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
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Oil & gas in brief
Petrobras news
Biofuels in brief
Electricity sector
Politics, Law, Society
n
n
n
n
n
n
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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
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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
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Managing Partner: Pedro Aguiar de Freitas
2
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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.
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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
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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
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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.
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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
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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
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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
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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.
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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,
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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
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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
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(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
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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
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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
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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
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april 2014 · Volume 03 · Number 04
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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
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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.
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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.
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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).
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