IN THIS ISSUE BUILDING SKILLS TO CREATE OPPORTUNITIES
DANIEL SMITH
16 IRON ORE: A SURE-FIRE STRATEGY
CRÉDITO
20 6
27 2
ERNANE GALVÊAS, FORMER FINANCE MINISTER AND CNC FINANCIAL CONSULTANT
29
ARTICLE: PROF. JONATHAN VAN SPEIER
42
FREE SOFTWARE FOR LIBRARIES
31
SYNOPSIS OF THE SITUATION
44
BOOKS IN SQUARES
AMCHAM RIO
38
WINE IS ALL AROUND US
EDITORIAL THANKS FOR THE WARM WELCOME You are reading the second issue of EXIMBR magazine. All I can say is thanks for the warm welcome our publication has received. The event marking its launch was a huge success, attended by officials, the chairs of affiliated chambers, and honored guests. The magazine’s app was downloaded hundreds of times and the magazine has had thousands of views already. It doesn’t stop there. I would also like to invite you to visit the FCCE’s new website at www.fcce.org.br. We now have a more modern and dynamic look that is fully responsive and updated daily. Another innovation: we are sending out weekly news clippings to our affiliates and partners, with a view to sharing information of general interest. Among other news, in this issue we discuss the future of the iron ore market, feature the online classes the FCCE is offering and its partnership with the ADESG (War School Graduates Association), and present an interview with former Brazilian Finance Minister Ernane Galvêas. Good reading! ■
PAULO FERNANDO MARCONDES FERRAZ PRESIDENT OF THE FCCE
EXIMBR PUBLISHED BY THE FOREIGN TRADE CHAMBER FEDERATION (FCCE)
Credits Editor Thell de Castro Mtb 41364/SP thell@newsprime.com.br writers Daniel Smith Jonas Gonรงalves Leonardo Anjos English Translation Sabrina Gledhill Copy-Editor (Portuguese) Bianca Montagnana Layout Roberta Furukawa Bartholomeu managing editor
NewsPrime
sรฃo paulo - rio de janeiro www.newsprime.com.br contato@newsprime.com.br Signed articles do not necessarily reflect the views of the magazine. The authors are entirely responsible for their content.
4
DIRECTORATE 2014-2017
Fiscal Board
Board of Directors
President Paulo Fernando Marcondes Ferraz
Members Bruno Silva da Motta Darke Resende Bhering de Mattos Marcelo Ignácio de Pinheiro Macêdo
Life Members
1st Vice President Marco Polo Moreira Leite Vice Presidents Cláudio do Carmo Chaves Mauro de Lima Câmara Sohaku Raimundo Cesar Bastos Ricardo Vieira Ferreira Martins Vitor de Lemos Alexandre
Alternates Luiz Octavio B. Burnier Mônica Oliveira Bendia
Directors Alexander Zhebit Augusto Tasso Fragoso Pires Carlos Jund Cesar Moreira Charles Tang Claudine Bichara Eliana Ovalle Georges Ramez Hage Gil Vicente Gama Gilberto Ferreira Ramos Glorisabel g. Thompson Flores Gustavo Brigagâo Jayme Blay Jonathan Speier Jovelino Gomes Pires Luiz Oswaldo Aranha Marco Aurélio Kühner de Oliveira Nelson Mufarrej Filho Pietro Petraglia Ricardo Coelho Ricardo Sirotsky Roberto Katan Arita Roberto Prisco Paraíso Ramos
Vice President “Eastern Europe” Ruy Antonio Reis Alves
Vice President “Europe” Paolo Franco Vittorio Arrigoni
Vice President “Middle East” Nagi Naoufal Vice President “Southern Brazil” Arno Gleisner Vice President “Northeastern Brazil” Roberto de Arruda Nóbrega
Chairman José Botafogo Gonçalves Vice Chairman Paulo Pires do Rio Antonio Delfim Netto Benedicto Fonseca Moreira Bernardo Cabral Carlos Geraldo Langoni Carlos Tavares Ernane Galvêas Joaquim Ferreira Mângia José Carlos Fragoso Pires Lauro Moreira Marcus Vinicius P. de Moraes Mauro Laviola Milton Cabral Paulo D’Arrigo Vellinho Paulo Tarso Flexa de Lima Philippe T. de Saxe Coburgo e Bragança Major Benefactors
Vice President “Northern Brazil” Cleymisse Coelho da Silva Morais Vice President “SÃO PAULO” Rubens Medrano
Gustavo Affonso Capanema João Augusto de Souza Lima Laerte Setúbal Filho Contact the FCCE
Director Rio Grande do Sul Mauro Stomorvski Director Paraná Rui Lemes Director Rio Grande do Norte Joham Alves Xavier Director Ceará and Piauí Rômulo Alexandre Soares
Executive Secretary eduardo treinta Avenida General Justo, 307 6th Floor - Zip Code: 20021-130 Rio de Janeiro – RJ, Brazil Phone: +55 21 3804 9289 Fax: +55 21 2524 1624 E-mail: fcce@cnc.org.br Website: www.fcce.org.br
5
INTERVIEW
PR PHOTO/CNC
ERNANE GALVÊAS, FORMER FINANCE MINISTER AND CNC FINANCIAL CONSULTANT
6
Minister Ernane Galvêas
INTERVIEW Born in Cachoeiro do Itapemirim, in the eastern Brazilian state of Espírito Santo, Ernane Galvêas began his experience in the foreign market as a student. He holds undergraduate degrees in Science and Literature, Accounting, Economics and Law, and has taken extension courses in the United States and Mexico. In the course of his career, Galvêas has held several important government posts that enabled him to help strengthen the economy, such as deputy director of the Financial Department of the Mint and Credit Directorate, financial assistant to several Finance Ministers, and president of the Central Bank of Brazil, among others. He served as Brazil’s Finance Minister from 1980 to 1985, when he headed the Figueiredo administration’s finance team. After that, he spent some time in the private sector and devoted himself to intellectual activities, developing publications and teaching at prestigious universities. He has been condecoratedby state, federal and foreign governments.
“Brazilian foreign policy is stagnant. The current administration’s diplomacy in that area shows less activism and more limitations”
Today, he is a financial consultant for the CNC (National Confederation of Trade and Tourism), a Board Member of the Getulio Vargas Foundation, and an active participant in confederations, associations, foundations and committees on foreign trade, tourism, policy and economics. How do you view the current state of Brazil’s foreign policy? Brazil’s foreign policy is stagnant. The current administration’s diplomacy in that area shows less activism and more limitations. Membership in Mercosur has reached a critical point, and there is a clear need for this country to seek alternatives in other markets, possibly through bilateral agreements. We have witnessed the declining value of exports, which has progressively decreased in the last three years, following the movement of the price index for exported products. It is essential to establish clear new goals for Brazilian foreign policy so that we can accordingly enhance trade relations with countries that are on the path of economic growth. What international measures do you believe could help the country during this crisis? Two alternatives that could benefit the Brazilian economy at this time are the depreciation of the exchange rate and directed credit, especially geared for the productive and export sectors. Growth through foreign trade is possible when there is a larger trade balance. Depreciation of the exchange rate is bad for inflation but it increases export revenue, stimulates the trade surplus, and consequently reduces the negative impact on current transactions. A larger supply of credit for the industrial export industry right now is key to restoring that sector’s level of activity.
7
INTERVIEW What is your forecast for Brazil’s economic recovery?
“The challenge facing exporters and the government is attacking the Brazil Cost to improve competitiveness. This country needs to reduce the Brazil Cost to increase systemic competitiveness through incentives for investments aimed at boosting productivity”
The recovery of the Brazilian economy will be slow. National GDP for 2014 was negative, and projections for 2015 also point to a recession. In the most recent report of its COPOM [Monetary Policy Committee], the Central Bank considered that the Brazilian economy will only embark on an upward trajectory of recovery in the second half of next year. Market expectations for 2015 have worsened, according to the latest Focus Reports. How have public protests influenced politics and the current economy? The demonstrations we have seen in several parts of the country have two distinct characteristics: they are positive for politics, in the sense that they encourage citizens to get more involved, but they are negative for the economy. However, the protests have affected commerce, retailers and service providers, and violence and looting have done damage that go beyond that which is reflected in reducing the opening hours of business establishments. In your view, with which countries should Brazil seek closer ties? Brazil should increase dialogue with all markets, especially those with more potential demand for manufactured and semi-manufactured goods, like the United States, for example. In 2014, sales to the United States grew by 9.2%. It was the only destination that showed an increase in exports. In 2013, the percentage was 10.3%, and in 2014 it reached 12.1%, surpassing Mercosur (11.1%) and Argentina (6.3%). Generally speaking, what is Brazil’s main weapon abroad?
