Sep 18, 2012

Brazil’s Arabica Coffee Discount Widens as New York Futures Rise

Buyers of coffee from Brazil, the world’s largest producer, were getting a bigger discount for arabica beans this week, with futures in New York rallying, according to Flavour Coffee and Cazarini Trading Co.

Fine-cup beans were trading at a discount of 10 cents a pound to the price of the December contract on ICE Futures U.S. in New York, compared with 6 cents a pound last week, data from Rio de Janeiro-based broker Flavour Coffee showed. Good-cup quality beans were at a discount of 20 cents a pound up from 16 cents a pound last week, it said in a report e-mailed yesterday.

Arabica coffee futures rallied 11 percent this week as some investors bought the futures after betting on a price drop for six weeks, U.S. Commodity Futures Trading Commission datacompiled by Bloomberg showed. The price dropped 20 percent this year as certified stockpilessurpassed 2 million bags, the highest since August 2010. Fine-cup quality beans are usually more expensive than good-cup ones because of the taste profile.

“Funds are still short covering and better news on the macro scenario started the happy mood in coffee, other commodities and stock exchanges,” Thiago Cazarini, a broker at Cazarini Trading Co. in Varginha, Brazil, said in a separate report e-mailed yesterday. “Even though prices rallied that much, differentials only softened 2 cents to 3 cents.”

Short covering denotes purchases to close bets on lower prices. Differentials refer to a discount or a premium paid to obtain physical coffee in relation to the futures prices. The discount for fine-cup beans did not widen enough to attract more demand, Flavour Coffee said in the report.

In the domestic market, sales volume was “big,” Flavour Coffee said, adding that producers didn’t miss “the opportunity to sell coffees at more attractive prices in Brazilian reais.”

Robusta Premium

Buyers of conillons, as Brazilian robusta beans are known, are paying a premium of 15 cents a pound ($330 a metric ton) to the price on the NYSE Liffe exchange in London, up from 14 cents a pound last week, according to Flavour Coffee data.

“With the huge premium against Liffe, the market is neglected to a very sporadic short-coverage,” Flavour Coffee said. Robusta futures rose 2.4 percent this week.

Robusta coffee for November delivery rose 0.8 percent to $2,098 a metric ton by 10:37 a.m. on NYSE Liffe. Arabica coffee for December delivery was up 1.4 percent to $1.814 a pound on ICE.

To contact the reporter on this story: Isis Almeida in London at Ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter atCcarpenter2@bloomberg.net.

Sugar Bulls Ascend as Rain Returning to Top Producer Brazil

Sugar traders are the most bullish in two months on speculation rain may again disrupt the harvest in Brazil, the world’s largest producer, just as output and exports from second-rankingIndia decline.

Twelve of 18 traders surveyed by Bloomberg expect raw sugar to gain next week and three were bearish, the most bullish since July 6. The commodity has gained 6.9 percent this week to 20.72 cents a pound on ICE Futures U.S. in New York.

Brazil’s main growing area is set to get rain again as of Sept. 20, according to weather forecaster Somar Meteorologia in Sao Paulo. Prices climbed 8.2 percent in June and 7.8 percent in July after rainfall delayed its harvest and shipments.

Sugar production in India, the biggest consumer, may be 23.5 million metric tons in the season starting in October because of dry weather, according to ED&F Man Commodities India Pvt. That’s less than the 24 million tons estimated by the country’s Sugar Mills Association and the 26 million tons produced in 2011-12.

India won’t export sugar from the domestic crop in the fourth quarter, John Stansfield, a senior analyst at Vitol Services Ltd., said at a conference in New Delhi this week. Shipments under the so-called tolling mechanism which allows refineries to import raw sugar and re-export the refined product will continue, he wrote in an e-mail today.

“There are still some weather issues both in Brazil and India and sugar is clearly undervalued right now,” Michael McDougall, head of the Brazil desk at broker Newedge Group in New York, said by e-mail yesterday. “Millers in Brazil will probably leave more cane in the fields if rain returns, which will tighten availability for the rest of this year.”

Sugar Surplus

Sugar has fallen 11 percent this year as supplies were forecast to outpace demand by 5.9 million tons in 2012-13, a third consecutive surplus, the International Sugar Organization in London estimated last month. The commodity is the fourth worst performer in the Standard & Poor’s GSCI index of 24 raw materials, beating coffee, cotton and lean hogs.

Sugar’s drop accelerated last month as dry weather in Brazil helped boost production. Sugar-cane processing in the center south, the country’s main growing region, climbed 14 percent to a record 46.5 million tons in the second half of August, according to data from industry group Unica. Cane processing for the season through Aug. 31 fell 9.4 percent to 307.6 million tons, Unica estimates show.

“This year’s crop is still behind last year’s and if it rains in October, millers won’t be able to process all of the cane,” Bruno Lima, a risk consultant a INTL FCStone Inc. in Campinas, Brazil, said by phone yesterday. “The crop in India, which is already forecast to be smaller, may start late to allow for the cane to mature after a poor monsoon.”

October Weather

While all of September will still be drier than normal in Brazil’s cane-growing regions, wet weather in October may be 10 to 15 percent above average, Celso Oliverira, a meteorologist at Somar, said yesterday. World Weather Inc. forecast rain at normal levels in October, with precipitation increasing to 1.5 times to 2.5 times above the norm in November and December, Drew Lerner, president of the Overland Park, Kansas-based company, said yesterday. Rain in May and June that delayed the crop was more than double the average, according to Somar.

India is unlikely to export any of its 1.5 million-ton surplus in the fourth quarter and in the first three months of 2013, according to Manish Gupta, head of sugar trading at Singapore-based raw materials trader Olam International Ltd. (OLAM) Exports may emerge after there is more clarity on the size of the crop, he said in an interview on Sept. 1. In Thailand, the second-biggest sweetener exporter, production will be 9.5 million to 10 million tons in 2012-13, down from 10.2 million tons this season, according to Mitr Phol Sugar Corp.

Sugar Shorts

Large and small sugar speculators excluding index funds have been betting on lower prices for three weeks to Sept. 4, according to U.S. Commodity Futures Trading Commission data. Prices fell 3.9 percent in the week ended Sept. 4 as the net short climbed by more than 13 times.

Sugar may rise at least 2 cents a pound when investors return to buy futures to close bets on lower prices, according to Piromsak Sasunee, chief executive officer at the Thai Sugar Trading Corp., Thailand’s biggest exporter.

Prices may also gain if the Brazilian government raises the percentage of ethanol into gasoline back to 25 percent from 20 percent now, and rising corn prices result in more exports of the biofuel to the U.S. Both sugar and ethanol are made from sugar cane in Brazil. Corn has climbed 21 percent this year after the worst drought in the U.S. since 1956.

“If the government raises the mixture of ethanol into gasoline still this year as some expect, millers could take away some cane away from sugar production,” FCStone’s Lima said. “Rising corn prices may also mean that the Brazil could increase ethanol exports to the U.S.”

Raw sugar survey results: Bullish: 12 Bearish: 3 Hold: 3
White sugar survey results: Bullish: 12 Bearish: 3 Hold: 3
White sugar premium results: Widen: 6 Narrow: 3 Neutral: 9

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter atccarpenter2@bloomberg.net

Spanish firm cuts energy deal in Brazil

Spanish wind energy firm Gamesa said Thursday it has signed an 843-million-reais ($417 million) contract in Brazil to supply 258 MW of generating capacity.

The contract calls for 129 turbines to be installed at 10 wind farms run by Santa Vitoria do Palmar Holding, part-owned by Brazilian state-owned power utility Eletrosul and private-equity fund Rio Bravo Energia I.

The Spanish company will also provide operation and maintenance services at the wind farms - located in the southernmost Brazilian state of Rio Grande do Sul - over a period of 20 years.

Gamesa said in a statement it plans to begin installing the turbines in late 2013 and complete the process by the first quarter of 2014.

Once all are in operation, the 10 wind farms will generate approximately 957,000 megawatt-hours of electricity per year, equivalent to the annual energy needs of 510,000 Brazilian households, the company said.

With this latest contract, Gamesa now has secured deals to supply 652 MW of turbine capacity in three wind-rich Brazilian regions: the northern state of Ceara, the northeastern state of Bahia and Rio Grande do Sul.

Telecoms America (Claro) deploys first LTE sites in Sao Paulo

America Movil’s (AM’s) Brazilian mobile service provider Telecom Americas (Claro) has commenced 4G Long Term Evolution (LTE) network trials in the area of Joquei Clube in Sao Paulo, having previously launched trials of the technology in the capital Brasilia, Campos do Jordao (Sao Paulo), Paraty and Buzios (Rio de Janeiro). The latest trial will use equipment provided by Ericsson, reaching peak speeds of 80Mbps, Teletime reports, citing Claro Brasil CEO Carlos Zenteno as saying. According to Zenteno, Claro plans to commercially launch itsLTE network in Brazil by April 2013.

