted fuel

 

Brazil could struggle to find alternative diesel suppliers if the United States imposes new sanctions on Russia, experts told Valor. Russia has been the country’s leading diesel source since 2023, offering the fuel at discounted prices amid international trade restrictions.

 

On Tuesday (15), NATO Secretary-General Mark Rutte warned that countries such as Brazil, China, and India could be affected by secondary sanctions threatened by U.S. President Donald Trump. The proposed measure would impose 100% tariffs on nations buying from Russia, unless Russian President Vladimir Putin agrees to a peace deal in Ukraine within 50 days.

 

From January to June, Russia was Brazil’s top diesel supplier, accounting for $2.5 billion in exports, according to data from Brazil’s Ministry of Development, Industry, and Foreign Trade (MDIC). The United States ranked second, with $1 billion. Currently, domestic production meets 70% of Brazil’s diesel demand, with the remaining 30% filled through imports.

 

According to Felipe Perez, an analyst at S&P, Brazil would face difficulties sourcing diesel elsewhere amid already tight global inventories. “If tariffs are extended to fuels, U.S. diesel will become less competitive for Brazil. India could be an option, but it is also a major importer of Russian diesel and could be subject to the same sanctions,” he said. Mr. Perez said Nigeria and Middle Eastern countries remain potential suppliers, though high freight costs and limited volumes could make them less viable.

 

Russia emerged as a key player in Brazil’s diesel imports in 2023, after Western sanctions over the war in Ukraine shut the country out of its traditional markets. To attract new buyers, Russia offered discounted fuel, prompting increased purchases by Brazil, India, and China.

 

That same year, Moscow temporarily halted diesel and gasoline exports to contain domestic price spikes, as crude oil prices neared $100 per barrel. The short-lived export ban heightened global concerns over the reliability of Russian supply, which is rarely governed by long-term contracts.

 

According to MDIC, Brazil set a record in 2023 by importing $4.5 billion in diesel from Russia. That trend has continued into 2024, with Russian diesel purchases totaling $5.4 billion—well ahead of the $1.4 billion in imports from the U.S. For comparison, in 2022, Russian diesel accounted for just $95 million in Brazilian imports, ranking Russia eighth among suppliers. That year, the U.S. led the list, with $8 billion in sales.

 

Sergio Araujo, president of the Brazilian Association of Fuel Importers (ABICOM), said Brazil will likely face a challenge in finding an alternative supplier that can meet its needs. The situation would worsen, he said, if sanctions also affect China and India, creating global demand that outpaces supply. “That scenario would shake up the market. The U.S. could be an alternative, but I’m not sure U.S. refineries have the capacity to scale up production enough,” said Mr. Araujo. “If global supply falls short, prices will surge, adding pressure to inflation.”

 

ABICOM members importing Russian diesel are waiting to see if Mr. Trump’s threats materialize. According to an industry source, most Russian diesel buyers in Brazil are independent operators.

 

Asked for comment, Acelen, the owner of the Mataripe refinery in Bahia, said it does not purchase Russian diesel. Raízen declined to comment, while Vibra did not reply to Valor’s request for comment.

 

Petrobras also said it does not buy crude oil or refined products from Russia. In a statement, the state-run company said diesel imports are driven by market conditions. “Petrobras’s global operations, through its international trading subsidiaries, allow it to import from a range of suppliers, primarily from the U.S., India, and the Persian Gulf region.”

 

Thiago Vetter, an analyst at StoneX, sees NATO putting pressure on Brazil and other nations, but said the likelihood of sanctions being enforced remains low. “I consider the chance of secondary tariffs on Russian buyers remote, given the importance of these markets to the U.S. economy,” he said. In his view, even if Russian diesel were cut off, there is little risk of a fuel shortage in Brazil. Companies could replace Russian diesel, but it would come at a higher cost, he added.

 

Source: Valor International

https://valorinternational.globo.com

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07/18/2025

 

BRAZIL SETS NEW MONTHLY RECORD FOR BEEF EXPORTS

The volume of exports in June reached 341,550 tonnes, up 41%

 

 

Brazilian beef exports soared to a record high in June, reaching 341,550 tonnes, a 41% increase year over year, the Brazilian Association of Meatpackers (Abrafrigo) reported Thursday, citing federal data. This figure surpassed the previous monthly record of 319,290 tonnes set in October 2024.

 

June export revenues jumped 55% to $1.505 billion. In the first half of the year, total beef and byproduct exports generated $7.446 billion in revenue, up 28%, with volumes rising 17.3% to 1.69 million tonnes.

 

China remains Brazil’s top customer, importing 631,900 tonnes in the semester—an 11.3% increase in volume and 27.4% growth in revenue, which totaled $3.204 billion. The U.S., the second-largest buyer, significantly expanded its imports by 85.4% in volume and 99.8% in revenue, purchasing 411,700 tonnes worth $1.287 billion between January and June.

 

China accounted for 43% of Brazil’s beef export revenues and 37.4% of volumes in the period. The U.S. share was 24.4% of volume and 17.3% of revenue.

 

However, the outlook has darkened following the U.S. decision to impose a 50% tariff on Brazilian beef starting August 1. According to Abrafrigo, the measure could cost the Brazilian cattle industry around $1.3 billion.

 

Source: Valor International

https://valorinternational.globo.com

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07/21/2025

 

PUBLIC DEBT WILL KEEP RISING WITHOUT TOUGH FISCAL REFORM, STUDY WARNS

MCM 4Intelligence projects debt-to-GDP ratio above 100% in multiple scenarios within 10 years

 

Brazil’s public debt is on track to exceed 100% of GDP within the next decade, even if a mild fiscal reform package is approved, according to a study by consultancy MCM 4Intelligence. The analysis, which ran thousands of simulations based on Brazil’s economic and fiscal performance over the past 20 years, highlights growing concerns among economists ahead of this year’s elections.

 

In a scenario where no policy changes are made, there is a 53% chance that the debt-to-GDP ratio will surpass 100% within ten years, with a 61% probability of crossing this threshold at any point during that period. The baseline assumptions include a real interest rate of 5%, average GDP growth of 2.4%, and a primary surplus of 0.5% of GDP. Brazil’s gross debt currently stands at 76.1% of GDP.

 

Under a scenario involving diluted reforms, the probability of debt exceeding 100% within a decade still reaches 25%, rising to 32% when considering the possibility of it happening at any point in the next ten years. This projection assumes that, starting in 2027, the government achieves an average primary surplus of 1.5% of GDP through a set of measures: delinking healthcare and education spending from GDP growth and adjusting them only for inflation; indexing pensions and other social benefits to inflation plus half of real GDP growth; cutting wage bonuses to half the minimum wage; reducing legal tax exemptions by 10%—which the Finance Ministry estimates at over R$800 billion—and trimming parliamentary budget earmarks by 10%, from R$50.4 billion in 2025.

 

The study’s conclusions diverge sharply from the outlook of Dario Durigan, the Executive Secretary at the Finance Ministry. Speaking at a Brazilian Development Bank (BNDES) event earlier this month, Mr. Durigan said it was possible to resolve Brazil’s debt challenge within five years “through spending controls and fiscal rebuilding.” He acknowledged that returning to primary surpluses at the current Selic interest rate level is “neither viable nor feasible,” but suggested there was room for interest rate cuts “soon.”

 

The analysis by economists Alexandre Teixeira, Renan Martins, and political consultant Ricardo Ribeiro uses stochastic modeling, which employs historical averages and standard deviations of key variables to generate thousands of possible debt trajectories.

 

“The advantage of this method is that it produces not just a single forecast but a wide range of possible outcomes, allowing us to gauge the likelihood of specific events,” said Mr. Teixeira.

 

The diluted reform scenario was designed as a softer version of a much stricter package that has been circulating among market economists in recent months. The harsher version, however, is widely seen as politically unfeasible, given strong opposition from President Luiz Inácio Lula da Silva and powerful congressional lobbies. It includes eliminating real increases for pensions and social benefits, tightening eligibility for welfare programs such as the BPC, ending the wage bonus, making deeper cuts to tax expenditures, and slashing parliamentary amendments to the average level seen between 2020 and 2024.

 

According to MCM’s estimates, such a strict package could generate an average primary surplus of approximately 3% of GDP over ten years. “With this level of fiscal adjustment, it’s not hard to show the debt could be stabilized,” Mr. Teixeira noted.

 

Other institutions have reached similar conclusions. A recent World Bank study estimated the effort needed to stabilize Brazil’s debt trajectory at 3% of GDP. The Independent Fiscal Institution (IFI) calculated the required primary surplus at 2.4%.

 

A tougher fiscal adjustment could lead to a 3% primary surplus within a decade, MCM says

 

The study also tested a third scenario, using the same parameters as the diluted reform case but with two adjustments: it assumes the reforms enhance fiscal credibility, lowering the real interest rate to 4.5%—the same level recorded between 2016 and 2019 after the approval of Brazil’s spending cap—and reducing interest rate volatility by halving its standard deviation.

 

In this case, the probability of debt exceeding 100% of GDP virtually disappears. “The key takeaway is that investors need to view the reform as sufficient. For any reform to be effective, it must clearly signal debt stabilization,” Mr. Teixeira said. “A reform that is too lenient may not achieve this goal.”

 

Other institutions, such as IFI, have also published stochastic scenarios, though typically based on their baseline cases. In its latest Fiscal Monitoring Report, IFI estimated a 72.7% chance of gross debt surpassing 90% of GDP by 2029.

 

In the annexes to the 2026 Budget Guidelines Bill (PLDO), the government indicated that the likelihood of debt exceeding 100% of GDP is low and only materializes in an “adverse scenario” involving a 100 basis point Selic rate shock starting in September 2025.

 

The Finance Ministry, through its press office, said Mr. Durigan’s comments reflect the baseline scenario prepared by the National Treasury’s technical team, which assumes compliance with the fiscal targets set in the new framework. Under this scenario, debt peaks at 84% of GDP in 2029 before declining gradually. This aligns with the Treasury’s latest Fiscal Projections Report, which forecasts a debt peak of 84.3% of GDP in 2028.

 

The ministry added that its projections “rely on parameters consistent with current macroeconomic conditions and reaffirm the economic team’s commitment to gradual, responsible, and sustainable fiscal consolidation.”

 

A recent report by Warren Investimentos did not assign probabilities but outlined three potential scenarios. Not even the baseline scenario—which includes indexing the minimum wage to inflation from 2027 and freezing public sector wages until 2030—was able to stabilize debt by 2035. Only in the “adjustment scenario” does gross debt decline after peaking at 92% of GDP in 2029. In this case, the primary surplus would reach 1.7% of GDP by 2030 and 2.0% by 2035.

 

However, the measures in this scenario appear politically challenging: ending the minimum wage valuation rule and freezing public sector wages; abolishing the wage bonus; changing the minimum spending rules for healthcare and education; halving parliamentary earmarks; and cutting the federal contribution to the Fundeb education fund from 23% to 19%.

 

Source: Valr International

https://valorinternational.globo.com

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07/21/2025

 

VIVARA TO ELECT NEW CHAIR AS FOUNDER STEPS DOWN FOR HEALTH REASONS

Marina Kaufman Bueno Neto to take over as board chair at jewelry retailer

 

Vivara, Brazil’s largest jewelry chain, confirmed on Friday (18) key leadership changes previously reported by Valor. Citing health reasons, founder and majority shareholder Nelson Kaufman will step down as chair of the board. His daughter, Marina Kaufman Bueno Neto, currently vice chair and with the company since 2007, will take over the role. Mr. Kaufman will remain a signatory to the shareholders’ agreement.

