News from Faria Lima, by Capital Aberto
The best from Capital Aberto – for 20 years, a reference in objective, impartial, and in-depth information about the Brazilian capital market.
News from Faria Lima, by Capital Aberto

Analysts sound alarm as productive investments decline in GDP

Dec 5th, 2023

The Brazilian GDP, with a 0.1% quarter-on-quarter variation in the third quarter compared to the second quarter, reached its highest level in the historical series initiated in 1996. The surge amounted to 7.2% in comparison to the pre-pandemic level in the fourth quarter of 2019. 

However, not all news is positive for the market. Experts such as Lucas Farina, an economic analyst at Genial Investimentos fund manager, and Vinicius Moura, an economist and partner at Matriz Capital, draw attention to the retreat in Gross Fixed Capital Formation by 2.5% compared to the previous quarter, seasonally adjusted. This metric gauges productive investments in assets such as machinery and capital goods, providing insights into the future trajectory of the economy’s productive capacity.

Here are the key excerpts from the analyses of Farina and Moura, as well as the insights from Darwin Dib, an economist at Gauss Capital fund manager.

Genial Investimentos 


What caught my attention the most in this third-quarter GDP result was the continued decline in both gross fixed capital formation and the investment and savings rates. This is somewhat concerning, not in terms of growth for the current year, but in terms of future growth. As we know, the investment rate expressed in gross fixed capital formation is crucial for the economy to grow healthily in the future. Therefore, this decline implies a negative bias for the coming quarters and for 2024.”


Looking from the supply side, we observed a loss of momentum in the agricultural sector, with a 3.3% decline on a quarterly basis, following a robust growth in the first quarter that also had a spill-over effect into the second quarter of this year.

On the side of industrial activities and services, there was a slight positive surprise, with both growing by 0.6% on a quarterly basis, proving to be quite resilient to an economy still experiencing the delayed impacts of a higher interest rate (bearing in mind that the Selic [Brazil’s basic interest rate] remained around 13.75% for about a year, from August 2022 to August 2023). Therefore, we should also anticipate some deceleration in the industry and, especially, services due to this and the higher base effect.“

Argentina Effect

“Imports fell by 2.1% following the economic slowdown. However, exports grew by 3%, in our opinion, still influenced by what we can call the ‘Argentina effect.’ In recent times, Argentina has implemented a series of restrictions on exports, reacting to both prices and quantity. For example, there was a quantity limit on meat. This benefited Brazilian exports.

But the newly elected government has promised to eliminate these limits. So, in the coming quarters, we should see Argentine exports competing again with Brazilian exports. This should exert a bearish bias on export growth in the upcoming quarters.”

Lucas Farina, economic analyst at Genial Investimentos

Matriz Capital

Capital Goods

“Among the sectors that surprised negatively, we have Gross Fixed Capital Formation (FBCF). There was a significant drop, indicating a reduction in the internal production of capital goods and in construction, as well as in the import of capital goods. This may suggest a possible cooling in investments, affecting the economy.”


“The industrial sector suffered a decline, especially in areas such as machinery and equipment, chemicals, automotive, and metallurgy. This may indicate specific challenges within these sectors.”

Last Quarter

“For the next quarter, I believe that household consumption may slow down, reflecting a possible decline in economic activity between October and December. First, due to the reduction in government stimuli. Second, due to a less favorable economic condition with the increase in inflation, even more so if there is a lack of control over government spending.”

Vinicius Moura, economist and partner at Matriz Capital

Gauss Capital

Real Growth

“The result released today should stimulate market revisions for the real GDP growth in 2023 because even if the GDP remains stagnant in the fourth quarter, we will close the year with real growth in the range of 3.0%.”

Interest Rate Outlook

“That said, I do not believe that the result of this third quarter will change the trajectory of cuts to the Selic rate, nor the prospect of accelerating the cuts to 75 bps from the second Copom meeting of 2024, given the need to make a more significant reduction in the real ex-ante interest rate.”

Darwin Dib, economist at Gauss Capital

Why the capital market is expected to continue surpassing savings accounts in real estate funding

Dec 4, 2023

In this year, for the first time in history, the volume of resources originating from the capital market surpassed the share of savings in real estate credit funding, as revealed by data from Abecip (Brazilian Association of Real Estate Credit and Savings Entities). That this trend is not a fleeting occurrence but rather a lasting shift according to Vitor Bidetti, co-founder and CEO of the real estate-based fund manager Integral Brei.