Given the fierce competition in the international market and the fall of trade barriers, which are characteristics of globalization, the challenge facing exporters and the government is attacking the Brazil Cost to boost competitiveness. A recent study published by the CNI [National Confederation of Industry] compared the competitiveness of fifteen selected countries. Brazil is in 14th place, behind the other BRICS and South Africa, as well as Mexico, Colombia, Chile and Turkey, and only ahead of Argentina. In another study, the Abimaq [Brazilian Machine and Equipment Manufacturers’ Association] found that the Brazil Cost drives up the prices of Brazilian products by about 36%. That is, this country needs to reduce the Brazil Cost to increase systemic competitiveness through incentives for investments aimed at making businesses more productive.
8
AGÊNCIA BRASIL
INTERVIEW
Minister Joaquim Levy
What role can businesses and the public play in the country’s economic recovery? It is important that Brazilian business leaders, workers and members of congress give the administration a vote of confidence and support the work of the new economic team. Like the Finance Minister, President Dilma [Roussef] believes that the economic model adopted during her first term in office has lost its value as a policy of tax relief and subsidized credit to stimulate consumption. Are there are any past measures that might work in the current situation? Without a doubt, the two major problems facing Brazil in the current situation are the public sector deficit and the balance of payments imbalance. The first is being handled by cutting public expenditure to balance the budget. The first round of spending cuts, reduced subsidies and increased revenues has already resulted in a fiscal adjustment of BRL 111 billion. The Finance minister believes that the measures announced will be sufficient to reach the primary surplus target of 1.2% of GDP this year. It is important to strengthen Minister Levy’s agenda. Do you believe it is still possible to improve Brazil’s image abroad during this administration? President Dilma [Rousseff] made numerous mistakes during her first term. Mistakes based on a misguided economic policy and a social policy that was beyond the government’s means. It seems clear, following the appointment of
9
INTERVIEW Joaquim Levy, that its economic policy has changed course. Furthermore, four more equally competent ministers in their fields of activity who intend to “change the game” have also been appointed: Development Minister Armando Monteiro, Planning Minister Nelson Barbosa, Agriculture Minister Kátia Abreu and Social Security Minister Carlos Eduardo Gabas. In this sense, the task of improving Brazil’s image abroad is difficult, but it seems that the government is trying, and the Brazilian public must believe that it is possible. This fact has just been recognized by Standard & Poor’s decision to confirm Brazil’s investment rating. Aside from political and economic measures, what else could contribute to Brazil’s global advancement?
REPRODUCTION
The bureaucracy and high taxes are the biggest obstacles to competitiveness, both for foreign exports and for competing with foreign imports. ■
Manchete Magazine - 1980
10
FCCE RADAR FCCE DIRECTOR MEETS WITH BRAZIL’S MDIC MINISTER
FCCE
FCCE Director Gil Vicente Gama, who also represents the organization in the Brazilian Congress, met with then-senator and now Minister of Development, Industry and Foreign Trade Monteiro Neto in early 2015. The agenda included support for launching the Foreign Trade Congressional Front and projects that will be implemented next year to boost the culture of exports.
APEX-BRAZIL DENIES CLOSING OVERSEAS BRANCHES
CNC BACKS GOVERNMENT PROPOSALS FOR AUSTERITY AND BUDGET CUTS Business leaders welcomed measures announced by Brazilian President Dilma Rousseff because they signal the government’s commitment to balancing the federal budget, but they must be on the same page with other measures in order to channel resources to reducing the deficit and financing social programs.
VALTER CAMPANATO/AGÊNCIA BRASIL
This is the assessment of the Chairman of the National Confederation of Trade and Tourism (CNC), Antonio Oliveira Santos.
The Brazilian Export and Investment Agency (Apex-Brazil) does not intend to close its overseas branches, according to its new president, David Barioni Neto. He stressed that Apex plans to open another branch in Shanghai (China). “We do not plan to close any branches. If a unit is considered inefficient, it will be closed, but that is not the issue now. On the contrary. We want to expand our overseas operations,” said Barioni after taking office. “We will be present wherever we find opportunities to expand Brazilian exports.”
According to the CNC chair, the federal budget cuts for fiscal 2015 – so called “contingency cuts” proposed by Finance Minister Joaquim Levy and Planning Minister Nelson Barbosa – are “an extremely effective means of rebalancing government budgets and achieving the basic surplus required to repay interest on public debt.”
11
FCCE RADAR FCCE EVENT LAUNCHES EXIMBR MAGAZINE
EXPO IN MILAN RUNS FROM MAY TO OCTOBER, SHOWCASING BRAZILIAN BUSINESSES
12
Authorities, the chairs of chambers of commerce affiliated with the organization and guests attended the event. FCCE President Paulo Fernando Marcondes Ferraz thanked everyone for attending and for their confidence in the publication, initially published in digital format (see photos of the event below and on the following page).
PHOTOS: DANIEL SMITH
The Executive Secretary of the Brazilian Ministry of Development, Industry and Foreign Trade (MDIC), Ivan Ramalho, visited the headquarters of the Rio de Janeiro Federation of Industries (Firjan) system to underscore the opportunities Expo Milano 2015 presents for Brazilian businesses. The theme of the exposition, which will run from May 1 to October 31, 2015, in the Italian city of Milan, will be “Feeding the Planet, Energy for Life.” One hundred and forty-five countries have confirmed their participation in Expo Milano 2015, which expects an estimated 20 million visitors over the course of the event. The Brazil Pavilion will have a prime location near the western gate, which will be the entrance for 65% of visitors. Brazil’s theme will be “Feeding the World through Solutions.”
EXIMBR magazine, the official publication of the FCCE (Foreign Trade Chamber Federation), was launched at an event held on January 29 at the headquarters of the National Confederation of Trade and Tourism (CNC) in Rio de Janeiro. The apps for the publication for IOS (Apple) and Android were also launched on that occasion.
Alice Pessoa de Abreu (Head of the FINEP International Cooperation Directorate), Paulo Fernando Marcondes Ferraz (FCCE President) and Eraldo Alves da Cruz (Executive Secretary of the CNC Tourism and Hospitality Board)
Ricardo V. Martins (FCCE Vice President) and Roberto Nóbrega (FCCE Vice President for Northeastern Brazil)
FCCE RADAR EXPORT COMPANIES WILL KEEP GROWING IN 2015, SAYS AEB Sohaku Raimundo Bastos (FCCE Vice President and Honorary Consul of Sri Lanka) and Paulo Fernando Marcondes Ferraz (FCCE President)
Glorisabel Garrido Thompson-Flôres (FCCE Director and Executive Manager of the Norway Chamber) and Uta Schwietzer (Vice President of the BrazilChina Chamber)
Ricardo Mota da Costa (Brazilian Post Office Manager of International Operations and Business), Jovelino Gomes Pires (FCCE Director) and José Augusto de Castro (AEB Chairman)
Mauro de Lima Câmara (FCCE Vice President), Nagi Naoufal (FCCE Vice President Middle East) and Eraldo A. da Cruz (Executive Secretary of the CNC Tourism and Hospitality Board)
Pietro Petraglia (Chairman of the Brazil-Italy Chamber) and Pedro Spadale (Rio de Janeiro State Under-Secretary for International Relations)
The number of export companies in Brazil – which, according to MDIC (Ministry of Development, Industry and Foreign Trade) data, currently total 19,250 – will continue to grow this year. This is the assessment of José Augusto de Castro, Chairman of the Brazilian Foreign Trade Association (AEB). His organization projects growth of about 10% compared with 2014. According to Castro, although that number is low, the growth of the number of exporters is important because that increase shows that the downward trend has turned around. “Since 2005, the number of companies that export had been falling. That decline halted in 2013, when 178 companies were established, and now again in 2014.” He stresses that, in the past, the strong Brazilian real against the US dollar hindered exports. That situation has changed since the dollar’s upsurge.