 

Paulo Kruglensky, Mr. Kaufman’s nephew, was named vice chair. A former CEO who led one of the company’s most significant growth periods, Mr. Kruglensky spent 17 years at Vivara before stepping down in 2024. His departure followed Mr. Kaufman’s controversial decision to retake the helm of the company.

 

Mr. Kaufman submitted his resignation on Friday, and the changes will be formally approved at an extraordinary shareholders’ meeting. Valor has learned that Icaro Borrello will remain CEO and that the company is discussing initiatives to improve metrics such as cash flow and margins.

 

Mr. Kaufman suffered a stroke last year and is recovering gradually, which prompted the decision to strengthen the board. The company declined to comment.

 

Source: Valor International

https://valorinternational.globo.com

 

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07/22/2025

 

U.S. COMPANIES TAKE LEGAL ACTION AGAINST TRUMP OVER ‘BRAZIL TARIFF’

Two orange juice importers argue the tariff on Brazil will slash profits and drive up retail prices

 

Two U.S. importers have taken the first step in challenging Donald Trump’s proposed sanctions against Brazil, laying out arguments that could pave the way for similar actions by other companies and intensify pressure on Washington.

 

On July 18, orange juice importers Johanna Foods and Johanna Beverage Company filed a request for declaratory and injunctive relief with the U.S. Court of International Trade in New York, aiming to block Trump’s threat to impose 50% tariffs on Brazilian goods.

 

Based in Flemington, New Jersey, the plaintiffs are premium food manufacturers, producers, and distributors of fruit juices, beverages, and yogurts.

 

In the lawsuit, the companies argue that the proposed tariffs—set to take effect on August 1—exceed the president’s authority under the International Emergency Economic Powers Act and constitute an unconstitutional delegation of power.

 

Robert Facchina, executive director of both companies, stated in a declaration attached to the 150-page lawsuit that the tariff would harm the group financially, increase retail prices by roughly 20% to 25% for consumers, and could trigger layoffs in the U.S.

 

“Brazil’s tariff will result in a significant, and perhaps prohibitive, price increase on a staple of the American breakfast,” the importers warn.

 

The filing also challenges the rationale behind Mr. Trump’s proposed tariff, citing his reference to “the way Brazil treated former President Bolsonaro,” “Brazil’s insidious attacks on free elections and the fundamental rights of Americans to freedom of expression,” and “the long-standing and very unfair trade relationship.”

 

The suit notes that Mr. Trump’s letter does not cite any legal or statutory basis for imposing a 50% tariff against Brazil. It asserts that the letter “does not constitute proper executive action, is not an Executive Order, does not refer to or incorporate any Executive Orders, or modify or amend any existing Executive Order.”

 

Moreover, the document points out that Mr. Trump “has not identified any unusual or extraordinary threat originating outside the U.S. that is a threat to the national security, foreign policy, or economy of the U.S.,” nor has he “declared a national emergency as the basis for imposing the Brazil Tariff.”

 

The two importers claim that Mr. Trump’s imposition of a 50%—or higher—tariff on Brazilian orange juice will cause substantial and immediate financial harm to both their companies and American consumers.

 

Brazil is the world’s leading producer of orange juice and the second-largest supplier to the U.S., accounting for more than half of all orange juice sold in the American market.

 

“The 50% tariff imposed on Brazil by the Trump administration will significantly affect the petitioners’ businesses, resulting in an estimated additional cost of at least $68 million over a twelve-month period, which exceeds any single year of profits in the petitioners’ 30-year history,” the importers state in their complaint.

 

They argue that the imposition of the tariffs undermines their ability to plan, fulfill production requirements, and manage cash flow, “as the additional costs impose an immediate and uncontrollable financial burden that our current profit margins cannot absorb.”

 

Without “relief from these tariffs,” the importers warn they will face potential layoffs of unionized employees, reduced production capacity, and an existential threat to the long-term viability of their operations. Together, the companies support nearly 700 jobs in the U.S. and make significant contributions to the economies of New Jersey and Washington.

 

They further argue that the increased costs associated with the so-called Brazil Tariff will compel them to raise prices for customers, leading to an estimated 20% to 25% hike in retail prices for consumers.

 

The filing also highlights the steep decline in domestic orange juice production—particularly in Florida—which has dropped by more than 95% over the past 25 years due to citrus greening disease, hurricanes, and urban sprawl, rendering the U.S. supply insufficient for its production needs.

 

According to the plaintiffs, Florida’s orange harvest for 2025 is projected to fall by approximately 33% compared to last year, marking the lowest output in 95 years. Brazil and Mexico now account for roughly 95% of U.S. orange juice imports.

 

In conclusion, the companies assert that the imposition of the Brazil Tariff—particularly the 50% rate—is unlawful and urge the court to bar the Trump administration from enforcing the measure.

 

Source: Valor International

https://valorinternational.globo.com

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07/22/2025

 

GOL AND AZUL ARGUE CODESHARE DEAL BEFORE CADE

Antitrust agency flagged deal after airlines announced merger talks

 

Gol and Azul have denied before Brazil’s Administrative Council for Economic Defense (CADE) that their codeshare agreement constitutes an “associative contract” or violates competition law. The two carriers submitted their responses to CADE late Friday (18), addressing inquiries from Commissioner Carlos Jacques, the case rapporteur reviewing the partnership.

 

In May 2024, Gol and Azul announced their codeshare agreement. Earlier this year, they also opened talks on a potential merger. Back in April, CADE’s technical division, the Superintendence-General (SG), had argued that the codeshare deal should have been reported to the antitrust authority and amounted in practice to an “associative contract” between rivals. Although the SG archived the case, the CADE Tribunal later reopened it. If CADE’s commissioners find that the agreement was improperly executed without prior notification, the airlines could face fines.

 

One of the commissioner’s main questions was whether Gol or Azul had discontinued any overlapping routes after the codeshare agreement took effect.

 

Gol responded that changes in flight networks—including frequencies, connections, and schedules—are routine in the airline industry and were not influenced by the codeshare deal. The company stated that, based on routes with overlapping services at the time of the codeshare signing and flight schedules published by Brazil’s civil aviation regulator (ANAC), two regular overlapping routes were discontinued. However, Gol did not specify which routes.

 

Gol further argued that labeling the codeshare as an associative contract is “based on incorrect premises and is fundamentally flawed.”

 

“It is impossible to equate the codeshare agreement with precedents involving actual infrastructure sharing,” the airline said. Gol maintained that the SG’s conclusion was based on the mistaken assumption that codeshare agreements involve shared infrastructure. Gol insisted the agreement involves only code-sharing, without the creation of a joint enterprise or shared risks and returns, thereby ruling out classification as an associative contract.

 

Azul echoed this argument in its response, emphasizing that flights sold through the codeshare account for only a small portion of its total revenue.

 

Azul also stated that since the codeshare’s implementation, there has been no integration or sharing of operational systems, airport infrastructure (including staff or check-in counters), or any essential assets for conducting business.

 

Furthermore, Azul argued that the agreement does not include joint pricing arrangements. “The parties do not exchange any pricing or operational information that could lead to any coordination between their activities,” the company said.

 

Eric Hadmann Jasper, an attorney and professor of economic law, said it is “natural” for Gol and Azul to frame their codeshare agreement within precedents that do not treat such arrangements as associative contracts.

 

He added that CADE could, in principle, fine the airlines. “However, there have been cases where CADE found that a transaction should have been notified but refrained from applying a fine, citing unclear precedents and regulations,” Mr. Jasper noted.

 

In a recent interview with Valor, CADE President Gustavo Augusto pointed to the codeshare agreement as one of the Tribunal’s top cases for the second half of the year.

 

“I expect the Tribunal will address these issues in the coming semester, and even if we find no infraction, we may still require that the codeshare be formally notified and reviewed. Depending on the Tribunal’s decision, it could also influence the direction of the proposed merger,” he said.

 

Gol declined to comment, and Azul did not immediately respond to requests for comment.

 

Source: Valor International

https://valorinternational.globo.com

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07/15/2025

 

PREVI EXITS BRF, REJECTING MARFRIG OFFER

Pension of Banco do Brasil workers sheds stake after 30 years as investors, citing better price from market

 

One of BRF’s longest-standing shareholders, the pension fund for Banco do Brasil employees, has opted not to wait for the outcome of the merger with Marfrig. Previ closed its historic position last Friday (July 11), selling off its remaining shares, according to Pipeline and confirmed by the fund.

 

Previ had been a shareholder since the 1990s, originally through an investment in Perdigão, and remained in the company after its 2009 merger with Sadia. The fund was among the investors dissatisfied with the share swap terms proposed by Marfrig for the merger with BRF, arguing that it secured a better price for its beneficiaries by selling on the open market.

 

“The shares were sold at a price higher than what would have been offered to minority shareholders through the appraisal rights process if the BRF-Marfrig merger were finalized,” Previ said in a statement, emphasizing its more than 30-year history with the company.

 

“Previ believes the proposed exchange ratio in the merger does not adequately reflect BRF’s value, potentially leading to losses for minority shareholders and, by extension, for our members. By exiting before the merger’s completion, Previ protects participants’ assets and reaffirms its commitment to technical, well-founded decisions aligned with the best interests of the pension plan,” the statement added.

 

Previ’s exit rattled investors, with BRF shares dropping 4.55% on B3.

 

The fund’s departure may weaken the push by minority shareholders seeking better merger terms. Previ, along with asset manager Latache and a member of the Fontana family, had appealed to the Securities and Exchange Commission of Brazil (CVM), successfully delaying the shareholder meeting to vote on the merger twice—the latest postponement, granted last Friday, extended the process by another 21 days.

 

They are demanding further disclosure of the valuation study underpinning the share price and have also raised concerns about the involvement of Marfrig’s controlling shareholder, Marcos Molina, in the merger vote.

 

Meanwhile, Marfrig and Mr. Molina continue to buy up BRF shares. The company disclosed that its combined stake, together with Molina’s MAMS fund, has reached 58.87%. When the merger was announced in May, Marfrig held 50.5% of BRF. This increased stake means the merger could be approved even without minority shareholder support.

 

BTG Pactual has also been purchasing BRF shares in recent days. The bank disclosed it now holds a 7.79% stake in BRF and has derivatives involving call and put options on the stock. BTG did not specify whether the position is proprietary or on behalf of a client.

 

Source: Valor International

https://valorinternational.globo.com

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07/25/2025

 

U.S. EYES BRAZIL’S RARE EARTHS AS LULA GOVERNMENT PUSHES FOR TALKS

Finance Minister Fernando Haddad signals credit line to support Brazilian companies hit by potential U.S. tariffs

 

With the United States showing interest in Brazil’s so-called rare earths, the Lula administration on Thursday (24) called on Washington to return to the negotiating table to find an alternative to the 50% import tariff announced by President Donald Trump.

 

Finance Minister Fernando Haddad publicly reinforced the government’s strategy, advising business leaders to challenge the measure in U.S. courts in an effort to mitigate the impact of the unilateral decision. He also revealed that the contingency plan to be submitted to President Lula includes a range of proposals, including a credit line.

 

Mr. Haddad said more than 10,000 Brazilian companies could be harmed by the tariff hike, which is set to take effect on August 1. The government has tried to negotiate a solution—relying on backchannel communications through political and business intermediaries to appeal to Mr. Trump—but has received little response from the White House.