Here are the main excerpts from his interview: 

Saving accounts

“The savings account has been losing ground in the investment universe for some time due to its low profitability. From the perspective of real estate credit funding, the savings account has always been an inappropriate type of funding because it is a one-day funding. It is a type of investment with daily liquidity for a credit period of up to 30 years. This is an old problem that should be overcome with the prominence that the capital market has been assuming.”

Aligned assets and liabilities

“In the capital market, assets and liabilities are matched. Those who hold a Real Estate Receivables Certificate (CRI), for example, are real estate funds, which have no deadline, closed-end funds, insurers, or pension funds. So the terms of the asset and liability are matched, which is much healthier.”


In this context, the capital market already represents 38% of funding today. The savings account represents 36%, and it is decreasing. We are in a scenario that points to the basic interest rate being in single digits by the end of 2024. This creates a very important incentive for the real estate sector as a whole, and new issuances of real estate funds, CRIs, etc. will surely come. In real estate funds alone, for example, this year we will have something like R$ 20 billion in new issuances. Next year, in a scenario of lower interest rates, this number should be much higher.

The era of CRIs

Within real estate funds, Real Estate Receivables Certificate (CRI) funds, for example, are currently the big stars. They already represent 45% of IFIX.

Check out the market expectations for December and the coming year

Dec 1st, 2023

The closing chapter of the year started on Friday, fueled by the most substantial monthly surge in the stock market in three years — an impressive 12.54% rise in the Ibovespa index in November. This starkly contrasts with the challenging conditions prevailing at the year’s outset, characterized by uncertainties, persistent inflation, heightened global interest rates, and a consequential 7.16% decline in the stock market during the initial quarter.

Now, attention turns to what to expect for December and the beginning of 2024. To discuss the opportunities and risks that may arise, Capital Aberto interviewed four experts: Luiz Eduardo Portella, partner at Novus Capital; Anna Reis, chief economist and partner at Gap Asset; Daniel Delabio, founding partner at Exploritas; and Bruno Stuani, commercial head at Plural Gestão

On Monday, we will publish the views from Delabio and Stuani. Check below the main excerpts from the interviews with Portella and  Reis:

Novus Capital 

Overcoming Adversity

“We had that horrible first quarter, with assets deteriorating significantly in Brazil. But then, the approval of the spending cap brought predictability for the coming years. This made it possible to project that the [public] debt will not explode in 2026.

Now, we are entering a more benign period in the external scenario as well. U.S. inflation is showing more positive signs, and we are also in a process of global disinflation. We have Fed directors signaling that they are satisfied, opening up space to start an interest rate cut cycle in the middle of next year, which benefits emerging countries.”

Interest rates

“Within the emerging markets, geopolitics favors Brazil. The country has natural resources and has had a strong harvest. We do not depend on anyone for energy. Another positive point is that we are close to the United States.

We have everything to attract investment. There is a positive outlook for us to return to single-digit interest rates. We work with the scenario of cuts of 0.5 points to the level of 9.75%. It would even be possible to reach 9% if a cycle of interest rate cuts begins in the U.S. in mid-2024.

In addition, we will close 2023 with a record trade balance. So, there is the prospect that the dollar will continue to fall.”

December Outlook

“November was an exceptional month, characterized by a substantial surge in stocks, stable currency conditions, and global interest rate closures. While December may not replicate the robust strides of November, strong indications suggest the persistence of positive momentum, concluding the year on a favorable note.”

Risks on the Horizon

“Challenges include the impact of a potent El Niño, inducing weather instability and affecting local harvests, thereby posing an inflationary risk.

We are also looking at the U.S. election next year. We expect a lot of volatility because the government there needs to hold back spending – something difficult in an election year. Therefore, at some point, as there are strong issuances there, the market may demand a premium, and interest rates may rise again. The situation indicates that we will have a recession at some point next year in European countries and in the United States as a result of the interest rate hike [in 2023]. 

Recessions in the United States end up impacting Brazil. In these cases, with uncertainty about companies, the stock market falls. But, on the other hand, the recession helps bring interest rates down, which would benefit some assets.”

Luiz Eduardo Portella, Novus Capital

Gap Assets

Good surprise

 “We are coming to the end of the year with better-than-expected growth and lower inflation than the initial expectation. The Focus report showed the market expected a 0.8% advance for GDP, which will now close near 3%. As for inflation, the market had more than 5%, and we will close near 4.5%.

We managed well this year, even with complications from an international perspective and the noise caused by the back and forth [of the government’s discourse] on fiscal policy.