13
FCCE RADAR FCCE PRESIDENT ATTENDS BRAZILCHINA SEMINAR
BALANCE OF TRADE: USD 458-MILLION SURPLUS IN MARCH
Paulo Fernando Marcondes Ferraz, President of the FCCE (Foreign Trade Chamber Federation), attended and presented at the BH-Brazil-China Business Seminar: Business and Opportunities, held in Belo Horizonte, Minas Gerais, on March 4 by Brazil’s Chinese Chamber of Commerce, an FCCE affiliate. The first initiative of its kind, the event presented business opportunities in Brazil and China with a focus on the Brazilian state of Minas Gerais in general and its state capital, Belo Horizonte, in particular. Its dynamic program covered a range of topics related to that sphere of interest, boosting and driving the chain involving a wide range of sectors, seeking to promote the exchange of knowledge among business leaders, academics, experts, the government, the private sector and the public.
Total trade was USD 33.5 billion, 17.7% less than the same period in 2014. In the first quarter, exports totaled USD 42.775 billion, 13.7% lower than the first three months of 2014. Imports totaled USD 48.332 billion, down 13.2% compared with the same period in 2014. Trade reached USD 91.107 billion, representing a 13.4% reduction against the previous year, when it totaled USD 105.254 billion, based on the daily average. The trade balance accumulated a deficit of USD 5.557 billion, lower than the figure reported for the same period in 2014: USD 6.078 billion.
14
FOTOS SÂMILA NEVES / MIRA PRODUÇÕES
The Brazilian trade surplus reached USD 458 million in March. That performance is a result of exports of USD 16.979 billion and imports of USD 16.521 billion.
FCCE RADAR STATEMENTS “The year 2016 could be reasonable if we do our homework to fix the economy and unleash the ‘animal spirit’ of domestic agents”
PR PHOTO
Alberto Ramos, chief Latin America economist at Goldman Sachs
“Tax reform is a constant concern. It is one thing to adopt measures and quite another to ensure that they have an impact. Some states will do that automatically. Some, because of the crisis they are experiencing, will have to be monitored, helped”
DIVULGAÇÃO
Renato Villela, São Paulo State Finance Secretary, in Istoé Dinheiro magazine, April 1, 2015
“If GDP doesn’t grow, we cannot expect an improvement in the tax situation, with growing expenses and stagnant or recessive revenue. Therefore, the Finance Minister’s first bet, on a primary surplus, is unlikely to result in a win. We have to face that fact”
DIVULGAÇÃO
Antonio Oliveira Santos, Chairman of the National Confederation of Trade and Tourism (CNC), in an article in Jornal do Commércio, March 12, 2015
“Brazilian and American business leaders favor establishing closer ties. That effort is paving the way for an important agenda for Dilma [Roussef’s] likely visit to the USA in the second half of the year or 2016”
DIVULGAÇÃO
Gabriel Rico, CEO of AMCHAM-Brazil, regarding the Brazilian government’s interest in increasing exports to the USA, in the newspaper O Globo, March 9, 2015
15
DANIEL SMITH
EMPOWERMENT
Lecture by Gustavo Heck (ADESG Professor)
BUILDING SKILLS TO CREATE OPPORTUNITIES FCCE partners up with Estรกcio de Sรก University and the ADESG to offer extension courses for professionals, entrepreneurs, executives, college students and businesses. By LEONARDO ANJOS
16
EMPOWERMENT In partnership with Estácio de Sá University and the War College Graduates Association (ADESG), the FCCE has created two extension courses – “Doing Business in Brazil” (face-to-face) and “Opportunity Brazil” (distance education) – for professionals, entrepreneurs, executives, college students and businesses that work with foreigners. Tapping FCCE professionals’ day-to-day experience of working in the foreign market, the idea is to boost the development of foreign trade by sharing knowledge. The classes are taught in English and Portuguese to prepare students for Brazil’s economic, demographic and social situation with a focus on entrepreneurship and foreign investment. FCCE Director Marco Aurélio Kuhner explains that these courses are targeted at entrepreneurs, college students and foreigners who do business or intend to open a market in Brazil. “We created this project with a view to providing the chambers of commerce affiliated with us educational products to serve the different nationalities that might do business or are doing business with this country,” he says. In his view, these courses will empower both foreign entrepreneurs wishing to expand their businesses in Brazil and individuals working in the domestic market who want to do business abroad. He is confident that it is part of “A growing drive to include this country in our globalized and interconnected world.”
DANIEL SMITH
Another FCCE director, Ricardo Sirotsky, who is in charge of the organization’s Innovation, Empowerment and Education area, explains that, despite the fact that Brazil is the seventh-largest global economy based on GDP and the fifth-largest in terms of population and territory, it is much further down in the ranking of Global Bilateral
Ricardo Sirotsky (FCCE Director)
Marco Aurélio Kuhner (FCCE Director)
17
EMPOWERMENT Trade – in twenty-fourth place. “There is plenty of room for growth in that direction, where a few hundreds of billions of dollars could be generated and many jobs created,” he explains. He believes that the FCCE’s core mission is supporting the development of Brazilian bilateral trade. According to its directors, by carrying out its mission of supporting and developing bilateral Brazilian trade, bringing together dozens of countries through its chambers of commerce, the FCCE is becoming one of the main channels for driving international relations. This partnership with the ADESG aims to combine the strengths of an organization that has experience in academic coordination and military strategies, considering the numerous classroom courses it offers throughout Brazil, with those of the FCCE, which has international business development prospects. Together, they have formulated syllabuses that can strengthen the intellect and strategies of business owners in Brazil and foreign residents who do business with this country. “Advance planning from the viewpoint of military science, combined with business objectives, prioritize the business venture’s financial security, resulting in lower risks for the investee,” says Vice Admiral Ricardo Veiga Cabral, chairman of the ADESG, explaining the strategies built into the program’s content. Cabral feels that this is a timely partnership that prioritizes guaranteeing good business and transactions. He adds that the knowledge acquired through the course will result in more viable investments and a greater probability of success for decision makers in their dealings with export finance agencies. Doing Business in Brazil The six-day face-to-face course “Doing Business in Brazil” is held at a three-star hotel. During the morning sessions, the teachers work with the Case Method developed by Harvard, a benchmark for educational excellence, and involves evaluating real-life cases. To make learning more dynamic, during the afternoon sessions the Living Case Method will be applied, where guest lecturers recount their personal experiences and interact with participants, supplemented by technical visits to businesses and a happy hour to encourage networking and team spirit. The aim is precisely to avoid the exhaustion and dispersion that are all too common in courses of this kind. The course content will include the following subjects: getting acquainted with the local culture and setting up an office and operations in Brazil; tips on how to overcome difficulties in day-to-day operations; people management in Brazil; opportunities in Brazil’s national and regional markets, and the challenges of Brazilian infrastructure (logistics, taxation, legal aspects), among others. Opportunity Brazil “Opportunity Brazil” is an on-line course with a total of 24 class hours divided into four weeks. The content consists of video lectures and an ongoing forum of ideas, enabling participants from anywhere in Brazil or abroad to interact with the teachers and virtual groups around the world.