Sep 11, 2012

Indonesian airline firm orders 20 commercial planes from Brazilian plane maker

JAKARTA, Sept. 11 (Xinhua) -- A senior official of Indonesia's Sriwijaya Air said on Tuesday that it will use commercial planes produced by Brazilian plane maker Embraer for its subsidiary firm serving full-service flight, local media reported.

Sriwijaya Air President Director Chandra Lie said that the firm has allocated 9 trillion rupiah (about 940.1 million U.S. dollars) to acquire 20 Embraer commercial planes for its would-be operated Nam Air, expecting initial delivery next year.

"The price of each plane is 50 million U.S. dollars," he said here, adding that the firm has sent crews to undergo training programs in Brazil.

Chandra said that Nam Air is projected to serve domestic flights to cities with short landing strips. He added that Embraer planes fit to the need as the plane is capable to take off and land in short runways. "They can take off and land in runways as far as 1,450 meters," he was quoted by local media as saying.

Indonesia has the largest growth airline business in the region as it grows 15 percent per year. The largest economy in Southeast Asia region is now served by 54 domestic airlines that operate more than 700 planes.

Many of those airlines ordered to buy new planes from domestic and foreign producers to strengthen their fleets in anticipating of the growing air transport needs among people living in the country that has demonstrated excellent economic growth in the last few years.

Argentine president to visit Brazil

Brazilian President Dilma Rousseff will meet on Friday her Argentine counterpart Cristina Kirchner for talks on enhanced bilateral cooperation, Brazilian authorities said Wednesday.

The Brazil-Argentina Business Council created during Rousseff's visit to Argentina on Jan. 31 will meet for the first time in Brasilia on Friday, a statement released Wednesday by the Brazilian Foreign Ministry, known as Itamaraty, said.

"The council aims to bring business communities from both countries together to address issues of mutual interest, such as competitiveness, scientific and technological development, and common strategies for entering international markets," Itamaraty reported.

According to Itamaraty, Rousseff and Kirchner will discuss ongoing projects under the Brazil-Argentina Integration and Coordination Mechanism (MICBA), in areas such as nuclear cooperation, defense, science and technology, health, transport and the integration of production areas.

Bilateral trade between Brazil and Argentina amounted to about 33 billion U.S. dollars in 2010, and the trade volume in the first half of 2011 rose 27 percent year-on-year. 

Brazil Small-Cap Shares Cross Above 200 DMA

In trading on Friday, shares of the Brazil Small-Cap ETF (AMEX: BRF) crossed above their 200 day moving average of $40.20, changing hands as high as $40.74 per share. Brazil Small-Cap shares are currently trading up about 2.8% on the day. The chart below shows the one year performance of BRF shares, versus its 200 day moving average:

Click here to find out which 9 other stocks recently crossed above their 200 day moving average »

Brazil Small-Cap 200 Day Moving Average Chart

Looking at the chart above, BRF’s low point in its 52 week range is $33.99 per share, with $52.04 as the 52 week high point — that compares with a last trade of $40.66.

Petrobras First Female CEO Is Rousseff’s Response to Delayed Oil

Bloomberg Markets Magazine

As Maria das Gracas Silva Foster took over as chief executive officer at Petroleo Brasileiro SA (PBR), she couldn’t help giving a shout-out to two forces that have shaped her life.

The first went to Petrobras, the world’s biggest deep-water oil producer, on whose Rio de Janeiro stage she was standing on Feb. 13 to be sworn in as CEO, Bloomberg Markets magazine reports in its July issue. The second was to her mother, who decades ago encouraged a work ethic that propelled her young daughter from a poor neighborhood to the pinnacle of her profession.

Petrobras CEO Maria das Gracas Silva Foster

Petroleo Brasileiro SA Chief Executive Officer Maria das Gracas Silva Foster takes over as Brazil's government-controlled oil giant faces slowing production growth and a cooling economy. Photographer: Douglas Engle/Bloomberg

“The badge and I have been together for more than 30 years,” Foster told several hundred employees as departing CEO Jose Sergio Gabrielli handed her a symbolic Petrobras ID card. “I thank my mother, Terezinha, for the power of her transforming love.”

Foster, a 58-year-old engineer who favors pantsuits and has two small stars tattooed on her wrist, is leading Latin America’s biggest company by market value just as Brazil’s economy cools.

During a decade-long boom, at least 30 million Brazilians have emerged from poverty, and the country now has at least 100,000 millionaires. In 2011, though, growth slowed to 2.7 percent from an annual average of 4.6 percent in the previous four years.

Self-Sufficient

Brazil is counting on Petrobras to provide national energy self-sufficiency that will meet the demands of a growing economy. The company, which is 51 percent controlled by the government, produces 91 percent of Brazil’s oil and 90 percent of its natural gas.

It’s struggling to increase output and develop reserves after new offshore wells have failed to compensate for faster- than-expected declines at older fields. That imbalance is putting Petrobras behind in reaching its 2020 target of 6.4 million barrels of oil equivalent a day, up from the current 2.6 million.

Petrobras will account for about 40 percent of the 922 billion reais ($456 billion) in energy and infrastructure spending in Brazil from 2010 to 2015, even as the country splurges on airports and stadiums for the 2014 World Cup and 2016 Olympics.

‘Tremendously Important’

“Oil and gas are an increasingly important sector of the economy and will only grow in size and import,” says Christopher Garman, an analyst who covers Latin America at Eurasia Group in New York. “The capacity of Petrobras to deliver is tremendously important.”

Investors are betting that Foster, an engineer who has spent 31 years immersed in Petrobras -- from its drilling platforms to its management suites -- is the right person for the job. Petrobras stock, hit by the slowing output growth, jumped 3.8 percent on Jan. 23 when she was named the company’s first female CEO -- the biggest increase in eight months.

Nick Robinson, a portfolio manager at Aberdeen Asset Management in Sao Paulo, says Foster is a skilled technical manager who can tackle glitches that have forced unscheduled shutdowns at drilling sites.

Delays in platform construction and increased outages to perform maintenance began surfacing during Gabrielli’s tenure. The former CEO, an economist and academic, focused more on finances than on day-to-day operations as he shepherded Petrobras’s $70 billion share offeringin September 2010, the world’s biggest.

Attractive Bonds

Today, public shareholders own 49 percent of the company’s voting stock. Petrobras shares have dropped 29 percent since the share offering through May 31.

Luz Padilla, who helps manage $1 billion of emerging-market debt, including Petrobras, at Doubleline Capital LP in Los Angeles, is bullish on the company.

“It’s an industry that could reshape the profile of Brazil, given the potential of their finds,’’ she says. Padilla says Petrobras bonds are attractive compared with such global peers as BP Plc because they have a lower price and higher yield, paying more interest.

Foster is pushing Petrobras to cut through bottlenecks. In May, she created a management position to oversee the purchase and installation of platforms, rigs and pipelines. The division will try to head off cost overruns and construction setbacks at local yards that have slowed progress at a company with 80,000 employees and 244 billion reais in annual revenue.

“Someone like her, who is perhaps more of an operational person, could be a huge asset,” says Robinson, whose firm held 5.8 million Petrobras shares on Feb. 29.

Detail-Oriented

Manuel Fernandes, head of KPMG International’s oil and gas division in Rio, met Foster when she ran Petrobras’s natural gas business and KPMG was its auditor. He says she knows the nitty- gritty of the company and the industry.

“You wouldn’t expect someone in her position to look into too many details, but she does,” he says. “That’s how she is.”

Brazilian President Dilma Rousseff is another fan. The two, now among the world’s most powerful female leaders, began working together in 2003. Rousseff was energy minister under President Luiz Inacio Lula da Silva. Foster, who holds a degree in chemical engineering from the Fluminense Federal University in Niteroi, in Rio de Janeiro state, was Rousseff’s secretary for oil, natural gas and renewable fuels.

‘Good Hands’

Foster returned to Petrobras in 2005, while Rousseff served as its chairman from 2003 through 2010. Like Rousseff, Foster is a member of the governing Workers’ Party, which has close ties to unions. The party’s jobs programs and subsidies for poor households have helped vault millions into the middle class.

“With Graca at the helm, Petrobras will be in good hands,” Rousseff said at the February event, using Foster’s nickname. “I know the work capacity, competence and seriousness with which Graca dedicates herself, not only to this company but also to everything she does in her professional life.”

For investors, Foster’s first order of business is to boost output, which rose 1.5 percent last year, to an average 2.6 million barrels per day of oil equivalent. It was the slowest pace since 2007 and well below the company’s 7.7 percent target.

The new CEO is stymied by rules enacted under Lula. Petrobras must buy as much as 70 percent of its equipment -- from giant offshore platforms to polyester rope for anchors -- from domestic suppliers.

Local Rules

The former president set the local-content regulations to aid Brazil’s oil services industry and reduce reliance on imports. In December, Petrobras canceled a plan to lease 21 drilling rigs after offers by local suppliers proved too expensive. One bidder, Sete Brasil Participacoes SA, is a shipbuilder that Petrobras and the Brazilian Development Bank formed to construct the platforms.

