Risco Brasil | Courts Uphold Derivatives Contracts

The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so  far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are  potentially lethal. –Warren Buffet 2002

“It’s an established fact: corporate governance in Brazil is divided into two periods: before the derivatives scandal and after it.” –Rodrigo Zeidan, Fundação Dom Cabral.

According to research performed for the Folha de S. Paulo — and not, for some reason, by the FSP — courts are tending to uphold the caveat emptor school of thought on the subject of

I translate. Author: Adriana Aguia, Valor Econômico Portal ClippingMP.

The exchange-rate derivative contracts that pressured the finances of such major business groups as Sadia, Aracruz e Votorantim, causing billions of dollars in damage during the panic of 2008, are now being  recognized as valid by the Brazilian judiciary.

During the 15 minutes of fame generated by the Aracruz and Votorantim “too big to fail” derivatives cases, Brazil’s SEC, the CVM created and issued a new accounting form — above — in which derivatives contracts would be reflected on an appendix to the quarterly books.

In 2010, CVM issued Instruction 486/10,

which deals with the execution and clearing of derivatives contracts negotiated or registered in organized trading venues: the stock market, the commodity and futures market, and the organized OTC.  The main objective of Instruction 486/10 is to support information-sharing on derivative transactions conducted in the market or in an OTC by the oversight bodies of the stock, commodities and futures exchanges, in keeping with certain recent and unprecedented tendencies in the Brazilian market. Continue reading

Open Market Energy | The Year of Living Danger-Free?

Adoption of the electricity free market, which enables direct negotiation of prices with energy providers, has been led by midsize companies such as shopping malls, food producers and agribusiness, according to a report by the Brazilian Association of Energy Marketers – Abraceel. Currently, some 12,000 companies are in a position to qualify for this market segment, most of them midsize firms, as large companies already buy their energy in the free market.

 Data provided by Abraceel shows a new shopping center adhering to the free market at a rate of at least one per week. Since 2010, these sort of migrations have increased two-fold as 109 newly qualified companies began purchasing energy on the open market. “This increase reflects the 10% to 15% savings obtained by using this system,” says Reginaldo Medeiros of Abraceel. In 2002, the Campinas shopping mall Parque D. Pedro was the first to adhere to the ACL program.

Companies that consume between 500 kW and 3,000 kW per month have another advantage: a 50% discount when and if they opt for alternative energy, such as aeolic, biomass and small hydroelectrics. Companies consuming 500 kW pay somewhere around BRL 75,000 per month, while those consuming 3,000 kW spend BRL 500,000.

Medeiros of Abraceel says that midsize and large firms are displaying an increased appetite for this structure, although the system is still not widely known enough among potential adopters. To rectify this situation, an advertising campaign, “2010: The year of the open energy market,” was devised by Canal Energia and its associates.

Another obstacle to adoption is that it requires companies to foot the bill for an energy monitoring system on their premises.

Brazilian Auto Industry | Beemers Built in Blumenau?

It is not by accident that the Brazilian automobile sector has been the showcase of industrial policy under a president whose political career emerged from the auto workers unions of the São Paulo metropolitan area.

It is no surprise, either, that FIESP president Paulo Skaf — the Industrial Federation of São Paulo State — is endorsing the PT’s candidate for mayor, Fernando Haddad.  This here is not Venezuela. Corporate interests have enjoyed a seat at the table from the get go.

In contrast with other sectors — telecommunications, media, agribusiness, logistics —  the auto market already seems more modern, diverse and competitive and has attracted foreign investment to manufacturing for Brazil’s promising internal market.

Stuck in the city’s legendary traffic jams, you can bide the time birdwatching the economy models of U.S. and European brands — Citroen, Renault, Mercedes, Fiat, VW —  as well as Asian vehicles — the recently launched Chery of China, Honda, Toyota, Kia, Nissan.

Source: Estadão Conteudo, via Yahoo! Notícias.

On Friday, October 20,  BMW announced through its press office that its Brazilian president, Henning Dornbusch, will meet with President Dilma on Monday to formalize the company’s plan to build a factory in Brazil and to announce its location.

BMW has intended to build vehicles in Brazil for some time now — an intention bolstered by the new regulatory scheme for the industry, known as Inovar Auto, which will take effect in 2013. Continue reading

French Connection | A Note on the Sugarcane Sector

Source: Bloomberg|EXAME

How about this for a lede graf: «As Brazil’s sugarcane sector consolidates and traditional family-owned sugarcane groups face extinction, fuel- and industrial-grade ethanol producers and processors diversify products though biochemistry».

This is a sector I have not regularly followed for a year or two, so caveat lector.

First, sugarcane miller and federal legislator João Lyra of Alagoas is pressured by creditors and is working to avoid the bankruptcy of his group — reported by Tatiana BAUTZER of ISTOÉ Dinheiro.

Second, several major sugarcane processors build capacity to diversify their by-products.

