Viewpoint Petrobras corruption scandals threaten to unseat Rousseff n Economy & Business n n n n n Energy & Environment Good prospects for Brazil Infrastructure issues Banking and financial policy Economy and business Economists give voice n n n n Oil & gas in brief Petrobras news Biofuels in brief Electricity sector Politics, Law, Society n n n n n n n Pressure in the Chamber The campaign heats up Senators and governors Workers’ Party plans Politics in brief Legal issues Social issues International Affairs n n Diplomatic briefs International trade Veirano Advogados’ Monthly review of economic, legal, and political developments photograph: Roberto Stuckert Filho/PR 1 16 Petrobras corruption scandals threaten to unseat Rousseff Multiple charges of corruption within Petrobras have launched five federal police investigations of the company, in addition to others. of the major incident chaired the company board. While the full effects of the crisis remain ahead, it is possible to establish a chronology of the facts. The company has lost about 51 percent of its market value within the last three years, shrinking from US$197 billion to US$90 billion. It dropped from 12th largest company in terms of global market share five years ago to 120th, according to the Financial Times. Over the same period, production from Brazilian oil fields has stagnated at approximately 2 million b/d. Chaired by Rousseff, in 2006 the Petrobras board approved the purchase of 50 percent of a refinery in Pasadena, Texas, for R$360 million (approximately US$165 million). The refinery had been acquired one year earlier by Belgian company Astra Gl for US$42.5 million, and Petrobras is reputed to have paid more than 10 times the market value for its share of the operation at the time. What appears to be a scandal on a monumental scale is now tainting President Dilma Rousseff, who at the time After a dispute with its partners in 2008, Petrobras was obliged by a contractual clause to buy the other … april 2014 · Volume 03 · Number 04 04.14 Economy & Business Energy & Environment Politics, Law, Society 50 percent of the refinery, which it did in 2012, paying US$1.18 billion. VistaBrazil is published monthly Produced by Prismax Consultaria Editor: Georges D. Landau Production: Blakeley Words+Pictures © 2014 · Veirano Advogados and Prismax Consultoria All text rights reserved Vista Brazil is sponsored by Veirano Advogados Founding Partner: Ronaldo C. Veirano Managing Partner: Pedro Aguiar de Freitas 2 16 Rio de Janeiro Av. Presidente Wilson, 231 / 23º andar 20030-021 – RJ (55 21) 3824 4747 Phone (55 21) 2262 4247 Fax contact@veirano.com.br www.veirano.com.br São Paulo Av. Brigadeiro Faria Lima, 3477 / 16º andar 04538-133 - SP (55 11) 2313-5700 Phone (55 11) 2313-5990 Fax Porto Alegre Rua Dona Laura, 320 / 13º andar Rio Branco – 90430-090 – RS (55 51) 2121 7500 Phone (55 51) 2121 7600 Fax Brasília SCN Qd. 2 Ed. Corp. Financial Center – Bloco A 10º andar/Sala 1001 – 70712-900 – DF (55 61) 2106 6600 Phone (55 61) 2106 6699 Fax Disclaimer This newsletter is intended to provide general information regarding recent events, developments, and trends in Brazil. It is not intended, nor should it be relied on, to provide legal analysis or legal advice on any of the information covered in the newsletter. Veirano Advogados and Prismax Consultoria cannot ensure against or be held responsible for inaccuracies. To the full extent permissible by law Veirano Advogados shall have no liability for any damage or loss (including, without limitation, financial loss, loss of profits, loss of business, or any indirect or consequential loss), however it arises, resulting from the use of any material appearing in this publication or from any action or decision taken as a result of using information presented in the publication. Rousseff says that she approved the transaction based on a deficient report whose author, Nestor Cerveró, an international director for Petrobras at the time, was then fired on 20 March 2014 while vacationing in Europe. The refinery purchase is currently being investigated by the federal police, the Federal Court of Accounts (TCU), and the office of the Federal Prosecutor. The Brazilian Congress on 9 April also approved the creation of a mixed parliamentary commission of inquiry (CPMI) to deal with the matter and other corruption scandals. It had been called for by opposition candidate Senator Aécio Neves of the Brazilian Democratic Movement Party (PMDB) and violently opposed by the Workers’ Party (PT). PT wants to avoid repercussions for the president and for the party itself, but it is bound to have electoral consequences. An opinion poll released by Datafolha in the first week of April showed Rousseff’s support dropping from 44 to 38 percent the previous month. Some analysts suggest, however, that the timing of the scandal smacks of political opportunism, considering that the refinery sale was effected years ago. International Affairs As well, former director for supplies Paulo Roberto Costa was apprehended by the federal police on 20 March – the first arrest of a company director in 60 years. He is alleged to have been involved money laundering. As if that were not enough, the company is being investigated over allegations that its officials took bribes in exchange for steering contracts to SBM Offshore NV, a Netherlands-based supplier for offshore vessels. The Office of the Federal Public Prosecutor will join forces with the federal police to investigate the charges of corruption in Petrobras related to SBM Offshore. Petrobras is also conducting its own investigation. On 12 March the Chamber of Deputies approved, by 268 votes to 28, the creation of an external commission of inquiry to investigate the charges related to SBM Offshore. The vote represents a political defeat for the government. On 27 March the Senate Commission of the Environment approved an invitation to both Minister of Mines and Energy Edison Lobão and Petrobras CEO Maria Graça Foster to testify in the Senate about the Pasadena refinery and the energy crisis. And on 7 April, the company denied a suggestion that it had shelved plans to sell debt in local and … Veirano Advogados Offices in Rio de Janeiro, São Paulo, Porto Alegre, and Brasília … april 2014 · Volume 03 · Number 04 Viewpoint international markets later this year, allegedly worried that investor perception about the extent of the scandals could dampen demand or raise borrowing costs. Energy & Environment Politics, Law, Society Economy & Business The Lula angle Rousseff and former president Lula da Silva met for three hours on 4 April in São Paulo. It was their first meeting after the news emerged about the Pasadena refinery, and Lula repeatedly advised Rousseff to do her utmost to thwart the CPMI about Petrobras, which he regards as a “weapon” against her. 3 16 Lula addressed bloggers in Rio de Janeiro on 8 April, setting the tone for the Rousseff campaign by urging her to take the offensive on several issues – notably the CPMI. He reminded his listeners that the mensalão CPI had started with the investigation of a minor incident of corruption in the postal services and had escalated to dominate the national political scene. As a result, the former president thinks that it is essential to defend Petrobras against all investigations. Lula also argues that the president should take a