In an effort to control inflation, which reached 5.2 percent in March, the government also caps how much Petrobras can charge for gasoline. The price of fuel in early May was 4.38 reais per gallon at the refinery gate, a 21 percent discount from international markets, according to estimates by Banco Bradesco SA.

Brazilian motorists pay more at the pump than U.S. drivers do because of taxes. With domestic prices low, Petrobras loses money on every liter of imported gasoline and diesel it sells in Brazil.

Foster must guide the company through some of the world’s most challenging petroleum-engineering feats. She knows the territory, having been the first woman at Petrobras to board an oil platform in the Atlantic Ocean to install drilling equipment.

Drilling Deep

As of March, 90 percent of Petrobras’s oil production in Brazil came from offshore fields, most from wells at depths of more than 300 meters (980 feet). With these wells aging, Petrobras is betting on so-called pre-salt fields -- regions as deep as 7,000 meters and as far as 300 kilometers (186 miles) from land.

Rough seas, tricky geology and the distance workers must travel make drilling more complex than in the Campos Basin off southeastern Brazil, where Petrobras gained most of its expertise.

Petrobras will be going it alone with these deep wells. A law passed in 2010 requires the company to be the sole operator of new pre-salt developments. Foreign oil companies can only take stakes, not run the sites.

“That’s a problem,” says Scott Black, president of Delphi Management Inc., an investment management firm in Boston. He says Petrobras is a good investment that would be even more attractive if Brazil’s oil industry were a free market. “Free enterprise might do better long term,” he says.

Chevron Spill

Foster is also navigating the environmental hazards of drilling in deep waters. Chevron Corp., the second-biggest U.S. oil company, spilled 3,000 barrels in November at the Frade Field, where Petrobras is a partner. It was Brazil’s eighth- most-productive area until Chevron suspended drilling.

Prosecutors are going after Chevron with three lawsuits seeking a total of 40 billion reais in damages, and lawmakers have demanded investigations into the incident. Petrobras said in a March 30 filing with the U.S. Securities and Exchange Commission that it’s liable for 30 percent of any payments for the spill.

Petrobras foresees as much as $527 million in possible losses from other environmental claims. Among these are a July 2000 spill at the President Getulio Vargas Refinery in Araucaria, Parana state, and payouts to fishermen for a spill in Rio that same year, the company said in the filing.

Jobs Machine

Ultimately, Foster, with guidance from Rousseff’s government, will have to decide whether to run Petrobras as a state-owned, job-creating bureaucracy or a modern public company. Today, the government names seven members of the 10- person board, and shareholders lack any real power.

Petrobras workers say the company must tilt toward local industries and the interests of Brazil.

“Petrobras can’t produce oil according to what’s needed by others,” says Silvio Sinedino, who represents employees on the company’s board. “It can’t be a company that’s concerned about revenue for the sake of revenue.”

Jim Crandell, an analyst at Dahlman Rose & Co. in New York who leads coverage of oil services providers, says ignoring market realities can hurt Petrobras.

“The goal of Brazil seems to be to provide employment to its citizens,” he says. “Brazil may find that it has to pay more for equipment and services going forward. There certainly is the risk of material delays.”

‘Net Exporter’

Should Foster overcome Petrobras’s drilling hurdles, appease shareholders, satisfy employees and boost output as planned, Brazil may go from being almost self-sufficient in oil to becoming a big source for the U.S. and other consumers. President Barack Obama said during a 2011 visit that he wants the country to be a major U.S. supplier.

“If Petrobras doesn’t help Brazil by increasing production growth, there’s a serious chance Brazil moves back into an oil- importing situation and loses its status as a self-sufficient producer,” says analyst Gustavo Gattass at Banco BTG Pactual SA in Rio.

T.J. Conway, a research and advisory manager at New York- based Energy Intelligence Group, says Petrobras must strike a balance between local demands and exporting.

“Brazil can definitely be a contributor to global markets and an important player, and perhaps eclipse the rest of the region in terms of being a net exporter,” he says.

Dubbed ‘Caveirao’

Foster, whom colleagues have dubbed “Caveirao” in a reference to the armored vehicles police deploy in crime-ridden neighborhoods, is used to plowing through roadblocks.

Her mother raised young Graca and her sister, Rita, in Rio’s Morro do Adeus, a poor neighborhood that eventually deteriorated into a shantytown. Her mother worked. Her father was an alcoholic, Foster told Bloomberg News last year. Graca collected cans and paper for pocket money until the family moved in with an aunt in Niteroi.

Foster graduated from Fluminense Federal University in 1978, going on to earn a master’s degree in nuclear engineering from the Federal University of Rio de Janeiro and a Master of Business Administration from the Rio-based Getulio Vargas Foundation. She joined Petrobras’s exploration and production division as an intern in 1979.

Corporate Ladder

Two years later, she boarded an offshore oil platform to install equipment, going on to manage the drilling division. She became the first woman to run Petrobras’s field engineering, taking over the distribution unit and the chemical and petrochemical division, Petroquisa.

In September 2007, Gabrielli named her Petrobras’s first female director, the second-highest management level, when she took charge at the gas and energy division. Today, of about 12,200 engineers at Petrobras, about 1,400 are women.

Foster married and had a daughter. She then divorced, remarried and had a son. Her second marriage stirred controversy after Brazilian newspapers reported that husband Colin Foster owned an engineering company that had supplied Petrobras with equipment from 2007 to 2010.

Petrobras responded in 2010, saying the division Foster headed didn’t do business with Colin Foster’s company, according to Petrobras’s website.

Foster, wearing a pink suit with a satin blouse at headquarters the year before she was named CEO, said she had to be 100 percent available for her job.

“I have two children,” she said in the January 2011 interview in a 23rd-floor office with a view of Guanabara Bay. “I gave up a lot for my career, but I’m very happy for it. I’ve done what I’ve always thought was best for me and my family.”

‘Above Expectations’

Foster expects similar dedication from her employees. She says she wants her staff to work one day a week -- joking that the day starts on Monday and ends on Saturday.

“I once called one of my managers, and he answered while he was bathing his two children,” she recalls. “While he spoke, he dropped the cell phone in the tub, picked it up and continued talking.”

Marcio Mello, CEO of Brazilian oil explorer HRT Participacoes em Petroleo SA, worked with Foster for 18 years. He recalls their time at the research division, Cenpes, which develops technology to explore the pre-salt region.

“She’s the kind of person you give a mission to and she delivers above expectations,” Mello says, showing a framed photo of himself with Foster in 1999, when they received a research award for their work at Cenpes. “This is why Graca will do a fantastic job at Petrobras. She’s fair, a hard worker, focused; she has targets; she’s a performer. My dream is to have a person like Graca at HRT.”

Oil Women

Foster isn’t the only woman leading Brazil’s energy effort. There’s also Magda Chambriard, who, like Foster, rose through Petrobras. She heads Brazil’s oil regulator, ANP.

“Brazil is in a unique moment,” Mello says. “Now we have two ladies, not only with huge experience but huge knowledge.”

Chambriard’s job at the regulator ends years of the plum political appointment going to people with little oil experience.

Foster’s promotion at Petrobras may mean continued government meddling, Delphi’s Black says.

“They’ve got probably the best drilling profile of any of the national oil companies,” he says of Petrobras. “They’ve got expansive fields off the coast. The problem is, the government keeps upping the ante.”

‘Slightly Aggressive’

Black points to the controls on gasoline as one way the government hurts the company. Publicly traded competitors benefited as oil prices rose 8.3 percent during the fourth quarter. Petrobras lost by operating as an arm of the government instead of competing in a free market. Fourth-quarter net income dropped to 5.05 billion reais, 52 percent less than a year earlier.

Foster may be willing to challenge Rousseff on gasoline prices. Petrobras’s budget for 2012 estimated oil at about $90 a barrel. With oil above $110, she told an April conference organized by the Brazilian Oil, Gas and Biofuel Institute that prices may have to be adjusted.

“The very fact that she’s brought this argument to the forefront and is being slightly aggressive means the government is being tested,” Aberdeen’s Robinson says. “There’d be a pretty clear signal that they are going to use Petrobras as a tool of economic policy rather than let it be run for the benefit of minority shareholders if they don’t allow the company to increase prices.”

Effort Ahead

At the same time, employees are demanding that Foster look after them. Board member Sinedino, an engineer in the seismic department, says Petrobras must improve worker safety. He expects Foster to remain an ally.

“She is one of us,” he says. “She has spent her life at the company, has worked everywhere; she knows exactly what’s going on and what needs to be done.”

Foster, in her acceptance speech, acknowledged the effort ahead.

“Taking over the company is a big challenge, bigger than the combination of all those challenges I faced till I reached this day,” she said.

Then she touched her heart in a gesture to her Petrobras colleagues. “I owe the moment to you all,” she said.

