Viewpoint
Economy & Business
Energy & Environment
Politics, Law, Society
International Affairs
n Petrobras
n Infrastructure
n Oil
n Politics
n Diplomatic briefs
struggles to raise cash
as shares downgraded to junk
n Mining
issues
notes
and finance
n Economy in brief
n Business news
n Banking
& gas in brief
n Petrobras news
n Biofuels in brief
n Electricity sector
n Environmental news
n Science & technology
in brief
n Defense issues
n Who’s on the list?
n Legal issues
n Social issues
n Happy birthday, Rio!
n International
trade
Veirano Advogados’ Monthly review of economic, legal, and political developments
Petrobras struggles to raise cash
as shares downgraded to junk
photograph: flickr/Tracy O
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Two weeks after Aldemir Bendine took over as chief executive officer of Petrobras, the company was downgraded
to Ba2 by Moody’s Investors Service on 24 February. That
puts its rating at two notches below investment grade,
the second downgrade in less than a month. Brazil itself
is rated three steps higher, at Baa2.
Petrobras needs to sell at least US$20 billion in assets
The company is exploring financing options in response.
It needs to sell at least US$20 billion in assets and reduce
capital expenditures to approximately US$25 billion for
2015, according to a recent Bank of America report. The
BofA report pointed to the potential for Petrobras to raise
significant sums from its exploration and production
assets if oil prices rebound.
According to Reuters, Petrobras hired financial services
company JPMorgan to help sell US$3 billion in assets
this year, including exploration licenses for pre-salt oil
reserves, but the company denied the report.
In any event, on 2 March, Petrobras announced a more
aggressive divestment program, putting the value of
planned asset sales in Brazil and abroad at US$13.7
billion over 2015–16. The company expects 30 percent
of the funds to come from the sale of exploration and
production projects and 30 percent from the supply area,
covering refineries, pipelines, terminals, and elements of
the gas distribution network. Although it has not defined
precisely what will be up for sale, the company did
…
March 2015 · Volume 04 · Number 03
03.15
Economy & Business
Energy & Environment
Politics, Law, Society
indicate that most of the assets will be related to
natural gas.
The board of Petrobras has authorized the company to
raise up to US$19.1 billion in fresh capital in 2015.
VistaBrazil is published monthly
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Managing Partner: Pedro Aguiar de Freitas
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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
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Veirano Advogados and Prismax Consultoria cannot ensure against or be held
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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.
The company also announced plans to cut up to US$10.7
billion from its planned investment budget for 2015 in
order to preserve cash and improve its status in the marketplace. With investments of US$27.5 billion originally
planned for deep-sea exploration and development, the
cut is a deep one.
By the end of 2014, Petrobras had debts of US$114 billion,
almost five times its capacity to generate funds.
Estado do São Paulo newspaper on 26 February cited an
unidentified Petrobras executive, who said that the Brazilian government has offered the company up to US$2.1
billion in loans from state banks to shore up its cash position. In light of reduced government spending, that possibility remains speculative. The Brazilian government has
withdrawn its backing from a proposed local Petrobras
bond, according to Bloomberg on 12 March.
The Moody’s ratings cut will not only lower the company’s intrinsic value but also increase its cost of capital significantly. Yield spreads on Petrobras international bonds
International Affairs
widened in response to the cut, although they tightened
again somewhat on the news of the company’s two-year
divestment program.
It may be a drop in the bucket, but one bright spot in
the company’s financial picture should be noted. On 12
March, some US$58 million of Petrobras money was
repatriated by federal prosecutors from Swiss accounts
held by former engineering manager Pedro Barusco,
substantially exceeding the US$26 million repatriated
from funds embezzled by former supplies director Paulo
Roberto Costa.
Paving the way for financials
In the effort to adjust Petrobras financial statements and
release them along with a report from auditing firm PricewaterhouseCoopers, an approach appears to be taking
shape, according to Valor. Petrobras will reportedly make
the adjustment after an impairment test, which requires
the company to make two calculations of asset value.
Fair value indicates how much a third party would be
willing to pay for an asset. This form of evaluation is based
on market assumptions, even for discount rates and other
variables. Value-in-use, on the other hand, may include
synergies obtained in the operation of the asset and the
company’s own assumptions about the discount rate,
production cost, and other variables.
Veirano Advogados
Offices in Rio de Janeiro, São Paulo, Porto Alegre, and Brasília …
March 2015 · Volume 04 · Number 03
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Economy & Business
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The exercise has both technical and political motivation.
Technically, the company must produce a well-justified
adjustment of earnings by a calculation that the auditor
and regulators will accept. Politically, the company must
convince the public that any shortfall has been arrived at
transparently, does not contradict earlier reported losses,
and is not entirely explained by corruption.
Politics, Law, Society
Urban mobility projects will receive about 22 percent of the US$80 billion allocated to transportation
Economy & Business
Annual results must be published by 31 May at the latest,
or else creditors will have the right to demand immediate
repayment of the company’s debts. Petrobras financial
director Ivan Monteiro has been touch with the major
creditors in an attempt to address their concerns.
Petrobras has created a taskforce to analyze all the testimony of those being investigated by federal police in
Operation Lava Jato (Car Wash) and compare it with
internal information in order to estimate the losses to be
taken into account.
Infrastructure issues
PAC funding suspended
The Brazilian government has put US$11 billion in funding
on hold under its Program to Accelerate Growth (PAC).
PAC funds cover a wide array of infrastructure sectors,
including transportation, urbanization, water and sanitation, electric power, urbanization, and housing.
An assessment is expected in July to decide whether to
re-release the funds. Projects that have still not been
approved for funding by that point will be cancelled.
The distribution of investment
Veirano Advogados
White-Collar Crimes …
International Affairs
photograph: wikimedia commons/Gabriel Da Sobreira
After the impairment test, Petrobras will make a writedown if it can verify that the recoverable value of assets
– calculated as the higher of fair value and value-in-use – is
still lower than the booked value. This calculation will take
some time, as it has to be made across a wide collection of
assets and will entail determining the discount rate to be
applied. The lower the discount percentage, the higher the
current value of the asset and the lower the write-down.
Energy & Environment
A study released by the National Bank for Economic
and Social Development (BNDES) indicates that infrastructure investment over 2015–18 should total about
US$203 billion. That is more than 30 percent higher than
in 2010–13, and BNDES has suggested that infrastructure
bonds will be launched as a key part of fund raising.
Transportation infrastructure will received the largest
proportion of investment, garnering US$80 billion over
the period.
Highway projects will receive about 35 percent of that figure, urban mobility projects such as light rail and subway
systems will receive about 22 percent, railways will garner
20 percent, ports 16 percent, and airports 7 percent. That
represents almost twice as much rail investment as over
the preceding three years.
Electric power will get US$64 billion, telecommunications
US$47 billion, and social infrastructure over US$12 billion.
Water and sanitation budget
The Brazilian Ministry of Cities has established a 2015
budget of US$2.59 billion for water and sanitation works.
The projects are to be implemented through the
…
March 2015 · Volume 04 · Number 03
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Economy & Business
Building waterworks
The municipality of Pará de Minas, in Minas Gerais, has
awarded Saneamento Ambiental Águas do Brasil (SAAB)
a concession to build a water uptake and distribution system, treatment and storage facilities, and sewage collection and treatment facilities.