18
DANIEL SMITH
EMPOWERMENT
Paulo Fernando Marcondes Ferraz (President of the FCCE) e John Creamer (US Consul General in Rio de Janeiro) The aim is to provide an overview of Brazil and its economic, demographic and social characteristics with a focus on entrepreneurship and foreign investment, making this an obligatory course for investors, executives and members of multinational organizations. The course covers topics such as Brazil’s macroeconomic situation and how they have changed in recent decades; main imports and exports; Brazil’s participation in international agencies; regions of Brazil and their economic differences, and structural barriers in the Brazilian economy, among others. Successful partnership In partnership with the ADESG and the Clio Internacional school, the FCCE on March 9 held the opening talk for the lecture series “Strategic View of Brazilian International Relations: Decision Theory Applied to the Business World, Commercial and Economic Opportunities and Prospects,” at the CNC’s headquarters in Rio de Janeiro. The lectures focused on international business opportunities, commercial and economic aspects of Brazil-US relations, and decision-making strategies from the viewpoint of the Decision Theory adopted by the War College. John Creamer, the US General Consul in Rio de Janeiro, attended the event and gave a speech praising the commercial partnership between the two countries. The speakers were Commander Adalberto Souza, Director of the ADESG, FCCE directors Ricardo Sirotsky and Marco Aurélio Kühner, Clio Internacional teacher Daniel Henrique Rocha de Sousa and ADESG Professor Gustavo Heck. ■
19
PR PHOTO
COVER STORY
IRON ORE: A SURE-FIRE STRATEGY The challenge of regaining market growth in the context of a domestic economic downturn and changing foreign demand. By JONAS GONÇALVES
20
COVER STORY Iron is the fourth most abundant element on the planet, found in minerals like hematite and magnetite. Its multitude of applications and strategic importance for the various sectors of the economy, especially because it is the key raw material in the alloy forming steel, give iron ore a status enjoyed by few commodities. However, the mining market is also suffering the effects of the current economic crisis in Brazil and the fluctuations in the foreign market, especially in terms of price and demand. The present situation can be viewed as unfavorable and rife with uncertainty. However, there are possible solutions, such as the depreciation of the exchange rate. This is the assessment of Carlos Thadeu de Freitas, chief economist of the National Confederation of Trade and Tourism (CNC). “A depreciated exchange rate increases export revenue and contributes positively to the balance of trade,” he observes. At the same time, Freitas points out that the construction of the Southeast Port, a private-sector port terminal on Madeira Island in Itaguaí, Rio de Janeiro, is a key project for solving the industry’s logistical issues.
CHRISTINA BOCAYUVA/CNC
Located four kilometers from the railway owned by the MRS Logística logistics firm, the terminal is strategically positioned to ship iron ore production to market, particularly from Minas Gerais. According to the CNC economist, the Brazilian Navy is about to approve the port’s flow of goods. It has an export capacity of roughly 50 million metric tons of ore per year, which can be expanded to 100 million metric tons. “As a result, the terminal will play a key role not only in the shipment of ore production but also in the development of the Itaguaí region and the creation of more business for Rio de Janeiro State,” he says.
Carlos Thadeu de Freitas, from CNC
According to data provided by the State of Rio de Janeiro, when the port
21
COVER STORY begins operations, nearly 900 people will be working there, including its own staff and sub-contractors. As a result, iron ore produced in Brazil will reach major consumers like the Southeast Asian market. The Southeast Port will have a draft of 20 meters and two berths capable of docking large ships. The venture’s infrastructure includes a 2.3-km rail branch, a reverse loop, wagon tippers to unload trains, two storage yards with capacity for 2.9 million metric tons and operational support facilities. A 1.8-km tunnel – 11 meters high and 20 meters wide – connects the storage yards to the pier. Since February of this year, the Southeast Port’s main shareholder has been the world’s second-largest metal trading company, Trafigura Beheer BV, from the Netherlands, whose partner is the Mubadala Development Co., from Saudi Arabia. PR PHOTO
Mariano Marcondes Ferraz, CEO of the DT Group The company is assessing further opportunities in Brazil, which is the second-largest exporter of iron ore on the planet. According to Mariano Marcondes Ferraz, CEO of the DT Group, a subsidiary of Trafigura, mines can be acquired, and producers could also receive a stimulus from the company through loans for expansion. Expectations are that the port, which is located on Sepetiba Bay, 90 kilometers west of downtown Rio de Janeiro, will reach its total annual capacity of 50 million metric tons of iron ore by 2016 and should begin operations by August according to Ferraz, who is a member of the board of that port facility. That start-up date is three years behind the more optimistic predictions of its former owner, Eike Batista, of MMX. Porto Sudeste do Brasil, the company that runs the terminal, is negotiating with unnamed iron ore producers to use its facilities to ship the commodity and will have about 400 employees as soon as the ramp-up phase is completed. Under the leadership of former Vale executive Eugenio Mamede, studies are being conducted to determine the feasibility of using the port to ship farm commodities and bulk cargo as well.
22
COVER STORY Trafigura began dealing with iron ore in 2009, and last year sold 4.3 million metric tons globally, including shipments from Brazil and Australia. Vale, the world’s largest iron ore producer, and Companhia Siderúrgica Nacional also export iron ore through their terminals in Itaguaí, which is linked by rail to the state of Minas Gerais. Last year, Brazil produced 415 million metric tons of the ore used to make steel, 110 million metric tons less than Australia, the world’s leading iron ore exporter according to the Brazilian Mining Institute (IBRAM). Benchmark The dynamo of the global iron ore market is China, which accounts for about half of the world’s steel output. For example, the Asian superpower increased its imports last March by 8.9% (80.51 million metric tons) compared with the percentage for the same period last year. That increase can be explained by the sharp fall in price. In March alone, the price accumulated a 19% decrease, and several times it reached its lowest level since the Steel Index began its historical series of compiled prices in 2008, reaching USD 47.30 per metric ton. The steady fall in price confirms the prediction of Andy Xie, an independent economist in Shanghai. Since 2012, he has argued that the price of iron ore would fall substantially, which has occurred dramatically in the last two years. The situation is forcing high-cost mines to stop operating and making the Chinese government plan a subsidy for the sector. “When iron ore peaked at USD 190.00, I started talking about a collapse and no-one believed it,” says Xie, a former chief economist for the Asia-Pacific region at Morgan Stanley. More precisely, the peak was USD 191.70 per metric ton in February 2011, according to Metal Bulletin Ltd. The Chinese economist forecasts that in 2015 the price could fall to less than USD 40.00 per metric ton before a recovery begins, due to the growth of cheap reserves in Australia and Brazil and a decrease in demand for steel in China. The cumulative 47% drop in the price of iron ore in 2014 gained further strength this year with the rapid growth of low-cost production by three strong market players: the Anglo-Australian Rio Tinto Group and BHP Billiton Ltd. and Brazil’s Vale SA, which encouraged a surplus in the context of the slowing Chinese economy. Last year, China grew at the slowest rate since 1990. Support from the Chinese state should take the form of tax cuts, which could potentially increase a glut on the market and weaken the strategy of the big mining companies to force high-cost competitors out of the market. In particular, Brazil’s Vale and the Anglo-Australian Rio Tinto and BHP Billiton companies have sought to force out less efficient, higher-cost mining companies in China in order to make way for a new production flow. The Chinese government has announced that it will cut the tax charged to domestic producers of iron ore by half to 40% of the base rate, effective May 1st, in an attempt to help mining companies that have accumulated losses in the context of falling global prices. “The offer of this tax subsidy means that Chinese miners will continue to produce. If this is the case, the strategy of the three largest suppliers of forcing China’s high-cost supply out of business will not work,” assures mining analyst Helen Lau, from Argonaut Securities. Vale While the Santander bank lowered Vale’s “hold” recommendation to “sell” and stressed that there is even more
23
SHANA REIS/GERJ
COVER STORY
Mariano Marcondes Ferraz and Governor Luiz Fernando Pezão visit the Southeast Port
room for its shares to fall, Deutsche Bank maintained its “buy” recommendation (despite having cut the target price for shares). According to Santander analysts Felipe Reis and Renato Maruichi, despite a significant drop of 20% in 2015, the recommendation is that investors maintain a “sell” position for mining shares. They expect the price of iron ore to fall from USD 65 to USD 50 per metric ton as of the second quarter, and are predicting a negative free cash flow of USD 10 billion after dividends in 2015 and 2016. Reis and Maruichi also stress that Vale has a disadvantage compared to its Australian competitors: freight. “The big disadvantage for Vale’s profitability compared to its Australian counterparts is freight. With just 20% of its ocean freight contracts on the spot market, we believe Vale will not capture all the benefits of lower international freight charges,” the analysts observe. Deutsche Bank maintained its buy recommendation for the company’s assets, but cut the target price of ADRs
24
COVER STORY (certificates of deposit issued by US banks) from USD 13 to USD 10. The German bank points out that [Vale] is one of the most diversified mining companies in the world and faces significant challenges, with the drop in prices being driven by the lower price of commodities, a possible government intervention and prospects that iron ore prices may fall even further. However, in the assessment of analysts Wilfredo Ortiz, Rene Kleyweg and Jorge Beristai, the market is overpenalizing the company’s shares. “In our view, the market is assigning a very high discount to the price of Vale shares (compared to its counterparts), which does not seem to take into account cost-cutting efforts, a projected increase in iron ore production (450 megatonnes in 2018 against 319 megatonnes in 2014), as well as changes in areas facing operational challenges and greater focus on core assets for the company,” say the analysts. Furthermore, estimates show generation of free cash flow for Vale should increase over the years as soon as investment decreases, allowing the company to continue paying dividends and firm up its balance sheet. In Santander’s assessment, Vale’s low operating performance will put a dent in its free cash flow in 2015 and 2016. Because CAPEX should remain high due to the completion of several investment projects (especially the Carajás S11D), the estimate is a negative flow of approximately USD 6 billion in 2015, after dividends, and negative USD 4.2 billion in 2016, totaling over USD 10 billion in negative free cash flow within two years. “According to our estimates, Vale will only generate positive free cash flow in 2018,” they note. In addition, Deutsche makes its estimates considering the price of a metric ton of iron ore to be USD 80, compared to a reduction to USD 50 per metric ton according to Santander’s analysis. Thus, both believe that the scenario for the company is quite challenging. However, their views on the impact it will have on the company’s shares and its future prospects are very different. Risks
S&P will make a more detailed assessment of the companies’ plans to deal with the negative impact of
PR PHOTO
The Standard & Poor’s (S&P) rating agency could cut the ratings of Vale and seven other mining companies in two or three weeks, due to the low estimated prices for iron ore in this and the coming years.
