Eucatex | Twilight of the Maluf Family Empire?

If Mexico can finally imprison Elba Ester Gordillo, why shouldn’t the Brazilian finally bring down the notorious M.A.L.U.F?

The following excerpt is translated from the Estado de S. Paulo |  Portal ClippingMP. File it under «political grotesques».

SÃO PAULO – A São Paulo court has ordered the freezing of R$ 520 million from the Maluf family business Eucatex.

Or about US$ 260 million.  Eucatex, a eucalyptus grower, was founded by in 1951, thrived under the military dictatorship — which named Maluf mayor of the capital and later governor of São Paulo state. He is featured in a World Bank list of 150 notable corruption cases.

The measure was taken at the behest of the São Paulo state prosecutor’s office, which denounced insider transactions within the Eucatex group as part of a fraudulent effort to transfer Eucatex assets off the books and avoid payment of future court-ordered reimbursements as a result of various law suits against Maluf, accusing him of embezzling public funds while serving as mayor of São Paulo.

[The court] found that the prosecutor’s indictment demonstrates “the possibility of fraudulent reporting of assets” by Eucatex, but the ruling may be overturned if Eucatex can show that the penalty will drive the company into bankruptcy.

As the Folha de S.Paulo revealed in March, the prosecutor’s office believes that the family is trying to escape payment of court-ordered monetary awards by transferring assets to a newly founded member of the group, ECTX. Prosecutors see the transaction as fraudulent and believe its purpose is to “dehydrating” Eucatex of its assets.

Back in March, Eucatext VP José Antônio Goulart de Carvalho, denied the accusation. Goulart said the asset transfer to ECTX was undertaken because the new company would represent the vanguard of a new, more transparent governance model.

In July 2012, Eucatex transferred R$ 320 million of its assets to ECTX. In May and October, Eucatex released a Material Event statement to the market, saying it had initiated a “process of share reorganization” in order to transfer its assets.

ECTX, according to Goulart de Carvalho, is waiting for CVM authorization to launch an IPO in the capital markets.

Legal Troubles

Eucatex and the Maluf family are defendants in a case in which prosecutors have moved for the return of US$ 153 milhões that was supposedly stolen from the São Paulo city government, wired overseas and then funneled into Eucatex through various financial transactions.

There is also an open case on the Isle of Jersey involving the transfer of money by Maluf family members.

Overseas companies with ties to the Malufs have been ordered to reimburse US$ 28 million to the city of São Paulo, funds thought to be the fruit of fraudulent dealing involving the city government. These companies have appealed the decision.

In the present case, the Jersey court also ordered the freezing of Eucatex shares belonging to foreigners with ties to Maluf.

In a statement, Eucatex says it was not officially notified of the asset freeze involving R$ 520 million as ordered today by the São Paulo court.

There is another open case against Maluf, in fact, O Dia notes:

In the federal Supreme Court, Maluf and family were charged in 2011 on allegations of money laundering and using Eucatex to camouflage the misappropriation of public funds during Maluf’s term as mayor, from 1993 a 1996.

Maluf’s status as a sitting federal legislator entitles him to be tried by the Supreme Court.

Without Notice

In an official statement, the company says the motion to block its accounts has already been applied for by the prosecutor in 2009, and the application failed both in the first instance and on appeal.

According to Eucatex, the accusation is groundless given that the company’s net assets increased after the cretion of ECTX, from R$ 997 million in 2011 to R$ 1.1 billion at year’s end 2012.

“It should be recalled that Eucatex is a publicly traded corporation, with hundreds of shareholders, among them the federal legislator Paulo Maluf, who is not an executive of the company or even a member of  the board of directors,” the company added.

True: it is currently led by Maluf’s son Flávio. Interpol has an open arrest order on Flávio, from what I read. Otávio Maluf is chairman of the board.

The creation of ECTX was part of a general restructuring of the company with the goal of qualifying for the Novo Mercado listing segment of the São Paulo Stock Exchange, reserved for companies with superior governance standards and practices. The new company has been waiting since December for the CVM to rule on its registration as a publicly traded company.

Water Over the Dam | Will Investors Take the Plunge?

Source: Brasil Econômico | 24 January 2013
Tenor: Market is moderately cautious over energy-sector pricing reform
Excerpt | Translation: C. Brayton

Negative pressure on shares is transitory and reflects the continued uncertainty of investors. The BM&F Bovespa’s electricity and energy sector index (IEE) is down 1%.

The reduction in energy bills announced by the president on January 23 has had a limited negative impact on the shares of electricity generators, transmitters and distributors.

Pedro Galdi,chief analyst at the SLW Corretora brokerage house, explains that the government has already absorbed part of the losses suffered by some companies. 