“Finally, I thank the Lord for this moment, my children for accepting me as I am, and my mother, Dona Terezinha.”

To contact the reporters on this story: Rodrigo Orihuela in Rio de Janeiro atrorihuela@bloomberg.net

Orix setting its sights on local banks, asset managers in South America

Bloomberg

Financing company Orix Corp. opened a Brazil unit this month to seek acquisitions in South America.


Orix is seeking assets being sold by European financial firms as they streamline overseas operations to weather the continent's debt crisis, Nitanai said.The three-member operation marks Orix's re-entry into Brazil since exiting a leasing venture with Banco Bradesco 12 years ago and follows Mizuho Financial Group Inc.'s agreement to buy Germany-based WestLB's Brazilian unit in June.

Shares of Orix have jumped 16 percent this year, compared with 4.7 percent for the Nikkei 225 average.

Orix, whose operations include insurance, aircraft and auto leasing, and the Buffaloes baseball team, has been examining a return to the South American market and is focusing acquisitions on fee businesses, according to its annual report for the year that ended in March 2011.

Brazilian mergers and acquisitions announced this year total about $46 billion, according to data compiled by Bloomberg. Takeovers in the country totaled $120 billion last year, a 27 percent decrease from 2010. The country's equity and equity-linked offerings total $5.2 billion this year and ended 2011 with a tally of $12.1 billion, the data show.

Orix has made more than 50 merger and acquisition deals globally over the past five years. It earned 23 percent of its revenue from overseas operations in the year that ended last March.

President Makoto Inoue said in an interview last month that his company is in talks to spend about $400 million to buy a stake in a Dubai-based life insurer from a European bank. He also said Orix may invest in aircraft leasing, asset managers and other insurers in the Middle East as European firms sell assets to rebuild capital and retrench to their home markets.

The company plans to sell about $3 billion in bonds this year to accelerate an overseas expansion plan hampered by Europe's debt crisis and the Great East Japan Earthquake in 2011.

Mizuho and bigger rivals Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. are also looking to gain market share abroad from European competitors. The country's lenders are looking to higher-yielding markets to make up for declining profitability on domestic loans.

WestLB, now known as Portigon AG, agreed in June to sell its Brazil unit to Mizuho, without disclosing terms of the transaction. The acquisition gives the Tokyo-based lender access to growing demand for infrastructure-related financing in Brazil.

Brazil leader announces deep cuts in energy costs

SAO PAULO (AP) -- Brazil's president has announced new efforts to boost the nation's sagging economy, this time targeting energy costs for both industry and residential customers.

Haldex and Master Confirm Strategic Partnership in Brazil

Haldex (HLDX.ST) and Master Sistemas Automotivos Limitada, confirms the closing of a long term collaboration contract. The partnership include manufacturing, sales and technical support of commercial vehicle trailer anti-lock systems for pneumatic brakes (Trailer ABS). Haldex estimates the total sales resulting from this agreement to amount to more than 300 MSEK during the initial five year period.

As previously communicated a new legislation will be introduced in 2013 requiring all new trailers in Brazil to be equipped with ABS systems. The legislation will be fully implemented by 2014. The annual trailer production volume for the Brazilian market amounts to about 60,000 vehicles.

Haldex and Master have been cooperating successfully during the period since the letter of intent was signed in December 2011.

“The Brazil road conditions require durable high quality braking systems with optimal braking performance to improve safety on the roads. The Haldex partnership with Master will provide our customers access to this ABS technology and premium products. Through this partnership we will provide support for the new legislation requirements”, Paul Bale, Haldex Senior Vice President, Business Development, says. “This is also confirming our decision to restructure our previous 3 site operations in Brazil to achieve a more efficient cost base with a new modern site in São José dos Campos (close to São Paulo) which was inaugurated in February this year”.

Background

Haldex headquartered in Landskrona, Sweden, is a provider of proprietary and innovative solutions to the global commercial vehicle industry, with focus on products in vehicles that enhance safety, environment and vehicle dynamics. Haldex is listed on the Nasdaq OMX Stockholm Stock Exchange and had net sales of app. 4 billion SEK in 2011. The number of employees amounts to about 2,350.

Haldex do Brasil Ind e Com Ltda, founded in 1992 and presently consolidating all its activities to São José dos Campos in the state of São Paulo, is serving the South American market with mainly Haldex automatic brake adjuster and trailer valves. The number of employees is about 160.

Founded in 1986 Master Sistemas Automotivos Ltda is the largest manufacturer of brakes for trucks, buses and trailers in Brazil. Located in Caxias do Sul / RS – Brazil and with about 1,300 employees, Master is a joint venture between two leaders in the automotive and road equipment segment - Randon S.A. Implementos e Participações, based in Caxias do Sul, and Meritor Inc., located in Troy, Michigan, USA. The company is active in the export and aftermarket businesses.

Haldex (www.haldex.com) headquartered in Landskrona, Sweden, is a provider of proprietary and innovative solutions to the global vehicle industry, with focus on products in vehicles that enhance safety, environment and vehicle dynamics. Haldex is listed on the Nasdaq OMX Stockholm Stock Exchange and had net sales of about 4 billion SEK in 2011. The number of employees amounts to about 2,350.

Haldex AB (publ) is required to publish the above information under the Swedish Financial Instruments Trading Act. The information was submitted for publication on September 4, 2012 at 8.30 am CET.

This information was brought to you by Cision http://www.cisionwire.com

Goldman Sachs Plans Private-Equity Comeback in Brazil

Goldman Sachs Group Inc. (GS), the Wall Street bank that doubled its Brazil headcount in the past two years, is planning a comeback in the nation’s private-equity market and expects returns as high as 35 percent.

“We are looking at some sectors that we think we understand and that need investments,” Alejandro Vollbrechthausen, president of the New York-based company’s Brazil unit, said in an interview in Sao Paulo. Infrastructure, commodities and telecommunications are among the target industries, the 44-year-old banker said.

Goldman Sachs’s last major foray in the Brazil private- equity market ended in 2007, when the bank invested 400 million reais ($196 million) of its own capital in Santelisa Vale SA, a sugar-cane processor that later had to restructure its debt. Santelisa was bought in 2009 by Louis Dreyfus Commodities. Goldman Sachs also in 2007 invested in BRA Transportes Aereos Ltda., an airline that went bankrupt.

Now the bank thinks returns could be as high as 35 percent from taking stakes in projects for roads, airports, railroads, ports and other infrastructure, said Paulo Leme, chairman of Goldman Sachs’s Brazil’s unit.

“If Brazil plays it right from the regulatory point of view, with transparency and predictability of the macro environment, and avoids stirring too much uncertainty related to taxes and exchange rates, it is just a natural diffusion of capital moving from low-return to high-return,” Leme, 57, said in a interview. “The most stable, lasting economy is the easiest for foreigners to navigate.”

Government Help

Brazil’s development bank, BNDES, has said it will finance as much as 80 percent of the nation’s 1 trillion reais in infrastructure needs during the next five years as the country prepares to host the 2014 World Cup and 2016 Olympics. Private investors may have to fund 10 percent to 20 percent of the total, according to Denise Pavarina, president of Brazil’s capital-markets association.

“The roads, airports and port concessions in Brazil are attracting a lot of interest from foreign private equity,” said Patrice Etlin, managing partner for Latin America at Advent International Corp., the Boston-based private-equity fund.

Advent acquired a 50 percent stake in Terminal de Conteineres de Paranagua SA in January 2011 in its biggest deal in Brazil and has about $3 billion to invest in the country, Etlin, who is also chairman of the Latin American Venture Capital Association, said in a telephone interview.

International Airport

“Advent has been in the region since 1996 and never left,” he said. The fund participated in a consortium that bid for the license to operate Sao Paulo’s Guarulhos international airport in an auction earlier this year. “We are going to participate in other auctions for sure,” he said.

Warburg Pincus LLC, Hamilton Lane Advisors LLC, Actis LLP, TPG Capital, 3i Group Plc and Carlyle Group LP are among firms that have opened offices in Brazil since 2008.

Blackstone Group LP (BX) acquired a 40 percent stake in Patria Investimentos, a Brazilian private-equity and asset-management company, in 2010, while JPMorgan Chase & Co.’s Highbridge Capital Management unit bought Gavea Investimentos Ltda’s private-equity business in October of that year. Kohlberg Kravis Roberts & Co., the New York-based buyout firm, named former Brazilian Central Bank Governor Henrique Meirelles as a senior adviser in June.

BRIC Investments

“You still have sectors in the BRIC countries where in order to reach equilibrium you need to grow at a much faster pace than the general economy,” Goldman Sachs’s Leme said, referring to Brazil, RussiaIndia and China. He cited infrastructure as one example.

Total credit has doubled from 25 percent of Brazil’s gross domestic product to 50 percent and has room to grow to about 80 percent, according to Leme. “Mortgages are still underleveraged,” he said.