We successfully deflated the economy, with relative success, without much sacrifice in terms of GDP slowdown or increased unemployment. Along with this, the Central Bank managed to start cutting interest rates at a pace that seems to be cruising speed.

Another positive news of the year was our spectacular trade balance.”


“The big question is on the fiscal side. Our view is more optimistic, due to the important things that the minister Fernando Haddad signaled, such as the commitment to seek to zero out the deficit and generate some primary surplus.

 But to achieve ambitious primary targets, you need a lot of revenue. According to our calculations, about 2 percentage points of GDP are needed by 2026 in tax increases or review of tax expenditure. The tax agenda was left until the last minute, now on the year-end agenda. But we have indications that things will move on in Congress.”

Risks for 2024

“If the amendment to the LDO (Budgetary Guidelines Law) that limits contingencies in 2024 is not accepted, we will have a change in target already in March, in the first year of the framework, which would be quite negative.

On the inflation side, I think the risks are more to the upside. In addition to El Niño, there is the recomposition of the states’ losses of ICMS revenue during the Bolsonaro government. But this would be a short-term impact.

Anna Reis, Gap Assets

Partnership between Vórtx and MB makes cryptocurrency in Brazilian real accessible to investment funds

Nov 30, 2023

Vórtx and Mercado Bitcoin announced a partnership this Wednesday that will allow fund managers under Vórtx to acquire cryptocurrencies in Brazilian real seamlessly through integration with the MB Prime Services platform.

This pioneering initiative is made possible thanks to CVM Resolution 175, which allows investment funds to acquire crypto assets in Brazilian real from exchanges in Brazil.

Before this new regulation, this operation was only allowed for individuals. Investment funds had to operate through foreign exchanges.

One of the conditions imposed by the resolution, however, is that the exchange must have authorization from an international regulatory body. MB fulfills this requirement through a subsidiary in Portugal authorized by the country’s central bank.

“The previous ecosystem involved several limitations, such as reduced windows for acquisition, high costs, and operational inefficiency,” says Marcelo Cherri, Head of Solutions at Vórtx.

“With a partner in Brazil, I no longer need to close the exchange. Previously, I closed with an international exchange, converted the Brazilian real into the currency or dollar, sent it to them, and settled.”

“Now, I can buy in Brazilian real, and as an administrator, I already capture the movements made by the Mercado Bitcoin market,” adds Cherri.

In addition to gaining efficiency and reducing costs, the service also increases security and brings greater reliability to transactions in crypto assets.

“The platform allows managers and administrators to manage permissions. One buys, another approves, and we release transfers. Always with dual-factor authentication,” explains Guilherme Pimentel, Director of Products at MB.

“MB Prime Services is a set of tools that allows for a more sophisticated and controlled buying and selling. In this sense, the participation of administrators here is very relevant,” adds Pimentel.

According to Cherri, the first investment fund operations using the new platform were closed on Tuesday.

Since Resolution 175 allows for the allocation of up to 10% of the assets of multimarket funds in cryptocurrencies, there is a theoretical potential allocation of up to R$ 160 billion in this segment.

For Cherri, the service offering consolidates Vórtx’s innovation strategy.

“We’ve had several innovations here in the crypto world, the first crypto ETF, etc. This consolidates our position as a one-stop-shop and being at the forefront when clients want to operate new assets and use new instruments,” he says.

Inflation preview comes above expectations, but the market sees a ‘benign trajectory’

Nov 28, 2023

The National Consumer Price Index 15 (IPCA-15), which is considered a preview of the country’s official inflation, was 0.33% in November of this year.

The rate was above the 0.21% from the previous month’s preview but below the 0.53% from the November 2022 preview.

The index also exceeded the market analysts’ estimate of 0.30%.

The data was released on Tuesday (28) in Rio de Janeiro by the Brazilian Institute of Geography and Statistics (IBGE).

With this result, IPCA-15 accumulates 4.30% for the year and 4.84% in 12 months.

Despite the result being slightly above the market’s expectations, analysts say that inflation should continue on a “benign trajectory.”

“The main upward deviations from our projection came from volatile items such as food and airfares,” said Alexandre Maluf, economist at XP. “However, the main metrics came in line with our expectations, not altering our view of the short-term deflationary process in Brazil.”

According to Alexandre Lohmann, chief economist at Constância Investimentos, “the quarterly moving average is at -0.12%, putting a downward bias on the Focus median for the next year.”

“The IPCA continues its very benign trajectory, once the El Niño shock in Q1/Q2 2024 has passed, the return of food prices could help the IPCA return to the Central Bank’s target.”