Electricity | Waiting for the Waters of March

As the date draws near for the early renegotiation of generation, transmission and distribution concessions in the Brazilian electrical sector,  Jornal da Energia suggests that major players — including the state-owned Copel and Cesp and the privately owned Tractebel — will fare better in the stock markets than will companies that agreed to the renegotiation.

I cannot offer an authoritative translation of the article because I am still trying to catch up on my investor education regarding the ins, outs and bureaucratic tesseracts of the industry.

It does seem plausible that the state-owned companies refusing early renegotiation, the aim of which is to reduce electricity retail prices by 20%, represent political alliances acting in concert.

Copel, Cesp, and Cemig are all owned and operated governments of the opposition PSDB party. Their combined market share — my half-assed pie chart, above — represents a near-perfect counterweight to the federal Eletrobras.

Cemig is not, however, included in the list of higher performing concessionaires, and has demonstrated systematic seasonal volatility over the past 5 years — above, the company’s ADRs.

7D | A Mexican Standoff?

On 7D, nothing will happen

Argentine media group Clarín announces a stay of execution.

It says it will not be required to comply with the 2009 Ley dos Medios until all appeals have been exhausted.

As soon as [the court] extended the stay in the case challenging the constitutionality of certain provisions of the media law, Clarín issued the following statement:

The Grupo Clarín has just been informed that the injunction has been extended until a definitive ruling on the constitutionality of provisions of the Media Law  has been arrived at.

As it has throughout the process,  Grupo Clarín will follow the law, respecting the Constitution, the law, and the findings of the courts.

Eric Nepomuceno of Brazil’s Observatório da Imprensa summarizes the case, below.

As it happens, and contrary to the image of a deeply polarized debate, there is internal disagreement among shareholders in the Clarín group over compliance — I will translate that, too. But first,

Scandal 47 | Dilma Delegates

I read it in the Estadão, and translate.

BRASÍLIA – President Dilma Rousseff has decided to fire the head of the Federal Presidency’s office in São Paulo, Rosemary Nóvoa de Noronha, who has been indicted by federal police for corruption and influence peddling. The second highest ranking official in the federal Attorney General’s office will also be let go.

The case apparently involves a Paraguayan over-the-counter market in favorable regulatory findings, such as those required to get cargo into the country via Santos, one of its principal ports.

Remind me to tell that well-worn story of mine about getting my books into the country using a Santos despachante.

In the meantime, this item from the white-collar police blotter sounds a lot like a familiar broken record — petty-ante crimes by permanent civil servants of the State used to leverage accusations of endemic corruption inside the Government.

Electric Sector Legislation | Doomsday for Debentures?

BRAZIL — While sentencing in the «big monthly payola scandal» and an upcoming vote on the «Constitution of the Internet» monopolize the headlines, Provisional Measure 579, currently under debate by the Brazilian congress,

addresses concessions for the generation, transmissions and distribution of electrical energy, as well as the reduction of taxes on the electrical sector, the price to the consumer, and other provisions.

According to today’s Folha de S. Paulo,

members of the government benches in Congress are contemplating an amendment  under which MP 579 would apply only to electric companies that have already had their concessions renewed.

The lack of definition may be affecting the credit-worthiness of major players in the sector, as Valor explained on Monday –Source: Portal ClippingMP..

Faced with uncertainty in the process of renewing electrical energy concessions, Eletrobras has decided to delay plans to raise BRL 2 billion in the capital markets with a debenture issue. The state-owned utility is the latest in a series of electricity companies with fundraising plans affected by the federal government’s plan to reduce retail energy prices. In September, Eletropaulo was obliged to raise interest rate yields in order to place a BRL 750 million debenture issue.

São Paulo | First World Cost of Living, Emerging Cost of Dying

 

For the average person in a developing city, the most important factor is safety, health, and security. Efficiency is also important— and that relates to transport or connectivity and how you lay things out through good urban planning. This ability to get around efficiently is probably second in importance only to safety. – Cities of Opportunity | PWC-Partnership for New York City (2012)

Globo News reports, awkwardly worded:

Among Brazilian cities, São Paulo hosts Brazil’s stock exchange as well as the largest number of multinational corporations among Brazilian cities, and its heart beats to the rhythm of business.  But it is  in terms of its business sector that it was recently ranked alongside other major cities in the world.

Among 27 global urban centers, São Paulo ranked 26th in terms of business opportunities. Mumbai was ranked in 27th place.

The city ranks 26th in terms of transportation and infrastructure. In terms of health care and public safety, it ranks last. Along with these well known problems, another difficulty stands out: Internet access is a bottleneck for local businesses due to low quality and high cost.

“Infrastructure that remains out of date and a lack of innovative uses of this technology prevents us from offering a more attractive business environment,”says Alexandre Barbosa of Cetic.br.