Goldman Sachs expanded its workforce in Brazil in the past two years from about 150 people to 300.

The firm became a full-service bank in Brazil in late 2009, after two failed attempts to buy local companies. In 1998, Goldman Sachs tried to purchase Banco de Investimentos Garantia SA, which was acquired by Credit Suisse Group AG. Seven years later it sought to purchase Banco Pactual SA, a top investment bank eventually acquired by UBS AG. Pactual was sold back to BTG partners in 2009 and is now Grupo BTG Pactual.

Equity, M&A

Goldman Sachs ranks third among equity underwriters in Brazil this year and seventh for merger advisers as both markets shrink. New Brazilian equity sales declined 53 percent to $5.16 billion this year through August, and M&A transactions dropped 41 percent to $43.3 billion. Still, Goldman Sachs plans to maintain its expanded workforce.

“We don’t feel that we have overstretched or that we’ve built something that we cannot sustain,” Vollbrechthausen said. “We have a diverse portfolio of businesses, so when some businesses start to shrink a little bit others pick up.”

Falling interest rates in Brazil offer Goldman Sachs an opportunity, even as economic growth slows below 4 percent, Leme said. “It is a great opportunity for trading and to develop a business since it is going to be a prolonged cycle of low real interest rates,” he said.

Goldman Sachs will have to navigate the U.S. Volcker rule, which lawmakers passed in 2010 to reduce risks at deposit-taking banks. The restrictions, still being finalized by regulators, will bar banks from proprietary trading and limit how much capital they can dedicate to private-equity firms. The rule, named for former Federal Reserve Chairman Paul Volcker, exempts some activities, including certain public-interest investments and hedging.

Michael DuVally, a spokesman for Goldman Sachs, declined to say how the firm plans to comply with the rule.

Tags goldman sachs

Jul 5, 2012

Renova Strives For World’s Cheapest Wind Power In Brazil: Energy

Renova Energia SA (RNEW11)’s strategy to produce wind energy cheaper than anywhere else in the world will be tested as it brings its first turbines online, helping to transform Brazil into the world’s fourth-biggest market.

Renova, which counts utility Light SA (LIGT3) as among its biggest shareholders, started operating South America’s biggest wind farm cluster in northeastern Brazil last week. The company, based in Sao Paulo, plans to build at least six farms next year.

Brazil aims to more than double its capacity to generate wind power next year by harnessing the same weather system that brought Portuguese and Spanish sailors to the continent in the 1500s. Renova is betting its farms can produce energy for as little as a quarter of the price needed to make some European projects viable.

“There’s uncertainty over whether these turbines will perform as expected,” Unai Otazua Aranguren, director of renewable energy consultant Garrad Hassan Group Ltd.’s Brazil office, said by telephone. “The wind here behaves differently to what we have in Europe and the U.S.”

Renova rose 0.3 percent to 31 reais in Sao Paulo trading on June 29, bringing its year-to-date gain to 16 percent. It has more than doubled since it first sold shares in 2010.

Brazil’s government is promoting wind and other renewable energy projects in a bid to diversify away from hydroelectric plants, which account for 66 percent of the nation’s installed capacity. Wind farms can help shore up the supply of electricity in drier months when dam reservoirs diminish.

$16.9 Billion Investments

National energy agency Empresa de Pesquisa Energetica, known as EPE, expects 10 gigawatts of wind farms to come online between 2012 and 2020, requiring investments of about 34 billion reais ($16.9 billion).

Developers including Spain’s Iberdrola Renovables SA and Renova signed wind contracts in six auctions through December to add 6.8 gigawatts of generating capacity. The first of the farms are required to start operating this month.

Brazil was the world’s 11th market for the renewable energy last year, Steve Sawyer, secretary general of the Brussels-based industry lobby group Global Wind Energy Council, said in a Feb. 7 interview.

Europe Projects

In an August auction, companies agreed to generate power at an average rate of 99.54 reais, or about $49.31, per megawatt- hour, according to EPE. Wind developers receive about 150 euros ($190) a megawatt hour in Italy, 75 euros in Germany and 74 euros in Spain, Bloomberg New Energy Finance analyst Eduardo Tabbush said by telephone from London.

Renova estimates its turbines will spin more than 50 percent of the time, compared with an average of 25 percent for wind farms in Europe. The gusts that blow westward over the Atlantic across Brazil’s northeast are the most consistent weather system in the world, the American Meteorological Society says, allowing companies to use cheaper and lighter turbines.

Renova declined to comment when contacted by Bloomberg News.

Brazil’s drive to become a major producer of wind energy has lured France’s Alstom SA, the U.S.’s General Electric Co. (GE) and India’s Suzlon Energy Ltd. (SUEL), which have all built factories to make equipment in Brazil in the past three years.

‘Tight’ Margins

Turbine makers likely agreed to cut prices for the Brazil auctions after the market for the equipment collapsed in the U.S. and Europe as the debt crisis prompted governments to scale back the size of subsidies for renewable energy projects, Tabbush said.

Even with the discounts, margins will be “very tight” on the projects, Tabbush said. A weaker local currency, which makes imported parts and equipment more expensive, may erode margins, he said.

Brazil’s real has weakened 23 percent against the U.S. dollar in the past 12 months, the worst performer of the 16 most-traded currencies tracked by Bloomberg.

Pacific Hydro Pty., a Melbourne-based developer that’s built two wind farms in the northeastern state of Paraiba, chose not to participate in the auctions on concern the rates being offered were too low.

Unsustainable Returns

“We’re pleased we didn’t take part,” said Rob Grant, chief executive officer of Pacific Hydro, which aims to develop wind farms and sell to the free market. “After the 2010 auctions, we realized the regulated market wasn’t the place to make sustainable returns.”

Light SA, a Rio de Janeiro-based utility, bought a 26 percent stake in Renova Energia for 360 million reais last year and agreed to purchase power from 400 megawatts of wind farms on the free electricity market, the companies said in a statement last July.

Renova expects to raise at least 250 million in a private stock offering to BNDES Participacoes SA, a unit of Brazil’s development bank, to fund current and future projects, according to a June 25 regulatory filing.

“We’ll see what will happen -- maybe there will be problems,” said Garad Hassan’s Aranguren. “When you’re bidding, it’s like a gamble, like a game.”

Rio do Janeiro and its spectacular landscape declared world heritage site

Rio do Janeiro's iconic landscape, marked by soaring granite facades that drop into the ocean and white-sand beaches that go on for miles, is now an official world heritage site.

UNESCO gave Rio the title in recognition of the unique way its exuberant natural setting blends with the urban landscape.

Rio has great waterfront open spaces, and one of the world's largest forested areas encompassed entirely within an urban setting: the Tijuca National Park.

The designation mentioned several key features that have shaped and inspired the city's development: the Christ the Redeemer statue atop Corcovado Mountain, the Botanical Gardens, established in 1808 by the Portuguese emperor, and Copacabana, a vast bay bracketed by granite hills and hemmed by a white-sanded beach.

These elements “have contributed to the outdoor living culture of this spectacular city”, UNESCO said, adding that “Rio de Janeiro is also recognised for the artistic inspiration it has provided to musicians, landscapers and urbanists”.

Some of the elements mentioned in the decree have been well kept, but others, such as Botafogo Bay, at the foot of Sugar Loaf Mountain, have been degraded by pollution over decades.

The designated sites in the city will now benefit from preservation efforts, officials.
  


Brazil-Based Reusable Plastic Container Manufacturer to be Acquired by Myers Industries

Myers Industries¸ a diversified, international manufacturer of polymer products for industrial, agricultural, automotive, commercial and consumer markets, has entered into an acquisition agreement with Plasticos Novel, a Brazilian company specializing in injection molded material handling products.

The transaction is anticipated to end in July 2012. Plasticos Novel is a developer and producer of reusable plastic totes and crates that are used for storage and shipping in the rapidly developing food and agriculture sectors. In addition, the company manufactures a wide range of plastic industrial safety solutions.

Plasticos Novel owns two production plants in Paraná and Bahia, Brazil which cover the major agribusiness and industrial centers of southern and northeastern Brazil. The company develops reusable plastic containers for various markets, ranging from beverage and food to agriculture. In addition, it offers traffic and industrial safety products, including safety helmets, ear protection, flooring and signs.

l, President and CEO of Myers Industries, stated that the acquisition of Plasticos Novel complements their existing material handling business in the region. Since the Brazilian company has strong alliances with industry-leading companies, it is an ideal fit for Myers Industries’ material handling and growth strategy, added Orr.

The materials handling division of Myers Industries also include the following businesses: Myers do Brasil in São Paulo, Akro-Mils and Buckhorn in North America. Myers do Brasil manufactures bulk containers and totes for use in Brazilian agriculture and manufacturing sectors, Akro-Mils produces storage systems and plastic bins, while Buckhorn manufactures reusable totes and bulk containers.