The Focus survey released on Monday by the Central Bank alongside the market shows that the expectation is for IPCA to end this year with a cumulative increase of 4.53%, reaching 3.91% in 2024.

Eight of the nine expenditure groups surveyed by IBGE showed price increases in the official inflation preview for November, with a highlight for food and beverages: 0.82%.

This was the first price increase for food since the preview of May this year, in other words, in five months.

With Agência Brasil.

Ibovespa Rebalancing: Get to know the favorite company to join the index

Nov 27, 2023

As part of its regular four-month schedule, B3, the Brazilian Stock Exchange, will announce on Friday the first preview of the rebalancing of the Ibovespa, B3’s main index, which will take effect on January 2.

With the reassessment of the index, there is the possibility of companies entering and exiting the index, and a potential alteration of the relative weight of companies in the indicator.

The market’s high expectation for the Ibovespa rebalancing is the confirmation of Isa Ceetip’s inclusion in the index.

In recent reports, BTG, XP, and Itaú BBA investment banks are betting on this movement.

“Cteep experienced a boost in its average daily trading volume due to recent discussions about the potential sale by Eletrobras (ELET6) of its stake in the company,” wrote Carlos Sequeira, Osni Carfi, and Guilherme Guttilla in a report from BTG sent to clients.

Even if the ADTV returns to levels before the announcement of this possible transaction, we believe there is still a great chance that the company will be included in the index.

The company’s shares closed Friday’s session at R$ 24.69, up 7% for the year so far.

In the third quarter of the year, the company achieved a regulatory net profit of R$ 474.5 million ($97.8 millions) , a 22.7% increase compared to the same period in 2022.

For the January-to-September period, the amount was R$ 1 billion ($206 millions), a leap of 81.7% compared to the nine months of the previous year.

Net revenue was R$ 1 billion in the last quarter, a growth of 18.8% compared to the same period in 2022. In the cumulative nine months, the volume reached R$ 2.9 billion ($597 millions) , representing an increase of 21.5% compared to the previous year.

Regulatory EBITDA totaled R$ 876.6 million ($180.7 millions)  in the last quarter, a 17.9% increase compared to the same period of the previous year. In the January-to-September period, the amount reached R$ 2.3 billion ($474 millions), an increase of 25.8%.

IsaSA CeetpEETP emerged from the division of assets of CESP (Companhia Energética do Estado de São Paulo) as part of the privatization program of the São Paulo state government.

In 2001, the company incorporated the Empresa Paulista de Transmissão de Energia Elétrica (EPTE), a result of the demerger of Eletropaulo.

The company is present in 18 states and operates a transmission network through which 30% of all electricity transmitted in Brazil and 94% in the State of São Paulo pass.

Privatization took place in 2006 through an auction on the stock exchange. The multilatin business group ISA took control of the company by acquiring 50.1% of ordinary shares (with voting rights).

Ibovespa Rebalancing

To be included in the B3 Ibovespa portfolio, listed companies need to meet certain requirements:

  • Traded in 95% of trading sessions during the validity period of the last three portfolios (approximately 1 year),
  • Financial turnover equivalent to at least 0.1% of the spot market’s financial volume in the same period, and
  • Be among the assets representing 85% in descending order of the Negotiability Index (IN), which measures the volume traded by an asset on the exchange.
  • Not be a penny stock (shares traded at a value below R$ 1.00 or around $0.20).

In the last change in September, the stocks of PetroReconcavo ON (RECV3) and Grupo Vamos ON (VAMO3) became part of the index, and Meliuz ON (CASH3) exited.

Capital markets recovers in October, and issuances surpass those of 2022 for the month

Nov 24, 2023

After the best result of the year in September, capital market issuances returned to strong performance in October, according to data from Anbima (Brazilian Association of Financial and Capital Market Entities).

Issuances last month reached R$ 46.1 billion, the third-best result of the year, behind only the R$ 57.8 billion in September and the R$ 46.7 billion in June.

From January to October, the cumulative fundraising was R$ 337.3 billion, a decrease of 24.4% compared to the R$ 445.9 billion recorded in the same period in 2022.

But all this decline is still a reflection of the market’s retraction in the first months of the year.

The monthly average of issuances in the second semester exceeds R$ 40 billion, almost double the average value in the first semester, around R$ 20 billion.

The October result also surpasses the one recorded in the same period last year by 8%.

Once again, debentures lead the fundraising, with R$ 28.5 billion in October, the second-best performance of the year, with a 24.8% increase compared to the same month in 2022.

