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Government will cut bureaucracy of opening a business

26.02.2019

The government plans to issue this week a provisional measure that establishes the automatic registration of small and medium-sized businesses. It is likely to reduce the time necessary for setting up firms, with the issuance of the business registration number (CNPJ) taking one rather than seven days, the secretary of De-bureaucratization, Management and Digital Government of the Economy Ministry, Paulo Uebel, told Valor.

The same provisional measure (MP) will also take a step toward trying to reduce the longtime problem of excess of notary requirements. Now, the lawyer or accountant of these firms may declare the authenticity of documents presented in their foundation without need of notary certification.

The simplified registration will be allowed to companies classified as limited liability, individual company of limited liability or individual micro-entrepreneur, which, according to Mr. Uebel, account for 96% of the annual registration filings. He also said that fewer than 1% of filings are rejected.

Even though the average registration period is seven days, it can take up to 30 days, from the filing and considering the analysis of documentation. The idea now is to invert the process, giving automatically the registration and then verifying whether there is any problem or irregularity. In case some situation not allowed is found, the authorization is overturned.

Mr. Uebel believes this measure is important for the country to improve its position on the World Bank’s “Doing Business” ranking, which shows the countries with better business environment. Brazil is currently number 109 and the Jair Bolsonaro administration aims to reach the number 50. “The measure aims to speed up the process of starting businesses and may have big impact in Doing Business,” Mr. Uebel said. “The automatic CNPJ issuance will allow the business owner to set up immediately the business, such as leasing space, buying inputs and hiring employees,” he added.

Regarding the initiative of no longer requiring document authentication, he stressed that the goal is also to cut red tape and costs. The measure not only does away with this procedure, but also with the owner’s appearance at the Commercial Registry, leaving in charge of the accountant or lawyer the necessary procedures and the manifestation of reliability of documents. “Now the business owners will no longer need to go personally to the registries nor having to deliver original personal documents to facilitators,” he said. “We will trust the people.”

For him, the measure doesn’t reduce the security or raises the risks of frauds, because the necessary verifications will be made. And the idea is to move toward this practice in a series of other activities. “In all low-risk activities we will move toward the declaratory model, which has no irreversible impacts to society, damage to its health,” he said. “We want to identify what we can make easier. We will focus on what is complex and simplify what is simple. We will focus on what is medium and high risks,” he said.

Source: Valor International

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The government plans to issue this week a provisional measure that establishes the automatic registration of small and medium-sized businesses. It is likely to reduce the time necessary for setting up firms, with the issuance of the business registration number (CNPJ) taking one rather than seven days, the secretary of De-bureaucratization, Management and Digital Government […]

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Brazil economy minister Guedes optimistic pension reform will pass

21.02.2019

Brazil’s Economy Minister Paulo Guedes said he is “pretty optimistic” that a “mature” Brazilian Congress will approve without too many changes the pension reform proposal that he unveiled on Wednesday.

“I am not seeing much resistance from the enlightened political class because they have realized that this is the path to get Brazil growing, create jobs and reduced inequalities,” he said in a television interview. Guedes expects to achieve fiscal savings of 1.15 trillion reais ($308.70 billion) over 10 years if the bill is not changed by Congress.

Source: Reuters

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Brazil’s Economy Minister Paulo Guedes said he is “pretty optimistic” that a “mature” Brazilian Congress will approve without too many changes the pension reform proposal that he unveiled on Wednesday. “I am not seeing much resistance from the enlightened political class because they have realized that this is the path to get Brazil growing, create […]

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Brazil aims to save more than $270 bln in a decade with pension reform

20.02.2019

Brazil’s government aims to save more than 1 trillion reais ($270 billion) in 10 years for public coffers with a pension reform bill delivered to Congress on Wednesday, according to an Economy Ministry presentation.

A proposed constitutional amendment that President Jair Bolsonaro presented to congressional leadership would save 1.072 trillion reais in a decade. Proposed changes to military pensions, which the government pledged to deliver within 30 days, would bring savings to 1.165 trillion reais in 10 years.

Source: Reuters

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Brazil’s government aims to save more than 1 trillion reais ($270 billion) in 10 years for public coffers with a pension reform bill delivered to Congress on Wednesday, according to an Economy Ministry presentation. A proposed constitutional amendment that President Jair Bolsonaro presented to congressional leadership would save 1.072 trillion reais in a decade. Proposed […]

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Buffett signs up for significant stake in IRB

18.02.2019

Conglomerate Berkshire Hathaway is negotiating to buy part of an 8.9% slice in reinsurer IRB being offered by state-owned bank Caixa Econômica Federal, Valor has learned. Controlled by Warren Buffett, one of the world’s most celebrated investors, Berkshire has insurance assets making up a major part of its operation. Caixa, for its part, hopes to raise as much as R$2.5 billion with the IRB stake amid a new plan to divest non-core assets. The offering will be priced on February 26.