 

In light of the situation, the government is preparing a support package for affected Brazilian firms. Minister Haddad said a “menu of measures” is ready and will be presented to Mr. Lula next week. It will be up to the Brazilian president to decide which ones to implement and to what extent.

 

“This is a political decision that necessarily rests with him, given the sensitivity and importance of the issue,” Mr. Haddad said in an interview with Itatiaia radio. He declined to give further details, but confirmed the plan includes a credit line and measures “permitted under international law.”

 

On the investigations by U.S. authorities into Brazil’s Pix instant payment system, Mr. Haddad suggested the U.S. may be motivated by profit.

 

“Pix is now being accepted in Europe, in the U.S., in Argentina, at no cost to those countries. Who is that hurting? It’s hurting those who profit from financial transactions,” he said.

 

President Lula said Thursday that Mr. Trump has shown no interest in negotiating a way out of the trade conflict. In his view, if Mr. Trump truly wanted a resolution, he would have already made a phone call, which hasn’t happened.

 

President Lula said he is good at “playing cards” and warned that if Mr. Trump is bluffing, he’s ready to call it and double the challenge. “Brazil is used to negotiating,” he added during an event in Minas Gerais.

 

President Lula also demanded respect from the U.S. government and challenged Mr. Trump to explain “what his problem is” with Brazil, while warning that retaliation is on the table. “If the United States wants to negotiate, Lula is ready to negotiate. But I only take disrespect from Dona Lindu,” he added, referring to his late mother. He implied that American discomfort may stem from Brazil’s regulation of social media and the success of Pix.

 

Race for strategic minerals

 

In his speech, Mr. Lula also mentioned U.S. interest in Brazil’s strategic mineral resources.

 

“We have 12% of the world’s fresh water to protect. We have 215 million people to protect. We have all our oil to protect. All our gold to protect. All the rich minerals you want to protect. And no one touches them. This country belongs to the Brazilian people,” he said.

 

The remark was a response to reports that the U.S. chargé d’affaires in Brasília told representatives of the Brazilian Mining Institute (IBRAM) that the United States is interested in reaching agreements with the Brazilian government to secure access to so-called critical and strategic minerals such as lithium, niobium, and rare earths. In response, he was reportedly told that any such negotiations must be led by the federal government, not by private-sector executives.

 

Global competition for these strategic minerals, which are crucial for technological development and the energy transition, is at the heart of growing tensions between the United States and China. These resources are essential for sectors such as defense, telecommunications, and energy.

 

Vice President Geraldo Alckmin, who also serves as Minister of Development, Industry, Trade, and Services, said there is “a very long agenda to explore and advance” in ongoing talks with the U.S. when asked specifically about American interest in critical minerals.

 

“There are countless areas,” he said, referring to discussions he has had in recent days with representatives from several sectors, including mining.

 

Mr. Alckmin also met on Saturday (19) with U.S. Commerce Secretary Howard Lutnick. The vice president described the 50-minute conversation as positive and said Brazil reaffirmed its willingness to negotiate with the United States.

 

Source: Valor International

https://valorinternational.globo.com

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07/25/2025

 

CORN ETHANOL PRODUCER FS RESUMES EXPANSION WITH R$2BN INVESTMENT

Company to build new plant in Mato Grosso following financial recovery

 

FS, Brazil’s second-largest corn ethanol producer, has resumed its expansion strategy after a three-year pause marked by financial strain. The company announced on Thursday (24) a R$2 billion investment to build its fourth corn ethanol plant, to be located in Campo Novo do Parecis, in the state of Mato Grosso.

 

The decision to move forward with expansion follows two crop years of financial tightening, during which FS faced rising debt levels stemming from earlier investments amid reduced cash flow. At the close of the 2023/24 harvest, the company’s leverage ratio (net debt to EBITDA) stood at 6.34 times, increasing to 7.39 times by the end of the first quarter of the 2024/25 crop year.

 

However, that ratio dropped to 2.52 times by the end of the most recent harvest, supported by a rebound in ethanol prices and higher sales volumes.

 

With healthier finances and rising demand anticipated due to a higher ethanol blend in gasoline, FS decided the time was right to revive its growth strategy.

 

Construction of the new plant began in June and is scheduled for completion by December 2026. Once operational, the facility will have an annual production capacity of 540 million liters of ethanol, 350,000 tonnes of DDG and DDGS (animal feed co-products), 69,000 tonnes of corn oil, and 56,000 megawatt-hours (MWh) of electricity.

 

In a statement, CEO Rafael Abud said the decision to invest in Campo Novo do Parecis was “reinforced by the approval of the Future Fuel project, which paved the way for E30 and soon E35.” Starting August 1, Brazil will increase the mandatory blend of anhydrous ethanol in gasoline from 27% to 30%.

 

Despite the operational improvements, FS still lacks access to lower-cost credit lines. In its latest rating review on July 1, Moody’s reaffirmed the company’s “AA-.br” rating on the national scale and “Ba3” globally, but with a negative outlook, citing persistent inflation and high interest rates in Brazil.

 

Moody’s noted that while FS has reduced its leverage, the company’s interest coverage remains under pressure, and any new funding raised in the domestic market is likely to come at a higher cost. In the most recent harvest, FS’s interest coverage ratio (EBIT to interest expenses) was 1.7 times—typically considered insufficient, as the market expects this metric to exceed 2.0 times for financial comfort.

 

The new investment will raise FS’s capital expenditures this season. Last season, the company spent R$370.9 million on expansion-related capex, primarily for incremental capacity improvements at its existing facilities. Even with those investments, FS posted R$1.32 billion in net operating cash flow after capex.

 

The company’s growth plan also includes a fifth plant in Querência (Mato Grosso), where preliminary work such as site grading and basic infrastructure is already underway. FS has yet to disclose the investment amount or financing details for that project. The company also declined to comment on how it plans to finance the fourth plant or what return on investment it expects.

 

Source: Valor International

https://valorinternational.globo.com

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07/25/2025

 

BRAZIL NEARS INTERNET UNIVERSALIZATION

Streaming services reach 25% of households in 2024, banking access is growing with use of Pix, and almost every household has cell phones

 

In 2024, the Brazilian population had almost universal access to the internet; access to online banking services was also rapidly expanding, influenced, among other factors, by Pix; video streaming services were accessed in one in four homes; and nearly 100% of households had cell phones.

 

Last year, the country still had 20.5 million people without internet access; 2.1 million households lacked any kind of phone; and access to technology and related services was still limited to higher-income households.

 

This snapshot of access to technology in the country was detailed by the Brazilian Institute of Geography and Statistics (IBGE). On Thursday (24), IBGE released the Continuous PNAD: Characteristics of Information and Communication Technology survey (PNAD TIC). Conducted annually, the survey measures the evolution of Brazilians’ access to technological services and devices.

 

Among the 188.5 million people aged 10 or older in the country, 89.1%, or 168 million, declared to have internet access, 2.1% more than in 2023 (164.528 million). In total, internet access already reaches 93.6% of all households in 2024—compared with 92.5% in 2023.

 

The growth rate of internet access in households has been gradually decreasing in each survey round. This lower level of annual growth, the researchers reported, reflects an almost universal access to the internet in Brazil.

 

Among the reasons for accessing the internet, mapped by IBGE, “accessing banks and other financial institutions” was the one that showed the greatest growth between 2023 and 2024. “More and more people are using banks through mobile apps, for example,” commented Leonardo Quesada, an IBGE researcher.

 

Asked if the result could also have been impacted by increased use of Pix, the expert agreed that “it’s a reasonable hypothesis.”

 

On the other hand, 20.5 million people still had no internet access in 2024, or 10.9% of people aged over 10. In practice, 5.1 million households in the country had no internet access.

 

Lack of knowledge about the service and economic reasons were mentioned as reasons. Of those who did not use the internet, 45.6% reported not knowing how to use it, followed by those declaring lack of need (28.5%); expensive service (7.5%), and expensive equipment (3.4%).

 

Streaming gains

 

Another aspect surveyed was the use of video streaming services in the country, which reached 43.4% of Brazilian households with TV sets, or 32.654 million households, in 2024. In 2023, they were accessed in 42.1% of households with TV sets, or 31.107 million. Around 1.5 million households began to access streaming services between 2023 and 2024.

 

Cell phone use reached 97% of all households last year, higher than in 2023 (96.7%) and the highest share in the historical series since 2016 (93.1%).

 

This means that, last year, the country had 167.5 million people aged 10 or over with cell phones, 88.9% of the population in this age group. However, in 2024, 20.9 million people in Brazil still did not have a cell phone, representing 11.1% of the population aged 10 and over. The survey also showed that 2.1 million households did not have any kind of phone.

 

“We see that where [tech] equipment is available, the average income is much higher,” Mr. Quesada said. “Income is an important factor in explaining these differences, but, for example, when it comes to cell phone ownership, the cost of the device is still an important factor,” he noted.

 

In the IBGE survey, the main reason for not having a cell phone among public school students—that is, among students who don’t pay tuition, and mostly come from lower income households—was that the device was too expensive (27.7%). However, when private school students who did not have a device were asked the same question, the main reason was concern about privacy or security (33.4%).

 

In the results on lack of a phone and other services provided by tech devices, IBGE researchers also noted regional disparities.

 

The lack of phone access remained highest in 2024 in households in the Northeast (absence in 4.7% of households in the region) and North (3.2%). In the other, wealthier regions, this percentage did not exceed 2% for the same year.

 

Also last year, 24.3% of households in the country had access to a paid cable or satellite television service. However, in the Southeast region, the wealthiest in the country, the percentage was 31.1%. In the North and Northeast, the share was, respectively, 16.5% and 13% last year.

 

In the case of paid video streaming services, the average real monthly income per capita in households with this service was R$2,950 in 2024. In those without the service, it was less than half, R$1,390.

 

Source: Valor International

https://valorinternational.globo.com

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07/28/2025

 

RECIPROCAL U.S. TRADE RETALIATION WOULD SHRINK BRAZIL’S GDP

Study suggests opening to other markets would soften the blow

 

Brazil could benefit from a trade retaliation strategy against the United States, if the federal government opts for one, that shifts the focus from tit-for-tat tariffs to broader trade liberalization. The idea would be to lower import tariffs on goods from other countries while maintaining current rates for U.S. products, according to André Valério, head of macroeconomic research at Inter bank, and his assistant Gustavo Menezes.

 

In a previous analysis, Inter’s chief economist, Rafaela Vitória, found that the impact of the proposed U.S. tariffs on the Brazilian economy would be relatively small, due to the country’s low trade openness and limited exposure to the U.S. market. A key assumption in that assessment was that Brazil would not retaliate by matching the 50% tariff on American goods.

 

So far, the Brazilian government says it aims to resolve the dispute through diplomatic channels. Still, retaliatory measures have been floated as a potential course of action.

 

Unlike its trade relationships with many other countries, the United States runs a trade surplus with Brazil, exporting more than it imports. That dynamic would make the U.S. economy more vulnerable to Brazilian retaliation than in most trade disputes. However, a tit-for-tat response—imposing a 50% tariff on U.S. imports—would also hurt Brazil, the economists said.

 

“Taxing these imports could trigger a ripple effect across multiple sectors, particularly in manufacturing, which heavily depends on intermediate inputs,” wrote Mr. Valério and Mr. Menezes in their study.

 

Smaller GDP

 

Their general equilibrium model estimates that a proportional retaliation would reduce Brazil’s GDP by 0.17 percentage point, on top of the damage from the U.S. tariffs themselves.