The 35-year concession is expected to require US$80.9
million in investment. It should raise water coverage from
95 to 100 percent within five years and wastewater service coverage from 88 to 95 percent within six years.
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Stemming water loss
São Paulo governor Geraldo Alckmin is planning a public–
private partnership to reduce water losses in the metropolitan region of São Paulo. The area loses approximately
19 percent of its water through damaged pipelines and
water main connections and 11 percent through illegal
connections, theft, and water meter failures.
The state is seeking for companies with the technological
and financial capacity to carry out works such as replacing pipelines and water meters, combating illegal connections and theft, and improving leak detection capabilities.
Planning for urbanization
Marília city, in São Paulo state, is planning US$207 million
in urbanization works. Some 81 percent of the total will
Veirano Advogados
Infrastructure & Projects …
Politics, Law, Society
International Affairs
photograph: wikimedia commons/Pessoal/Clara
national unemployment insurance fund FTGS. Some 76
percent of the funding is tagged to the public sector. The
drought-stricken southeast will receive the lion’s share.
Energy & Environment
The Brazilian Land Transportation Agency issued an invitation to tender for the concession of the bridge connecting Rio de Janeiro and Niterói
be allotted to housing, 18 percent for water and sanitation
works, and 1 percent for roadworks.
Bridge tender issued
The Brazilian Land Transportation Agency on 4 February
issued an invitation to tender for the concession of the
bridge connecting Rio de Janeiro and Niterói. The 30-year
concession covers the operation, maintenance, monitoring, conservation, and improvement of the bridge, and the
bid winner will be responsible for building road access to
improve traffic on the bridge and its surroundings.
The project is estimated at approximately US$1.9 billion.
The 13 km bridge was built in the early 1970s and is the
longest pre-stressed concrete bridge in the southern
hemisphere and among the longest bridges in the world.
The current concession expires in June 2015.
Tunnel tender halted
The São Paulo state court has ordered a halt to the tender
of a US$732 million contract to build an underwater
tunnel between the coastal cities of Santos and Guarujá.
The 900 m six-lane tunnel was initially slated for
construction from 2014 to 2017.
Bidders complained that the tender rules had a number
of inconsistencies and that the time provided to respond
was insufficient. Andrade Gutierrez, Camargo Corrêa,
Ferrovial Agroman, and Carioca Christiani-Nielsen
Engenharia are among the companies that requested the
tender be suspended.
The inclusion of companies that have been named in
relation to Operation Lava Jato, the Petrobras bribery
investigation, in three of the four bidding consortia has
raised concerns that the tender process could be delayed
on more than one front.
Porto do Sul gets smaller
The scope of Porto Sul, one of the largest private terminals
currently planned for the Brazilian coast, is being reduced
as a consequence of the dramatic drop in the price of
…
March 2015 · Volume 04 · Number 03
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Energy & Environment
Politics, Law, Society
Domestic air passengers in Brazil are expected to increase from 90 million in 2013 to 122 million in 2017
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iron ore. The decision to close the terminal, which is to be
constructed near Ilhéus, Bahia, was taken jointly by the
state government and the Bamin mining company.
International airport concessions
The third round of international airport concessions in
Brazil could be delayed until end-2015 or later, according
to Folha de São Paulo, as the country’s major construction
companies come within the orbit of the Operation Lava
Jato investigation.
Concessions are being prepared for Salvador airport in
Bahia state, Porto Alegre airport in Rio Grande do Sul, and
Manaus airport in Amazonas, but many construction
companies will be hard pressed to bid as they struggle
with restricted access to funds to pay a total US$45 billion
in debts.
The national airport authority Infraero is currently guaranteed a 49 percent share in the special purpose companies
that operate airport terminals in partnership with private
companies. Some analysts believe that reducing the
public-sector share and permitting more companies to
participate in tenders will make them more viable.
Regional airport plan
The Brazilian government’s ambitious regional airport
plan involves building or remodeling some 270 airports
throughout the country, some 83 percent of them already
operating. Nine concessions will be offered to the private
sector, and the Secretariat of Civil Aviation (SAC) and
Planning, Budget, and Management Ministry are carrying
out studies in order to prepare tender proposals.
Civil Aviation Minister Eliseu Padilha has now said,
however, that the need to obtain environmental permits
may make it difficult to launch those tenders by the end
of the year as planned. At President Dilma Rousseff’s
behest, the minister is in talks with Environment Minister
Izabella Teixeira to expedite the process.
Domestic air passengers in Brazil are expected to
increase from 90 million in 2013 to 122 million in 2017,
making the need for airport improvements urgent
International Affairs
and also creating a significant opportunity for aircraft
manufacturers.
Port dredging
The Brazilian Special Ports Department (SEP) has
announced the winners of port dredging tenders worth
US$263 million in Paraná and Rio Grande do Sul states.
In Paraná, DTA Engenharia will carry out dredging and
install signage at Paranaguá port. The company will prepare plans within six months and has 11 months to complete the civil works. In Rio Grande do Sul, a consortium
of Jan de Nul do Brasil Dragagem and Dragabras Serviços
de Dragagem will dredge Rio Grande port.
Pulling out of Oi deal
Telecom Italia announced on 20 February that it was
halting its involvement in a potential deal to merge with
Brazilian telecom Oi. Instead, Telecom Italia will spend
€14.5 billion over the next three years to improve its
mobile and fixed broadband network, some €10 billion
of that in Italy.
Recently, Communications Minister Ricardo Berzoini
indicated that the Brazilian government did not intend
to intervene in on-going telecom consolidation in the
country. Oi is one of the largest telecom providers in
Brazil and has been the subject of numerous merger and
acquisition rumors. Its shares have come under extreme
selling pressure recently in the wake of perceived poor
performance in 2014Q3, but it is still considered to have
solid fundamentals.
Veirano Advogados
Shipping …
March 2015 · Volume 04 · Number 03
Economy & Business
photograph: wikimedia commons/Tango21961
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Economy & Business
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Politics, Law, Society
Banking and finance
Vale sells gold stake
The rout of the real
Brazilian mining giant Vale has agreed to sell 25 percent
of its payable gold by-product stream from the Salobo
copper mine to Canadian-owned Silver Wheaton. The
agreement applies until the end of the mine life. Silver
Wheaton will pay US$900 million in cash up front and a
per ounce payment for gold delivered in the future.
The Brazilian currency, the real, continued its slump in
February, depreciating 5.6 percent over the month. That
put the currency at its weakest level against the US dollar in a decade and represented its sixth straight monthly
loss. The performance of the real was the worst of 31
major currencies tracked by Bloomberg.
Silver Wheaton receives a percentage of production rather
than a fixed volume and so assumes a production risk.
Vale receives the lesser of US$400 per ounce and the prevailing market price, and so assumes a price volatility risk.
While the on-going corruption scandal at state-owned oil
major Petrobras continues to send ripples into the economy, that crisis is seen as only one factor in the sliding
real. Worsening labor data and rising inflation estimates
are taking a toll as well, amid a generally gloomy picture
of the country short-term economic prospects.
And posts fourth-quarter loss
Shares of Vale dropped on 26 February as the miner
posted its second consecutive quarterly loss. Iron ore lost
approximately 50 percent of its value in 2014, bringing a
US$1.85 billion dollar loss to Vale in 2014Q4.
The company is working hard to reduce its costs and
pursue divestment and partnership opportunities, and
it does not expect to lose its investment grade status. It
exported 280 million tonnes of iron ore in 2014, out of a
national total of 306 million tonnes.