25
COVER STORY falling ore prices on their cash flows. Among the other companies that had their ratings placed on negative watch by S&P are the formidable competitors Rio Tinto and BHP Billiton, who are contributing to the excess supply while feeling the negative effects of falling prices on sales revenue for iron ore. According to Reuters, S&P has lowered its expected average price of iron ore by the end of the year to USD 45 per metric ton, compared to previous expectation of USD 65 per ton. For 2016, the agency has revised the estimate to USD 50 per ton, compared with the previous forecast of USD 65, and for 2017 it believes that the average will be USD 55 per ton, down from its last projection of USD 70. According to S&P the revised estimate was prompted by the continued strong growth of the supply of iron ore in the international market, the slower than expected pace of high-cost producers’ output, and the slower growth of the Chinese economy. The agency also noted that the lower operating prices due to the drop in [price per] barrel of oil and the strong dollar are extending the presence of marginal producers and, therefore, the glut on the market and weak prices are expected to continue. Data In 2014, 2.2 billion metric tons of iron ore were produced worldwide. China alone imported more than 64% of the exported volume. The other major buyers were the European Union (12%), Japan (11%), and South Korea, accounting for 5% of imports of the available ore. China is expected to import 941 megatonnes in 2015. All told, the four largest mining companies, Vale, Rio Tinto, BHP and Fortescue, produced more than 1 billion metric tons of iron ore in 2014. That total should be maintained for a long time, as the main producers are Australian and Brazilian. Together, they account for more than 84 billion cubic tons of ore. Although banks like Goldman Sachs are predicting more losses, their expectations are not as pessimistic as those of Chinese economist Andy Xie. Rio Tinto has reiterated its view that the expansion of China’s steel production will continue. Goldman projects an average of USD 66.00 this year, while Citigroup Inc. forecasts USD 58.00 and the UBS Group AG, USD 66.00. In 2014, steel production in China barely changed as local demand fell and exports rose. Domestic consumption fell 3.4%, to 738.3 million metric tons, according to the China Iron and Steel Association. Crude steel production increased 0.9%, the lowest rate in at least 24 years, according to Bureau of Statistics data. Exports jumped 51% to a record high of 93.8 million metric tons. In a report published earlier this year, UBS predicts that worldwide iron ore reserves transported by sea will increase 6.3%, more than the 4% growth in demand. The global surplus will swell from 35 million metric tons this year to more than 200 million tons in 2018, according to the bank. “They believe it is not rational to reduce production to maintain the price because that would only encourage the costly mines to maintain production,” Xie observes, referring to the group of iron ore suppliers known as the “Big Four” – Rio Tinto, BHP Billiton, Fortescue Metals Group Ltd. and Vale. “Iron ore has not yet hit rock bottom,” warns the economist. ■
26
CHAMBER IN FOCUS
NEW AMCHAM RIO BOARD TAKES OFFICE The American Chamber of Commerce of Rio de Janeiro is one of the oldest business entities in Brazil. The creation of AmCham Rio in 1916 resulted from the enterprising drive of US firms recently established in Brazil that were interested in building a modern support structure to facilitate business partnerships. On March 13, Rafael Sampaio da Motta, CEO of Case Benefícios e Seguros, officially took office as its new chairman for 2015-2016. The insurance executive succeeded Roberto Ramos, a senior advisor at Odebrecht Oil & Gas. The ceremony was held at the Windsor Atlântica Hotel, in Copacabana, Rio de Janeiro, and attended by the US Ambassador to Brazil, Liliana Ayalde, Rio Governor Luiz Fernando Pezão, and AmCham-Espírito Santo Chairman Otacílio Coser. Working in a situation marked by falling oil prices, instability in public security and a retraction of infrastructure investments, the chamber’s new administration will encourage the development of diversified market niches that can ensure the sustainability of economic activities in the states of Rio de Janeiro and Espírito Santo in the next few years.
“In a time of slowdowns for the national and global economies, the US market presents an opportunity for Brazil’s export agenda. Brazil,
PR PHOTO/AMCHAM RIO
To support this drive, the organization has a new board of directors, whose members include Pedro Almeida, senior executive at IBM, João César Lima, a partner at PwC, and Fabio Lins de Castro, CEO of Prudential, as vice-chairmen.
New AmCham Rio board takes office
27
CHAMBER IN FOCUS
PR PHOTO/AMCHAM RIO
Rio and Espírito Santo need to become an increasingly integral part of the global supply chains. The way forward is encouraging the presence of our companies in foreign markets, while attracting foreign investors to operate in different segments of the domestic market,” said Rafael Motta.
First AmCham Rio board, in 1916
Services, infrastructure logistics, technology tourism are among chamber’s focuses for coming years.
and and the the
The reestablishment of closer relations with the United States, a market that is showing signs of recovery, is another growth opportunity in this context. According to Governor Luiz Fernando Pezão, it is vital to ensure cooperation and trade between Brazil and the United States, especially at a time when his state is suffering from falling oil royalties. “It is important to emphasize the strategic and fundamental value of this partnership between Brazil and the United States, particularly at a critical time for Rio de Janeiro State, whose economy is so dependent on oil. It is not easy for Rio de Janeiro to lose BRL 10 billion in revenue, but we have been doing our homework from the start and believe that bilateral relations will ensure fresh investments,” he observed. The US Ambassador to Brazil, Liliana Ayalde, stressed the importance of rapprochement between the two countries regarding the improvement of trade and for the sustainability of continued economic development. “The American Chamber of Commerce in Rio de Janeiro has been a major and important partner of the US diplomatic mission to Brazil. Trade and investment are the two most important pillars of this partnership, and together they have a huge positive impact on all other aspects of our relationship. The link between our two countries is very strong. Brazil is the seventh-largest economy in the world and the eighth-largest trading partner of the United States – without a doubt, a key market for US companies,” said Ayalde. As part of its commitment to strengthen the business environment, AmCham Rio plans to deliver solutions aimed at small and medium-sized businesses and boost growth opportunities in executive education, in addition to organizing new business missions. On the eve of celebrating its first centenary, the multisectoral organization’s membership includes over 250 companies of different nationalities that are active in the states of Rio de Janeiro and Espírito Santo. ■
28
ARTICLE
SUSTAINABILITY AND FOREIGN TRADE BY PROFESSOR JONATHAN VAN SPEIER, PhD Over the last few decades, the perspectives of sustainable development have been integrated into foreign trade by government institutions with public policies and required standards and criteria for sustainable trade and by international institutions and the private sector with voluntary standards and criteria. This global trend to sustainability creates opportunities for foreign trade in goods, services and tourism, and becomes necessary to be competitive in the market and to achieve the internationally set goals which address economic, social and human development as well as the protection and preservation of biodiversity and the environment. Sustainable practices in international trade – such as the requirement of certified products and the demand for environmental goods and services – are on the rise globally in absolute terms. There are, in fact, important steps at the global level to integrate sustainability into production and trade.