Brazil’s Vale gets green light for largest ever iron ore mining project

The world's number two mining company, Brazil’s Vale Doce said it received an environmental license to build its biggest-ever iron ore mine, an Amazon region project that holds about one trillion dollars of reserves at current prices.

The S11D mine, an extension of the company's giant Carajas complex, is expected to cost 8.04 billion to build. It will produce 90 million metric tons of iron ore and begin operations in 2016, Vale said.

Vale, which puts out about 300 million tons a year, is the world's largest producer of iron ore. S11D's design capacity is equal to nearly 10% of the world's annual exports of the principal raw material for steel.

S11D will help Vale maintain production and exports, replacing output from ageing mines in Brazil's Amazon and Minas Gerais regions. It will also consolidate Carajas -- part of the company's Northern System of mines, railways and ports -- as Vale's most important iron-ore district.

The expansion will also help Vale keep up with Australian rivals BHP Billiton Ltd and Rio Tinto Ltd in meeting growing demand from China, the world's largest steelmaker and largest customer for iron ore.

Vale, BHP and Rio Tinto, known as iron ore's “Big Three”, produce about 70% of the world's sea-borne iron ore exports of about 1 billion tons a year.

The preliminary license from Ibama, Brazil's environmental protection agency is the first major hurdle in a series that Vale needs to clear to bring the mine into production.

The S11D project has faced delays as the company investigated potential risks to local plants and animals and studied potential archaeological sites in and around the proposed mine site.

Vale said the new mine will use far less power and emit fewer greenhouse gasses than conventional open-pit mines.
  


Jun 14, 2012

India, Brazil set trade target of $15 billion by 2015

RIO DE JANEIRO: India today sought investments from Brazil, mainly in the infrastructure sector for which it needs USD 1 trillion over the next five years, as the two countries set bilateral trade target of USD 15 billion by 2015.

Commerce and Industry Minister Anand Sharma, on a 4-day visit to Brazil, said businessmen of both the countries can cooperate in sectors like agriculture, textiles, IT, infrastructure and pharmaceuticals.

"Huge opportunities are available in both the countries. Currently the bilateral trade is at USD 10 billion. Both the sides have fixed the target of USD 15 billion by 2015. Trade is increasing but huge potential is there to further boost it," Sharma said here at a function.

He sought investments from Brazil in setting up of the National Manufacturing and Investment Zones (NMIZs).

The government is taking several steps to increase the share of the manufacturing sector in the GDP to at least 25 per cent by 2020 from 16 per cent at present. For this, a new National Manufacturing Policy (NMP) was announced recently, which envisages setting up of NMIZs.

They will be mega industrial zones with world-class supporting infrastructure. The government is offering a host of incentives and a liberalised labour and environment norms to promote these zones.

Sharma, who is leading a Ficci business delegation here, said that entrepreneurs of India and Barzil can also come together in other areas of infrastructure like ports, airports and railways.

"India is expected to absorb about USD 1 trillion investments in the infrastructure sector in the next five years. Brazilian companies should participate in it," he said.

Besides, industry chambers, the minister met his Brazilian counterpart Fernando Pimentel in Brasilia and discussed ways to increase economic cooperation.

Ficci President R V Kanoria said education is one of the important sectors for both the countries for increasing engagement.

"Several Indian companies can help in this sector. We have expertise in distant education field. Our present trade is concentrated in oil and its by-products. The potential between the two countries allows us to expand and diversify our trade," Kanoria added.

At present, few Indian companies like Renuka Sugars are operating in Brazil, while some Brazilian firms are operating in India in sectors such as biofuels.

Brazilian industry also sought investments from India in infrastructure sector in the wake of Olympics game being hosted by Brazil in 2016.

Tags India Brazil

Brazil Oil Giant Raizen Gives Up Controversial Sugar Cane Plans

A biofuels company established by Brazil's oil giant Shell has given up plans for sourcing sugar cane from land allegedly stolen from an indigenous tribe after a vociferous campaign by Indians and Survival International.

Established in the year 2010, Raizen is a joint venture of Shell and Brazilian ethanol giant Cosan to produce biofuel from sugar cane.

However, some of its sugarcane is cultivated on lands declared as indigenous by the ministry of justice. It was only due to sustained campaigning by Survival and pressure from Brazil's public ministry that ultimately led to negotiations between Raizen and FUNAI, Brazil's Indian affairs department.

The breakthrough also sees Raizen vow to consult FUNAI, to avoid further investment or expansion in conflict areas that could be recognised as indigenous land in the future.

Guarani Indians have welcomed the news. Many of the tribe live in appalling conditions, in overcrowded reserves or camped on roadsides after being forced from their land. Particularly, the Valdelice Veron's community in Mato Grosso do Sul state is directly affected. Guaranis living here report that their rivers have been polluted by pesticides used in the plantations.

"We'll be able to drink water from our land again. We'll be able to start afresh," a tribe member told Survival International.

Raizen has acknowledged the sensitive range of issues faced by the Guarani and promises to carry out a "social investment programme focused on the indigenous population".

"We want to use our withdrawal as a good example for other companies to follow. We are committed to respecting indigenous land declared by the Ministry of Justice," Raizen told Survival.

The landmark decision could set a precedent in Brazil, and will see Raizen's buying of sugar cane from land declared as indigenous, "definitely cease" by November 25.

"Raizen's decision is excellent news for the Guarani, who have been left to die on the roadside, and squeezed off their land by sugar cane production. Other companies must follow Raizen's example, and stop bankrolling the theft of Guarani land. It's time the world woke up to the fact that Brazil's biofuel is tainted with Indian blood," Survival's Director Stephen Corry said.

Brazil’s Cemig Bets On Shale Gas To Triple Fuel Sales

Cia Energetica de Minas Gerais, Brazil’s largest electricity company by market value, is betting shale gas will help it triple fuel sales by 2016.

The Belo Horizonte, Brazil-based company is seeking U.S. partners with experience in drilling shale gas to help develop four blocks in Minas Gerais state, according to Chief Financial Officer Luiz Fernando Rolla. The company, known as Cemig, completed two exploratory wells this year and plans to drill three more, according to its website.

Cia. Energetica de Minas Gerais Chief Financial Officer Luiz Fernando Rolla said, “The outlook for shale gas is very positiv.” Photographer: Dado Galdieri/Bloomberg

Cemig is investing in unconventional fuels as it seeks to boost sales from its gas unit to 3 million cubic meters a day by 2016 from an estimated 1.1 million cubic meters in 2012. A boom in shale may allow the U.S. to become a net exporter of natural gas by early next decade, while Argentina is seeking investors to help develop about 13 billion barrels of reserves.

“The outlook for shale gas is very positive,” Rolla said in an interview in London. “Natural gas is still very underdeveloped for Brazil and can be a great growth driver for the company.”

Cemig is interested in buying Vale SA’s natural-gas reservoirs to diversify its supplies for thermal plants from Petroleo Brasileiro SA (PETR4), Brazil’s state-controlled oil company, Rolla said in an interview last month. Vale, which has minority stakes in onshore and off-shore gas projects in Brazil, is selling stakes to focus on minerals and metals.

The power company’s clients include Vale, the world’s largest iron-ore miner, and ArcelorMittal, the world’s biggest steelmaker, according to data compiled by Bloomberg. (CMIG4)

Third Best

Cemig rose 37 percent this year, compared with a 1 percent decline for CPFL Energia SA (CPFE3) and a 28 percent drop for Centrais Eletricas Brasileiras SA (ELET6), and is the fifth-best performer in Brazil’s benchmark index after Cia de Saneamento Basico do Estado de Sao Paulo, Hypermarcas SA, Cielo SA and Ultrapar Participacoes SA.

Profit at Cemig’s gas unit has almost doubled in the past five years as the company seeks to diversify away from electricity. Earnings before interest, taxes, depreciation and amortization probably will rise to about 189 million reais in 2012, from 95 million in 2008, while profit is expected to climb to 127 million reais from 86 million in the period, according to a presentation on the company’s website.

Shale oil output has reversed decades-long declines in the U.S. Oil production last year was 15 percent higher than in 2008, when it touched a 62-year low. In Argentina, YPF SA, the country’s largest oil company, made its biggest oil discovery this year when it found at least 13 billion barrels of shale oil resources.

Economic Growth

Brazilian gas output, which reached 66.2 million cubic meters per day in March, increased 72 percent between 2001 and 2011, according to data from the country’s oil and gas regulator, known as ANP. Gas use has been driven by economic growth that has pulled more than 30 million people out of poverty.

Gas imports account for about 42 percent of Brazilian gas supplies, even as domestic output increased 72 percent in the last decade.

Cemig has expanded through at least 13 acquisitions in the past five years, including transmission company Transmissora Alianca de Energia Eletrica SA, known as Taesa, and distributor Light SA. The company’s success in executing mergers and acquisitions is a good signal for their expansion into gas, according to Filipe Lopes, an analyst at Agora Corretora.