proactive role in her re-election campaign, while emphasizing his own role as her chief ally despite ever more insistent demands for his return to power. Rousseff, for her part, said that she will not yield a millimeter in her political campaign. Other factors threatening her drive to re-election are mixed economic news, power shortages caused by drought, and the rising costs of hosting the FIFA World Cup of soccer. Veirano Advogados International Trade / WTO … International Affairs Even so, the Central Bank has sustained its market interventions in order to force the value of the real upward. Foreign investment is attracted by a number of factors, among them an interest rate of 11 percent per year. US pension funds and mutual funds are strong players in the financial market. On the negative side of the coin, inflation rose 1.48 percent in March, the largest increase since July 2012, and was the highest economic indicator for the month of March. Inflation has increased 7.55 percent over the last 12 months, well above the target ceiling of 6.5 percent. Infrastructure issues The price of inefficiency In March alone, Brazilian enterprises raised US$12 billion Good prospects for Brazil Foreign investment and successive interventions by the Central Bank have led to strongest exchange rate for the real against the US dollar in the last five months (R$2.217) in the Brazilian market. While Brazil imports more than it exports and thus loses foreign exchange, in the financial market the reverse is true: copious foreign investment has increased the value of the Brazilian currency. The Brazilian stock exchange Bovespa has attracted US$2 billion since the beginning of the year and is performing above expectations. In March alone, Brazilian enterprises raised US$12 billion, and the economy is buoyant thanks to the strong inflow of funds invested in the stock exchange and in debt papers issued by the government. Brazil has dropped 20 positions in the global ranking of logistics, according to a World Bank survey of 160 countries. The report released on 20 March takes into account business perceptions of the efficiency of the country’s transport infrastructure. Brazil is now ranked 65th, its worst ranking since the survey was launched in 2007. Entrepreneur Jorge Gerdau, head of a complex of steel mills in Brazil and abroad and chair of the Management Policies Committee of the government, remarked on 8 April that Brazilians ought to rebel against the poor quality of public services, especially logistics. Designing concessions The government has decided to change the procedure for federal highway and railway concessions, whose design will cease to be the monopoly of public enterprise Estruturadora Brasileira de Projetos (EBP). This should make concession projects more attractive to the private sector. … april 2014 · Volume 03 · Number 04 Economy & Business photograph: flickr/c melo Viewpoint Viewpoint Economy & Business Putting money in The CCR Group and Arterics, two of the largest concession holders for highways, are together expected to invest over R$6 billion this year in their highway projects, double what they invested in 2013. Politics, Law, Society International Affairs photograph: wikimedia/Diego Silvestre The Secretariat for Civil Aviation (SAC) announced on 17 March that it will hold a public hearing on a proposed national plan for concessions of regional airports. Energy & Environment Airport concession holders will invest R$3.2 billion this year, according to a survey conducted by the National Agency for Civil Aviation (ANAC) and the National Agency for Land Transport (ANTT). Odebrecht will invest R$30–40 billion over the next three years, largely in infrastructure in Brazil and abroad. The conglomerate is involved in sanitation projects as well as oil and gas. Vale will invest R$7 billion in port logistics through to 2017, of which 70 percent will go to Terminal de Ponta da Madeira. The Maranhão terminal is to be used mainly for iron ore exports. Giant French firm Louis-Dreyfus Commodities (LDC) will invest US$1 billion in logistics for grains exports over the next five years. Highway to the future President Dilma Rousseff on 12 February signed concession contracts for three lots of highways tendered in late Veirano Advogados Infrastructure & Projects … A planned underwater tunnel between Santos (shown here) and Guarujá is estimated to cost R$1.8 billion 2013: BR-163 in Mato Grosso and Mato Grosso do Sul, and BR-040 between Juiz de Fora and Brasília. The contracts involve total investment of R$18.2 billion over 30 years, with road duplication to be concluded within five years. To that end it has ordered 2,000 railway carriages from AmstedMaxion and Randon for the transport of bulk commodities in its various logistical corridors. Tunneling under water Railway concession holder Transnordestina Logística (TLSA) on 26 March received R$400 million from Valec, the federal railway builder, toward the 25 percent stake the latter is taking in TLSA. The government of São Paulo received proposals on 13 March from five consortia bringing together 18 enterprises interested in the contract for an underwater tunnel between Santos and Guarujá, two coastal cities in the state. The project, estimated to cost R$1.8 billion, will be financed in part by the Inter-American Development Bank (IDB), whose rules will apply to the tender. Some 11 Brazilian enterprises and 7 foreign ones will participate. Taking a stake Railway news Running a ring round São Paulo The railway ring around the city of São Paulo, Ferroanel, is about to take off with support from the state of São Paulo through a partnership between the government and the private sector. The project is essential to improve access to the port of Santos. It will cost R$2 billion. Rolling stock Vale subsidiary Valor de Logística Integrada (VLI) plans to invest R$9 billion in ports and railways through to 2017. The port of Itagui, Maranhão, is to receive up to R$3 billion through to 2020 in order to expand as the Port prospects … april 2014 · Volume 03 · Number 04 4 16 Economy & Business cargo hub for the center-west and “Matopiba” area: the states of Maranhão, Tocantins, Piauí, and Bahia. The port moved 15.3 million tons of goods in 2013, and volume is expected to rise to 17 million tons. The bulk of expected investment will come from the private sector. The Maranhão grain terminal, for example, is under construction by a consortium that includes Glencore Services and Trade, CGG Trading and Growth Consortium, Amaggi Exportação, and NovaAgri. It is expected to cost around R$600 million. Banking and financial policy 5 16 S&P cuts, Moody doesn’t Standard & Poor’s (S&P) has lowered Brazil’s debt rating from BBB to BBB–, the agency’s lowest investment-grade rating. At the same time, it cut the credit ratings of Petrobras, Eletrobras, and mining company Samarco. S&P finds Brazilian fiscal targets “challenging,” and discards as unlikely the possibility of any reform before the next election. The rating agency nevertheless clarified that Brazil is not at risk of losing its investment grade. Another lowering of the rating is “not on the horizon,” and the country’s prospects are stable in light of the solid composition of its debt. Only three days after the announcement, Brazil borrowed €1 billion with an overseas issue of bonds. Minerva, a meat-packing