Votorantim earnings jump
Votarantim Industrial saw its net income increase
sevenfold in 2014, according to its just-released earnings
report. The Brazilian steelmaker has mines and industrial
units in several Brazilian states.
The report attributed the rise in earnings to higher prices
in most of the company’s businesses, but in the metals
division sales of zinc, nickel, and aluminum all fell in
volume in response to weakened domestic demand.
As well, the Central Bank has indicated that a portion of
some US$9.96 billion in currency-swap contracts to support the real that are due on 1 April will not be rolled over.
This signaled a reduction in its program of shoring up the
currency, causing some concern among investors.
Foreign debt factor
As reported in Folha de São Paulo on 3 March, Brazilian
banks and private companies owed a total US$208 billion
to foreign sources in 2014, the greatest level of external
debt in 25 years. That puts the value of repayments due
in 2015 at a whopping US$102.5 billion in short- and longterm debt, some US$89.7 billion of which is owed by the
private sector.
Economists are concerned that the high value of debt
installments to be paid will put pressure on the Brazilian
currency. About 30 percent of private companies with
debts in foreign currency have either no hedge or inadequate hedges against a devaluation of the exchange rate.
International Affairs
photograph: wikimedia commons/Wilson Dias/Agência Brasil
Mining notes
Energy & Environment
Brazilian Finance Minister Joaquim Levy
A painful adjustment
The so-called fiscal adjustment is already showing its
teeth. The Ministry of Education for instance, will lose
US$4.5 billion, some 31.1 percent of its appropriations.
The Ministry of Health will lose 6.7 percent and the
Ministry of Social Development and Hunger Alleviation,
which manages the Bolsa Família program, will lose 3.4
percent (US$0.95 billion). The Ministry of Cities, which
manages the Minha Casa, Minha Vida (My Home, My
Life) program, will lose 28 per cent (US$2.3 billion).
Wooing investors
Brazilian Finance Minister Joaquim Levy was in the United
States last month to talk up favorable investment opportunities in Brazil, particularly in the infrastructure sector.
On 17 February in Washington, DC, he spoke with analysts from international financial institutions in support of
the fiscal adjustment and the positive changes in Petrobras management. On 18 February, he addressed 185
investors in New York. His talk was well received.
…
March 2015 · Volume 04 · Number 03
Viewpoint
Energy & Environment
Politics, Law, Society
On the same theme, Brazilian Central Bank president
Alexandre Tombini told the G-20 meeting in Istanbul that
by April, Brazil intends to present a strategy to promote
investment in the country. This will involve an agenda to
expand public savings and make long-term financing by
private institutions more viable.
In addition, the government will implement measures to
improve the business climate, facilitate financial intermediation, and mobilize resources from multilateral banks.
BNDES buying capital goods
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The National Bank for Economic and Social Development
(BNDES) announced in February that it was expanding its
financing alternatives to acquire capital goods. The bank
will adopt a new fixed interest rate at current market value
to complement financing under its Investment Maintenance Program (PSI). The rate will be adjusted monthly.
BTG Pactual profits
The net income of Brazilian investment bank BTG Pactual
rose 23 percent to US$1.2 billion in 2014, according to
its latest financial results. Net income was up 10 percent
year on year in 2014Q4, whereas revenues were down 12
percent over the same period. Annual total revenues rose
14 percent, mainly on the strength of sales and trading.
Economy in brief
Industrial output improves
Brazilian industrial output rose 2 percent in January, making
a healthy start on reversing the 3.2 decline of the previous month. That represents the best monthly result in 18
months, as capital goods production increased by 9.1 percent. Output rose in 13 out of 24 industries studied by the
Brazilian Institute of Geography and Statistics (IBGE).
Brazilian industrial output rose 2 percent in January
The good news lacks a rosy context, however, as overall
industrial output has fallen 5.2 percent year on year.
Foreign direct investment
According to the United Nations Conference on Trade
and Development (UNCTAD) Global Investment Trends
Monitor, foreign direct investment decreased by 4 percent in 2014 in Brazil.
Nevertheless, the country moved up two notches in the
global rankings and is now the fifth-largest destination
for these types of investments, behind only China, Hong
Kong (China), the United States, and Singapore. Total
annual foreign direct investment was US$62 billion.
Health and infrastructure were favored sectors.
Cross-border mergers and acquisitions were up by 45
percent, or US$14 billion.
International Affairs
Inflation keeps climbing
Brazilian economists continue to raise 2015 inflation forecasts and lower economic growth predictions. As March
opened, the annual inflation forecast was pushed to 7.47
percent, from 7.33 percent estimated the previous week.
Actual annual inflation accelerated to 7.7 percent in
February, from 6.69 percent the previous month, according to the Brazilian Institute of Geography and Statistics
(IBGE). That is the fastest pace in nearly a decade, and
in response the Central Bank monetary policy committee (Copom) decided unanimously on 4 March to raise
the benchmark Selic interest rate 50 basis points to 12.75
percent.
In the minutes of the Copom meeting, the committee
members indicated that they expect to see inflation
quickening this year despite the aggressive interest rate
policy but then easing back toward its target – a rate of
4.5 percent with a +/–2 percent band – in 2016.
Economists are now expecting the Selic to close out 2015
at 13 percent.
Taxing times
Folha de São Paulo newspaper reported on 27 February
that the Brazilian government was considering imposing
higher taxes on the country’s richest citizens, according to
Senator Gleisi Hoffman of the Workers’ Party (PT). Planning Minister Nelson Barbosa met with PT senators the
preceding week to discuss how to apply fiscal austerity
measures higher up the income chain.
…
Veirano Advogados
International Trade / WTO …
March 2015 · Volume 04 · Number 03
Economy & Business
photograph: wikimedia commons/Tittenberger
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Upcoming events
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Brazilian M&A and Private Equity Outlook: Resilience in Deal Flow
25 March 2015
São Paulo
Mergermarket and RR Donnelley
edward.custer@mergermarket.com
12th LatinFinance IDB Breakfast
27 March 2015
Seoul
BNP Paribas, Mizuho
jbolivar@latinfinance.com
12th International Trade Fair for Autoparts, Equipment, and Services
7–11 April 2015
São Paulo
Automec Heavy and Commercial
www.automecfeira.com.br
International Exhibition for Logistics, Transport Cargo, 7–9 April 2015
São Paulo
and International Trade, in conjunction with
Ports Infrastructure Event
Intermodal South America & Infraportos South America
www.intermodal.com.br
Institutional Real Estate Latin America Forum
12–13 April 2015
New York
Markets Group
francisco.pascual@marketsgroup.org
13th Brazil Issuers & Investors Forum
16 April 2015
São Paulo
Latin Finance
jbolivar@latinfinance.com
Pension Fund Brazil Forum
13 May 2015
São Paulo
Latin Markets
anna.gonzalez@latinmarkets.org
Private Wealth Brazil Forum
14 May 2015
São Paulo
Latin Markets
cassia.diroberto@latinmarkets.org
On the same day, however, Finance Minister Joaquim
Levy rejected the idea, saying that increasing taxes on
the super rich would not raise much revenue and offered
“no advantages.”
Levy also announced a reduction in tax credits for exporters of industrial goods. The Reintegra program had offer
credits equivalent to 3 percent of exporters’ foreign revenue. That has now been cut to 1 percent. Exports of manufactured goods have soared in response to the 22 percent
depreciation of the currency since September 2014.