‘Track Record’

“They have a good track record on their side after they bought Taesa and Light and turned in profits from the two business,” Lopes, who has a buy recommendation on the stock, said in a telephone interview from Rio de Janeiro yesterday.

While no companies have announced commercial shale gas production so far in Brazil, developing the reserves would help lower costs of the fuel in the country, according to Adriano Pires, head of the Rio de Janeiro-based Brazilian Center for Infrastructure.

“It would be an opportunity to have cheaper gas in Brazil,” Pires said in an interview yesterday from Rio. “Demand is huge. And Cemig is very well located, near Rio, Minas Gerais and Sao Paulo, to several companies that need gas. It makes a lot of sense to invest in shale gas.”

To contact the reporter on this story: Rodrigo Orihuela in Rio de Janeiro at rorihuela@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

Tags Brazil Bloomberg Shale

Jun 13, 2012

Obama to skip Rio20 Earth Summit | Brazil News

Home Brazil News.NetWednesday 13th June, 2012 (ANI) U.S. President Barack Obama will skip 20 Earth Summit later this month in Rio de Janeiro.Obama, however, instead, will send Secretary of State Hillary Clinton as the top U.S.

Infrastructure, permitting issues hinder Brazilian iron ore expansions -S&P

As Brazil rushes to meet global iron ore demand, domestic iron ore companies find their production projects facing delays, particularly in project permitting, S&P observed in a recent report. 

A surge in global iron ore demand has spurred a major expansion in Brazil's mining industry as the country's iron ore exports now account for about 33% of the global seaborne iron ore market, says Standard & Poor's.

However, difficulties in obtaining environmental permits, labor constraints and delays in financing new iron ore projects and expansions will keep a number of these projects from launching on time.

In a June 11 report, Primary Credit Analyst, Rafaela Vitoria, said Brazil's iron ore production is expected to grow beyond the world's largest iron ore mining company, Vale's current and planned capacity. Several other producers are also expanding iron ore mining operations and will boost Brazil's iron ore exports in the next few years.

Anglo American and MMX Mineração e Metalicos have sizable projects under development. Steelmakers such as Usinas Siderurgicas de Minas Gerais, Gerdau, and Companhia Siderurgica Nacional (CSN) are also venturing into iron ore exports.

"We estimate that these expansion projects together will add about 300 million tons per year (tpy) of incremental iron ore exports from Brazil," said Vitoria, "which at current prices would produce some $39 billion in annual revenues for companies operating in this sector."

"Investments to start production in this capital-intensive industry are sizable, particularly for the infrastructure to transport the mined ore to port terminals on the coast," said S&P. "As in other mining sectors, building a cost-competitive infrastructure and obtaining regulatory approvals, including environmental licenses, can be huge obstacles for companies to overcome."

"In Brazil, these challenges have somewhat hampered the iron ore mining sector's ability to expand to meet the surging market demand, especially from Chinese steelmakers."

"We believe market fundamentals remain good for Brazil's iron ore mining sector, but we also recognize that, from a credit standpoint, delaying investments due to these challenges may have the unexpected benefit of reducing exposure to a global economic slump and, possibly, slower growth (and thus less demand from China)," Vitoria advised.

"In addition, amid currently high iron ore prices and the resulting cash flow generation from existing operations, delaying expenditures on these massive projects can also prevent the pressure of higher debt on these companies' credits," Vitoria noted.

China now receives about 60% of traded global iron ore deposit shipments as Chinese crude steel production reaches about 700 million tpy in 2012, "which makes the country the largest steel producer in the world, with a share of 45%," said S&P.

Although an abrupt slowdown in China's economic growth could impact iron ore markets, eventually lowering growth rates of the Chinese steel industry, S&P does not expect prices to weaken significantly in the next few years.

"Given current supply level, Chinese iron ore prices, which market estimates place at around $120/ton, may well be setting the price floor for the commodity in the near time," S&P forecast. "As a result we expect supply demand balance to remain tight over the next several years.'

Vale leads the list of major iron ore projects with its construction of the Serra Sul mine, which is expected to yield 90 million tpy, and its expansion of the Cajaras mine to produce another 40 million tpy. "These two projects alone could drive up the country's exports by 40% compared with the 2011 level," S&P noted.

Nonetheless, S&P advised that no major iron ore projects will come online this year and next, "and we are not optimistic that the projects with plans to start operations in 2014 and 2015 will launch on time." Even expansion projects are experiencing delays.

"The environmental licensing process has been one of the major constraints to iron ore mining projects in Brazil. Companies which estimated it would take six months to one year to obtain the licenses now find it is taking one to two years, "given the government agencies' constraints in processing the licensing," S&P observed.

"Furthermore, most iron ore projects in Brazil involve not only the actual mine sites, which are in the middle of the country, but often the infrastructure to transport the ore to the ports on the countries coast," the credit agency said. "These railroad or pipeline transport systems average 400-500 kilometers in length and typically pass through different states and jurisdictions, thereby increasing the complexity of state approvals."

Nevertheless, S&P believes as long as natural resources are available and iron ore prices remain favorable, companies in the Brazilian iron ore mining sector will continue to plan expansions and new capital expenditures. "However, after construction begins, the impact of budget increases on cash flow and the potential for higher-than-expected debt burdens can become a credit concern for these companies," Vitoria cautioned.

Gilani to attend UN conference in Brazil

Pakistani Prime Minister Yousuf Raza Gilani will attend the upcoming UN conference on sustainable development in Brazil June 20-22.

More than 120 heads of the governments and countries are expected to attend the conference. Over 40,000 representatives of NGOs, academia, media, youth, environmentalists and social activists will also attend, Xinhua reported Monday.

Tags Gilani UN Conference Brazil

India seeks Brazilian investment in infrastructure sector

Commerce and Industry Minister Anand Sharma has invited Brazil to invest in the recently launched National Infrastructure and Manufacturing Special Economic Zone as well as in the food processing industries.

Sharma had a Ministerial Dialogue with his counterpart Fernando Pimentel, Brazilian Minister of Development, Industry and Foreign Trade in Brasilia on Monday.

Both sides agreed that infrastructure was one area in which lot of opportunities existed on both sides for the companies to participate in.

During the recent state visit of Brazilian President Dilma Rousseff to India, President herself had invited Sharma to visit Brazil for advancing the bilateral economic and commercial relations, as also to address the larger issue of making essential drugs available at affordable prices to our population.

In this context, Sharma was accompanied by a pharma delegation of 15 top Indian companies coordinated by Pharmexil.

During the ministerial dialogue, both sides agreed that the establishment of a working group in the pharmaceuticals and life sciences would be a welcome step towards furthering the cooperation between India and Brazil in this area. Brazil expressed keen interest in collaboration with India in joint production of essential drugs for fighting HIV Aids and malaria.

Both sides also stressed the importance of re-launching the India-Brazil CEOs Forum, a decision taken in the form of declaration at the Summit level in March 2012. They also agreed that the proposed meeting of the two Co-chairs of CEOs Forum would be a positive step in taking this initiative forward.

Indian side also sought for an early meeting of the existing joint working group in hydrocarbon sector to move this area of bilateral cooperation on faster track.

A MoU between the Council of Scientific and Industrial Research (CSIR), through National Physical Laboratory (NPL) and the National Institute of Metrology (INMETRO), Brazil was also signed for scientific and technological cooperation in chemistry, physics, engineering measurement sciences, development of certified reference materials for thermo physics properties, nanometrology, analysis of surface and thin films, biofuels, and biotechnology.

The purpose of this memorandum is to provide a framework for the exchange of scientific and technological knowledge services and the enhancement of scientific and technical capabilities of the two sides in the areas of chemistry, physics, and engineering measurement sciences. (ANI)

Tags India Brazilian Investment

Countries must fully support right to water at Rio20 conference, says UN expert

A United Nations independent expert today called on governments to "fully support" the right to drinking water and sanitation at the United Nations Conference on Sustainable Development (Rio20) in Brazil later this month.

In an open letter to States negotiating the outcome document of Rio20, the UN Special Rapporteur on the human right to safe drinking water and sanitation, Catarina de Albuquerque, expressed concern that a clear recognition of the human right to water and sanitation is at risk of being suppressed from the document after three rounds of negotiations in New York over the past three months.

"Some States suggested alternative language that does not explicitly refer to the human right to water and sanitation," Ms. de Albuquerque said in a news release. "Some tried to reinterpret or even dilute the content of this human right." 

She noted that the right to water and sanitation has been recognized as a human right under international law, including by the General Assembly and the Human Rights Council in 2010. 

More than 100 world leaders, along with thousands of parliamentarians, mayors, UN officials, Chief Executive Officers and civil society leaders will come together at Rio20, in Rio de Janeiro from 20 to 22 June, seeking to renew commitments to find solutions to the world's most pressing social, economic and environmental challenges, including access to water and sanitation.

Negotiators concluded the last round of Rio20 preparatory talks focussed on the upcoming event's outcome document in New York last Saturday, and they have reached agreement on more than 20 per cent of the document, with many additional paragraphs close to agreement. The next and final preparatory talks will be held in Rio de Janeiro from 13 to 15 June.