At 82, the richest sugarmill owner and  federal legislator ( PSD-AL) faces a legal tempest in a bid to retain control of his sugar and alcohol business. In late September, a state court declared the bankruptcy of Laginha Agro Industrial, which controls five processing plants — three in Alagoas and two in Minas Gerais. The group had been in reorganization since 2009 and has debts of R$1.2 billion. A batallion of lawyers, however, managed to overturn the ruling, alleging bias on the part of judge Marcelo Tadeu, who transformed the reorganization into a bankruptcy.

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BINGOs e Broncas | Kátia, Camila e a Lei da Floresta

Recomendo o artigo por Simon Romero do New York Times sobre a Lei Florestal.

Diferentemente do trabalho do antigo correspondente principal no País, Larry Rohter, o Romero parece buscar ouvir uma amostra mais ampla de vozes para ilustrar o conflito social, citando outras reportagens boas como as do jornal Valor Econômico.

Pode-se até dizer que a Dama Grisalha — alcunha carinhosa do secular diário — oferece melhor cobertura do que a imprensa nacional. Mas vou deixar aquele juízo para vocês.

O que me interessava em particular foi o retrato dos ruralistas no Congresso, liderados pela poderosa Kátia Abréu. Ela é a única legislador ou legisladora que conheço que chefia o lobby que pretende convencer os congressistas. Parece que recebe dois salários, o público e o privado, mas ainda não tenho certeza disso.

De qualquer jeito, segundo Romero, a Kátia está dando coices a várias BINGOs — sigla em inglês para «grandes ONGs internacionais».

«Há ONGs no mundo comprometido com os paises de origem, especialmente de Europa,“ ela disse, referindo-se as organizações não-governamentais e descrevendos suas atividades como «uma tentativa de paralisar o crescimento do setor agricultural brasileiro. [ ...]

Ainda outras vozes brasileias de destaque estão cantando a mesma ladainha … e raiva contra o projeto de lei já transbordou na consciência popular. Falando pela indústria de entretenimento, a atriz Camila Pitanga quebrou o protocolo em um evento nesse mes, chamando a Dilma, que estava presente, a vetar o PL. O video do seu discurso espalhou-se rapidamente nas mídias sociais.

Eu gostaria saber quais as ONGs internacionais apontadas como indevidamente intrometidas. Me lembro de ouvir a mesma crítica contra a Marina Silva.

E tenho a impressão — por minha leitura do blog de César Maia de vez em quando  — de que os DEM têm laços estreitos com ONGs como a Fundação Adenauer. …

Será que o discurso neonacionalista vai pegar no tranco?

ALL & Cosan | The Sugar Cane Train

Brasil Econômico reports on movements in the Brazilian in the invariably compelling sugarcane industry, dominated by dark horse Coopersucar and odds-on favorite Cosan.

Fitch Ratings has today — 24 Janurary — reaffirmed the rating assigned to Cosan, and Cosan subsidiaries Cosan Combustíveis e Lubrificantes; Cosan Overseas Limited; Cosan Lubrificantes e Especialidades; CCL Finance Limited; and Cosan Finance Limited should be affected by the agreement under which railroad concessionaire América Latina Logística (ALL) will buy shares in the company.

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The Empire of Orange Juice | Cutrale v. the MST

The pro-rural media is once again drooling its hatred for the MST, which yesterday returned to reoccupy land “claim-jumped” by Cutrale in Iaras, in rural São Paulo.

Altamiro Borges, a one-time editor of Vermelho — the party organ of the PCdoB — recites the litany: the commercial media in Brazil is systematically biased against the Landless Workers Movement, or MST.

The allegation has the misfortune of being painfully obvious, independent of which side you favor. I translate in the spirit of providing context for official diplomatic cables on the situation of the MST.

TV anchors and commentators denounced the “invasion” and ran archive footage in which orange trees were damaged …. footage dating from September 2009. Though Incra has ruled again and again that the land belongs to the federal union, the media insist on demonizing the landless workers movement .

The occupation of Cutrale was part of a day of action for agrarian reform, including an encampment with 4,000 participants in Brasilia and various actions in other states. The media aired not a single word of our grievances or the absurdities of land ownership in Brazil. The media prefers to hear from the “victim,” Cutrale – a fact that at least attracts attention, even if it is negative attention, to the problem of land entitlement.

A criminal omission

At critical moments, the hegemonic mass media always takes sides. It unfailingly takes the side of the powerful, including in this case the barons of agribusiness, against the side of the workers. It will even cover up events that it has already reported during a less eventful period. Cutrale’s is an emblematic case. The newsrooms know full well the irregularities practiced by this company, but prefer the criminal conspiracy of silence.

In May 2003, for example, Veja magazine — possibly for mercenary reasons –- did a long report on Cutrale. Veja recounted that Cutrale is one of the largest agribusiness concerns in the world and that it has built its empire on the basis of predatory and illegal practices. “The Brazilian José Luís Cutrale and his family control 30% of the world market in orange juice, a figure comparable to that of OPEC in the oil business”.

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