At the same time, Levy announced an end to a break on
payroll tax that had been granted to certain industrial sectors in 2011 in order to boost employment. The minister
noted that the break had caused an annual revenue shortfall of US$8.8 billion without creating or protecting jobs
as intended.
Advanced analytics acquisition
Levy went further, referring to the payroll tax cuts as a
costly “joke.” This earned him a slap on the wrist from President Dilma Rousseff, who called his remark “unfortunate.”
Global management consulting and technology services
company Accenture has completed its acquisition of
Gapso. Gapso is an advanced analytics services and solutions provider based in Brazil that specializes in solving
Business news
complex supply chain and logistics challenges, mainly in
the natural resources and agribusiness sectors. Accenture will thus expand its analytics capabilities in Brazil.
Bottling business booming
Mexican beverage company Coca-Cola FEMSA will
invest US$200 million to expand operations in Brazil.
Beverage consumption was down in 2014 and is showing
no sign of recovering in 2015, but company representatives believe that a new tax regime for beverages that is
due to take effect on 1 May will help to improve the outlook this year.
Fertile ground for fertilizer firm
Canadian firm PotashCorp has agreed to buy a 9.5
…
March 2015 · Volume 04 · Number 03
TitleDatePlaceSponsorContact
PotashCorp is set to buy a 9.5 percent stake in Fertilizantes Heringer
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percent stake in Brazilian fertilizer company Fertilizantes
Heringer for US$55.7 million. Heringer operates 21 production, marketing, and distribution units in Brazil, distributing 5 million tonnes of fertilizer and generating US$2.5
billion in 2013. With the acquisition, PotashCorp will
become Heringer’s long-term principal potash supplier.
Bosch gets regional hub
Bosch Packaging Technology, which supplies machinery
to the food and pharmaceutical industries, is opening a
regional service hub in São Paulo. Bosch currently has a
base of 3,000 machines in the Latin American market,
most of them for companies with production sites in Brazil.
It has plan to expand the facility over the next few years.
Qatari firm eyes Brazil
Hassad Food, the agricultural arm of the Qatar
Investment Authority, is reportedly seeking Brazilian
sugar and poultry assets. No details have been revealed
except that discussions are in an early stage. Hassad was
established in 2008 to promote Qatari food security.
Energy & Environment
Politics, Law, Society
Energy & Environment
Oil & gas in brief
Round 13 postponed
Despite announcing in January that Round 13 of bidding
for oil and gas licenses had been approved for the first
half of 2015, the Ministry of Mines and Energy has confirmed that the bid round has been postponed until later
in the year in response to falling oil prices and the graft
scandal involving Petrobras.
Details of what will be on offer along the Eastern Margin
– the on- and offshore areas from Rio Grande do Sul
to Rio Grande do Norte – are expected by the end of
March, according to Energy Minister Eduardo Brago. The
National Council on Energy Policy (CNPE) has approved
the auction, which will not place any restrictions on
foreign participation.
The delay is intended to give Petrobras time to recover
from its current difficulties and to restore investor
confidence.
Gas pipeline tender
The Brazilian government intends to hold the country’s
first gas pipeline tender under the concessions regime.
Some 10 companies have expressed interest. The 11 km
pipeline between Itaboraí and Guapimirim, in the
state of Rio de Janeiro, will require an investment of
US$34.6 million.
Fluor victorious
CFPS Engenharia e Projetos, a 50/50 joint venture
between Fluor Corporation and Construcap Engenharia e
Comércio, has been awarded an engineering and design
International Affairs
contract by Parnaíba Gás Natural (PGN) for a natural
gas field development project in the Parnaiba basin, in
Maranhão state.
PGN is Brazil’s leading private gas exploration and production company and has several concessions in the
region. It has average gas production of 5.5 mcm per day.
The consortium will be responsible for the engineering
and design of a gas-gathering system. As well, a 40 km
gas pipeline will connect the Gavião Branco production
and treatment facility to a central gas-processing facility.
Technip wins big
Tupi BV, a consortium comprising Petrobras Netherlands
BV (65 percent), BG Group (25 percent), and Galp Energia
(10 percent), has awarded the on-going development of
Lula Alto to Technip. The US$559 million contract covers
200 km of flexible pipes and associated equipment for the
pre-salt field, which is in the Santos basin.
Technip has an operating center in Rio de Janeiro to handle the project management and engineering, and manufacturing sites in Vitoria and Açu to produce the pipes.
Delivery is scheduled for the second half of 2015.
Development delays
The corruption probe of Petrobras is likely to introduce
delays of at least a year in four major offshore oil projects,
according to Portuguese partner Galp Energia. Galp
is involved in nearly 30 on- and off-shore oil and gas
projects in Brazil.
…
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Oil, Gas & Biofuels …
March 2015 · Volume 04 · Number 03
Economy & Business
photograph: wikimedia commons/Amazone GmbH & Co. KG
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Economy & Business
Biofuels in brief
Politics, Law, Society
International Affairs
photograph: wikimedia commons/Divulgação Petrobras/Agência Brasil
The company indicated that the construction of production ships for the Lula Sul, Lula Norte, Lula Extremo
Sul and Lula Oeste fields, which it is developing with Petrobras, was affected. The problem lies with the construction
contractors for the project, some of which have either
gone bankrupt or been banned from receiving money
from Petrobras because of the investigation.
Energy & Environment
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Israeli company Evofuel and Brazilian Insolo Agroindustrial have signed an agreement to examine the suitability
of growing Evofuel’s proprietary castor bean varieties in
Insolo farms in Piauí state, in northeastern Brazil. The two
companies plan to develop the agronomic know-how to
integrate castor into the Insolo production system.
Evofuel focuses on the development of castor bean seeds
for industrial use and production of oil feedstock for the
biofuel market. Its castor varieties could provide a second
crop solution for Insolo farms. Evofuel is a wholly owned
subsidiary of Evogene.
Converting to corn
The São Francisco plant, which belongs to American
agribusiness giant Cargill and produces sugar and ethanol
from sugarcane, will begin producing corn-based ethanol
as well. The expansion will allow the plant to operate
year round and will take advantage of the abundant corn
grown in Goiás state, where the plant is located.
The project is expected to cost US$49 million, of which
70 percent will be financed by the Brazilian Innovation
Agency (FINEP). The plant will reach full capacity in
three years.
Petrobras news
Naphtha deal extended
Petrobras in the first week of March extended its contract to supply naphtha feedstock to Brazilian petrochemical giant Braskem.
Farfan discovery confirmed
A third appraisal well has confirmed the 2013 Farfan
discovery of light oil and gas in the ultra-deep-water
Sergipe basin. Petrobras has drilled the well to a water
depth of 2,467 m, with plans to achieve 6,060 m.
This is the third extension of the contract. Braskem, the
largest petrochemical company in the country, uses
naphtha to produce approximately 80 percent of its
chemicals for the domestic market.
The company operates the area with a 60 percent
share, in partnership with IBV-Brazil, which has the
remaining 40 percent. The drilling is part of a discovery
assessment plan approved by the National Petroleum,
Natural Gas, and Biofuels Agency (ANP).
Repair service contract
Búzios pilot program
Petrobras has awarded a one-year contract extension
to DeepOcean Brasil Servicos, a subsidiary of DeepOcean Group Holding. The company uses the multipurpose subsea support, construction, and cable-laying
vessel Deep Endeavour to repair flexible pipelines and
electro-hydraulic control umbilicals.