Ms. de Albuquerque emphasized that Governments need to set a target for water and sanitation for all, without discrimination, to protect the health and dignity in particular of marginalized populations. 

"I call on all States to maintain their support to this fundamental human right and its explicit inclusion in the Rio20 outcome document," Ms. de Albuquerque said. "It is clear that a commitment to water and sanitation without the recognition of the human right to water and sanitation is insufficient to achieve the future we all want." 

Independent experts, or special rapporteurs, are appointed by the Geneva-based Human Rights Council to examine and report back on a country situation or a specific human rights theme. The positions are honorary and the experts are not United Nations staff, nor are they paid for their work.

Tags RIO20 Brazil

Brazil claims successful test of parasite vaccine

Brazilian researchers say they have successfully tested a vaccineagainst schistosomiasis, a disease caused by parasitic worms that afflicts more than 200 million people worldwide.

"This is an unprecedented breakthrough in medicine that involved 30 years of scientific work," Dr Tania Araujo-Jorge, of the Oswaldo Cruz Institute in Rio de Janeiro, said Tuesday. The institute receives public and private funding.

"We are confident that within three years Brazil will be able to distribute the first vaccine against parasites, and help combat schistosomiasis, a disease that strikes the poorest because it is spread by unsanitary conditions."

The vaccine against the parasite, which also afflicts cattle, was developed from the reconstruction of a protein found in a species of worm.

The institute said it had successfully tested the vaccine in humans, but that more testing would be required in areas where the parasite is most common, mainly in Africa and South America.

The freshwater parasite can penetrate people's skin, and children are at especially high risk because they swim and bathe in contaminated water.

Brazil has some 2.5 million cases of schistosomiasis, which initially causes an itchy rash, followed in subsequent weeks by fever, chills, coughing and muscle aches. After a few years, the disease can damage internal organs.

"While the mortality rate is low, schistosomiasis causes incapacity, which makes it a disease that is caused by poverty and one that perpetuates poverty," Araujo-Jorge said.

Research and Markets: Biomass Industry in Brazil

Research and Markets(http://www.researchandmarkets.com/research/tx3bcd/biomass_industry_i) has announced the addition of the "Biomass Industry in Brazil" report to their offering.

Brazil has a large amount of biomass stock available in the country. Last year, Brazil accounted for over 20 billion MWh of power generation through biomass. With its lush green forests spread over 6.3 million hectares of land which basically consists of pine and eucalyptus has set Brazil with abundance in biomass feedstockHydroelectric power and natural gas dominate Brazil's electricity generation capacity.

Brazil's total installed renewable power capacity was 14GW in 2011, including the key renewable sectors being ethanol, biomass, and small hydroelectric power leading the country's renewable power supply. Historically, hydroelectric power has dominated Brazil's electricity supply, with more than 80% of electricity being fed into the grid.

Brazil's most abundant biomass feedstock is sugarcane, which makes cogeneration the most viable biomass technology for installation across the country. Brazil has abundant forest residues, which can be used as a source for electricity generation in Brazil. Currently, the majority of Brazil's sugarcane is grown in the north east region around Sao Paulo. The surplus electricity generated from the existing sugar factories in Brazil is fed to the power grid. Biomass power plant size is often driven by biomass availability in close proximity as transport costs of the (bulky) fuel play a key factor in the plant's economics. It has to be noted, however, that rail and especially shipping on waterways can reduce transport costs significantly, which has led to a global biomass market.

Key Topics Covered:

1. Executive Summary

2. Introduction to Biomass

3. Challenges Facing the Global Power Industry & the Need for Biomass

4. Biomass Industry in Brazil

5. Analysis of Major Players

6. Glossary

Companies Mentioned

- Areva SA

- Cosan SA Industria e Comercio

- RWE AG

- SSE Plc

- Vattenfall AB

- ETH Bioenergia SA

- New England Wood Pellet Co

- Ptz Bioenergy Ltd.

- Wartsila Corporation

- Welsh Power Group

For more information visithttp://www.researchandmarkets.com/research/tx3bcd/biomass_industry_i

Contact:
Research and Markets
Laura Wood, Senior Manager.
press@researchandmarkets.com
U.S. Fax: 646-607-1907
Fax (outside U.S.): 353-1-481-1716
Sector: Energy and Natural Resources

Fraga Leads Brazil Private Equity Beyond India as Selic Falls

Brazil's private equity and venture capital industry will grow by more than 20 percent this year after it overtookIndia in fund raising, according to the Brazilian Association of Private Equity and Venture Capital.

Tags Fraga leads Brazil

From Poor to Rich: Why Brazil's Economy is Flourishing

While the United States and Europe struggle with financial woes, Brazil has become one of the fastest-growing major economies in the world.

Brazil now has the sixth-largest economy, but could soon become the fifth.

CBN News Reporter Heather Sells spent the last week in northeast Brazil, in a city once considered the poorest area in the country. Now, the area is leading Brazil's economic growth.

Tags Brazil Economy

Argentine president pledges to turn her dollar savings into Pesos and urged ministers to follow

Argentine President Cristina Fernández insisted Wednesday on the need of saving in Pesos instead of US dollars and announced that she would “pesify” her dollar fixed-term bank deposit, urging her ministers to do the same.

CFK has declared three million dollars in fixed-term bank deposits. Likewise the Argentine cabinet and top officials from the Cristina Fernandez administration are estimated to have savings of over ten million dollars, according to Buenos Aires media reports based on their affidavits.

During a ceremony at the Government House where she made several announcements, the President urged Argentine people to recall the 2001 economic crisis, when “many people and some journalists” demanded a dollarization of the economy.

“I am surprised at the fact that there are people and journalists who are demanding a dollarization of the economy. If the dollarization had succeeded in 2001, we would all be dead,” the president added.

“Did you forget what happened?” she asked, assuring savers who were affected by the “corralito” they will receive Boden 2012 bonds on August 3.

Several ministers and close allies of the president called last week for the country to start “thinking in pesos.”

“You are the first in the queue to change your dollar savings into Pesos”, said Cristina Fernandez pointing to Senator and former cabinet chief Anibal Fernandez, one of the most outspoken preachers in favour of dumping dollars and trusting Pesos until he had to admit most of his savings were in greenbacks.

Likewise a report from the well known journalist Jorge Lanata who visited the Cristina Fernandez family posh hotels in El Calafate, Patagonia, showed that rates were still been billed in US dollars.

The near-impossibility of buying dollars or “dollar clamp” at the official rate is driving some savers and investors to pay a hefty premium in the black market.

Others are withdrawing dollars from banks and stashing them under the mattress or in safety deposit boxes, fearing moves by the government to forcibly “de-dollarize” the economy. Officials have strongly denied any such plan.

Meanwhile, the central bank has been snapping up almost all the dollars available as it seeks to replenish the foreign reserves earmarked for debt repayments.

So far this year, the monetary authority has bought about 7 billion dollars.

In support of her arguments President Cristina Fernandez mentioned stats from the Tax Revenue Office, AFIP saying that only 3% of Argentines hoard dollars.

“I’m president of 40 million Argentines, and therefore it is my job to look after the interests of the 40 million”.

The Argentine president also referred to a legal demand started by a solicitor from Mar del Plata claiming the government impeded him from purchasing 10 dollars for his grandchildren which was accepted by a court. However the demand was later rejected.

“Before any comments, I would say the grandpa is quite a scrooge: only ten dollars for his grandchildren!”

CFK added that behind the court case was more than the controversy over dollars, “rather, as a solicitor I can see an attempt to begin the litigation industry”. 


Tags Argentine Brazil

Brazil re-assessing its 3bn dollars potash project in Argentina due to ‘political risk’

Brazil’s Vale Doce, the world's second-largest miner, expects to overcome obstacles that prompted management to re-assess a 3 billion dollars potash project in the Argentine province of Mendoza, the company's head of fertilizers, Roger Downey, said.

Vale Doce said in April it would re-evaluate the 5.9 billion Reais project due to political and cost overrun risks.

The concession for the Rio Colorado potash project was suspended in the middle of 2011 when the provincial government of Mendoza accused Vale of failing to comply with local labour laws.

Earlier in April, Argentina worried investors when it initiated plans to seize control of Spanish-controlled energy company YPF to boost flagging oil and gas production.

“We remain in contact with the Argentine government, which is aware of the obstacles concerning the project” said Downey however “we're confident we'll overcome the difficulties with it”.

This week, the Brazilian and Argentine governments will meet to address trade issues, such as the adoption of barriers by Argentina that have slowed Brazilian exports to its neighbour.

Marco Aurelio Garcia, special spokesman for President Dilma Rousseff on foreign affairs, said he “felt Rio Colorado would move ahead,” after recent talks with Vale Chief Executive Murilo Ferreira and Argentina's Federal Planning minister, Julio De Vido