Source: Valor International

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Conglomerate Berkshire Hathaway is negotiating to buy part of an 8.9% slice in reinsurer IRB being offered by state-owned bank Caixa Econômica Federal, Valor has learned. Controlled by Warren Buffett, one of the world’s most celebrated investors, Berkshire has insurance assets making up a major part of its operation. Caixa, for its part, hopes to […]

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Citibank bullish about Brazilian equities

13.02.2019

Indications from the Central Bank’s Monetary Policy Committee (Copom) that base rate Selic could stay parked at 6.5% throughout 2019 are encouraging investors to seek equity funds and could lend support to rising prices, says Citibank’s head of Latin American trading, Fabio Gheilerman. “There’s a chance we could keep seeing this performance without foreign capital, but there would be a second rally once these investors join in,” says the New York-based executive. B3 featured a net outflow of R$11.5 billion last year, but Mr. Gheilerman argues that foreign investors will start pouring back into the country only after Congress passes pension reform.

Source: Valor International

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Indications from the Central Bank’s Monetary Policy Committee (Copom) that base rate Selic could stay parked at 6.5% throughout 2019 are encouraging investors to seek equity funds and could lend support to rising prices, says Citibank’s head of Latin American trading, Fabio Gheilerman. “There’s a chance we could keep seeing this performance without foreign capital, […]

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Brazil’s Next Central Bank Chief Has a Long Family History

11.02.2019

The man who helped found Brazil’s central bank didn’t live long enough to see his grandson take over as its next president, but his legacy appears to have survived.

While Roberto Campos Neto, whose Senate approval for the leadership post is expected later this month, hasn’t made clear where he might take monetary policy in Latin America’s biggest economy, clues can be found by looking to his grandfather and namesake, Roberto Campos.

“Campos Neto was very close to his grandfather, who was his main mentor,” said Alexandre Aoude, a friend of the nominee who used to run Deutsche Bank AG’s Brazil unit.

The grandfather, a controversial economist, diplomat, writer and politician who enjoyed sprinkling his conversation with dry witticisms, helped mold Brazil’s economic liberalism in the 1950s and 1960s, and as Brazil’s planning minister signed the decree that created the central bank in 1964.

The grandson, who declined to be interviewed for this story, has so far been reticent about making his policy views public. But his trading background — the 49-year-old Campos Neto was a top treasury executive for the Americas at Banco Santander SA, where he worked for a total of 16 years — leaves no doubt he understands the language of the markets.

“Wherever he went, he made money,” said Aoude, who’s a founding partner at investment firm Vectis Partners in Sao Paulo. “As a trader and the head of treasury departments at banks and funds, he’s made the right decisions most of the time.”

Working Abroad

In taking on his first public-service role, Campos Neto heads to the central bank with a deep understanding of international investors. Much of that experience comes from his work at Santander Americas’ treasury business, which had offices in the U.S., Mexico, Chile, Peru, Brazil and Argentina. Campos Neto also oversaw the market-making business at the bank, a job that introduced him to dozens of fund managers and company executives looking to invest in Brazil.

Experience abroad is another trait shared by his grandfather, who served as Brazil’s ambassador in Washington and London. Those roles earned him the nickname “Bob Fields” — an exact English translation of his name that was used as a way to criticize his penchant for foreign capital.

Although later in his life the grandfather was one of the most vocal opponents of socialism or any type of state interventionism, in 1951 he defended the creation of the nation’s development bank, where he later served as president. Economy Minister Paulo Guedes admired him so much, he proposed that his grandson head the central bank. President Jair Bolsonaro, who has given Guedes sweeping powers to run the economy, agreed.

Management Style

Colleagues who worked with Campos Neto during his 10 years at Santander say he was a skilled negotiator, with a flexible approach that helped him build long-lasting relationships not only with his superiors at the bank but also with his team and clients. They said he fostered a relaxed culture while serving as a mentor for his colleagues, compared with some other executives at the bank whose management styles sometimes humiliated subordinates. None of the colleagues agreed to be identified, citing Campos Neto’s future job as a public official.