company, issued US$300 million in Veirano Advogados Banking & Finance … Energy & Environment Politics, Law, Society perpetual notes. It seems that the rating cut was mostly ignored by investors. Moody’s has decided to maintain Brazil’s credit rating at Baa2 rather than follow the leadership of S&P. The agency does not expect any surprises in either the domestic or the international economic scenario in 2014, and intends to wait for Brazilian election results and evaluate the proposals of a new government before adjusting its credit rating. Central Bank policy An unexpected hike in food prices has alerted the Brazilian Central Bank to the risk of further inflation. While testifying on 18 March before the Senate Commission on Economic Affairs, Central Bank president Alexandre Tombini signaled the possibility of new increases in the Selic basic interest rate, due to the pressure of agricultural products. He added, however, that monetary policy should be able to soften the impact of this price shock. International Affairs papers denominated in reais yielded 3 percent interest this year, and the proportion of Brazilian debt papers in foreign hands rose to 16.5 percent in January. According to JP Morgan, this is the highest yield in four years. Bonds, bank bonds In order to take advantage of a good phase in the market and obtain greater liquidity for some of its bonds, the Banco do Brasil on 18 March issued bonds worth €300 million, yielding 3.75 percent and due in July 2018. Demand exceeded €800 million. Stiff competition The president of the US Ex-Im Bank, Fred Hochberg, visited Brazil in early April to attend a meeting of national export credit agencies and to promote the bank’s activities in Brazil. Hochberg sees opportunities in various parts of the Brazilian economy, such as oil and gas, mining, biofuels, the medical sector, air transport, and energy. In its quarterly report on inflation, the Central Bank expected the price index to remain above 6 percent per year until the second half of 2015. The bank also advised that it will extend the rising interest rate cycle and cut the forecast for GDP growth from 2.3 to 2 percent in 2014. Ex-Im Bank has lost 23 percent of its country portfolio over the last five years, largely due to competition from the National Bank for Economical Fund and Development (BNDES). In 2012, Ex-Im disbursed US$28 billion globally. The bank’s Committee on Monetary Policy (Copom) announced on 2 April the ninth consecutive rise in the basic interest rate, from 10.75 to 11 percent per annum, the highest since November 2011. The Ministry of Finance has renegotiated loans of R$238.2 billion to BNDES, equivalent to half the R$415.1 billion debt owed by the bank to the National Treasury. BNDES raises funds Foreign investors stay the course BNDES raised US$1.5 billion in early April by means of a bond issue, in two tranches. This was the bank’s second bond issue this year. The last one, of €650 million, was directed at the European markets whereas this new one was 80 percent subscribed by US investors. Inspired by high interest rates and relatively low risk, US asset managers have been buying Brazilian debt. Sovereign On 27 March the bank closed financing contracts This compares with 3.5 percent in Mexico and 12 percent in Nigeria. … april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business Swiss roll into Brazil Nearly three years after having bought 30 percent of the capital of GPS Investimentos Financeiros e Participacoes, which is the largest independent asset manager in Brazil, Swiss banking group Julius Baer bought another 50 percent share, giving it a majority stake. The deal, which cost the Zurich-based Baer 100 million Swiss francs (US$113 million), is part of a drive to expand abroad as a crackdown on tax evasion hits private banking in Switzerland. 6 16 Moelis opens in São Paulo New York-based investment bank Moelis & Company has opened an office in São Paulo, its first in Latin America. Moelis focuses on financial advisory services and in particular on mergers and acquisitions. It expects M&As to surge in Brazil. M&A activity has lagged behind the boom in equity markets. If merger activity catches up, boutique banks such as Moelis will be in a good position to take advantage of the rebound. The private equity firm is about to make an IPO. Taxing overseas profit At a meeting with large entrepreneurs held on 12 March, Minister of Finance Guido Mantega accepted the idea of changing Provisional Measure no. 627, which deals with taxation of company profits earned overseas. Specific changes to the measure will be proposed within a fortnight by a working group consisting of representatives of the business sector, the Ministry of Finance, and the Federal Revenue (which objects to any changes). Politics, Law, Society Government debt The savings that the government holds for payment of interest on the public debt decreased nearly 50 percent in January–February in relation to the same period in 2013. The Central Bank has increased its forecast of the external account deficit in 2014 from US$78 billion to US$80 billion. The increase is due principally to a reduction of the trade surplus, which dropped from US$10 billion to US$8 billion this year. International Affairs photograph: wikimedia/United States Treasury Department with the Japan Bank for International Cooperation (JBIC) and Mizuho Bank, in the amount of US$800 million. Energy & Environment Minister for Social Security Garibaldi Alves regards the government’s estimate of a R$40.1 billion deficit in the social security system for 2014 as unrealistic. He puts the figure at R$49.9 billion. Rewarding innovation Financiadora de Estudos e Projetos (FINEP), an agency of the Ministry of Science and Technology, plans to increase its innovation credit by 60 percent, raising the limit to R$10 billion in 2014 from R$6.3 billion last year. Economy and business GDP growth estimates The year 2014 began with activity above expectations in terms of income, employment, industrial production, retail sales, and cargo movements, and that means avoiding a drop in GDP growth in the first quarter of the year. The International Monetary Fund (IMF) World Economic Outlook, released on 8 April, forecasts growth of 1.8 percent in 2014, 2.7 percent in 2015, and 3.5 percent in 2019. The head of PriceWaterhouse Coopers in Brazil, Fernando Alves, estimated that GDP growth in 2014 of between 2 and 2.2 percent, and slightly less in 2015. US Secretary of the Treasury Jacob Lew Talking to the US Minister of Finance Guido Mantega met US Secretary of the Treasury Jacob Lew in São Paulo on 17 March to discuss the impact of a recovering US economy on emerging countries like Brazil. Mantega considers the recovery insufficient. The two also discussed the governance of the International Monetary Fund and new US sanctions against Russia prompted by the crisis in Ukraine. What business wants The American Chamber of Commerce in São Paulo (AmCham), canvassed 170 São Paulo business people representing large enterprises and found that 41.6 percent of them intend to invest more in Brazil in 2014. Two factors are noted as deterrents: deficient infrastructure and the lack of rainfall. april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business Politics, Law, Society Introduced by Lloyd’s Brazil’s industrial production rose 2.9 percent in