Furthermore, how can São Paulo make itself more attractive when it is the third most expensive city in the world in terms of the cost of maintaining a business? The “cost of Brazil” is another factor that diminishes São Paulo’s ability to compete. Other world cities, such as Mumbai and Buenos Aires, have tax rates similar to those found here, according to the study. But the cost of living in São Paulo is as high as it is in cities of the First World.

The results of the ranking were not worse only because of São Paulo’s central economic role: it plays host to some of the largest corporations in the world and its cultural life is intense. “Options exist. What the city must do now is discuss what is to be done and create a plan for the middle and long term,” said Richard Dubois, a partner at Price Watherhouse [sic] Brasil.

The Estado de S. Paulo provides a more complete summary, including a full and proper citation of the study, which had to be googled up to be checked.

São Paulo has declined in terms of its score in a recenlty released 2012 PricewaterhouseCoopers (PwC) study of social and economic development indicators compared with 2011, and as a result fell to next to last among 27 global urban centers.

According to Cities of Opportunity 2012, released on Wednesday, it outranks only Mumbai and ranks behind other emerging urban centers such as  Johannesburgo (25th), Istambul (24th), Buenos Aires 23rd) and Mexico City (21st). New York remains the leader with 1,112 points, more than double the points scored by the Brazilian city (527).

São Paulo saw its score decline in seven of the ten criteria analyzed, many of them crucial to the realization of such international events as the World Cup 2014. In transportation and infrastructure, for example, the São Paulo capital beat out only Johannesburg.  Its score fell from 28 points in 2011 to 22 in the study just released. levantamento divulgado hoje.

São Paulo also scored lower in the areas of economic influence, technological readiness, health and public safety, demographics and quality of life, sustainablity, and lifestyle.

Improvements were noted in the areas of intellectual capital and innovation, but these advances wre insufficient to improve the city’s score — it ranked 24th, 21st and 25th, respectively, in these areas.

The study is not as purely negative as Globo makes it out to be.

“In relation to other emerging cities, São Paulo is among the easiest to do business,” said the  PwC Brasil partner and lead researcher for government and the public sector, Richard Dubois. The study shows it is easier to open businesses in São Paulo than in Beijing  (22nd place), Istambul (23), Moscow (24), Buenos Aires (25), Mumbai (26) e Shanghai (27). Emerging cities scoring higher than the Brazilian metropolis were Johannesburg (19) and Mexico City (17).

Dubois notes, on the other hand, that national data were used for the nine items used to calculate the ease of doing business. An example is the ease of starting a new business, in which São Paulo received a grade of 6 out of 27 possible. Sydney,  Austrália received the highest grade in this area.

The only Brazilian city studied — Rio de Janeiro will join the list in 2013 — is notable for its real growth in GDP. It growth in this area ranked 16th from 2010 to 2011, ahead of Seoul, Abu Dhabi, Sydney, Tokyo, Paris and London, among others. São Paulo ranks 7th in economically active age groups and 15th in terms of major construction projects.

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.

R7 To Translate New York Times Content

The Record network of Brazil — a heavily bankrolled wannabe rival to the dominant Globo media empire — announces the signing of a content sharing agreement with the New York Times.

Source: R7.

In 2008, the metrosexual Folha de S. Paulo — its content is used to stock the UOL portal as Record and Globo do the R7 and G1 portals — entered into a similar, and not uncontroversial, agreement with the Gray Lady.

Folha ombudsman Suzana Singer — the admirable Suzana Singer — commented in June on the «imported from the Times» paywall model.

The Carta Capital newsweekly has a similar arrangement with The Economist, despite some divergences in policy viewpoints.

Does this mean that Times correspondent Simon Romero will be reduced to translating the reporting of the Folha‘s Lilian Christofoletti?

Note to self, gin up a matrix of content partnerships of this kind.

The Grupo Abril — which began life as a local franchise of Disney cartoons — has long developed Brazilian franchises of U.S. magazine titles, everything from Playboy to  National Geographic. Big publishing has resisted protectionist efforts designed to stimulate media and entertainment production at home.

In any event,

The R7 news portal has signed a content partnership with  The New York Times. Internauts will find articles from the North American daily on the R7 Web site.

«Internaut» is a word that deserves to be absorbed into English.

«Uncle Sam Wants You» | Clóvis Rossi

Veteran Folha de S. Paulo columnist Clóvis Rossi reports on efforts to increase the flow of academic exchanges between the U.S. and Brazil.

I translate a selection.

In Dilma’s case, the American hunger for Brazilian exchange students matches the president’s own appetites: she has adopted the program as a personal priority and trumpeted it in all the countries she has visited.

For those who have not heard of the program, Science Without Borders seeks to promote the consolidation, expansion and internationalization of science and technology, driving Brazilian innovation and competition through academic exchange and international mobility.

Finding qualified applicants for the government program is managed by the Institute of International Education, about which more later.