Before Santander, Campos Neto traded interest rates, derivatives, debt and stocks at Banco Bozano Simonsen SA, which was sold to Santander in 2000. Previous jobs included a stint as a portfolio manager at hedge fund Claritas Investimentos e Participações Ltda. He earned bachelor’s and master’s degrees in economics from the University of California, Los Angeles, specializing in finance. He also has a master’s degree in applied mathematics from the California Institute of Technology.

Campos Neto, who was born in Rio de Janeiro, is an avid sportsman who likes tennis, running and lifting weights, according to the central bank. He spends his evenings at home with his family, all of whom travel in armored cars after once becoming victims of a robbery.

‘Pragmatic Guy’

“The modern central banker has become a lot more technologically sophisticated, and someone like Campos brings unique skills to the equation, since he has been at a very large bank, knows how markets work, understands the regulatory environment, and has fantastic contacts around the world,” said Hari Hariharan, chief executive officer of NWI Management LP. “He’s a pragmatic guy,” said Hariharan, who worked at Santander and has known Campos for 16 years.

Gustavo Loyola, a former president of the central bank during the 1990s, said “continuity” with the policies of his predecessor, Ilan Goldfajn, will probably characterize Campos Neto’s tenure. Loyola, now a partner at advisory firm Tendencias Consultoria Integrada, expects a “central bank committed to the inflation-target regime, preserving the credibility earned during Ilan’s time.”

Source: Bloomberg

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The man who helped found Brazil’s central bank didn’t live long enough to see his grandson take over as its next president, but his legacy appears to have survived. While Roberto Campos Neto, whose Senate approval for the leadership post is expected later this month, hasn’t made clear where he might take monetary policy in […]

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Whisper it, but there’s good news on Brazilian pension reform

08.02.2019

There was good news from Brazil this week when a draft emerged of the government’s plans to overhaul the country’s deficit-ridden pensions system.

The reform, under new president Jair Bolsonaro, would be a big step in setting the country back on the path to growth after its crushing recession of 2015-2016, raising hopes of investors who have seen several attempts to get the changes through congress fail over the past quarter of a century.

Former president Fernando Henrique Cardoso (1995-2002) became the standard-bearer of liberal market reform in Latin America even before he took office, with the inflation-busting Plano Real measures of 1994, enacted while he was finance minister. As president, he put pensions reform front and centre of his policy agenda. To the astonishment of many, so did the former leftwing firebrand Luiz Inácio Lula da Silva (2003-2010) who, having blocked the government’s assault on “acquired rights” while in opposition, quickly understood the fiscal imperative to act once in office.

Indeed, both presidents succeeded in passing partial reforms: Mr Cardoso after years of struggle in 1998, Mr Lula da Silva as one of his first acts in 2003. Both faced fierce resistance among the population and from vested interests in Brasília. Neither did the job properly and Brazil’s public finances continued on their unsustainable course.

Reform then took a step backwards under Dilma Rousseff (2011-2016), Lula’s chosen successor, but was back on the agenda under Michel Temer (2016-2018). His caretaker government, installed after Ms Rousseff’s impeachment, quickly pushed through two important fiscal reforms (curtailing subsidised lending and putting a cap on public spending) but failed, again, at pensions.

The predictable spectacle of elected politicians putting their interests — and those of their cronies — ahead of the country has been peppered with farce. A central plank of Mr Cardoso’s reform was defeated by one vote when a senator accidentally pressed the wrong button. Mr Temer’s plan was kiboshed within days of its expected success when recordings became public that implicated him in corruption. He denied the allegations and survived, but the plan was dead.

However, despite a history of failure on pension reforms, this time may be different. Mr Temer’s speechwriters had the idea of shifting the focus of his argument from the fiscal imperative to social justice. This was long overdue. Of public spending on pensions (more than a third of tax revenues), 53 per cent goes to the wealthiest 20 per cent of the population by income and just 2.5 per cent to the poorest 20 per cent. Resentment of pensions reform among voters may have eased.

The fiscal pressure has become overwhelming, too. Largesse on pensions has sapped the country’s ability to invest for future growth. Speaking of the need to get the reform done properly, Rodrigo Maia, president of the lower house of congress, told the Folha de S.Paulo newspaper this week: “Everyone [in congress] understands that there will be a definitive rupture in politics if this country doesn’t return to growth.”

The pensions system not only saps the ability to spend; it also creates a savings drought. As Alberto Ramos, of Goldman Sachs, put it: “If you are told that when you retire you will get the same income you had in your job, there is no incentive to save at all. Exactly the opposite.” No surprise, then, that Brazil’s savings rate was equal to just 13 per cent of gross domestic product in 2017, far too low for a developing, middle-income economy.