Petrobras has launched a six-month pilot for crude oil
production from the pre-salt Búzios field. The field is
located 200 km off the coast of Rio de Janeiro in the
Santos basin, at a depth of 1,600–2,100 m. Output will
be capped at 15,000 b/d as Petrobras appraises the
potential of the area.
March 2015 · Volume 04 · Number 03
Sowing castor seeds
Economy & Business
Viewpoint
Building a wind farm
Enel Green Power has started construction on the
Esperança wind farm, the final portion of the Serra Azul
wind complex, north of Bahia. The new plant will have
an installed capacity of 28 MW. The complex will have
a total capacity of 118 MW and will be able to generate
more than 500 GWh of electricity per year – enough for
320,000 households – once it is fully operational. That is
expected at the end of 2015.
Politics, Law, Society
International Affairs
photograph: wikimedia commons/Lukas9415
Electricity sector
Energy & Environment
And more wind farms
Powering up on rates
The Brazilian Electricity Regulatory Agency (ANEEL)
gave 58 electricity distributors permission to implement
a special rate hike of 23.4 percent as of 2 March. The revenue is slated to pay the US$7.77 billion cost of an energy
subsidy program that the government has decided to
cease funding directly.
The program subsidized such things as system expansion,
fuel purchases for remote communities, and coal power.
With the government bowing out in its on-going effort to
cut expenditures, those costs will now be passed directly
Veirano Advogados
Electric Energy …
São Paulo officials have warned that water might be cut off for up to five days per week in the metropolis
to the consumer on top of rising rates in response to
power shortages.
Commissioning Jirau turbines
GDF Suez has released a report on the 3,750 MW Jirau
hydropower plant in the Rio Madeira complex. In the
report, the operator said that 24 of the 50 turbine units
are now in operation, and that a total of 33 will be commissioned by June. The 75 MW turbines are part of the
largest renewable plant to be recognized as a clean development mechanism by the UN Framework Convention
on Climate Change.
Buying distributor stakes
Brazilian company Neoenergia has paid €192 million to
Spanish Iberdrola for an 8.5 percent stake in Coelba and
a 7.01 percent stake in Cosern. The two Brazilian power
distributors together provide approximately 23.8 TWh
of electricity annually to 7 million customers. Neoenergia
controls power generation, distribution, and transmission
assets in 13 Brazilian states.
Self-generation power tenders
Brazilian electricity distributors plan to tender short-term
contracts to ease the current power shortage. Distributors and micro-generators will sign flexible supply deals
valid until the end of the year. Self-generators must have
their plants approved by the Brazilian Electricity Regulatory Agency (ANEEL) in order to sell their surplus power
back to distributors to be inserted into the national grid.
Environmental news
Flood follows drought
São Paulo officials have warned that water might be cut off
for up to five days per week in the metropolis, as drought
continues to empty reservoirs and force operators to deactivate hydropower plants. The city director of state water
utility SABESP, however, asserted that rationing water by
shutting off the system intermittently could increase the
risk that pipelines will absorb underground contamination
once water pressure reverts to a normal level.
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March 2015 · Volume 04 · Number 03
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French utility EDF (through its renewable energy arm
Energies Nouvelles) and German renewable energy
developer Sowitec will build 800 MW of wind farms in
Brazil via a newly formed Energies Nouvelles subsidiary.
Sowitec will have a 20 percent stake in the EDF EN do
Brasil venture.
Energy & Environment
Politics, Law, Society
The Guarapiranga reservoir is one of six supplying the São Paulo metropolitan region
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Some residents have been drilling boreholes through
asphalt and concrete to tap into water resources. Others
are using bottled mineral water for cooking and showering.
Ironically, torrential rains that swept the city in late February – 96 mm of rain in one hour on 27 February – have
not helped much. The main reservoir is located 60 km
north of the city and did not receive enough useful rainfall.
Meanwhile, city streets were flooded, cars submerged,
and one man was killed by a fallen power line.
The latest news has prompted speculation that São Paulo
will become at least temporarily unlivable for its 20
million population.
The São Paulo state government is considering an initiative
to divert the São Lourenço River just south of São Paulo
city, connecting it with the Lavras River via a 5 km channel. The Lavras River supplies the Guarapiranga reservoir,
which is one of six supplying the metropolitan region.
Another option, being considered by both São Paulo
and Rio de Janeiro states, is desalination. It is technically
feasible to pump in water from the Atlantic, though such
projects are very expensive.
Rio reservoirs
A public hearing on the water crisis in Rio de Janeiro was
opened on 11 March, with discussion including potential
management solutions for the Paraíba do Sul river
basin. At the beginning of the month the six reservoirs
of the basin were operating at 7.83 percent of combined
capacity. The Santa Cecília and Pereira Passos reservoirs
are now operating with water from below the surface.
The hearing was sponsored by the Office of the Federal
Prosecutor (MPF) and attended by officials from the
Environment Ministry, the Brazilian Electricity Regulatory
Agency (ANEEL), the National Water Agency (ANA),
the state environmental agency, and Rio water utility
Companhia Estadual de Águas e Esgotos (CEDAE).
International Affairs
Genetically modified trees
Brazilian consulates and embassies around the globe
were the focus of a Global Day of Action on 3 March to
demand that the Brazilian government reject a request
by FuturaGene to legalize genetically engineered eucalyptus trees.
The company asserts that, when integrated into the existing industrial model, its eucalyptus strain will bring environmental and socio-economic benefits. The Campaign
to Stop GE Trees argues the opposite.
The Brazilian Technical Commission on Biosafety
(CTNBio) regulates genetically modified organisms
(GMOs) in the country and planned to make a decision
about the FuturaGene request at a meeting on 5 March.
That morning, however, some 1,000 women from the
Landless Workers Movement (MST) destroyed GE eucalyptus seedlings at the company’s facility and occupied the
CTNBio building.
The meeting was abruptly cancelled and the decision
postponed.
A sunny side to climate change?
Grain production in southern Brazil, especially in the state
of Paraná, has been rising in response to climate change.
The soy bean harvest for 2014–15 is expected to be 3.4
percent greater than in 2013–14.
Science & technology
Squeezing oil from a rock
Scientists and engineers at the International Center for
Carbonate Reservoirs, which is sponsored by Petrobras
and BG Group, have identified a naturally occurring
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March 2015 · Volume 04 · Number 03
Economy & Business
photograph: wikimedia commons/Hamilton Breternitz Furtado
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Economy & Business
characteristic of oil that could facilitate its recovery from
reservoirs in deep subsurface rock formations.
Approximately 50 percent of global oil reserves are
located within limestone reservoirs. Researchers have
discovered that oil droplets trapped within the complex
pore structure of limestone can be broken into smaller
fragments by flowing water. This allows the oil to flow
more freely through the network of pores.
The findings could apply to recovering oil from the giant
pre-salt fields and also possibly to treating contamination
in natural aquifers.
The morning hit?
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Brazilian scientists have discovered a protein in coffee
that has similar effects to morphine. The “analgesic and
mildly tranquilizing qualities” of the protein fragments are
thought to have biotechnological potential for the health
foods industry.
The naturally occurring opioid peptides appeared to have
a longer-lasting effect than morphine when tested on
laboratory mice and could be used to help alleviate stress
in animals bound for slaughter.