January but is still far from recovery. Industry still operates at 4 percent below the record level of May 2011. The majority of retail chains and manufacturers of consumer goods plan to invest at the same level as 2013 (R$12.26 billion) or higher in 2014. Lloyd’s announced on 8 April the entry into the Brazilian market of one of its underwriters. Bermuda-incorporated insurer Hiscox, which specializes in niche areas such as coverage of hacking, kidnapping, and satellite damage, also offers property and contents insurance for highervalue properties. Hiscox is the latest company to enter the Brazilian insurance and reinsurance market. American giant private equity fund KKR (formerly Kohlberg Kravis Roberts and Co.) in early April closed the purchase of a controlling share in Brazilian information technology firm Aceco Ti, which specializes in the construction and maintenance of data centers. While the cost of the acquisition was not disclosed, the company is worth an estimated R$1.5 billion. Card payment processing Banco Santander Brasil announced on 7 April that it had purchased the operations of GetNet Technologia for R$1.104 billion. GetNet is one of the largest card payment processors in Brazil, controlling about 6 percent of the US$300 billion industry. It will be owned by Santander Brasil’s own local card-processing unit. IT complementarity Chilean information technology company Sonda announced on 13 March that it had bought Brazilian IT company CTIS Tecnologia for about US$170 million. The final acquisition price could increase by US$36 million, depending on 2014–18 earnings. Sonda sees the acquisition as a way to increase its coverage in Brazil. Veirano Advogados Commercial Contracts … International Affairs photograph: Argo Tractors Industrial production Data center acquisition 7 16 Energy & Environment A new plane from Embraer Embraer on 12 February presented a new jet model in the E175 category. A new wing design will permit up to 6.4 percent fuel economy. Embraer regards the 88-seat jet as a transition to the newer generation of commercial jets. Argo Tractors will open its first plant outside Europe in Belo Horizonte Weg on the world stage Vehicles and vehicle products Tractor pull Argo Tractors, an Italian manufacturer, is establishing its first plant outside Europe in Brazil. To that end, it has signed a memorandum of understanding with the government of Minas Gerais state for the installation of a plant in the metropolitan area of Belo Horizonte. The investment in fixed assets will be R$30 million. Suspended animation Eight months after buying a share of suspension manufacturer Suspensys from US company Meritor for US$200 million, the Brazilian group Randon, which specializes in the production of heavy-duty vehicles, has started expanding into the European, Asian, and African markets. Truck tanks Austrian automotive manufacturer Salzburg Aluminium Group (SAG) opened its first factory in Brazil in early April. Located at Jaguariúna, São Paulo, it will produce aluminum tanks for trucks with an initial investment of R$17 million. Volkswagen invests Volkswagen has defined a new investment cycle of R$10 billion in Brazil from 2014 to 2018. These resources will be earmarked for the development of new products and technologies in order to make the company the largest global automotive manufacturer, ahead of Toyota. Tires for all Italian tire manufacturer Pirelli will invest R$500 million to modernize and expand its factory at Campinas, São Paulo, the largest plant for the company worldwide. Pirelli also has plants in Santo André and Sumaré in São Paulo, Gravataí in Rio Grande do Sul, and Feira de Santana in Bahia. Weg, a manufacturer of electric engines and domestic electrical appliances with headquarters in the southern state of Santa Catarina, has made another step toward internationalization by acquiring a Chinese factory of small electric engines. april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business Unsold vehicles At the end of March, 387,000 vehicles were left unsold in automotive plants and retail stores. The number is equivalent to 48 days of sales and is 60 percent higher than average sales for the month. Commodity companies invest US commodities company Bunge is investing R$500 million in a new wheat mill in the state of Rio de Janeiro. US commodities firm ADM announced on 12 February that it plans to build a new complex for the production of soy protein in Campo Grande, Mato Grosso do Sul, representing an investment of US$250 million. 8 16 New and bigger plants Sweet news Italian chocolate manufacturer Ferrero Rocher has operated a factory in Poços de Caldas, Minas Gerais, since 1983. On 18 February it announced a R$200 million expansion. Energy & Environment Politics, Law, Society Economists give voice Reform and growth other, in force since 2009, consisting of economic micromanagement. The latter has been a failure, as has the policy of fiscal exemptions. Antônio Delfim Neto, a former minister of finance, of planning, and of agriculture, wrote in his column in O Estado de São Paulo of 8 April that Brazil needs coordinated reforms of the budget, security system, labor code, and fiscal and industrial policy. The social contract requires that the state’s social expenditures rise at a higher rate than GDP, he noted, but Treasury credits for public banks must be reduced and tax reform is crucial. The only way to return to growth is by increasing productivity, says Neto, “and it won’t be easy. It is like changing the tires on a truck that is moving.” The failure of developmentalism O Estado de São Paulo on 6 April published a full-page interview with Samuel Pessoa, director of the Center for Economic Growth at the Brazilian Institute of Economics (IBRE). Pessoa is a prestigious economist and currently advises putative presidential candidate Aécio Neves. Vaccine factory Merial, the veterinary arm of French laboratory Sanofi, will invest €400 million in a new vaccine factory in Brazil, thus reinforcing Sanofi’s presence in the sector of vaccines against foot-and-mouth disease. He is a severe critic of the current economic model, which he calls a “national development essay” and a tragedy for the country. Pessoa insists on the need for reforms to make the state more efficient without reducing its size, in order to give it management tools to improve the delivery of health, education, and security services. He suggested that Brazilian families today want equity rather than growth. Crop protection products TIDE Group is a Chinese company producing crop protection products. It is establishing a new plant in Brazil, regarded as the world’s most promising market in this area. He describes the formulation of Brazilian economic policy as following two different agendas: one, reflected in the 1988 Constitution, aimed at developing a comprehensive welfare state along the model of continental Europe; the Bathroom appliances Bathroom appliances manufacturer Roca Sanitários Brasil has invested R$44 million in the first phase of a new plant in Brazil. International Affairs Growth at what cost? In an interview in O Estado de São Paulo on 23 March, Workers’ Party stalwart Marcio Pochmann, who presides over party think-thank Institute Perseu Abramo and was formerly the director of the Institute for Applied Economic Research (IPEA), voiced his opinion that the only