 

Though this may seem like a modest aggregate effect, it would be broad-based: 56 out of 66 sectors analyzed would experience losses in this scenario. Chemical manufacturing and oil refining would each see production shrink more than 6 percentage points, the study said. The broader manufacturing industry would contract by 2.1 points.

 

Sugar refining would also suffer a 3.8-point drop, largely due to its reliance on transportation and fuel, both directly affected by tariffs.

 

The negative production impact stems from the tariff shock: retaliatory tariffs would effectively raise taxes on the chemical industry by 3 points and on oil refining by 2.5 points. Even agriculture would be affected, with an effective tax hike of 1.2 points due to a 4.5-point increase on agricultural chemicals. That would shrink farm output by 3.4 points and agrochemical manufacturing by 4.4 points.

 

The most heavily taxed individual product would be mineral coal, where the 50-point tariff hike on U.S. imports would translate into an effective tax of 18.8 points. “Ironically, the domestic coal sector—the one most protected by the tariff—would be among the hardest hit, because of its heavy reliance on chemical inputs. This highlights the potential harm of a retaliation policy that overlooks sectoral complexities,” wrote Mr. Valério and Mr. Menezes.

 

Next in line would be various chemical products, with an 11.9-point tax hike on inorganic chemicals and 4 points on organic chemicals, as well as capital goods, which—even if not mostly sourced from the U.S.—lack local substitutes.

 

“This analysis suggests retaliation would not be a beneficial strategy for Brazil, as it would deepen distortions in the economy,” the economists said.

 

Redirection of imports

 

An alternative that does not appear to be under government consideration, they said, would be retaliating by reducing import tariffs for goods from the rest of the world, while keeping U.S. tariffs unchanged. This could lead to a redirection of imports.

 

For instance, a 10-point across-the-board tariff cut on imports from other countries could raise Brazil’s GDP by 0.12 point, benefiting 57 of the 66 sectors analyzed.

 

“Petroleum refining, one of the hardest-hit sectors under reciprocal retaliation, would be among the biggest winners in the alternative scenario, where import taxes from other countries are cut. This is an important factor in weighing potential retaliation strategies, since refining has a strong export role in the Brazilian economy,” the economists wrote.

 

In that case, oil refining output would rise 3.5 points, chemical manufacturing 5.4 points, and both sugar refining and agriculture by 3 points or more.

 

The biggest tax relief on any single product would be for electronic components, down 9.9 points, followed by chemicals, fish, coal, and various capital goods—“reflecting differences in Brazil’s import profile from the U.S. versus other countries,” Mr. Valério and Mr. Menezes said.

 

Sectors hit hardest by reciprocal tariffs would also be the biggest winners from the alternative response. In addition, apparel manufacturing, IT, automobiles, and auto parts would benefit, especially from lower tariffs on electronic components.

 

“These simulations show how distortive tariffs can be and suggest that a more beneficial response would be to further open the economy to international trade,” the authors concluded.

 

Source: Valor International

https://valorinternational.globo.com

 

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07/29/2025

 

FINEP EXPANDS SUPPORT FOR CRITICAL MINERALS PROJECTS

Brazilian Studies and Projects Financing Agency has contracted 171 strategic minerals projects totaling R$1.4bn since 2019

 

With the increased demand for credit for mining critical and strategic minerals in Brazil, a sector that has come under the U.S. scrutiny after the tariff hike announced by President Donald Trump, the Brazilian Studies and Projects Financing Agency (Finep) has expanded its funding for the sector and also plans to launch a public call to promote the use of these minerals in the energy transition.

 

Finep has signed 171 contracts involving strategic minerals totaling R$1.4 billion since 2019. Last year, support reached a record high, with R$659.8 million contracted for 41 projects financed through repayable credit using the TR (Reference Rate), which is lower than the benchmark interest rate (Selic), and with grants for companies as well as scientific and technological institutions.

 

The investments are targeted at two fronts: encouraging research and development to enable the exploration of these minerals and strengthening domestic mineral processing to increase added value to national products.

 

Brazil has abundant reserves of critical and strategic minerals. For example, Brazil holds the second-largest rare earth reserves in the world, behind only China. However, domestic production remains low, and much of the ore is exported raw, resulting in a product with low value added.

 

“Finep has invested heavily in the energy transition and in the essential role of critical minerals in enabling this transformation. These minerals are strategic for Brazil from a technological and geopolitical perspective. So, we are expanding support for the domestic processing of these minerals to advance the production chain with high value-added technologies and products,” said Finep president Luiz Elias.

 

Projections from the International Energy Agency (IEA) indicate that global demand for copper, lithium, nickel, cobalt, graphite, and rare earths are expected to grow by more than 80% by 2024. In Brazil, the increase in public investment is part of the reindustrialization policy of President Lula da Silva’s third term, called NIB, and the new national mining policy, which is in the final stages of development by the federal government.

 

In the first half of this year, Finep contracted ten projects focused on critical minerals, totaling R$83 million.

 

The tally does not include a R$5 billion public call launched in partnership with the Brazilian Development Bank (BNDES) in January. The call, which selected projects from national and international companies, such as WEG and Stellantis, as well as small-sized mining companies and startups, involves R$ 4 billion from BNDES and R$1 billion from Finep.

 

“We expect the projects included in this call to increase our support in 2025, bringing us closer to the amount contracted in 2024. For 2026, we expect an even higher amount,” said Newton Hamatsu, Finep’s superintendent of energy transition and infrastructure.

 

The high demand for the call with BNDES, which received 124 proposals for a total of R$85.2 billion in disbursements, led BNDES to launch another public call this year. The new call will allocate R$200 million to the implementation of energy transition projects using critical minerals.

 

“The joint call with BNDES showed the strength and diversity of our scientific and industrial base in this sector. To enable the total investments planned for the submitted projects, we plan to launch a new call this year to support high-risk technological projects,” explained Elias Ramos, Finep’s director of innovation.

 

Finep downplays the impact of trade negotiations with the U.S. on investments in Brazil but emphasizes the need to continue developing the sector. “It is natural for the United States to seek to expand partnerships with Brazil in this field. I do not believe, however, that the current trade sanctions will harm Brazilian investments,” said Mr. Hamatsu.

 

Source: Valor International

https://valorinternational.globo.com

 

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07/30/2025

 

BRAZILIAN COFFEE MAY BE SPARED U.S. TARIFFS UNDER NEW TRADE DEALS

Commerce Secretary Howard Lutnick also mentioned pineapple, cocoa, and mango as products that could qualify for exemption

 

U.S. Commerce Secretary Howard Lutnick said on Tuesday (29) that imports of non‑U.S. grown goods, such as coffee and cocoa, could be exempted from tariffs in new trade agreements. He explained that the administration is evaluating such exemptions, which could benefit exporting countries like Brazil, although he did not specify which nations might qualify.

 

In an interview on CNBC’s Squawk Box, Mr. Lutnick said: “If you grow something and we don’t grow it, that can come in for zero, so if we do a deal with a country that grows mangos, pineapple, then they can come in without a tariff, because coffee and cocoa will be other examples of natural resources.”

 

Of the four products mentioned by the U.S. official—coffee, cocoa, mango, and pineapple—coffee could offer Brazil the greatest advantage. The country was the top coffee supplier to the U.S. last year. Of the $6.3 billion imported by Americans, 30% came from Brazil. Colombia ranked second with a 21% share, and Guatemala third with 7%.

 

For Brazil, the U.S. remained the top destination for Brazilian coffee in 2024, with $1.9 billion in sales, ahead of Germany ($1.8 billion) and Belgium ($1.1 billion). Americans have never spent so much on Brazilian unroasted coffee as in 2024, but the 17% share of Brazil’s total coffee exports was the second lowest in the past ten years, above only the 15% seen in 2023.

 

Coffee was the third most exported Brazilian product to the U.S. last year, trailing only petroleum ($5.8 billion) and semi-manufactured non-alloy iron or steel products ($2.8 billion).

 

According to a source in the coffee export industry, there is still a great deal of uncertainty. And while Mr. Lutnick’s remarks were an important signal for the sector, a potential exemption might not apply automatically to all countries or products and could also depend on bilateral negotiations.

 

Another product where Brazil plays a relevant role in sales to the U.S. is mango, which accounts for about 12% of American imports—making Brazil the fourth-largest supplier—although with much smaller trade values. Brazilian data shows the country exported $46 million in mangoes to the U.S. last year, ranking 101st in overall exports to the American market.

 

Brazil did not rank among the top 25 suppliers of cocoa beans or fresh pineapple to the U.S. last year.

 

Mr. Lutnick said all tariffs will be finalized by Friday, the deadline set by President Donald Trump for countries to reach trade agreements with the U.S.

 

On Monday, the U.S. president said that countries that have not received letters from the White House would be subject to a universal tariff of 15% to 20%. Mr. Lutnick reinforced that message on Tuesday: “But for the rest of the world, we’re going to have things done by Friday. August 1 is the date that we’re setting all these rates.”

 

The Brazilian government was notified by the White House on July 9 that it would face a 50% tariff: the highest rate announced in any of the letters sent by Mr. Trump. In the letter, the U.S. cited alleged “unfair trade practices” by Brazil and a supposed “witch hunt” against former President Jair Bolsonaro, who is on trial before the Supreme Federal Court for attempting a coup d’état.

 

The tone of Mr. Trump’s communication surprised Brazilian officials. Diplomatic officials noted that the president explicitly mixed political issues involving Mr. Bolsonaro with technical matters of bilateral trade—a move considered unprecedented in the 200-year history of relations between the two countries.

 

Last week, Mr. Trump said some countries received 50% tariffs because they had not “gotten along well” with the U.S. government. He did not mention Brazil by name, but it was the only country among the 25 letters sent by the Republican leader that received the 50% rate.

 

Commenting on ongoing negotiations with other countries, Mr. Lutnick said U.S. and European Union officials are still discussing tariffs on steel, aluminum, and digital services, continuing talks aimed at advancing the agreement announced Sunday by Mr. Trump and European Commission President Ursula von der Leyen.

 

Source: Valor International

https://valorinternational.globo.com

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MURRAY ADVOGADOS

January 05, 2022

PETROBRAS EXPECTS TO PRODUCE 20BN BARRELS BY 2030 IN EFFICIENCY DRIVE

Petrobras intends to enable the production of up to 20 billion barrels of oil equivalent in the main fields operated by the company by 2030, through a program aimed at increasing the recovery factor of the deposits. Named RES20, the effort was created by the company with a focus on incorporating new reserves into assets already in the operational phase.

The 20 billion barrels include not only Petrobras’s share, but also the volumes of Petrobras’s partners in the fields operated by the company. The figure, however, is nonetheless expressive. For comparison purposes, the company has produced 23 billion barrels over nearly seven decades of history.

The recovery factor indicates the percentage of the volume originally contained in a reservoir — the volume “in place” — that has already been extracted. In Brazil, these rates are historically low, in relation to what is seen, for example, in the North Sea, in Europe. According to the National Agency of Petroleum, Natural Gas and Biofuels (ANP), in the Campos Basin, where the main mature fields in the country are located, the recovered oil fraction is 15.8%.

In the case of mature fields, increasing the recovery factor means ensuring the extension of the asset’s useful life. Not all volume “in place” is economically recoverable, but by investing in the growth of the recovered fraction, the company is able to add more reserves to its portfolio — that is, more commercially viable volumes.

In a note, Petrobras highlighted that the RES20 will work with more well-defined and detailed deposit models. The company’s 2022-2026 business plan foresees investments of $2.5 billion in high-resolution seismic acquisitions for this purpose.