The findings emerged from a research program established by the University of Brasília and the Brazilian Enterprise for Agricultural and Livestock Research (EMBRAPA).
Medical technology deal
Rosatom, the Russian nuclear energy company, has
agreed to supply molybdenum-99 to the Brazilian
National Energy Nuclear Commission (CNEN). The
radioisotope is used as a radioactive tracer for imaging
body organs, the skeleton, and blood, and is widely used
in medical diagnosis.
Energy & Environment
Politics, Law, Society
Politics, Law, Society
Politics in brief
Political risk index holds steady
According to BMI Research, Brazil held steady on the
Short-Term Political Risk Index (STPRI) in February, with a
score of 69.6. That’s ahead of Latin American and global
averages of 59.4 and 64.0, respectively. Brazil also ranked
4 out of 17 countries in the region in terms of security and
external threats.
But Rousseff’s ratings plummet
Even before mass protests in mid-March, President Dilma
Rousseff’s approval had been slashed in half since being
elected last October. Her approval stood at 23 percent in
early February, according to a Datafolha poll. That is the
lowest of any Brazilian president in 15 years and represents a staggering 19 percent slide since December. Ibope
will publish a new poll at the end of March. One cannot
expect the results to be any better.
And party stalwarts grumble
Forty out of 59 Workers’ Party (PT) legislators oppose
the austerity measures proposed by the government.
That resounding rebuff was revealed by a survey conducted by O Globo newspaper.
Senate president Renan Calheiros of the Brazilian Democratic Movement Party (PMDB) has been particularly
outspoken in criticizing the fiscal adjustment, referring to
the efforts to rebalance the budget as lacking “a beginning, middle, and end.”
A new chief of staff
President Dilma Rousseff has replaced Beto Vasconcelos,
International Affairs
her chief of staff, with Álvaro Henrique Baggio, who is
now responsible for the presidential agenda. Vasconcelos
will take over the National Secretariat for Justice with the
specific mission of coordinating the legislative package
against corruption, starting with political reform. The
package consists of five bills, which are being prepared by
the ministry.
Who’s on the list?
Chief Prosecutor Rodrigo Janot on 3 March asked the
Supreme Court for authorization to investigate 54 people
implicated in the Petrobras corruption scandal, in 28
separate inquiries. Under Brazilian law, lawmakers and
cabinet members can only be tried by the Supreme Court.
Of the 54 people, 21 are federal deputies and 12 are
senators, including former president Fernando Collor
– who was himself impeached for corruption in 1992,
before making a political comeback as a senator.
Other high-profile figures to be investigated are Senate
President Renan Calheiros and Speaker of the Chamber of
Deputies Eduardo Cunha, both of whom are members of
the Brazilian Democratic Movement Party (PMDB).
As members of the largest party in the governing coalition, responsible for running both the Senate and the
House, it will be no surprise if they create gridlock in Congress in response to being named. Calheiros has already
rejected the presidential decree to raise payroll taxes.
…
Veirano Advogados
Commercial Contracts …
March 2015 · Volume 04 · Number 03
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Energy & Environment
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photograph: Gripen INternational
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International Affairs
Observers fear similar moves to block the passage of
other fiscal adjustment measures.
On 5 March, Folha de São Paulo reported Janot had recommended that requests for the investigation of former
presidential candidate Aécio Neves and former Congress
president Henrique Eduardo Alves be shelved.
Saab has selected AEL Sistemas as a new supplier for the Gripen NG in Brazil
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Defense issues
Avionics for the Gripen
Swedish defense and security company Saab has
selected Brazilian technology company AEL Sistemas
as a new supplier for the Gripen NG in Brazil. AEL will
provide the wide-area display (WAD) and the head-up
display (HUD) that will be integrated in the Gripen NG.
The new avionics systems program will run over four
years and includes development, integration, and
production work, to be performed in Porto Alegre.
System integration work will be undertaken by Saab
and Embraer.
Saab and AEL have also signed a technology transfer
contract that will focus on development the human–
machine interface for advanced fighters and provide
workshops in avionics maintenance.
Sikorsky in Brazil
On 27 February, Antonio Pugas, vice-president for
Latin America of US manufacturer Sikorsky Aircraft
Corporation, outlined a three-phase strategy for expansion in Brazil.
In what constituted the first phase, the company signed
an agreement with the Brazilian Technological Institute
of Aeronautics (ITA) on 11 February with respect to
knowledge transfer.
ITA is building a helicopter technology laboratory as a
result of the cooperative agreement.
The second phase of Sikorsky’s strategy will involve a
US$20 million facility in the Vale do Paraiba region for
maintenance, repair, and overhaul. The company may
also eventually establish a manufacturing facility in
Brazil to meet domestic and regional demand.
In a blow to Rousseff’s credibility, however, Workers’ Party
(PT) treasurer João Vaccari has been charged with allegedly soliciting party donations from a former Petrobras
director of services and various construction company
executives. Vaccari denies the charges, which came the
day after the mass protests against the Rousseff government on 15 March. PT has stated that all its donations
have been received legally.
Legal issues
No leniency deals?
The Brazilian Office of the Attorney General (AGU)
warned on 1 March that if the administration strikes leniency deals with companies accused of being involved in
the alleged Petrobras bribery and kickback scheme, it will
undermine the investigation and harm public interest.
The Office of the Inspector General (CGU) had mused
about reaching leniency agreements with major construction firms that stand accused of colluding to inflate
Petrobras contracts, in exchange for cooperation and
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March 2015 · Volume 04 · Number 03
Notably absent from the list were the names of current
and former presidents Dilma Rousseff and Luiz Inácio
Lula da Silva. A sitting president cannot constitutionally
be investigated for alleged criminal conduct that did not
occur during his or her presidency.
Energy & Environment
Politics, Law, Society
repayment of damages. President Dilma Rousseff has
expressed concern about the possibility of destroying
companies in the process of punishing wrongdoers, noting the growing economic fallout from the scandal.
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Civil procedure code approved
The Brazilian Senate has approved the New Code of Civil
Procedure, which is the first code drafted under the democratic regime and will replace that of 1973. The new code
encourages consensual dispute resolution, establishing
resolution centers for pretrial and mediation hearings.
Other innovations include allowing individual actions to
be converted to class actions, permitting oral arguments
to be presented via video conference, and reducing the
number of admissible appeals. The code thus introduces
tools intended to help the judiciary deal with its backlog of
cases and accelerate the litigation process.
Carlos Valente noted that net neutrality regulations must
be flexible in order to adapt to future technologies and
avoid impeding innovation.
Changes to biodiversity law expected
This is partly a matter of who strikes the deal. The AGU
has had notable success obtaining information through
plea bargains during the investigation but is concerned
that if the CGU pursues independent leniency arrangements it will do so without being in possession of the
evidence gathered by the prosecution.
As reported in the Wall Street Journal, the CGU has
indicated that eight companies have already asked for
information about leniency deals: Camargo Corrêa,
Engevix, Galvão Engenharia, Iesa, Mendes Junior, OAS,
Queiroz Galvão, and UTC-Constran. Only Engevix has
confirmed this.
International Affairs
Brazil has the world’s highest level of biodiversity but has
long limited access to genetic material and molecules
derived from its animal, plant, and microorganism species.
That seems set to change.
Did Justice Flavio Roberto de Souza take the Porsche for safekeeping?