question about the Brazilian economy is how much it will grow. In his opinion, a hybrid model is needed to involve the private sector in managing the great block of investments created from 2011 to 2012. While the developed world lost 62 million jobs over that period, Brazil created 11.5 million new ones, he asserted, and about 72 percent of jobs in the country are related to the services sector. Although he indicated that Brazil has succeeded in reconciling the three important objectives of democracy, growth, and income distribution, he pointed to the need for reform in such areas as taxation in order to consolidate this process. Landowners pay little by way of taxes, and Pochmann sees it as a “brutally” unequal policy. Veirano Advogados Labor & Employment … april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business Oil & gas in brief Cowan sell off blocks 9 16 Politics, Law, Society account of Petrobras, was paralyzed for 40 days by a strike. Some 29,000 workers went on strike and some violent demonstrations ensued. International Affairs photograph: rolls-royce Energy & Environment Energy & Environment Chevron okayed to resume drilling Cowan Petroleo e Gas, the oil and gas arm of contractor Cowan, intends to diversify its exploration areas. This strategy has led the company to divest itself of a 65 percent interest in two oil exploration blocks in Namibia. US oil company Murphy Luderitz has taken a 40 percent share and will be the operator, and Austrian OMV will get a 25 percent share. US oil major Chevron has received permission from the National Petroleum, Natural Gas, and Biofuels Agency (ANP) to resume drilling in the existing wells in the Frade field in the Campos basin. The field was temporarily shut after leaks were discovered in November 2011 and March 2012, and permission to resume activity had been held up by the company’s apparent failure to deliver a full report on the causes. In Brazil itself, Cowan participates in 18 blocks, and this year expects to drill at least one block in the Recôncavo basin, in the state of Bahia. No damage was done to workers, wildlife, or the shoreline, and ANP officials said there was no sign of negligence by Chevron. Rolls-Royce will construct a new plant at Duque de Caxias Comperj hit by strike Tender, but of what? Comperj, the largest petrochemical complex in the state of Rio de Janeiro and still under construction for the The government expects the next tender for exploratory blocks for oil and gas to take place before 30 June 2015, but hasn’t yet decided whether it will be for pre-salt areas, mature areas, or new frontiers. Rio de Janeiro. The plant will assemble and test engines and other maritime equipment used in offshore drilling platforms and other vessels in oil and gas E&P. Rogue reservoir Shell Brasil is optimistic about its negotiations with Pré-sal Petroleo (PPSA) over an exploration agreement regarding block Gato do Mato (BM-S-54), located in the pre-salt layer of the Santos basin. Shell discovered the deposit and is its operator, but the reservoir exceeds the concession area, intruding into an adjoining area that belongs to the federal Union. Veirano Advogados Oil, Gas & Biofuels … Maritime equipment plant Rolls-Royce announced on 7 April that it would begin in May the construction of a new plant at Duque de Caxias, The plant will consume investment of R$80 million, and its first commission is part of a US$100 million order from Sete Brasil for equipment to be installed on six drilling platforms. Petrobras problems trickle down Domestic producers of machinery, equipment, and technical solutions for the oil and gas sector are encountering great difficulty in borrowing funds at the subsidized rates of interest available to national enterprises providing these goods and services. The Inovapetro I program has R$3 billion available to finance the development of submarine installations, surface processing, reservoirs, and wells at belowmarket rates. … april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business The enterprises involved are suppliers to Petrobras but are having to shelve innovation projects given that company’s cash flow difficulties. The government now plans to disburse just R$500 million, 16 percent of the total earmarked funds. It does, however, expect to analyze proposals and disburse resources by 2015, when pre-salt exploration will be at full tilt. Biofuels in brief Sugarcane news 10 16 Confirming its interest in ethanol production, BNDESpar has decided to acquire a share of up to R$300 million in the Center for Sugarcane Technology (CTC). CTC is owned by sugarcane giants Copersucar and Raízen, the latter a joint venture of Cosan and Shell. Drought has affected the objectives of Raízen for 2014–15. The company will nevertheless process 65 million tons of sugarcane in this harvest, maintaining previous levels and permitting an 8–9 percent return on invested capital. Consultancy Datagro forecast on 24 March, however, that 574.6 million tons of sugarcane will be processed in south-central Brazil from the 2014–15 harvest, 3.6 percent less than in 2013–14. Suzano surges ahead Suzano Papel e Cellulose is one of the largest companies in the Brazilian paper sector. On 19 March it opened a new cellulose factory in the municipality of Imperatriz, Maranhão. The US$3 billion factory will increase Suzano’s production of cellulose to 4.4 million tons per year, making it the world’s second-largest producer of blanched cellulose from eucalyptus. Energy & Environment Politics, Law, Society Petrobras news New find, deep waters International Affairs form of senior bonds denominated in US dollars. With this issue, the company will have raised US$20.5 billion so far this year. Petrobras has announced that it has found oil in deep waters in the Potiguar basin, off the coast of Brazil’s northeastern-most state, Rio Grande do Norte. The well, informally christened Pitu, yielded oil 55 km off the coast at a depth of 1,731 m. The well reached a total depth of 5,353 m, and the hydrocarbon column measures 188 m. The oil has a density of 24º API. In a rare move, however, the company’s Fiscal Advisory Board (Conselho Fiscal) recommended on 14 March that management reduce its financial leveraging to avoid the possibility that risk classification agencies will lower their ratings. Record refining The Supreme Federal Court (STF) on 18 March suspended the distribution of R$4 billion in royalties by Petrobras for one year. Petrobras reached a record volume of processing at its refineries during the month of March, The average volume processed was 2.151 million b/d, exceeding by 12,000 b/d the former record of 2.139 million b/d, reached in July 2013. Borrowing for Abreu e Lima Petrobras has borrowed R$4 billion (US$1.8 billion) in a 17-year loan from Banco Bradesco SA to help pay for work on the Abreu e Lima refinery in northeastern Brazil and at the Comperj petrochemical complex in Rio de Janeiro, a source with direct knowledge of the deal said on 8 April. The maritime support fleet Petrobras CEO Maria Graça Foster gave a press conference on 17 March that presented an evaluation of the six-year Program for the Renewal of the Maritime Support Fleet for E&P (Prorefarm). Her main message was that the fulfillment of local content requirements is not as important as is the timely fulfillment of production targets. Raising funds