The reform plan leaked this week is the most radical yet proposed. It sets a minimum retirement age of 65 for all — men and women, public and private sector. It requires 40 years of contributions to qualify for a full pension. It creates a mandatory “defined contribution” component. For many in the public sector, looking forward to a cushy retirement in their early 50s, it is a window on to another, much tougher world.

Some say the plan was leaked as a trial balloon to gauge the public and political reaction. If so, the reaction was milder than may have been expected. Others say it was leaked by opponents to fire up opposition. If so, that scheme may have fallen flat.

Even so, Brazilians and investors should not get ahead of themselves. Mr Ramos says the greatest danger is that reform will once more be diluted, leaving the job to be tackled all over again in a few years’ time. Christopher Garman, of Eurasia Group, said this week that the risk of no reform at all “remained elevated” at an estimated 30 per cent.

What is certain is that any plan will come under attack. Hopes of swift progress are almost sure to be dashed. Nevertheless, some kind of reform looks likely to get through at some point this year. For investors having to weigh whether the rally in Brazilian assets has further to run, the shape it will take remains frustratingly unknowable.

Source: Financial Times

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There was good news from Brazil this week when a draft emerged of the government’s plans to overhaul the country’s deficit-ridden pensions system. The reform, under new president Jair Bolsonaro, would be a big step in setting the country back on the path to growth after its crushing recession of 2015-2016, raising hopes of investors […]

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Deutsche Bank Moves Fixed-Income Trading Business Back to Brazil

07.02.2019

Deutsche Bank AG, the German lender that cut investment-banking jobs in Brazil last year, is moving businesses back to the nation on a bullish view of the new government’s economic agenda.

After cutting costs in the Latin American nation 40 percent last year, Deutsche Bank is moving its fixed-income and currencies trading businesses to Sao Paulo from New York City, Maite Leite, the Frankfurt-based company’s chief country officer for Brazil, said in an interview. Two investment bankers will relocate there from New York to cover clients, and a director will be hired as local head of multinationals for global transaction banking, Leite said.

The moves don’t mean Deutsche Bank is increasing its headcount in Brazil. The company is shifting 20 to 30 jobs from middle- and back-office divisions out of the country to its hub in Jacksonville, Florida, over the next 18 months. It has 150 employees in Latin America’s biggest nation.

“Our focus now is on revenue, in trying to broaden the scale of our operation here in Brazil and the relevance of our business locally and globally,” Leite said.

Deutsche Bank exited Argentina and Mexico in 2016 and cut its team in Brazil in half, moving trading elsewhere, as part of a plan to eliminate about 26,000 jobs worldwide in two years. It also said it would shut operations in Chile, Peru and Uruguay.

Leite sees a “more positive environment” in Brazil with the election in October of a new government with what she views as business-friendly proposals. The political shift prompted her to seek more resources from the company. Michael Spiegel, Deutsche Bank’s global head of cash management and regional head of global-transaction banking for Germany, visited Brazil in October and was also impressed, she said.

The transfer of the fixed-income and currencies trading books back to Brazil, which started in November, will require only “marginal investments,” according to Leite, because all the infrastructure had remained in the nation and was being underutilized. No hiring will be needed for that business, because the bank plans to shift two Sao Paulo-based employees to jobs involved in the effort, she said.

Hedging Products

“We now have the ability to offer more sophisticated, flexible hedging products for clients than before,” said Ricardo Cunha, a managing director responsible for the fixed-income and currencies business at Deutsche Bank Brazil. He cited options and Libor hedging in the local currency as examples.

Cunha said his goal for this year is to boost revenue 50 percent at the businesses he’s responsible for, which include structured credit and underwriting international bonds.

He expects the new government’s policies will stimulate economic growth, fueling the need for companies to raise capital, and estimates total issuance of international bonds from Brazilian companies, banks and the government to reach $25 billion this year. That would be up from last year’s $15.8 billion, according to data compiled by Bloomberg.

Cunha also foresees a pick-up in mergers and acquisitions as international investors buy more companies in Brazil, which would spur demand for bridge loans. Cunha said the bank is planning to increase its total exposure to Brazilian companies’ credit risk, but declined to provide a target.

Deutsche Bank has 1.6 billion reais ($435 million) in equity in Brazil, which the bank expects to be enough for this year’s planned growth, Leite said.

“There was some anxiety about the economic team Finance Minister Paulo Guedes would choose,” Cunha said. “Now it’s been defined, and the bank’s management is viewing it in a very positive way.”

Leite said she’s so optimistic about the new government that she isn’t bothered by some of the remarks made in the past by the new president, Jair Bolsonaro. He once told a congresswoman she “doesn’t deserve to be raped, because she is very ugly,” and said, “I’ve got five kids but on the fifth I had a moment of weakness and it came out a girl.”