Among the assets expected to receive investments to increase the recovery factor are Roncador, in the Campos Basin post-salt, and Tupi, in the Santos Basin pre-salt.

Source: Valor International

January 05, 2022

BRAZILIAN COMPANIES LIKELY TO DRIVE M&A ACTIVITY THIS YEAR

Brazilian companies had a prominent role in mergers and acquisitions this year and are likely to be major consolidators in 2022, investment banks told Valor. Dealogic data shows that M&A activity totaled $87.7 billion up to December 20, surpassing by 26% the amount seen in 2020. In volume, 695 deals were closed, up 24% from 2020 and a record of the last 10 years.

The 571 deals involving Brazilian groups totaled $69.8 billion, while the 135 deals of foreign groups buying Brazilian companies reached $20.8 billion, according to Dealogic.

Data from consultancy Kroll show that the total number of operations totaled about R$ 600 million, with 1,500 transactions, a new record, with a more “multisectoral” profile than in other parts of the world.

“We saw activity in all sectors: retail, food and beverage, industrial, health, education, agribusiness, technology, services, oil and gas, and in techs, which is good for overall performance,” said Alexandre Pierantoni, head of corporate finance in Brazil at Kroll. He highlighted fields such as retail, logistics and healthcare, besides technology companies associated with these sectors.

Contrary to capital market offerings, which are expected to slow down next year due to the strong volatility caused by the presidential elections, M&A activity is likely to remain heated this year.

“Some companies that have given up on going public tend to seek private investors as an alternative,” said Diogo Aragão, head of M&A in Brazil at Bank of America.

Those companies that went public whose shares have devalued sharply this year may become targets of consolidator groups, Mr. Aragão said.

A group of 30 to 40 companies intended to go public between the end of this year and the first quarter of 2022, but postponed their plans due to the worsening of market conditions from September on, said Roderick Greenlees, head of investment banking at Itaú BBA.

“To make their projects viable, companies will look for an alternative, and the M&A path seems the most favorable today,” he said. Even so, the growth rate seen last year is unlikely to be repeated.

Mr. Greenlees recalled that, in the last three years, the capital market was extremely active and tapped by many companies with expansion projects. Thus, it was possible to see the result of capital injection in 2021, a very strong year for M&A, both in terms of number and financial volume. “The more we have listed companies, the greater the M&A activity.”

But there is caution from potential buyers about companies that have given up going public and are looking for a private investor. “There is an understanding that the consolidating groups are not willing to pay any price for the asset,” said Gustavo Miranda, head of investment banking at Santander. “The companies that gave up on IPOs had defined a very high price range for their assets.”

Another consensus is that private equity funds (which buy stakes in companies) are willing to look at assets in Brazil, which are cheap because of the weakened real.

Technology, health and education companies will continue to be acquisition targets, as in recent years. Another sector that will continue to be attractive is renewable energy, with interest from local and foreign companies.

“Renewable energy companies are the new tech companies. Biofuels and recycling companies will also continue to draw buyers,” said Mr. Aragão, with BofA.

This year, the number of M&A deals with volumes over $1 billion drew attention, representing about 6% of the deals, said Daniel Bassan, CEO of UBS BB. “This share was around 2% in the previous three years,” he said. The growth seen in large deals was driven by the capital market, where companies took advantage of IPOs and secondary offerings to make their expansion plans feasible.

For Mr. Bassan, the volatility expected for the coming months is expected to open M&A opportunities in the coming months. This is likely to keep activity strong in this segment given that many companies have been capitalized. “But I don’t see companies very leveraged. They don’t need to do business at any cost,” he said.

“Companies used to tap the market to pay debt and reduce leverage. Now most of them have focused on growth,” he said. Next year, with the proximity of the election and a more challenging macroeconomic backdrop, investors – whether financial or strategic – are likely to look at more advantageous deals. “Private equity firms, which have made many divestments, are now likely to start investing again. It will be a year of great opportunity for this class of investor,” he said.

Eduardo Miras, head of investment banking in Brazil at Citi, also sees venture capital funds looking for business opportunities, as well as unicorns (startups valued at over $1 billion). The executive, however, declined to offer any forecast for the number of M&A deals in 2022.

For Mr. Greenlees, the expectation is that the number of deals will remain close to stability, but that the financial volume will fall. “There is a substantial number of deals in the pipeline, due to the worsening of the capital market, but I believe that the size of the operations will be a little smaller.”

Source: Valor International

January 06, 2022

WAREHOUSES ARE IN FOR ANOTHER HEATED YEAR

The warehouse segment is in for another heated year, with multi-billion investments and high demand for leasing. E-commerce companies, retailers and the pharmaceutical industry are in the front line, and there is a search for areas for storage, exchange and distribution of products from in places as diverse as the city of São Paulo – Brazil’s largest market – and states like Minas Gerais, Bahia and Pernambuco.

Warehouse gross absorption, an indicator of new leasing contracts, grew 19% last year in the state of São Paulo, to 2.75 million square meters, data by consultancy CBRE show. Net absorption, which is the difference between leased and vacated areas, expanded 22%, to 1.56 million square meters. The consolidated figures for Brazil have not yet been disclosed, but CBRE expects that gross absorption has exceeded 5 million square meters. Both indicators meant all-time highs. Vacancy fell 1.4 percentage points in 2021, to 12.3%.

The volumes seen in the state of São Paulo and in Brazil are likely to remain flat in 2022, said Fernando Terra, senior director of industrial and logistics for Latin America at CBRE.

On the one hand, a slowdown in e-commerce is not expected, Mr. Terra said. On the other hand, most of the main companies in the segment have contracted a substantial volume of large warehouses in the last two years. “Certainly, the big players will take smaller areas,” he said. At the same time, e-commerce players that arrived recently in Brazil, like Shopee and Alibaba, are likely to pick larger warehouses.

As the vacancy rate of warehouses fell, the next effect of the heated demand will be higher rental prices, said Giancarlo Nicastro, CEO of SiiLA, a consultancy focused on real estate. In view of the high new inventory expected for the Brazilian market, however, there may be some increase in the share of vacant spaces in relation to the total.

“The year starts with scheduled delivery of 3.7 million square meters in Brazil, an all-time high. Even if the total reaches only 2.6 million square meters, the vacancy rate tends to rise a little,” Mr. Nicastro said. The announced figures are usually adjusted later, he said. In 2021, the initial projection of new warehouse stock was 3.38 million square meters, but the real volume was 2.2 million.

There may be some delay in construction works, said Mariana Hanania, head of research and market intelligence in Brazil at Newmark. Part of what is under construction is already leased, she said, so there is no risk of oversupply. “Even as there was an important growth in stock, vacancy is falling,” the executive said. In the state of São Paulo, deliveries of projects have occurred mainly in regions with almost no vacancy, and a relevant part of the new stock results from the expansion of already existing projects, she added.

Amid the heated demand, warehouse developers continue to disburse large amounts to expand their assets. Bresco plans to invest R$1 billion this year as part of a plan to have a portfolio twice as large by 2024. In 2021, its assets totaled R$3.2 billion.

The consortium formed by Credit Suisse, BTG Pactual, Construtora São José and Fram Capital, which will develop a set of warehouses on land that once belonged to Ford in São Bernardo do Campo, São Paulo, estimates to start deliveries in a year’s time and to finish it by 2024. Total investments in the purchase of the land, permits and construction work are estimated at R$1.3 billion.

Although most of the segment’s funds are destined for locations up to 30 kilometers from the city of São Paulo, there has also been the development of projects in other states. “Those who live in Pará or Amazonas also want to receive the product in one day, just like in São Paulo. This results in an avalanche of investments,” said Celina Antunes, CEO at real estate company Cushman & Wakefield.

Log Commercial Properties is the country’s most geographically diversified warehouse company. Considering finished projects and works in progress, it has facilities in 39 cities. The company expects to invest R$900 million this year. “We will have a very active year, with record investments and revenues. We will deliver almost 500,000 square meters of GLA [gross leasable area], most of it with construction already started,” CEO Sergio Fischer said. From the total to be concluded, 70% to 80% is already leased.

There may be an excess supply of warehouses in two years, considering that technological advances for cargo movement may result in the need for fewer square meters, said Nessim Sarfati, founder of Barzel Properties Gestora de Recursos. “But there is still much space for absorption of warehouses.”

Bruno Mendonça, a real estate market analyst at Bradesco BBI, expects more demand than supply of projects. But just like other segments of the real estate market, the one of warehouses has been impacted by the pressure of input costs, according to him.

Walter Cardoso, CEO at consultancy CBRE, believes that purchases and sales in the warehouse market are likely to fall this year after reaching R$8.7 billion in 2021, an all-time high. The potential drop would be driven by higher interest rates and lower fundraising by real estate investment funds. If an entire portfolio of warehouses is traded, however, the 2021 figure may be surpassed, Mr. Cardoso said. The executive also said that, in election years like this one, instability usually prompts a “flight to real estate.”

Source: Valor international


January 10, 2022

COMPANIES UNVEIL $500BN OF INVESTMENTS BY 2030

Companies are likely to take a wait-and-see approach regarding investment decision-making this year. But some segments, benefited by structural reforms or boosted by international prices, will put their money to work.

Basic sanitation, logistics, energy, oil and steelmaking are in the front line, according to company executives and business plans unveiled in documents delivered to the capital market regulator.

These companies, mostly large players on the stock exchange, can be a safe haven for a capital market that is coming off a drop in 2021 while international peers have seen all-time highs.

More than $500 billion in investments have been announced until 2030, according to a preliminary survey by consulting firm Deloitte. The highlights are the petrochemical and steel industries, and projects linked to oil and gas. These are investments unveiled for the medium to long term, with the prospect of a larger volume of allocation of funds this year than in 2021.

Petrobras, Brazil’s largest company by revenues, unveiled in November a $68 billion business plan for the 2022-2026 period – up 23% from the previous one – focused on exploration and production of oil and natural gas. In this period, the divestments foreseen by the state-owned company will be between $15 billion and $25 billion, which in theory paves the way for new investments from the companies that will take over these assets. That has been happening in recent years amid Petrobras’s effort to reduce its debt pile.

In the basic sanitation industry, large figures are also expected. Between 2022 and 2026, water utilities Sabesp (São Paulo), Copasa (Minas Gerais), Sanepar (Paraná) – the three largest listed companies in the sector – and Corsan (Rio Grande do Sul), which is expected to go public this year, have unveiled combined investments of R$45.5 billion, up 67% from the amount spent between 2017 and 2021.

That’s almost eight times what they had on hand at the end of September, and compares with combined assets of R$81 billion and net equity of R$43 billion in the same month. The market capitalization of the three public companies totaled R$37 billion at the beginning of this year. Corsan’s stock offering, a privatization on the stock exchange, may raise R$1 billion.

“Corsan will be the first opportunity of this new cycle to enter the sector through the stock exchange. The basic sanitation market has many gains to be extracted, and there is a lack of companies to invest in, so Corsan can be a vehicle for a future expansion across Brazil,” Fábio Abrahão, head of infrastructure, concessions and public–private partnership at the Brazilian Development Bank (BNDES), told Valor last month.

According to the new regulatory framework, from July 2020, the companies will have to provide drinking water to 99% of the population and sewage collection and treatment to 90% by December 31, 2033, which would finally take the country out of its secular backwardness in this sector. Since the approval of the framework, at least R$42.2 billion have been guaranteed by the companies that participated in the auctions organized by the federal government, including that for Rio de Janeiro-based Cedae.