The program involves the construction of 146 support vessels, with high local content requirements. So far only 87 contracts have been signed, and 61 vessels are under construction. Petrobras on 10 February raised US$8.5 billion in the capital market, against demand of US$23 billion, in the Overall, Petrobras has 504 vessels under contract, … april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business Energy & Environment Politics, Law, Society of which 265 are Brazilian built, 213 are foreign, and 26 were provided under a special regime. The local content varies from 50 percent (for anchor handling and tug supply, or AHTS) to 60 percent (for platform supply vessels, or PSV) and oil spill response vessels (OSRV). Fuel price adjustment 11 16 Graça Foster on 27 March advised analysts that there will be another fuel price adjustment this year, despite the impending election. The last adjustment took place four months ago. Fuel imports this year will generate a deficit of US$11.5 billion, according to the National Petroleum, Natural Gas, and Biofuels Agency (ANP). Changing the guard Minority shareholders for the first time succeeded in electing two independent representatives to the Petrobras board, defeating state pension fund representatives and other minority shareholders linked to the government. Thus, the board will have three independent representatives and the government has had its influence reduced to seven seats. Entrepreneur Jorge Gerdau was replaced by José Guimarães Monforte, a former Citibank executive in New York. A group of foreign investors led by British firm Aberdeen Assets that collectively own 0.5 percent of Petrobras equity is advocating for a new independent seat on the board in order to improve the company’s governance. CHS Inc., a US agricultural cooperative business with global revenues of US$44 billion, has been operating in Brazil for 11 years. On 18 March the company signed a contract for the exclusive purchase of ethanol produced by Brazilian firm Usibiorefinarias, from Rio Grande do Sul. The ethanol is made from a strain of rice known as “giant rice,” developed by Embrapa and not fit for human consumption. photograph: flickr/nasa Ethanol barter International Affairs The idea is for the companies to evolve together by means of ethanol barter operations, exchanging fertilizer for biofuel. Sugar, sugar The world’s largest trading company for sugar was born on 27 March as a result of a joint venture between Cargill and Copersucar. Together they represent 25 percent of global exports of sugar. Electricity sector Drought and rationing The Committee for Monitoring the Electric Sector has raised the risk of electricity rationing in Brazil from “very low” to “low,” according to Minister for Mines and Energy Edison Lobão. The continuing severe drought has depleted reservoirs, requiring the operation of thermoelectric plants as a complement to hydropower generation. According to consultancy PSR the risk of a cut of 4 percent or higher in energy consumption rose from 24 to 46 percent. A reduction of this proportion could mean energy disconnection for 12 million homes. The executive secretary of the Ministry, Marcio Brazil’s Sao Simao Reservoir Zimmerman, testifying on 18 March at a public hearing in the Chamber of Deputies, acknowledged for the first time that Brazil faces an energy crisis. Thermoelectric plants generate 20,000 MW, but they operate at a much higher cost than hydropower plants, and that cost increased to R$10 billion in the first quarter of 2014. According to analysts at Citi Research and BTG Pactual, it is highly unlikely that the goals established by official agencies to avoid electricity rationing will be adopted. Rescue package for distributors In order to avoid further increases in electricity bills, the government announced a rescue package of R$12 billion to power distributors on 13 March. R$4 billion will come from the Treasury and R$8 billion in the form of financing through the Chamber for Marketing Electric Energy … april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business (CCEE). In order to reduce the burden on the Treasury, the government intends to raise the PIS/Cofins tax on imported products. According to Brazilian Electricity Regulatory Agency (ANEEL), the package of aid will be paid in 2015 and will cost consumers up to 9 percent on their electricity bills. Private Brazilian banks on 20 March presented a proposal to the Ministry of Finance that the Chamber of Electric Power Markets (CDCEE) raise the needed R$8 billion on the capital market. Eletrobras losses 12 16 The renewal of electric concessions in 2012 has affected cash flow for Eletrobras so deeply that it has been obliged to fire over 4,400 employees, thereby reducing its expenditures by 16 percent. It has even moved its headquarters from a building in downtown Rio de Janeiro to cheaper one in Botafogo. Eletrobras lost R$19 billion in 2013 and requires a financial injection of R$10 billion in 2014. Selling in the free market Brazilian enterprise Alupar is accelerating construction of the Ferreira Gomes hydropower plant, located on the Araguari River in the state of Amapá, with the hope of selling energy on the spot market in the second half of this year. The plant has an installed capacity of 252 MW, 70 percent of which is to be sold to the regulated market, leaving Alupar free to sell 30 percent to corporate clients on the free market. Veirano Advogados Electric Energy … Energy & Environment Politics, Law, Society International Affairs Politics, Law, Society Rousseff Pressure in the Chamber Rousseff, who built a reputation as an efficient and effective manager while in the previous administration, has had her aura eroded by the glaring deficiencies of the Program to Accelerate Growth (PAC), for which she had direct responsibility. On 13 March, yielding to intense pressure from the Brazilian Democratic Movement Party (PMDB) and allied parties, President Dilma Rousseff nominated several new cabinet ministers (see Table 1). PMDB is the largest party in the Chamber of Deputies, with 75 representatives, and it is hopelessly split between a faction that endorses the government, led by Vice-President Michel Temer, and one that is hostile to it, led by the party leader in the Chamber, Deputy Eduardo Cunha. Indeed, Cunha has managed to form a mini-coalition of eight parties (including PMDB), called Blocão (Big Block), to fight the government on some important bills. The differences between the two factions seem at present irreconcilable. As a consequence, Rousseff recently suffered another defeat in the Chamber, as after much debate various commissions demanded the presence of no fewer than 10 cabinet ministers to testify on various issues. The request was led by Blocão. The campaign heats up A Datafolha poll released on 5 April showed a six-point slide in voter intentions for President Dilma Rousseff, though at 38 percent she still enough to ensure victory in the first ballot. Aécio Neves and Eduardo Campos maintained the level of support shown in a February poll, with 16 percent and 10 percent respectively. More recently, the string of scandals at Petrobras, whose board she chaired, have further dented her reputation, and the opposition is making hay of it. Campos/Silva Only six months before the election, and six months after the announcement of a national