The judge asserted that the police had no means to store
the car, which he had ordered confiscated, and so he had
taken it for safekeeping.
De Souza’s decisions in the case have been annulled, and
a retrial is likely.
Media regulation ahead
Communications Minister Ricardo Berzoini, speaking
while on a trip to Barcelona in early March, indicated that
his ministry will present a draft proposal on media regulation to President Dilma Rousseff later this year. He plans
to conduct extensive consultations with civil society and
industry stakeholders and regulators.
Parking the Porsche
Berzoini noted that he had been discussing net neutrality
and Internet governance with French communications
minister Axelle Lemaire and US Federal Communications
Commission head Tom Wheeler.
Justice Flavio Roberto de Souza was suspended from the
trial of Brazilian billionaire Eike Batista for insider trading
after he was seen driving home in the Batista’s Porsche.
Speaking on the same subject at the Mobile World
Congress, also in Barcelona, Telefônica Vivo CEO Antonio
In February, bill PL7735/2014 was approved in Chamber
of Deputies and moved to the Senate. The bill is intended
facilitate access to and use of biodiversity by reducing
bureaucracy and providing legal security for companies
and researchers, who believe the current law is confusing
and fear that their activities could be construed as criminal under the existing biodiversity law.
A change to the law would be a boon for the domestic
and international pharmaceutical community, with particular relevance for the cosmetics, textile, food, and energy
industries as well.
The bill would also address industry concerns over benefit-sharing requirements. With the new law, compensation would come later in the process: a 1 percent royalty
on products derived from genetic material. Compensation could also be made through other means, such as
technology transfers, participation in research and technology, exchange of information, and exchange of human
and material resources between national and foreign
research institutions.
…
Veirano Advogados
Environment …
March 2015 · Volume 04 · Number 03
Economy & Business
photograph: caricos
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Economy & Business
Toughening femicide penalties
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President Dilma Rousseff chose International Women’s
Day to sign a new law that sets stiffer penalties on the
killing of women and girls. Convicted murderers in crimes
linked to domestic violence will be subject to sentences
ranging from 12 to 30 years. The murder of girls under
14, women over 60, and pregnant women will bring
longer sentences. Approximately 15 women are killed
every day in Brazil.
Social issues
Marches and protests
Nationwide protests took place on 15 March, as more
than a million citizens rallied against corruption and for
impeachment. The protests were largely peaceful, but
coming just three months into the new presidential term
and amid economic and political turmoil, they could be
a sign of worse to come.
A February poll by Datafolha revealed that 75 percent
of Brazilians believe the President Dilma Rousseff knew
about the Petrobras graft and corruption scheme and 44
percent disapprove of her administration. The president’s
core supporters are the poor, and they are becoming
angry at rising prices, economic contraction, and inadequate services.
Two days earlier, however, on 13 March, thousands took
Politics, Law, Society
International Affairs
photograph: wikimedia commons/Fernando Frazão/Agência Brasil
According to Brazilian government statistics, the national
pharmaceutical industry is growing 15 percent annually
and had a total market value of approximately US$27
billion in 2013. Brazil is among the five largest pharmaceutical markets in the world in terms of unit sales, and
the eighth largest by market size.
Energy & Environment
The 15 March protests were largely peaceful, unlike this clash 2013 in the center of Niterói
to the streets in support of the government. Rallies of
labor unionists and left-wing social activists took place
under the banner of a National Day of the Struggle in
Defense of Workers’ Rights, of Democracy, of Petrobras,
and for Political Reform.
While various groups focused on various causes, the
theme was to show support for the democratic process, the democratically elected president, and the
state-owned oil company. The rallies urged reforms but
defended the president against recent calls for impeachment. That remains an unlikely option, according to
analysts.
Finally, through the first half of March, thousands of
rural workers, organized by the Landless Workers Movement (MST), marched along the highways of Brazil and
occupied public buildings in protest against the Brazilian
agribusiness model. Some marches led by women
workers also protested against the domination of field
work by men.
A manifesto for change
On 9 March, the Federation of São Paulo State Industries
(FIESP), business people from across several sectors, and
trade union representatives approved the creation of a
joint permanent committee to discuss the government’s
fiscal adjustment and devise solutions to the current
economic crisis.
Five major unions – the General Union of Workers (UGT),
the Brazilian General Labor Confederation (CGTB), Union
Force, the Brazilian Unions Central (CSB), and the Confederation of Workers of Brazil (CTB) – all joined forces with
entrepreneurs to vote on a position expressing opposition
to recent provisional measures put forward by the Rousseff
administration proposing changes to the rules for access
to unemployment benefits and pensions and increases to
some corporate taxes. Only the representative of the
Unified Workers Central (CUT) abstained from voting.
Carlos Pastoriza, the president of the Brazilian Association of Machinery and Equipment (Abimaq), promised
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March 2015 · Volume 04 · Number 03
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Economy & Business
to merge the actions of the committee with a manifesto
signed by 39 associations, led by Abimaq, that advocates
changes in the Brazilian economy.
The intention is to present President Dilma Rousseff with
a manifesto demanding the repeal of the provisional measures, support for industry to regain its competitiveness,
and relief from the current tax burden.
FIESP president Paulo Skaf promised that if the government does not pull back the proposals, “We close ranks
in Congress.” That could mean action in the Senate and
the House of Representatives against the measures.
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While Skaf asserted that the committee is not against the
fiscal adjustment, in practice it advocates precisely the
opposite.
Unemployment rises
The unemployment rate hit 5.3 percent in January, according to the Brazilian Institute of Geography and Statistics
(IBGE). That represents a 1 percent increase from December 2014 and a 0.5 percent increase year on year. Some
230,000 people were added to the ranks of the unemployed, bringing the national total to 1.3 million.
Four of the six major metropolitan areas showing rising
unemployment over the month, with figures as follows:
Recife rose from 5.5 to 6.7 percent.
Salvador rose from 8.1 to 9.6 percent.
nBelo Horizonte rose from 2.9 to 4.1 percent.
nSão Paolo rose from 4.4 to 5.7 percent.
n
n
Labor market participation is expected to remain off
peak over the next few months as workers delay entering
the formal labor force in response to weak employment
Energy & Environment
Politics, Law, Society
prospects. The average length of a job search is on the
rise, and some of those seeking employment are likely to
opt to enroll in higher education or join the informal workforce instead.
Striking truckers
Starting on 18 February, truckers established roadblocks
in seven Brazilian states in protest over fuel prices and
other costs. Airlines carried additional fuel on flights to
affected areas to ensure that they were able to make the
return journey. Meat-processing plants were forced to
close, and some grocery stories were left empty.
Of prime concern, some farmers in Mato Grosso ran
out of fuel to run their tractors and for three weeks only
a fraction of the usual number of trucks transported the
soybean harvest to port, raising concerns that the crucial
exports could be delayed.
The strike gave a boost to US soybean futures prices.
International Affairs
Happy birthday, Rio!
Rio de Janeiro is turning 450, and to celebrate it is
displaying almost 500 photographs taken between
1840 and 1930. Some are amateur and some professional, but many have never been seen before.
The images show wide avenues devoid of traffic and
views now blocked by massive urbanization, illustrating just how quickly the city of more than 6 million
has grown.
final roadblocks. Autonomous truckers are negotiating
new freight rates and will next sit down with government
representatives on 26 March.