Basic sanitation will be a highlight, credit rating agency S&P Global Ratings said, but it is part of a broader spectrum of the role of infrastructure in attracting investments in the coming years, which goes beyond short-term issues such as elections.

“Infrastructure investors are not short term. Infrastructure is a very deficient field, and taking on this risk is actually taking on Brazil risk,” said Julyana Yokota, an infrastructure analyst at S&P.

Another important road for capital inflow in the communications infrastructure is the fifth-generation mobile network (5G). The auction held in early November will bring R$47.2 billion, according to the National Telecommunications Agency (Anatel), considering fixed concession payments and investments to be made over the term of the contracts.

As expected, Brazil’s largest operators – América Móvil’s Claro, Telefónica and Telecom Italia’s TIM – had a prominent role, but the market will also have new players, which brings more money to the table. Of the 15 bidders, 12 bought frequency blocks, 7 of which are newcomers.

One is Ceará-based Brisanet, which won three lots. A few months earlier, the company went public and raised R$1.25 billion, most of it earmarked for network expansion, according to the prospectus of the IPO.

Mining and steelmaking will continue to have a substantial weight this year – on the stock exchange, trade balance and investments. Vale, Brazil’s largest exporter, set aside $5.8 billion for this year, up 7.4% year-over-year. The mining company’s projection, made in a meeting with analysts in late November, is to maintain capital expenditures around $5 billion to $6 billion per year. The forecast is to reach, by the end of next year, 370 million tonnes of iron ore production capacity, which may recover the levels of demand and price seen in the first half of last year if a Chinese recovery comes after the pandemic comes to an end.

CSN Mineração expects a balanced world iron ore market in 2022, with reduced restrictions on steel production in China and a small increase in supply. The investment planned for this year, about R$5 billion, is 70% higher than that of 2021.

In a meeting with investors in early December, chief financial officer Pedro Oliva said he expects ore to be traded between $100 and $120 a tonne this year. At the peak of what was seen as a new commodities boom at some point, the price was over $200.

In the steel industry, prices are expected to remain at levels much higher than recent years, even with the adjustments already put in place, said Luis Fernando Martinez, executive director at CSN, at the same event. The steelmaker foresees investments of R$4.1 billion this year, up from R$2.8 billion in 2021.

Competitor Gerdau foresees capacity increase investments in Brazil of $500 million starting in 2024. This year, the company will invest $130 million in the North American operations and $140 million in specialty steel.

(André Ramalho, Rafael Rosas and Ana Paula Machado contributed to this story.)

Source: Valor international

 

January 10, 2022

COMMODITIES DOMINATE EXPORTS EVEN IN SÃO PAULO

Commodities are grabbing an increasing share of exports across nationwide. In all regions, products related to agribusiness or the extractive industries ended the year dominating foreign sales. Soybeans have become the champion of shipments in ten states, crude oil or oil products are in the lead in three federative units and iron ore is now the main product exported in three others.

According to data from the Secretariat of Foreign Trade (Secex), the share of the manufacturing industry in Brazilian exports shrank to 51.3% in 2021 from 63% in 2010. This category also covers agribusiness products that undergo some type of industrial processing, such as meat, pulp and refined sugar.

Even São Paulo, Brazil’s most industrialized state, has its export basket led by commodities. Sugar ($5.6 billion last year) and crude oil ($4.3 billion) — whose production has soared in recent years because of the pre-salt layer — are the two goods most sold abroad. Embraer aircraft, the first purely industry item, came in third and contributed $2.3 billion.

In Paraná, passenger vehicle — which come at the front among manufactured goods outside agribusiness or extractive industry — are only the eighth most exported product. Also in eighth are shoes in the state of Rio Grande do Sul. Both states had soybeans as a prominent product in 2021.

For economist Paulo Gala, professor at the School of Economics at Fundação Getulio Vargas, the fact that the Brazilian map is now dominated by commodities allows for two thoughts. First: no state manages to have a sufficiently sophisticated exports agenda to have highly technological products — instead of grains, oil or minerals — as sales champions. Second: the Brazilian industry is predominantly focused on the domestic market and still lacks greater global competitiveness.

In his view, only a few micro-regions of the country — around cities like Campinas, Piracicaba (both in São Paulo), Caxias do Sul (Rio Grande do Sul) and Betim (Minas Gerais) — managed to transform themselves into “islands” of innovation and productivity, with leading industries. No wonder, he adds, they are among the municipalities with the highest per capita income.

“Only a few hubs have sophisticated export-oriented industries driving the local economy, but these hubs don’t come to dominate a entire state,” Mr. Gala said. “What brings jobs, income and reduced inequality is the production of complex goods. They require research and development, technology, patents. Embraer, WEG and Marcopolo are counterexamples of our incapacity for commercial insertion in the world,” he said.

According to the professor, not even the weakened real since the beginning of 2020 has been enough to avoid the loss of space of the industry in exports, compared to agribusiness and mineral extraction. “The weakened real helps price competitiveness, not quality competitiveness. The real exchange rate is at its lowest level in the last 20 years, but we need a much heavier science and technology policy and industrial stimulus,” he said.

The domination of commodities has intensified, said José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB). He estimates the deficit in manufactured products at $70 billion to $80 billion. On Monday, Secex unveiled a record balance of $61 billion in the balance of trade last year – obviously counting all kinds of products, not only those related to industry.

In his view, Brazil is now excessively dependent on three products (soy, oil and iron ore), which represent around 40% of total shipments, and on a single market (China) that buys 32% of our exports.

“In the 1980s, people complained a lot about the dependence on the United States, but the American market absorbed around 25% of Brazilian exports and there was more product diversification. At that time, eight of the ten main export items were manufactured goods. Now, the top 15 are commodities.”

In descending order, the 15 main products sold by Brazil last year were: iron ore, soybeans, crude oil, refined sugar, beef, soybean meal, fuel oils, chicken meat, pulp, semi-finished products or ingots of iron and steel, coffee, gold, corn, cotton and copper.

Therefore, Mr. Castro links the recent trade balance surpluses to the favorable price environment, not to the support of public policies. “The Brazil cost is still very high and the government has ended Reintegra [a program that reimburses companies for part of the taxes paid along the production chain], in addition to having reduced resources for financing exports, under Proex.”

Source: Valor international

January 10, 2022

ANALYSIS: XP’S ACQUISITION OF MODAL CAN BE A MASTERSTROKE

The acquisition of Banco Modal by XP Inc. brings to the financial group founded by Guilherme Benchimol R$30.4 billion in assets under custody, 501,400 active clients and a portfolio line of credit of R$606.8 million, data from the third-quarter results show. It may seem little for XP, which was already near R$800 billion under its umbrella, with 3.3 million active clients and R$8.6 billion in collateralized credit operations. But far from being a negligible step in the consolidation of the investment market in Brazil, XP’s bid can be considered a masterstroke.

With the countless agreements closed by Modal, such as the sale of up to 35% of its capital to Credit Suisse in mid-2020, the digital bank was one competitor with the potential to cause problems to XP. In the premium segment, which serves customers with at least R$300,000 in assets, Modal had been offering asset allocation with the Credit Suisse brand. Modal’s mobile application made available 28 exclusive funds from the Swiss group’s private banking in Brazil and the plan was to reach 40 in the first quarter of 2022.

In a meeting with investors in mid-December, Modal CEO Cristiano Ayres said that more than just a pretty name, the presence of Credit Suisse was the way to offer financial advice similar to what is done with large fortunes. The relationship with the Swiss group also paved the way for Modal to take part in the syndicate of banks in capital market operations and distribute assets originated by the firm to its retail base.

The foreign partner’s seal of approval also helps draw independent and professional brokerage firms to the platform, Mr. Ayres said. Modal had been moving forward in this distribution channel since the acquisition of the research company Eleven, which already had relationships with several asset management firms, including competitors.

Another front in which Modal had been investing was in the so-called “B2B2C,” in which it offered financial services to various partners. It already had agreements with companies such as Rappi, Dotz and Conta Black.

Acquisitions made by Modal to create an “ecosystem of financial well-being” are also in line with the businesses where XP demarcated its territory, including financial education and training of professionals, whether in investments or technology.

Source: Valor international


January 11, 2022

RENEWABLE POWER COMPANIES BECOME ACQUISITION TARGETS

At least four renewable power companies are for sale in Brazil, attracting the interest of groups and asset management companies, including from overseas. The two main assets — Ibitu and Rio Energy — are valued at R$12 billion, according to sources. Other businesses on the block are Renova Energia, which divested projects in 2021 and may sell others in the judicial recovery plan, and EDP Renováveis, with an open strategy of asset rotation.

With the increased global demand for clean energy, renewable companies in Brazil have become the target of interest from international investors. A survey by Itaú BBA, conducted at Valor’s request, shows that 22 deals were closed in the sector last year, with a business value of R$16 billion. For this year, the estimate is to reach R$20 billion.

Part of the recent investments made in the sector came from private equity funds (which buy stakes in companies) that now want to get out of the business. “Project development groups sell assets to recycle capital to invest in other projects,” said Gustavo Miranda, head of investment banking at Santander.

Put up for sale in the middle of last year, Ibitu, controlled by the American asset manager Castlelake, has wind and hydroelectric assets in Ceará, Rio Grande do Norte, Piauí, Santa Catarina, Mato Grosso and Minas Gerais — with more than 877 megawatts (MW) of installed capacity.

The renewable power company originated from the assets of Queiroz Galvão Energia, when the group went into financial crisis amid the now questioned anti-corruption task force Car Wash and put subsidiaries under judicial reorganization. The American private equity fund Castlelake bought the power subsidiary’s debt and took over the business.

With multibillion expansion plans for the business, Castlelake began to be harassed by funds and hired BTG Pactual and Credit Suisse to find an interested party for its assets, valued between $900 million and $1 billion.

Another target is Rio Energy. After giving up on making an IPO last year, the company controlled by U.S.-based private equity firm Denham Capital hired Bank of America (BofA) and Itaú BBA to sell its business, sources familiar with the matter say.

Rio Energy has three operational wind farms totaling nearly 485 MW in installed capacity in Bahia and Ceará, besides two wind farms in Bahia and one in Ceará expected to start in 2022. This is not the first time the company has negotiated the sale of its business. After dropping out of the IPO, the company is once again looking for a buyer. The assets are valued at around R$6 billion.

Another company that may sell assets in 2022 is Renova Energia. In judicial reorganization since 2020, the company sold Brasil PCH for R$1.1 billion and its stake in the Serra da Prata Hydroelectric Complex to settle part of its debt in the market. The power generating company still has a debt of around R$2 billion and is expected to continue divesting assets.

The Alto Sertão III wind farm, in Bahia, will remain with the company. However, the company still has 16 projects in development with leasing contracts, and 12 of these areas already have a previous environmental permit for the development of wind farms, which makes these areas eligible. The areas are located in Bahia, Paraíba, Pernambuco and Piauí, and have a generation potential of around 3.62 GW. The company is studying which one will be sold.

One of the main countries drawing investments in this segment, Brazil is on the radar of investors, since it has natural resources, lower costs and stable regulation. Furthermore, excluding the Unite States and Europe, funds from around the world do not find large platforms for investments in this sector.