alliance between the Brazilian Socialist Party (PSB) of Eduardo Campos and Marina Silva’s Sustainability Network (Rede), the two parties still do not know if the alliance will be sustained in the gubernatorial elections for at least half of the 27 states. Silva’s party objects to PSB’s “maintenance of the old politics.” Campos himself is still unknown by most electors, and in order to gain national exposure will travel throughout the country, followed by Silva. He left the governor’s seat in Pernambuco on 4 April in order to devote himself full time to the presidential campaign. After months of generic accusations against the government, Campos of late has started direct attacks against the president, saying on 10 March that “Brazil can’t stand five more years of Rousseff.” He has, however, asserted that his party will not engage in confrontation with former president Lula da Silva, who is stumping for Rousseff. The Campos/Silva team has endorsed an orthodox policy of austerity, prioritizing control of inflation, and has surrounded itself with economic advisors inherited mostly … april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business Energy & Environment Politics, Law, Society NomineeMinistryCurrent position Gilberto Occhi Cities Caixa Econômica Federal vice-president Miguel Rossetto Agrarian Development Petrobras Bio-combustíveis president Vinícius Nobre Lages Tourism SEBRAE international advisor Neri Geller Agriculture Secretary for Agricultural Policy Eduardo Lopes Fisheries Senator Clélio Campolina Dias Science and Technology Federal University of Minas Gerais rector Ricardo Berzoini Institutional Development – Institutional Development 13 16 from the Real Plan, in particular André Lara Resende, Pérsio Arrida, and Eduardo Giannetti da Fonseca. Neves Senator Aécio Neves of the Brazilian Social Democracy Party (PSDB) is now on the political offensive. He led efforts for the creation of a commission of inquiry into scandals at Petrobras and is intensifying his contacts with the São Paulo business community. Neves has selected Armínio Fraga, José Roberto Mendonça de Barros, and Mansueto Almeida as his economic advisors. On 31 March, he declared his support for a bill that reduces the minimum age of criminal responsibility from 18 to 16 years for certain categories of crimes and argued that the tax burden needs to be lightened. Maranhão governor Roseana Sarney, Brazilian Democratic Movement Party (PMDB) n Mato Grosso do Sul governor André Puccinelli, PMDB n Mato Grosso governor Silval da Cunha Barbosa, PMDB n Ceará governor Cid Gomes, Republican Party of the Social Order (PROS) n Bahia governor Jaques Wagner, Workers’ Party (PT) n Alagoas governor Teotônio Vilela, PSDB. n Table 1: Cabinet minister nominees Ideli SalvatiHuman Rights International Affairs Senators and governors In this year’s election to Congress, there will be only one eligible vacancy per state for the Senate. IBOPE polls show that voters still support state governors such as Omar Aziz in Amazonas and Antonio Anastasia in Minas Gerais. Governor Siqueira Campos of Tocantins, a Brazilian Social Democracy Party (PSDB) member, resigned on 4 April and may run for the Senate. Contrary to expectations, Chief Justice Joaquim Barbosa of the Supreme Federal Court didn’t resign before 4 April, which means that he will not run for office but will remain on the Court at least until the end of this year, when his turn in the presidency expires. Six state governors have decided to complete their terms and thus cannot be reelected in 2014: Workers’ Party plans The Workers’ Party (PT) plans to have run its own gubernatorial candidates in 12 states, and to support those of the Brazilian Democratic Movement Party (PMDB) in another seven. The states where PT will put up its own candidates include the three largest electoral colleges in the country and are as follows: São Paulo, Rio de Janeiro, Minas Gerais, Rio Grande do Sul, Piauí, Bahia, the Federal District, Acre, Paraná, Mato Grosso do Sul, Roraima, and Goiás. In Amazonas, Pará, Sergipe, Alagoas, Paraíba, Mato Grosso, and Tocantins, and possibly also in Maranhão and Roraima, it will support PMDB candidates. PT has also named the coordinators of the government’s program in a possible second term by President Rousseff: Mario Aurelio Garcia, special advisor to the president for international affairs; and economist Alessandro Teixeira, special advisor in the president’s personal cabinet. They were also responsible for the campaign in 2010. Veirano Advogados Government & Regulatory … april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business Politics in brief Peace offerings? President Rousseff on 10 March received a delegation of deputies and senators from Brazilian Democratic Movement Party (PMDB). She offered them airports in the states of Maranhão, Pará, Sergipe, Alagoas, Tocantins, and Paraíba. Real celebration Politics, Law, Society Defense issues Army purchases The Brazilian Army has purchased RB870 anti-aircraft missiles, produced by Swedish aircraft manufacturer SAAB and valued at R$29.5 million. On 24 March, the Army also received 13 new armored vehicles. The amphibious Guaraní, a successor to the Urutu EE11, was delivered to the 15th Brigade of Mechanized Infantry at Cascavel, Paraná, on the border with Paraguay. Cardoso remarked that “there is indeed an opposition in Brazil, and the country is adrift.” The Guaraní weighs 18.3 tons and has a speed of 100 km/h. It requires two operators and carries eight combatants. As with the Urutu, which was exported to 18 countries and is still in use, Brazilian defense authorities see a huge foreign market for the Guaraní. Keeping the Amnesty Law New trainers? President Rousseff, herself a victim of torture during the military period (1964–85) indicated on the 50th anniversary of the military coup of 1964 that she does not agree with the revision of the Amnesty Law of 1979 desired by many left-wing groups and NGOs such as Amnesty International, which advocates changes in its text. The Brazilian Air Force (FAB) is evaluating the possibility of replacing the Neiva T-25 Universal aircraft with In a speech at Planalto Palace, Rousseff endorsed a 2010 decision of the Supreme Federal Court that regards the Amnesty Law as constitutional. Promising PAC President Rousseff announced on 4 April, in São José do Rio Preto, São Paulo, that she would launch the third phase of the government’s Program to Accelerate Growth (PAC 3) in August – only two months before the election. International Affairs photograph: Iveco 14 16 To celebrate the 20th anniversary of the Real Plan, which put an end to galloping inflation in Brazil, a seminar took place in São Paulo on 12 March. Former president Fernando Henrique Cardoso attended along with most of his economic collaborators, a large segment of whom are now providing economic advice to Aécio Neves. Energy & Environment The Guaraní weighs 18.3 tons and has a speed of 100 km/h the 100 percent Brazilian-made T-Xc training aircraft, developed by Novaer Craft. The T-25 has been in use for 40 years in the primary training of Air Force Academy cadets. It will emphasize infrastructure and logistics projects. Incriminating disclosures Legal issues Following incriminating disclosures of his connections with a foreign exchange dealer currently under arrest, Deputy André Vargas of the Workers’ Party (PT) obtained a 60-day leave of absence. He is the vicepresident of the Chamber of Deputies. Another mensalão case? Attorney-General Rodrigo Janot on 27 March requested that former federal deputy Eduardo Azeredo (PSDBMG) be tried by the Supreme Federal Court for participating in the mensalão cash-for-votes scandal in the state of Minas Gerais. Veirano Advogados Dispute Resolution … april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business Politics, Law, Society Diplomatic briefs Curbing campaign donations Taking Venezuela in hand A majority of the Supreme Federal Court voted against political donations by corporate entities. Five more justices still have until July to vote on this type of campaign finance in order to implement the decision by the October election. Foreign ministers of the South American regional group Unasur met on 7 April in Caracas and talked with Venezuelan President Nicolás Maduro for over an hour in an attempt to end violence in that country over inflation and food shortages. The Unasur commission had already visited Venezuela in late March as part of its attempt to foster a peaceful resolution. A better future? The UN Scientific Panel on Climate Change has moderated its forecast of 2007. At that time it predicted that the Amazon forest would become a savanna. Seven years later, in the light of currently available data, the scenario is considerably less pessimistic. High pay, high employment In 2013, 87 percent of salary adjustments in Brazil exceeded inflation. Employment will be the principal banner in President Dilma Rousseff’s re-election campaign, as unemployment is now at an historic low of 4.8 percent. Violence against the media The mid-year session of the Inter-American Press Association in early April in Barbados heard a report from the Brazilian Newspaper Association denouncing violence against the media in Brazil. The report listed four deaths and 66 cases of aggression against journalists from October 2013 to March 2014, encompassing cases of judicial censorship, imprisonment, and intimidation. Minister of Justice José Eduardo Cardozo has acknowledged the gravity of the situation. International Affairs Brazilian Foreign Minister Luiz Alberto Figueiredo was on a mediation committee along with diplomats from Colombia, Ecuador, and other countries, participating in a dialogue with all political forces in Venezuela. As a result, on 14 April, Maduro met representatives of the opposition Democratic Unity Roundtable (MUD) for the first time since the disturbances began in mid-February. US Secretary of State John Kerry on 13 March had expressed the wish that the Unasur mission would consult all parties concerned and hoped for third-party participation in the mediation process, possibly by Brazil. President Dilma Rousseff has decided to keep Brazil distant from the crisis, however, and to exercise diplomacy only within the framework of Unasur – clearly with a view to the upcoming election. Ignoring an activist The Brazilian Foreign Ministry has officially ignored the presence in Brazil of former Venezuelan deputy Maria Corina Machado, who was expelled from the Venezuela Chamber of Deputies because of her opposition to Nicolás Maduro. International Affairs photograph: flickr/Hugo Chávez PT is pressuring Vargas to resign, since further disclosures in the case may compromise his role in the Petrobras commission of inquiry. The case will be adjudicated by the Supreme Federal Court. Social issues 15 16 Energy & Environment Venezuelan President Nicolás Maduro Machado came to Brazil to ask it to take a firmer position in regard to the mediation by Unasur. On 2 April, she made a speech in the Brazilian Senate in which she described human rights violations by the Maduro government and was very much applauded. Abstaining over Crimea With 100 governments voting in favor, 11 against, and 58 abstentions, the UN General Assembly on 27 March condemned the annexation of Ukraine’s Crimea by Russia. Brazil was among those abstaining. Managing the Internet The Committee for Management on the Internet (CGI.br) on 5 April finalized the text to be presented to the NET World Conference scheduled for 23–24 April in São Paulo. The civil framework for the Internet was approved by the Chamber of Deputies, and its advocates are already talking about a global project. … april 2014 · Volume 03 · Number 04 Viewpoint Economy & Business In the meantime, the bill is pending approval by the Senate. It is hoped that it will be approved by 22 April, when Brazil will host an international conference on governance of the Internet. The bill’s main point is the neutrality of the network. Patting oneself on the back President Dilma Rousseff gave the inaugural speech at the 64th annual meeting of the Inter-American Development Bank (IDB) board of governors on 4 April at the Costa do Sauípe resort on the coast of Bahia. Her speech downplayed a negative Standard & Poor’s report on the Brazilian economy and heaped praise on her own administration. 16 16 Finding friends in BRICS The next BRICS summit will take place in Brazil next July. It is expected that Russia will take a more positive approach toward two BRICS initiatives that it had offered only lukewarm support to earlier: the creation of a BRICS development bank and also of a contingency reserve. It seems Russia wants the support of large emerging economies like Brazil when it comes to matters such as UN sanctions over the annexation of Crimea. Energy & Environment Politics, Law, Society International trade in brief Nixing Mercosur? International Affairs percent to US$239.6 billion and exports dropped 1 percent to US$242.2 billion. Putative presidential candidate Aécio Neves, in a speech delivered in Porto Alegre on 7 April, proposed the end of Mercosur “as it does not represent the interests of Brazilians.” Instead he proposes a free foreign trade area, “in partnership with countries with which Brazil has complementarities.” The small trade surplus was pushed principally by a 14 percent rise in petroleum imports in relation to 2012, the tax burden, deficient infrastructure and logistics, and high labor costs. Among external factors are a weaker economy in China, Brazil’s largest market, and weaker commodity prices. A boost for Argentinean imports The Brazilian government expects that the World Soccer Cup of 2014 will improve matters, generating US$11 billion and about the same amount in public investment. The elections, the first round of which will take place on 5 October, may also influence trade results. Brazil has established a credit line of R$2 billion to finance Argentinean imports of Brazilian products. To that effect, a Brazilian mission visited Buenos Aires on 14 March, headed by the new minister for development, industry, and foreign trade, Mauro Borges, for discussions with the Argentina authorities. The officials also discussed the formulation of a joint proposal by Mercosur to the European Union, with a view to effecting the free trade agreement that has been under discussion for 13 years. Trade surplus shrinking Brazil’s trade surplus shrank in 2013 as imports rose 6.5 Taking it to the WTO The government of Japan has joined the European Union in questioning Brazilian fiscal incentives before the World Trade Organization (WTO). Veirano Advogados VistaBrazil 04.14 april 2014 · Volume 03 · Number 04 Viewpoint