DANIEL SMITH
Multilateral negotiations under the auspices of the World Trade Organization, are initiating the discussion of an Environmental Goods Agreement to eliminate tariffs and stimulate trade in environmental goods.
Professor Jonathan Van Speier, PhD, is FCCE’S Sustainability Director
Around the world, pioneering producers and service providers are already taking advantage of new business opportunities driven by growing consumer awareness and
29
ARTICLE
more sustainable purchasing standards. Countries like Brazil, with its abundant natural and human capital, have a comparative advantage for seizing these opportunities. Recognizing the importance of these new requirements for the successful participation of Brazilian companies in foreign trade, a model is presented that has been successfully used in practice as a tool to analyze, plan and operationalize the transition to sustainability. This model includes the recognition of the roles of strategy, management, innovation and more effective and efficient practices, expanding its goals to go beyond economic and financial development to include social and human development while respecting the unique characteristics of each local and corporate culture, as well as the limits imposed by the environment and natural resources. The FCCE aims to provide several forms of support to aid its members in their efforts to realize a vision of sustainability, including events, seminars, education and training, workshops, innovation and strategies, communication, information and debate, technical and legal consulting on standards and certifications, and a dynamic collaborative network – finding solutions and sharing best practices. This article is the first in a series aimed at informing and inspiring readers and providing an environment conducive to the path of sustainability and competitiveness in international trade. â–
30
SYNOPSIS OF THE SITUATION
SOLVING THE CRISIS BY ERNANE GALVÊAS The Brazilian economy is going through a crisis in three key areas: in the public sector, the government in 2013 spent BRL 158 billion more than in 2014, and the nominal deficit rose to BRL 344 billion. As a result, public debt reached BRL 3,252 billion last year (63.5% of GDP), a BRL 567 billion increase compared to 2013, that is, in a single year. This situation is continuing in 2015 and, in just one month (January), the government debt increased by BRL 63 billion. Clearly this state of insolvency is heading for financial chaos. That was certainly why President Dilma [Rousseff] agreed to “turn the tables” and appointed the orthodox [economist] Joaquim Levy to fix the situation. Brazilian society, especially politicians, must understand this crucial change of course and give a vote of confidence to the new ministers in the economic area. Excess domestic demand compared with the supply of goods and services also created a dangerous foreign trade deficit of more than USD 90 billion in the current account in 2014. This is the second aspect of the crisis, which could lead to a flight of capital and the significant loss of our foreign exchange reserves, requiring a disproportionate devaluation of the Brazilian real/US dollar exchange rate that will have a serious impact on inflation.
PR PHOTO/CNC
The third main aspect of the crisis is Petrobras, the country’s largest company, which has become financially unstructured and lacks the resources to carry out its investment plan in the pre-salt offshore oil fields. Minister Ernane Galvêas
The solution to the first aspect of
31
SYNOPSIS OF THE SITUATION the fiscal crisis must necessarily include a deep cut in government spending through bold reductions in budget allocations for all the administrative bodies in the executive branch. There is no other way out, and indeed, the government did not even have to risk its approval ratings by proposing a tax increase. Spending cuts are the only way to ensure a “primary surplus” of 1.2% of GDP. The solution to the balance of payments imbalance has started with the devaluation of the exchange rate and should be maintained. The inevitable effects on inflation must be offset with the balance of public accounts and credit control. The matter of Petrobras, which involves a number of errors, must basically start with abandoning the sharing system and urgently returning to the model of concessions. The previous change was a serious blunder. It is imperative to go back and correct that mistake. The public will understand that this is the first step towards salvaging Petrobras. What is at stake is the resumption of economic growth and maintaining employment and income rates for Brazilian workers. REGAINING COMMON SENSE “The government came to the belated perception that the commodities boom was over. And with it went the billion-dollar allowance that allowed Lula, until 2010, to distribute income and expand the economy. “Dilma was not so lucky, but clung for a long time to the illusion that Brazil was all-powerful.
“Working, in this case, means seizing the time of crisis to remodel the house, enforce discipline and sustainability on government spending, make the economy productive and regain common sense. Keeping spending within revenue and using surplus funds to offset gross debt, which is almost 70% of GDP, is the basic premise for reducing the cost of money. Real interest of 6.5% per annum and lack of confidence are incompatible with the resumption of investment.” (Claudia Safatle - Valor, March 20, 2015)
32
PR PHOTO/PETROBRAS
“The prices of agricultural commodities, minerals and oil have plummeted. Brazil’s trade relations with the world have deteriorated, and the small amount of accumulated ‘fat’ was burned with the expansion of government spending.
SYNOPSIS OF THE SITUATION ECONOMIC ACTIVITIES The IBGE’s methodological forecasts predicted GDP growth during the Rousseff administration: up from 2.7% to 3.9% in 2011, from 1.0% to 1.8% in 2012 and 2.5% to 2.7 % in 2014, but in 2014 it was almost stagnant, at 0.1%, due to the weak results from industry (-1.2%), exports (-7.0%) and falling investment (-4.4 %). There was a drop of 3.3% in the construction industry and of 9.5% in the production of machinery and equipment. According to most market analysts, this situation is expected to continue in 2016, with the investments only resuming in 2017. Underlying all this, the question persists of the brutal tax burden and suffocating official bureaucracy. The economy is still operating with the handbrake on. Household consumption fell from 2.9% growth in 2013 to just 0.9% in 2014, the lowest result since 2003. According to the FGV ICC, the consumer confidence index shrank 2.9% in March and reached the highest historical record for the third consecutive month. The number of bad checks increased to 2.15% in February, compared to 2.02% in January and 1.95% in February 2014. The risk of water and energy rationing is being averted, as more rainfall increased the level of reservoirs in the Southeast. The water supply system for São Paulo and its metropolitan region had the wettest summer since 2011.
ANTONIO CRUZ/AGÊNCIA BRASIL
Industry In 2014, industrial production fell 1.2%, accounting for the largest share in the stagnation of GDP (+0.1%). The Petrobras disaster has hit all sectors linked to oil activities and deepened the crisis of industry in general. In February, domestic oil production fell 2.1% compared to January, amounting to 2,146 million barrels, due mainly to the shutdown of the P-19 platform in the Marlim field and P-58 in Espírito Santo for technical and safety reasons. At the same time, a new drilling record was set, reaching 2,990 meters in the Sergipe-Alagoas Basin. The auto industry is still in recession. This year, by March 19, new car sales had fallen 19.3%. In construction, according to the CNI, activity is the lowest in
33
SYNOPSIS OF THE SITUATION
According to FIESP, industrial production is expected to fall 4.5% this year, resulting in a 1.7% decrease in the national economy. Industrial capacity utilization fell from 67% to 66% between January and February. Commerce
VALTER CAMPANATO/AGÊNCIA BRASIL
five years. SECOVI-SP data show that new home sales fell by 28%. Production of machinery and equipment rose 6.5% in February compared with January, increasing 5.4% in the 1st quarter (Abimaq).