“Brazil combines a large market and regulatory stability for renewable power generation,” said Alexandre Viana, a partner and head of consulting at Thymos. A practical example of this is that Brazil is once again on EDP’s radar. Last year, EDP Brasil acquired 100% of AES Inova and made partnerships in the viability of large-scale solar plants. CEO João Marques da Cruz often says that the company’s strategy involves the sale of operational assets to finance new investments.

The generation arm, EDP Renováveis, has Brazil in its 2021-2025 horizon. With global installed capacity of more than 12.6 GW, the goal is to reach 20 GW of capacity by 2025. The devaluation of the Brazilian currency is another point that made the assets cheaper and may draw the attention of international players. The already weakened real can fall even more and some analysts say the foreign exchange rate may reach R$6 to the dollar this quarter. The company put up for sale a hydroelectric plant in Espírito Santo and two others in Amapá. Pipeline, Valor’s business website, first reported last year that the assets of EDP, Ibitu and Rio Energy were put up for sale.

Consultants heard by Valor believe that wind and solar will remain as leaders of this business in 2022, because these sources are the pillar of growth in terms of profitability, scale and consolidated industry.

In addition, the ESG agenda linked to these sources and the learning curve that has cheapened the price of megawatt-hours has drawn the attention of players who want to diversify their operations, from companies seeking long-term risk management to oil companies.

The privatization drive has not progressed as the government says it wanted, but the Brazilian Development Bank (BNDES) announced that the stock offering of the state-owned company will be launched in mid-March. After that, the federal government will no longer hold 72.33% of the voting capital and will be diluted in the total capital of the company. The expectation is that the government’s stake will fall to 45% and that it will no longer be the majority shareholder in the power company. That situation would likely draw investors, from individuals to corporations.

Mr. Viana, with Thymos, added that the opening of the free energy market, a segment in which companies with high energy demand can negotiate directly with generation companies and traders, will probably drive mergers and acquisitions in Brazil. The BNDES and the Banco do Nordeste (BNB), major players that finance expansion projects in the electricity sector, want to develop projects in the free market and in renewable power.

Other operations have been going on since 2021 and are likely to materialize this year. One is the merger between the energy assets of Votorantim Energia and the Canadian pension fund CPPI, which is expected to create one of the largest energy groups, Nova VTRM, valued at R$15 billion and owner of a number of renewable generation assets and control of Cesp. The company received an investment of R$1.5 billion from CPPI for expansion that can be done in greenfield and acquisitions.

Denham Capital, EDP Renováveis, Ibitu, Renova and Rio Energy declined to comment. Castlelake did not immediately reply to a request for comment.

Source: Valor international

January 12, 2022

BRAZIL EXPANDS DATA CENTERS DRIVEN BY DEMAND FROM CLOUD GIANTS

Given the increase in demand for cloud services and the expected improvement of the structure of Chinese providers in Brazil, companies specializing in building large data centers in the country, such as Ascenty, Equinix, Odata, Scala, say that 2021 was a year of high demand and 2022 will be no different.

Besides the increase in the structures of large U.S.-based providers (AWS, Google, Microsoft, IBM, Oracle and others), which contract operations in the interior of São Paulo and in Rio de Janeiro, the expansion plans include projections for operations of Chinese giants.

Huawei, which began offering cloud services in Brazil in 2016 using the structure of phone carrier Vivo before having its own data centers in 2019, is a client of companies that build data centers in the country. Huawei has two data centers in the city of São Paulo and has expansion plans for 2022. “We have an aggressive expansion plan, but we cannot unveil this to the market yet,” the company told Valor.

Tencent, one of the largest internet service providers in the world – owner of video game developer Riot Games, famous for the title League of Legends – opened its first cloud center in the country in November. Then, the Chinese company said that the data center in São Paulo will serve companies in Brazil and in other Latin American countries as part of a global network of Tencent Cloud’s data centers with footprint in 27 regions.

Brazil is also in sight of Alibaba’s cloud division. Sources say the country is key for Alibaba Cloud, which currently operates in 70 countries, including two data center infrastructures in the East and West coasts of the United States, but has no operations in Latin America.

Alibaba, China’s main provider of computing cloud infrastructure as a service, held the third largest share of the world market in 2020 (9.5%), data by consultancy Gartner show. The first one, AWS, held 40.8% of the market, followed by Microsoft with 19.2%. Huawei debuted in the ranking of the five largest providers in 2020, in the fifth position, with a 4.2% share, behind Google, the fourth place, with 6.1%.

Alibaba’s plans, however, have no date yet. The group operates in the country through online marketplace AliExpress and, more recently, through logistics company Cainiao, which started to meet AliExpress demands locally last year.

After the rush for business digitalization at the beginning of the pandemic, 2021 was a year of consolidation and expansion of projects, which raised the demand for outsourced data centers. “Companies’ digitization drive consolidated in 2021,” said Eduardo Carvalho, general director in Brazil at Equinix. “Despite the economy and the market, all market segments increased investments in cloud computing last year,” he said.

Companies’ data and applications migration to the cloud also reflects the search for cost reduction with machine maintenance, space to expand their operations and the concern with network resilience. “I visited a customer in the region of Avenida Paulista, in São Paulo, who put big servers in the office reception because he handled all the data infrastructure internally, but ran out of space,” said Marcos Siqueira, chief operating officer at Ascenty.

The company, which has the largest number of active data centers in the country – 18 since its foundation in 2010 – invested R$160 million to open two data centers in Hortolândia (São Paulo) and Rio de Janeiro. This year, it will open its fifth data center in Hortolândia.

To create resilience zones, with more than one data center as a safe haven, the expansion of Brazilian data centers has been concentrated in cities near the city of São Paulo, such as Barueri and Osasco, and the nearby countryside, such as Hortolândia, Vinhedo and Santana de Parnaíba.

Source: Valor international

January 13, 2022

BRAZILIAN FIRMS RAISED RECORD AMOUNT IN 2021, EMBRAER SELLS SUBSIDIARIES IN PORTUGAL, VIA BUYS LOGISTICS STARTUP

Brazilian companies raised R$596bn in domestic capital market in 2021, an all-time high

The Brazilian capital market had a landmark year. Companies in the country raised R$596 billion in 2021 considering equity, bonds and hybrid instruments, up 60% year over year and the highest amount since records began, said Anbima, the association of securities firms.

The companies also raised $24.8 billion abroad, down 4.7% year over year. Considering funds raised locally and abroad, Brazilian companies got R$734 billion.

In variable income, companies issued R$128.1 billion, which was not higher than the nominal result of 2010, of R$150.3 billion. However, the figure of 11 years ago includes a one-off move by oil giant Petrobras, which raised R$120.3 billion.

In fixed income and hybrid instruments, companies raised R$467.9 billion in 2021. This is another record. The bond market alone totaled R$253.4 billion, more than double that of 2020.

Embraer sells subsidiaries in Portugal to Aernnova Aerospace for $172m

Embraer unveiled on Wednesday that it has sold two subsidiaries in Portugal, Embraer Portugal Estruturas Metálicas (EEM) and Embraer Portugal Estruturas empósitos (EEC), to Spain’s Aernnova Aerospace for $172 million. Both companies supply components used in aircraft manufacture and, after the closing of the deal, scheduled for the first quarter, they will continue to supply parts to Embraer.

The sale is neutral for the company, says Citi. The bank questions whether the company has not created unnecessary complexity. Citi has a neutral recommendation for Embraer, with a $17.50 price target for American Depositary Receipts (ADRs) traded on the New York Stock Exchange (NYSE).

Via buys logistics startup CNT

Via, owner of Casas Bahia and Ponto, announced the acquisition of 100% of the capital stock of the logistics startup CNT, which specializes in complete offers for e-commerce operations, according to a statement to the market. The value of the transaction was not disclosed.

According to Via, the transaction value consists of a fixed and a variable portion, with the fixed portion implying a multiple of about 0.20 times the gross volume of goods (GMV) in 2021. The variable part is conditioned to the achievement of performance targets and the permanence of CNT’s main executives at the head of the business.

CNT is specialized in complete offers for e-commerce operations, multi marketplace and platforms in the “plug & play” model, and have been operating for 11 years in the provision of complete logistics services (fulfillment) and for four years in services in e-commerce (full commerce).

Source: Valor international

 

January 14, 2022

AS BRAZILIAN EXPORTS GROW, CHINA GRABS LARGER SHARE

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

January 17, 2022

FREE POWER MARKET CAN GENERATE R$6.3BN IN INVESTMENTS IN 10 YEARS

The free power market, a segment in which consumers with high demand negotiate directly with generation companies and traders, may generate R$6.3 billion in investments in 10 years to draw customers, a projection by consultancy Thymos Energia made at Valor’s request shows.

The cost for companies to draw consumers who want to migrate from the regulated market to the free power market is higher than R$1,000, the consultancy said. However, the value is expected to fall to only R$100 as a result of a digitalization drive.

The calculation is based on the number of potential consumers that can migrate from the regulated market to the free market. In Brazil, there are about 87 million consumers. However, Alexandre Viana, a partner and head of consulting at Thymos, believes that about 63 million will change to the free market.

“The cost of drawing customers multiplied by the number of consumers who can migrate to the free market is equal to R$6.3 billion in investments in 10 years, excluding other injections that may come from generation and services,” he said.

The consultancy’s survey outlines a conservative, a baseline and an aggressive scenarios for electricity consumption and projects that the free power market will account for almost 73% of the total load of the National Interconnected System (SIN) in 2035, compared with 35.4% now.

This scenario takes into account that as of 2024 the free market will open fully to all consumers of high voltage, as proposed by the Ministry of Mines and Energy (MME), and THAT in 2026 the opening follows for low-voltage consumers.

“In 2035, this curve will stop growing because low income, public services and rural [clients] will have more difficulty migrating and will remain in the regulated market,” Mr. Viana said.

Bills in Congress on the modernization of the electric sector and regulations can speed up the migration of consumers, the executive added.

As for businesses, some power trading companies no longer want to only buy and sell energy and are expanding their operations by offering services to consumers and generation companies.

This is the case of 2W. With an eye on the liberalization of the market, the company is increasing the supply of renewable power to sell on the free market with the construction of two wind power farms, and has set aside funds for the acquisition of new customers.

“We see a more liberal market in the second half of this decade. For this, it is key to have generation assets so that we are not in the middle of the chain having to buy power from a generation company to sell it to the customer…We have R$150 million for customer acquisition cost to be able to tap the market and sell electricity from these farms,” CEO Claudio Ribeiro said.

Tradener follows a similar path. The company sells about 800 average megawatts and serves between 20% and 30% of its customer portfolio with its own generation. CEO Walfrido Avila said that the investment relies on better market conditions.

“We have 400 MW of projects, but we will do this in tandem with the economy. The interest rates are very high right now. This is bad for financing and this hinders investments,” he said.

For Alexandre Lopes, vice-president of the Brazilian Association of Power Trading Companies (Abraceel), this is a trend since the sector has been driving competitiveness in companies for more than 20 years and the expansion of the electric system.

“The free market has become the flagship of the expansion of electric power generation in Brazil, responsible for more than 70% of the plants under construction, mainly of renewable origin, aligned with national public policy and the global energy transition.”

Source: Valor International

January 17, 2022

DEVELOPMENT BANK TO INVEST UP TO R$2.5BN IN INFRASTRUCTURE FUNDS

The Brazilian Development Bank (BNDES) will invest up to R$2.5 billion in infrastructure funds, which will be selected through a competitive process. The state-owned bank opens a call for proposals this Monday to choose up to five funds. A maximum of R$500 million will be allocated to each of them. The bank expects, however, to draw at least R$5 billion more from the private sector through the effort.