Bolsonaro’s comments “never annoyed me, I never felt directly affected by his quotes,” Leite said. Experience working in banks’ treasury departments and trading floors exposed her to “very masculine environments,” she said, helping her “navigate with tranquility” in those types of situations.

“My concern isn’t with the president’s rhetoric, but to see Brazil grow again, create jobs, get better infrastructure,” she said.

Source: Bloomberg

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Deutsche Bank AG, the German lender that cut investment-banking jobs in Brazil last year, is moving businesses back to the nation on a bullish view of the new government’s economic agenda. After cutting costs in the Latin American nation 40 percent last year, Deutsche Bank is moving its fixed-income and currencies trading businesses to Sao […]

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Brookfield Bullish on Brazil With Bolsonaro’s Pro-Business Bent

06.02.2019

Brookfield Asset Management Inc., one of the world’s largest alternative asset managers, wants to capitalize on a wave of privatizations in Brazil as the new government of Jair Bolsonaro government moves to bring fiscal discipline to the country.

“With meaningful, large positions in many of those sectors already, I think we’re just very well positioned to look at various tuck-unders and growing our current platforms if new assets come to market,” Sam Pollock, chief executive officer of Brookfield Infrastructure Partners LP, said on a call with investors on Wednesday. “We’re just well-positioned as an incumbent rather than someone who is coming fresh.”

Brookfield’s various subsidiaries, including its infrastructure arm, have been actively investing in Brazil in recent years, including its acquisition, with a group of investors, of a Brazilian natural gas distribution business from Petroleo Brasileiro SA in 2016 for roughly $5.6 billion.

“We expect higher growth rates, lower inflation and interest rates, a stronger currency and more bullish market conditions,” Pollock said earlier in a letter to shareholders. The decline in interest rates has already allowed the company to refinance its gas transmission business after a meaningful decline in interest rates, he said.

Competition Increasing

The change in government is already generating renewed interest in Brazil, he said.

“We are seeing increased competition for high-quality assets, with more investors willing to bid higher values for infrastructure assets, relative to the last few years,” Pollock said. He pointed to a recent auction for an electricity transmission business in December where bids came in 40 percent higher than the value Brookfield ascribed to its investments during the depths of Brazil’s economic downturn.

“This market dynamic reaffirmed our view that these types of assets were trading significantly below intrinsic value a few years ago simply because the country was out of favor,” Pollock said, adding that currency stability will also create a tailwind.

Asset Sales

Brookfield Infrastructure reported $71 million, or 6 cents a unit, of net income for the fourth quarter, in line with last year’s earnings. Its funds from operations grew 4.1 percent over the year to $326 million, or 82 cents a unit, compared to $313 million, or 80 cents a unit. The infrastructure arm also increased its dividend by 7 percent.

Pollock said Brookfield has been very active monetizing its mature assets, including reaching an agreement in January to sell up to a third of its stake in its Chilean toll road business. He said the firm has five other sales processes underway that are expected to generate an additional $1.5 billion to $2 billion in the next 12 to 18 months.

“Going forward, we expect the majority of our growth to be funded by the proceeds from asset sales and cash flows retained in the business,” Pollock said. “This is different than when we started the business 10 years ago. In previous years, we issued equity to fund much of our M&A investments and large-scale capital projects.”

Source: Bloomberg

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Brookfield Asset Management Inc., one of the world’s largest alternative asset managers, wants to capitalize on a wave of privatizations in Brazil as the new government of Jair Bolsonaro government moves to bring fiscal discipline to the country. “With meaningful, large positions in many of those sectors already, I think we’re just very well positioned […]

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Brazil could export $10.5bn more as result of US-China trade war

05.02.2019

Brazil’s exports could increase by $10.5 billion to the US and China if the world’s two largest economies continue with their trade war, according to a study by the United Nations Conference on Trade and Development (UNCTAD). The organization estimates that about 80% of Brazil’s gains would come from additional exports to the US market, taking advantage of the barrier raised against Chinese products. UNCTAD forecasts that out of the $200 billion in Chinese exports subject to US tariffs, about 82% would be captured by other countries, while only 12% would remain with the Chinese and 6% would go to American companies.

Source: Valor International

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Brazil’s exports could increase by $10.5 billion to the US and China if the world’s two largest economies continue with their trade war, according to a study by the United Nations Conference on Trade and Development (UNCTAD). The organization estimates that about 80% of Brazil’s gains would come from additional exports to the US market, […]

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