Truckers’ strike
The level of retail sales was the worst since 2003, up 0.6% in January, compared to January 2014, mainly for office equipment and materials (+19.0%) and medical supplies and pharmaceuticals (+5.05%). On the negative side, books, newspapers, etc. were hardest hit (-10.4%). Regionally, the highlights were the North (+24%) and the states of Roraima (+26%), Amapá (+18.4%) and Rondônia (+8.9%). According to the IBGE PMS, the value of services increased 1.6% in January, compared to January 2014, especially Rio Grande do Norte (+9.2%), Ceará (+7.3%) and Pará (+6.6%). Fuel sales fell 0.4% in the 1st quarter due to Carnival and the truck drivers’ strike. In São Paulo, real retail sales fell 5.5% in December 2014 (Fecomércio-SP). The CNC revised its projection of commerce growth in 2015 to +1%. The household consumption intention index (ICF) fell 14% in March against March 20 14, while the consumer confidence index (CCI) fell by 15%, according to Fecomércio-SP. The percentage of indebted households increased from 57.8% to 59.6% between February and March and intended consumption (ICF) fell 6.1% in March compared with February and 11.9% against March 2014. Farming According to the IBGE, farm production reached 192.8 million metric tons in 2014 and is expected to reach 199.6
34
SYNOPSIS OF THE SITUATION million tons in 2015. In the previous harvest, wheat production rose 21.6%, soy by 9.8% and beans by 9.6%. Cotton had a negative change (-7.8%), along with potatoes (-19.4%) and corn (-6.2%). The delayed harvest caused a 43% drop in soy exports in the 1st quarter, totaling USD 2 billion against USD 4.5 billion in the same period of 2014. The average value of exported soybeans fell from USD 530.9/ton in December 2014 to USD 397.3 in March. Between 2013 and 2014, cattle slaughter fell 1.5%. Job Market The unemployment rate rose to 5.9% in February (5.1% in February 2014) and work income fell 1.4% between January and February, the first decline since 2011. According to the Continuous PNAD (National Household Sample Survey) in January the rate was 6.8%. In the SĂŁo Paulo metropolitan area, according to the DIEESE, unemployment rose from 9.8% in January to 10.5% in February. Jobless figures rose by 1.138 million. In February, 2,400 job vacancies were closed (Source: Caged).
MARCELLO CASAL JR./AGĂŠNCIA BRASIL
The number of people employed in industry fell 4.1% between January 2014 and 2015. Over 12 months, there was a 3.4% drop. About 6,000 jobs have been cut in the machinery industry since the beginning of the year (Source:
35
SYNOPSIS OF THE SITUATION Abimaq). The shipyards have laid off 28,000 workers since the beginning of 2014. The Government issued an Interim Measure (MP) extending the current minimum wage adjustment policy from 2016 to 2019. Financial Sector The Government clearly intends to reduce credit expansion in state-owned banks, but the effects of that intention have not yet been felt. In 12 months, by February, credit expansion continued at an annual rate of 11%, an increase of 5.2% in private-sector banks and 18.1% in public-sector banks. Interest rates in the financial system, driven by Brazil’s overnight rate (SELIC), continue to rise. Interest on overdrafts rose from 209% to 214% per year, and for credit cards, it went from 334% to 342%. BNDES disbursements will tend to decline, according to new guidelines to reduce inflationary pressures. In 2014, there was a 1% reduction compared with a 15% drop in the number of queries. Household debt rose from 57.8% in February to 59.6% in March. According to the CNC, that increase occurred for the second consecutive month, but maintained the annual downward trend. The default of major Petrobras suppliers is having a powerful impact on the banking system. Inflation Inflation in the retail sector gained momentum in January and February, driven by changing fuel, energy, and urban transport prices and the exchange rate. The IPCA/IBGE (Extended National Consumer Price Index) reached 7.7% in 12 months. In March, the forecast IPCA was 1.24%, the same level as in January and February, and the IGP-10 came to 0.83%. In the food sector, the highlights were onions (+19.1%), carrots (+18.3%), tomatoes (+13.0%), eggs (+12.0%), vegetables (+7.7%) and black beans (+4.2%). Energy bills rose by 10.9%. Market analysts project an IPCA of 8% in 2015, while the Central Bank allows 7.9%. Basic staple items in São Paulo rose by 0.71% from January to February, according to the DIEESE. In the wake of all these increases, other prices and tariffs will be adjusted for inflation, leveraged by the legal minimum wage adjustment. The Director of Economic Policy of the Central Bank considers that the current situation is transient and predicts that the cycle of increases in Brazil’s overnight rate (SELIC) will continue (!?). Public Sector In February, federal revenue reached BRL 84.982 billion, with the help of BRL 4.64 billion in atypical revenue, representing a real increase of 0.49% against February 2014. In two months, revenues reached BRL 215.26 billion,
36
SYNOPSIS OF THE SITUATION compared with BRL 206.81 billion in 2014. Social Security revenue totaled BRL 58.3 billion in the first two months, a real decrease of 3.17% that will have to be covered by the National Treasury. The federal budget approved by Congress includes BRL 1,429 billion in revenue, compared to BRL 1,203 billion in 2014 (+19%), not including tax increases planned for the CIDE and the IOF. In total, revenue is expected to reach BRL 2.84 trillion. Infrastructure projects, which were being carried out by large contractors with financing from the BNDES and the pension funds of state-owned companies, are virtually paralyzed. Galvão Engenharia, one of the contractors involved in Operation Carwash, has filed for bankruptcy. Foreign Trade The year 2014 was the worst for the balance of payments in recent decades. In the 1st two months of 2015, the situation worsened, with a trade deficit of USD 6.0 billion against USD 4.0 billion in the same period in 2014. Average daily exports in March stood at USD 755.4 million, down 18.6% compared to the same period in 2014, due to the 32.4% drop in exports of commodities and 6.7% in manufactured goods. The current account deficit closed at USD 91.3 billion last year, and the Central Bank has made an optimistic forecast of USD 80.5 billion for this year. In February, the gross foreign debt reached USD 557.8 billion, USD 1.6 billion more than in December 2014. Extremely optimistic, the Central Bank predicts a drop in current account deficits in 2015, which should fall to USD 80.5 billion. The S&P agency has maintained Brazil’s investment grade rating. After a round of talks, the MDIC (Ministry of Development, Industry and Foreign Trade) signed a bilateral trade agreement with the United States. An agreement on Brazil-Mozambique investments was also reached. The Central Bank announced the end of foreign exchange swaps, but will maintain the contracts still in effect. Outside Brazil, the highlights are the 2.2% growth of US GDP in 2014 and the indication that there will be no interest rate hikes in the first half of the year. That country is beginning to feel the drop in oil and gas production and the harvest. In Europe, the ECB is continuing to grow liquidity by purchasing € 97.8 billion in government bonds in the portfolios of banks, which is causing the devaluation of the euro against the dollar. In less than a year, the exchange rate fell from USD 1.39 to 1.09 per euro. The problem of Greece has not yet been resolved. In Asia, the big news is the creation of the Asian Infrastructure Investment Bank, which has been joined by several European and Asian countries, despite US opposition. ■
37
PR PHOTO
LIFESTYLE // FOOD
WINE IS ALL AROUND US A global favorite, the beverage is cultivated in different parts of the world; Brazilian exports are growing year by year By LEONARDO ANJOS
38
LIFESTYLE // FOOD Wine aficionados can take pride in sharing an ancient culture because, although its origins are unknown, it can be traced back to prehistoric times due to the remnants of grape seeds found in caves. Because they are easily fermented, grapes produce an alcoholic beverage that is linked to various kinds of events and peoples of all ages. Unlike other drinks, wine is universal and enjoyed in nearly all countries worldwide, whether because of its unknown origins or the ease of obtaining juice from a bunch of grapes and storing it in a container. Far beyond pleasure, wine goes where other alcoholic beverages cannot, because studies have proven its health benefits when consumed in moderation. Your heart, for example, will thank you for drinking a glass a day. It strengthens the immune system, is good for the bones and memory, and has fewer calories than other drinks. “Wine is the beverage that goes best with food. It is always associated with fine dining and good conversation,” explains Reinaldo Paes Barreto, a director of the Portuguese Chamber of Commerce and Industry of Rio de Janeiro, who has written many books on wine.
DANIEL R. CARNEIRO /PR PHOTO
Barreto says that the advantage of being a wine lover is that one can discover new flavors that transcend borders and provincialism, “although the wines produced in some historically qualified regions – the Bordeaux and Bourgognes, Tusscans, Riojas, Douro, Californians – come from the finest terroirs. Regions like Brazil offer different flavors, and a good wine drinker is, above all, curious to try new things,” he explains.