Meanwhile, truck traffic is back to normal and soybean
exports are on the rise again.
Government officials and industry and transport representatives met and agreed to keep diesel prices stable
for six months, extend cheap financing to truckers, and
approve a law that will regulate working hours. The legislation will also lower toll costs, waive fines for overweight
trucks charged in the last two years, and build more highway rest stops.
Autoworkers return to work
By 27 February, some unions had accepted the proposal
but others pledged to continue striking unless fuel prices
were reduced, something the government said it would
not do. The government warned that truckers would be
fined for the road blockages, and over the following week,
the strike lost momentum.
GM has cut the number of workers on the factory payroll from about 7,500 workers in 2012 to about 5,200
currently.
By the second week of March, truckers had lifted the
Workers at a General Motors plant in Brazil struck for
six days in late February in protest at the company’s plans
to lay off 800 employees. In a compromise with the
metalworkers’ São Jose dos Campos union, GM agreed
to put 650 workers on furlough for five months, with a
guarantee they will get their jobs back.
Veirano Advogados
Labor & Employment …
March 2015 · Volume 04 · Number 03
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Energy & Environment
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photograph: wikimedia commons/michael clarke stuff
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International Affairs
Brazil does not have capital punishment, but Indonesia
is adamant that implementation of the death penalty is a
matter of Indonesian sovereignty.
Indonesia is reportedly deciding whether to re-evaluate
a deal to procure 16 Brazilian-made Embraer EMB-314
Super Tucano aircraft for its air force and another order
for Astros II multiple-launch rocket launcher systems.
Indonesian foreign minister Retno Marsudi went further
and asserted that “all aspects” of bilateral relations would
be reassessed.
Celso Maldaner, a federal deputy for Santa Catarina state, visited the Falkland Islands in mid-February
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International Affairs
Diplomatic briefs
Friendly with the Falklands
Celso Maldaner, a federal deputy for Santa Catarina state
and member of the Brazilian Democratic Movement Party
(PMDB), followed a mid-February visit to the Falkland
Islands with an interview. He told Spanish government
news agency Efe that he is personally a strong supporter
of Brazilian trade with the islands, to which he had been
invited by the British embassy.
Although Brazil supports the Argentinean claim of sovereignty over the islands, Maldaner referred to them as the
Falklands, rather than the Malvinas. He declared that you
can’t shape political objectives by “looking in the rear view
mirror” and asserted that he intends to influence Brazilian policy in order take advantage of trade and tourism
opportunities.
Maldaner’s visit was reportedly a topic of discussion
when Brazilian Foreign Minister Mauro Vieira visited
Buenos Aires shortly afterward.
Tiff with Indonesia
Relations between Brazil and Indonesia have deteriorated
as Brazil delayed accepting the credentials of the newly
appointed Indonesian ambassador and Jakarta recalled
him in response. At a ceremony in Brasília on 20 February,
President Dilma Rousseff accepted the credentials of
several new ambassadors but Indonesian ambassadordesignate Toto Riyanto was absent.
The Brazilian Foreign Ministry postponed the acceptance
of his credentials in order to achieve “some clarity” about
relations with Indonesia after a Brazilian citizen convicted
of drug smuggling was executed there in January.
Jakarta had denied Brazilian requests for clemency, and
Brazil recalled its ambassador from Indonesia, although
he has since returned.
A Brazilian federal judge on 3 March ordered the deportation of Italian extremist Cesare Battisti, who was convicted
of murder in his own country. Brazil had earlier rejected an
Italian request for Battisti’s extradition, but Judge Adverci
Mendes de Abreu ruled that he does not have the right to
stay in Brazil although it is not necessary to hand him over
to his country of origin.
Battisti was sentenced to life imprisonment in connection
with the activities of an armed Marxist group in the 1970s
and spent 30 years on the run, spending time in both Mexico and France before settling in Rio. The judge indicated
that he should be deported to either Mexico or France.
Pizzolato extradition
The Italian Supreme Court on 12 February authorized the
extradition to Brazil of Henrique Pizzolato, a former director of marketing for the Bank of Brazil.
The final decision rests with the Italian government and is
expected by April. Pizzolato was sentenced by Brazilian
courts to 12 years and 7 months for illegal appropriation
of government funds, money laundering, and passive
corruption.
March 2015 · Volume 04 · Number 03
Battisti deportation ordered
Economy & Business
The World Bank has warned that the troubled Venezuelan
economy could produce “contagion” across Latin America.
The country relies on oil for 95 percent of its export earnings, and prices have been slashed in half since June 2014.
The result has been a massive fiscal deficit, accelerating
inflation, and shortages of consumer goods – spurring riots.
Brazilian Foreign Minister Mauro Vieira met with the
foreign ministers of Ecuador and Colombia on 6 March
in Venezuela in the wake of the police shooting death of
a 14-year-old student during a demonstration against the
government of Nicolás Maduro. The visit by UNASUR
ministers was spurred by increasing tension between the
Venezuelan government and the opposition.
19
19
UN Secretary-General Ban Ki-moon has expressed
concern about events and support for UNASUR efforts to
restart dialogue begun in 2014.
International trade
Drumming up Doha support
World Trade Organization (WTO) director-general
Roberto Azevêdo visited Brazil in early March to drum up
support for the Doha Round of trade talks. He met with
Foreign Minister Mauro Vieira, Minister of Development,
Industry, and Foreign Trade Armando Monteiro Neto, and
leading entrepreneurs.
February trade gap
Brazil had its largest ever February trade deficit this year
– US$2.842 billion – as the prices of iron ore, soybeans,
and other key exports sank. Iron ore export value fell 36
percent and soybean value fell 72 percent year on year.
Analysts had been expecting a US$2.2 billion gap.
Politics, Law, Society
International Affairs
photograph: wikimedia commons
The contagion of Venezuela?
Energy & Environment
UN Secretary-General Ban Ki-moon has expressed concern about events in Venezuela
Fast food nation?
An increase in fast food in China boosted exports of
Brazilian chicken modestly but steadily from 2007 to
2012, but only 10 percent of the Chinese population
has ready access to Brazilian meat. A São Paulo report
released on 26 February indicated that chicken exports to
China grew just 0.2 percent annually over the period, to
reach US$548.5 million, representing an opportunity still
to be developed.
By contrast, Brazilian soybean exports to China grew
43 percent over the same period. Soybeans, iron ore,
and petroleum account for 80 percent of Brazilian sales
to China.
Boosting trade with Iran
Fakhroddin Amerian, the head of the Iran–Brazil Chamber
of Commerce, said on 1 March that it was within the
realm of possibility that trade between the two countries
could reach US$2 billion per year.
Among other commodities, Iran imports corn, soy, sugar,
meat, and industrial machinery from Brazil and exports
carpets, carpet-making machines, industrial products,
saffron, raisins, and pistachios to Brazil. Tehran and
Brasília have been actively seeking to strengthen trade,
economic, and industrial ties in recent years.
And with Argentina
Brazilian Foreign Minister Mauro Vieira visited Argentina
recently to rekindle Brazil–Argentina trade. Argentina
has traditionally been a major trading partner with Brazil
but the exchange of goods has been slumping. Export of
capital goods from Mercosur countries to Argentina fell
34 percent in 2014, while China increased its Argentinean
exports by 13 percent.
Veirano Advogados
VistaBrazil 03.15
March 2015 · Volume 04 · Number 03
Viewpoint