Asset managers interested in receiving funds will have until March 4 to submit their proposals. The choice will be made by the bank, which will evaluate the fund’s investment thesis, governance and costs, as well as the manager and the team involved. The selection is expected to be concluded by the first half of this year.

It is a new investment mechanism of the bank. “The BNDES’s central objective is to increase its instruments for operating in infrastructure. We already have direct investments, financing, and now we want to allocate resources through funds,” said Bruno Laskowsky, head of shareholding, capital market and indirect credit at BNDES.

The plan is to boost both debt funds, destined to finance projects and companies, and equity funds, which will directly invest in the capital of the businesses. Of the five chosen, up to two will be debt funds and three equity funds.

The BNDES will give priority to investments in basic sanitation and urban mobility, segments that have a greater social impact. There is also a preference for funds from institutional investors (who manage third-party money) and with criteria for measuring social and environmental impact.

Mr. Laskowsky highlights two other focuses sought by the BNDES. The first is “project finance” operations, that is, in which the project is capable of “self-financing,” providing its cash flow as a guarantee. “We want to privilege the risk-taking of the project, and not necessarily the risk of the larger guarantor.”

The second goal is to lengthen the term of the loans. “We are looking for structures that follow the long-term timing of infrastructure projects, which is more like 15, 20 years, while the term of bank loans in general is 7, 8 years,” he said.

For this, the idea is that the funds are closed-end, with a minimum term of eight years, and up to 15 years (equity funds) and 20 years (debt funds), said Filipe Borsato, head of fund investments at BNDES. “The idea is, in the short term, to serve these companies and projects benefited, but also, in the long term, to bring institutional investors to the country and give them more security to put funds into infrastructure projects in Brazil,” he said.

The idea is for the BNDES to be a “relevant minority shareholder” in these funds, and for the allocation decision – that is, which projects or companies will receive the investments – to be made by the private-sector manager, the executives highlight.

“The choice of specific projects will be made by private-sector managers, not by the BNDES. Typically, the term for the allocation of funds is three to six years, so the benefited projects will be structured and selected over the next few years. It is not something thought out for the projects of 2022,” Mr. Borsato said.

For this reason, the fact that the process takes place in an election year will not be a problem, and potential changes in the bank’s direction is not a concern, Mr. Laskowsky said.

“We are talking about 15, 20-year projects. This goes beyond any administration. And the country has a huge gap in infrastructure. The math done when it comes to thinking about investments is: there are people prepared to execute the works, there are good project structurers, there is financing and there is demand. These factors are not trivial. Stability helps a lot, of course, but the central theme here is not electoral volatility,” he said.

As for BNDESPar the move is part of its “capital recycling” process, Mr. Laskowsky said. Since 2019, the development bank’s equity arm has been disposing of its shares in companies such as meatpacker JBS, paper and pulp maker Klabin and mining giant Vale, among others. The idea, the executive said, is to rebuild the portfolio having as guidelines innovation, environmental and social impact.

The investment in infrastructure funds will be a first experience in this investment model, which may be extended to other areas of BNDES’s operations. “This is the first call. We will understand how the process will work out. But one possibility is to give guidance, which could be annual, biannual, or triennial, and the bank will make subsequent calls in different strategic sectors, not just infrastructure,” he said.

Source: Valor International

January 25, 2022

STEEL CONSUMPTION GROWS 23% IN BRAZIL IN 2021

The country’s steel industry ended 2021 with strong growth in volume of crude steel produced, domestic sales and apparent consumption, as expected, despite the sharp deceleration of indicators in the last month of the year. The data are from the Instituto Aço Brasil, which represents steelmakers.

In a year marked by strong domestic demand until July and an increase in exports in the second half of the year, steelmakers in the country produced 36 million tonnes of crude steel, up 14.7% from 2020. In rolled products, the sector reached 26 million tonnes, up 19.3% year over year.

The performance was also robust in domestic sales, which totaled 22.4 million tonnes, up 15% year over year. In the year of the pandemic, the sector was impacted in the second quarter, but saw strong steel sales from July onwards.

Also with a record, since 2013, apparent consumption (local sales plus imports) of steel products totaled 26.4 million tonnes, up 23.2% year over year.

Faced with a heated market and difficulties in meeting all demand from local mills, imports of finished material grew by 144% in the year, totaling 5 million tonnes.

With an increase in steel production and an accommodation of domestic demand – which was supplied from the middle of the year with domestic supply and the entry of foreign material –, exports rose and ended the year up 3.9%, totaling 11 million tonnes. Benefited from higher steel prices in the international market, they generated $9.3 billion.

In December, indicators focused on the domestic market lost steam due to macroeconomic uncertainties as of September: in the production of crude steel (-11.4%), rolled products (-16.8%), domestic sales (-24.7 %) and apparent consumption (-17.3%). Exports, on the other hand, gained momentum, with an expansion of 74.9% —1.3 million tonnes. Imports continued to expand, with 309,000 tonnes (up 49.9%). Sources say there is still a lot of steel in the ports waiting to be cleared.

Source: Valor International

 

January 25, 2022

BRAZIL CHANGES VISA RULES TO ATTRACT DIGITAL NOMADS

The Brazilian government has amended immigration rules to grant temporary visas to professionals working remotely in a bid to attract well-paid individuals to contribute to the country’s economy.

Announced today (24), the measures establish an initial one-year visa, which can be renewed for an equal period. According to justice secretary and head of the National Immigration Council, José Vicente Santini, the new regulations are expected to boost local tourism and respond to global trends.

“Digital nomads’ salaries come from external sources, and the resources these immigrants bring can boost the national economy. This is an important step for Brazil to promote one of the world’s most modern working models,” he said.

Professionals can apply for the digital nomad visa at any Brazilian consular office, presenting proof of their remote worker status and documents such as an employment contract with an international organization and health insurance and evidence of availability means of subsistence in Brazil.

On the other hand, the increase of Brazilian remote workers taking up jobs with foreign employers has been a concern for the sector. The Federation of Associations of Brazilian Information Technology Companies (Assespro) launched a manifesto today calling for public policies to prevent a “labor blackout” of skilled tech professionals.

According to the trade body, the growing demand for IT experts globally and the acceleration of remote working has contributed to many experienced professionals being hired by companies abroad, without having to emigrate, in a phenomenon described as a “virtual brain drain”.

The association warned that best available estimates indicate that Brazil’s shortage of skilled professionals is expected to grow to 450,000 within three years. It added that the lack of strategies and policies from central government to support innovation and skills creation has been discussed since 2018. Still, the scenario remains unchanged in terms of strategy, while execution has become increasingly unviable due to the various budget cuts suffered by the Ministry of Science, Technology and Innovation in recent years.

Stressing the real possibility that Brazil may lose a significant amount of its technology experts to employers overseas, Assespro urged government leaders to “urgently unite to implement public policies that prevent this catastrophic situation.” It added the issue of skills shortages is the greatest challenge the sector has faced in the trade body’s 45-year history.

“Innovation processes arise from the existence of problems. Given the size of this problem, however, the collective action of all the actors involved is essential”, the manifesto noted.

Source: NewsNow

 

January 31, 2022

NEW PORTS EXPECT PRIVATE INVESTMENTS OF R$9.5BN

In a new drive of investments in the port sector, at least 30 Private Use Terminal (TUP) projects were authorized in 2021 or are being analyzed by port regulator Antaq for authorization in 2022, unlocking contributions of up to R$9.5 billion.

For the Association of Private Port Terminals (ATP), which carried out the survey based on public calls and publications in the Daily Gazette, this proves the preference of many investors for this type of expansion in the sector.

TUPs are necessarily outside organized ports — those managed by dock companies or by state administrations — and have more flexible regulation than the leases of public areas. In the past decade, they had a 38% growth. Today, they handle about two-thirds of port cargo in Brazil, mainly minerals and fuel.

Among the new projects under analysis with chances of signing contracts with the Ministry of Infrastructure in 2022, are two large undertakings. One is Nordeste Logística, on an 83-hectare plot in Pecém (state of Ceará), with four terminals planned — for ore, grains, fertilizers, and containers. Investments of around R$2.35 billion are expected.

Another project that draws attention in the sector is Porto Guará, neighboring Paranaguá (state of Paraná), whose plan also involves the movement of different types of cargo. The request to Antaq mentions disbursements of R$3.85 billion.

Both have already gone through a public call – a process in which the agency opens a period of 30 days for the manifestation of any interested parties in building a TUP in the same geographic region – and are awaiting authorization. For this, it is necessary to have at least a term of reference issued by federal environmental agency Ibama for the preparation of environmental impact studies and land regularizations, as well as the absence of tax pending issues.

“Investor interest is greater in private terminals than in leases within organized ports,” says ATP president Murillo Barbosa. “No one has to wait for the government’s goodwill to conduct bidding processes. The private terminal has more flexibility. It can choose the location and type of cargo. It does not need to comply with the development and zoning plan of the public port.”

In 2013, with the new Ports Law, the requirement for new private terminals to predominantly handle their own cargo was dropped. Thus, the movement of third-party cargo was allowed. According to Mr. Barbosa, the number of authorized TUPs soared to 253 today from 124 that year.

In the calculations of the Ministry of Infrastructure, which are different from those used by ATP, the number of private terminals currently awaiting authorization reaches 53 projects and provides for investments of R$38.8 billion. “The government is no longer hampering investment. The investor’s challenge becomes environmental licensing and the economic viability of the project. It’s up to him to decide,” says the national secretary of Ports, Diogo Piloni.

In fact, however, many authorized projects die out along the way or remain undefined for years because of environmental restrictions or lack of capital for the works. Projects such as the Alcântara Port Terminal (state of Maranhão), Petrocity (state of Espírito Santo), and Porto Sul de Ilhéus (Bahia) disclose figures of billions of reais, but have not yet considered financing or have not yet obtained a prior environmental license.

For consultant Frederico Bussinger, managing partner at Katalysis consultancy and former president of the Port of São Sebastião, one of the most important factors for the success of a TUP project is the cargo guarantee. Therefore, according to him, terminals associated with the owner’s own production chain tend to start operating more easily. This has been the case, for example, with new facilities for the outflow of grain by groups such as Cargill and Louis Dreyfus, in the so-called Arco Norte.

In Mr. Bussinger’s assessment, the difficulty is significantly greater for structures that intend to move different cargoes that are unrelated to the business itself. There are still few successful cases, such as Porto do Açu (state of Rio de Janeiro) or Portonave (Santa Catarina), in creating private ports that handle third-party containers or cargo. “With a guaranteed cargo, the money appears quickly.”

Given the ease with which Antaq’s approval to build TUPs can be obtained, says Mr. Bussinger, permits often become a kind of “government bond”, and applicants only then go after real investors.

Despite the growth trend of TUPs, companies complain about recent attempts to increase regulation on an activity that is entirely private. A group of industry associations even overturned in court, in 2019, Antaq’s resolution that created a system for monitoring prices charged by its customers’ terminals.

The end of Reporto, a tax regime that made investments in ports and railways cheaper, whose recreation was barred by President Jair Bolsonaro in January, is also much criticized. Murillo Barbosa, with ATP, says that the absence of the benefit makes the value of a portainer (a type of crane used for loading and unloading containers) rise to $15 million from around $11 million.

Even with many advertised terminals having difficulties materializing, Mr. Piloni says that TUPs are already the main growth vector in the sector. “For every R$1 in investments effectively executed in port leases, we had R$3 in private terminals in 2021.

Source: Valor International

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