Reinaldo Paes Barreto
39
LIFESTYLE // FOOD Brazil produces roughly 200 million liters per year of wines called “garrafões” (litrally, “big bottles”). Its output of fine wines, particularly white and red, is roughly 60 million liters per year, and the market is growing. According to Barreto, this country has the specialists, workforce and raw materials required to produce excellent products. All it needs is better tax incentives. In his view, the sparkling and white wines produced in Santa Catarina and the São Francisco Valley are of excellent quality and personality. “The biggest advantage of being a connoisseur is being part – whether as an amateur or professional – of the culture of a charming product whose consumption is on the rise,” says the expert. Barreto attributes the drink’s success to being the oldest in history, having been found both on the tables of kings and nobles, as well as the common folk of Europe, and is seen in famous artistic expressions. Because of that, it is well received in social gatherings. He also points out a curious fact: “the word ‘companion’ is derived from cum panis, he who shares bread and, if it is Biblical, consecrates the wine.” Brazilian exports Last year, Brazilian wine exports grew by 76.5% in value compared to 2013. Domestic wineries exported a total of USD 9.5 million, corresponding to 2.6 million liters of fine and sparkling wines. The UK was the main destination, followed by Belgium, Paraguay, Germany, Netherlands, the United States, Japan, Colombia, China and Switzerland. Barreto points out that China is the dream market. This success is largely due to the Wines of Brazil sector project, developed through a partnership between the Brazilian Wine Institute (Ibravin) and the Brazilian Agency for Export and Investment Promotion (Apex-Brazil). Currently, there are 31 wineries associated with the project. Roberta Baggio Pedreira, the manager of Wines of Brazil, is celebrating. “In 2014, the Wines [program] marked its 10th anniversary, and the positive figures are the result of the work done by the industry over that time, such as publicity, investment in technology, and tailoring products to international consumer demand. The category of Brazilian wines is gaining more visibility, and large chains in other countries have opened their doors to the Brazilian product.” Barreto argues that we should take advantage of the boom sparked by clever marketing during the World Cup and stay competitive. “The market sees us as a competitive commodity in terms of price. We just have to convince them,” he concludes. Lebanon One of the oldest wine producers in the world, Lebanon has vineyards described in biblical texts, with the first harvests dating as far back as 3000 BC. That center of production is suffering constant bombing, but even so, the surviving vineyards are among the most celebrated in the world and their wines are prized in collections of rare vintages, because Lebanese winemakers’ production does not exceed 500,000 bottles per year, giving priority to
40
ROBERTO SILVA /PR PHOTO
LIFESTYLE // FOOD
Zafer Chaoui, President of the Union Vinicole du Liban, Joseph Sayah, Lebanese Ambassador to Brasil, and Kabalan Frangieh, Lebano’s Consul General in São Paulo
quality. With an average of 9 million liters produced annually and an industry estimated at USD 41 million, Lebanon exports mainly to the UK, France and the United States, and is now beginning to look towards Brazil. Last year, ten Lebanese producers visited Brazil, six of whom lacked a domestic importer – until then. The group was accompanied by the president of the Union Vinicole du Liban, Zafer Chaoui. Barriers have been broken and markets created. Now that a path has opened, they might also try Brazilian products. Zafer observes that in 2014, about 62,000 bottles left the port of Beirut for Brazil. Confirming the trends pointed out by connoisseur Reinaldo Paes Barreto, the President of the UVL enjoys the Brazilian products, but the biggest favorites are sparkling and white wines. According to him, the good weather conditions in the Bekaa Valley allow for natural production, almost without the use of chemicals. The intention is never to compete in terms of quantity, because “Lebanese wine is limited, focusing production entirely on product quality,” he says. To gain market share in Brazil, they are working with a local importer that handles all marketing activities, including wine tastings and participation in fairs and events in various parts of the country. ■
41
LIFESTYLE // ARTS & CULTURE
FREE SOFTWARE FOR LIBRARIES In mid-2006, during the administration of National Library President Paulo Fernando Marcondes Ferraz, the SABIN (Friends of the National Library Society) proposed the first project to develop a new expanded version of a set of computer programs known as BIBLIVRE to computerize libraries of all sizes and enable them to communicate with each other. The Ministry of Culture approved the proposal under the auspices of the Rouanet Law, which provides tax incentives for social and cultural development, and the project was sponsored by IBM Brazil. BIBLIVRE was completed during the administration of Jean-Louis de Lacerda Soares, with the support of the COOPE/UFRJ. The program is now in its fourth generation. From the outset, the project has provided the software free of charge to libraries wishing to use this technology, in the form currently known as freeware. Because of this feature, the project was renamed Biblioteca Livre (Free Library). Since its inception, the motivation of the project has been to promote digital inclusion by computerizing libraries using free software. When it became aware of the objective and social and cultural relevance of the project in late 2006, the ItaĂş group decided to sponsor BIBLIVRE. The executive project director, Ubaldo Santos Miranda, says that the program is used in several Brazilian states and even other countries, as it is available in Portuguese, English and Spanish. Seven thousand libraries have registered voluntarily, but the number of institutions using BIBLIVRE is much higher, since the software is free and registration
PR PHOTO
The BIBLIVRE Project Team
42
LIFESTYLE // ARTS & CULTURE
12 reasons to use BIBLIVRE 1 – Zero cost; 2 – Fast and practical tool, easy to use; 3 - Access to the catalogues of any library in the world through the Z39.50 protocol; 4 – Can be used on Windows, Linux, Unix or compatible systems; 5 - Simple interface: different materials can be catalogued in bibliographic databases (books, pamphlets, theses, journals, journal articles, manuscripts, images, cartography, audiovisuals, music [sound], sheet music, computer-readables, 3D objects); 6 - Searchable by author, title, subject, ISBN (International Standard Book Number), year of publication, all attributes, serial number of the work and heritage listing; 7 – Allows cataloguing of the collections of libraries and online consultation of titles, fact sheets, excerpts from books and even complete works; 8 – Allows works in the public domain to be read and printed; 9 – Fosters the computerization and modernization of your library; 10 – Freeware: It enables users to customize the program according to their needs; 11 – Used by more than 6,000 libraries in Brazil and Portuguese-speaking countries; 12 – Permanent and free updates. is not required. “In 2015, BIBLIVRE is celebrating its ninth anniversary, a period marked by victories, including the growing number of users and the confidence of professional librarians. Gaining the librarians’ admiration and loyalty is a priceless achievement, because this has always been the most important goal for our team. Therefore, we are striving to offer an outstanding different tool that is more and more complete, with a simple and intuitive interface. This has led us to win over users in other countries who are also using the program and making their libraries’ collections available on the Internet,” explains Miranda. The program can be downloaded free of charge here: http://biblivre.org.br. ■
43
LIFESTYLE // BOOKS
BOOKS IN SQUARES
That is why Cristina Figueiredo has equipped two buses to work as mobile libraries that have been making the rounds in those remote areas for over two years. “For us, it is absolutely vital for our youth to have access to books, so that even in the poorest areas, these children are not deprived of reading materials,” she says.
PR PHOTO
Unlike the favelas in the southern zone of Rio de Janeiro, low-income communities in the northern zone have little access to public libraries. There are no facilities that offer these children and adolescents full access to books for their age groups.
“A country is made of men and books,” Brazilian children’s author Monteiro Lobato once said. The “Books in Squares” program is based on two libraries on wheels, each carrying about 1,300 titles. These bus-libraries are fully equipped. “We even have our own generators,” says Figueiredo. “Initially, we proposed focusing on books for young people, but the kids started coming with their parents, and because of their demand, we added a small section of 20% of the collection for adult readers. The remaining 80% are children’s books. We also offer a selection of books in Braille for adults and illustrations in Braille for visually impaired children,” says the manager. Readers can also use the bus-library as a reading space. They can borrow books free of charge and return them the next time the library on wheels comes around. Posters and brochures are distributed in public squares, neighborhood associations and municipal schools, informing readers of the bus-library’s arrival.
DIVULGAÇÃO
In 2012, the year the project was launched, it received 2,800 visitors. In 2014, that number surpassed 10,000 visits. “We have only lost 15% of the titles, which shows that, even though they have had no access to books, these children and young people are aware of the importance of books and reading. And long live books,” concludes Cristina Figueiredo. ■
44