Most issuances in this period were directed towards ordinary business management (38.2%) and infrastructure investments (34.8%).

Securitization instruments (CR, CRI, CRA, and FIDC) also performed well in October.

The combined volume of issuances reached R$ 12.2 billion last month, exceeding the monthly average for 2023.

In this segment, the highlight of the month was CRA (Agricultural Receivables Certificates).

In October, issuances reached R$ 6.1 billion, the highest value in 2023, with a growth of 75% compared to the same month last year.

Real Estate Investment Funds (FIIs) also achieved their best performance of the year in October, with R$ 3.7 billion, a 141.6% increase compared to 2022.

In the first ten months of the year, the volume of FII issuances totaled R$ 20.8 billion, an increase of 39.9% compared to January to October 2022.

Vórtx takes over fiduciary administration of Warren’s funds

Nov 22, 2023

Vórtx has announced that it will now be undertaking the fiduciary administration of investment funds for Warren Investimentos.

With this agreement, 126 funds, representing R$6.6 billion in assets under administration (AUA), will be managed by the infratech company, which already has over half a trillion reais in assets on its platform.

“This is a partnership that brings together two companies that share the commonality of placing technology at the core of their services and operating with their own platforms, each with its own specialization,” says Juliano Cornacchia, co-founder, and CEO of Vórtx.

“The move is in line with the strategy we implemented last year to enter the liquid funds segment, which until then was dominated by more traditional, less technological banks. Additionally, a distinguishing factor is that we are 100% independent.”

The deal will allow Warren to focus more on management and distribution, activities that are at its core.

For Tito Gusmão, CEO and founder of Warren, the partnership is strategic: “With Vórtx, we can focus on our wealth management service, creating and distributing good investments, with the assurance that the fiduciary administration of our funds is in qualified hands.”

With R$19 billion under management, Warren is an independent investment brokerage and wealth management firm.

The company, headquartered on Faria Lima and with eight other offices throughout Brazil, is known for its fixed-fee model and focus on long-term planning and investment for its clients.

Warren also has a fund manager, Warren Asset, an institutional brokerage, Warren Rena, an ecosystem for financial professional support, Warren Pro, and solutions in foreign exchange, insurance, pension plans, and capital markets.

The agreement strengthens Vórtx’s position as a national independent fiduciary administrator, expanding into a market that, until its emergence, was dominated by major banking players, particularly in the liquid funds segment, and having proprietary technology as a differentiator embedded in its DNA.

Brick-and-mortar funds boost the rise of REITs, shopping paper surges

Nov 21, 2023

The so-called brick-and-mortar real estate funds, whose returns come from the gains the fund makes from the rents of the properties in its portfolio, had an average appreciation of 15.23% in 2023.

The segment easily outperformed the IFIX, an index composed of shares of Real Estate Investment Funds listed on the stock and organized over-the-counter markets of B3.

During the same period, until November 14, the IFIX had a variation of 11.07%.

On the other hand, paper real estate funds, composed of securities linked to the real estate market, such as CRIs (Real Estate Receivables Certificates) and LCIs (Real Estate Credit Letters), only had an increase of 5.03%.

These figures are from a survey conducted by Quantum Finance.

According to Quantum, the positive result of the IFIX comes after a long period of difficulty during the pandemic when many commercial properties remained closed.

The segment also benefits from “inflation control and the signaling of a cycle of cuts in the Selic rate.”

Among brick-and-mortar real estate funds, there was also a significant variation.

According to Quantum’s data, brick-and-mortar funds that invest in shopping centers stood out.

These securities had an appreciation of 26.18% from the beginning of the year until now, even surpassing the Ibovespa, which recorded an increase in the range of 18%.

The worst performance in the segment was from slab brick-and-mortar funds, with an increase of 9.79%. Funds investing in logistics rose by 12.13%, and rural brick-and-mortar funds increased by 13.49%.

For the future, Quantum states that “there is an expectation of increased economic activity with lower interest rates ahead, which may mean growing demand for commercial properties, benefiting REITs that invest in physical spaces, the so-called brick-and-mortar REITs.”

However, the reduction in interest rates is expected to decrease the attractiveness of paper real estate investment funds.

Mergers and acquisitions: the market shrinks, but two segments stand out

Nov 17, 2023

Mergers and acquisitions operations in Brazil totaled R$ 19.8 billion in October, with a total of 145 recorded transactions. As a result, year-to-date transactions of this type amount to R$ 178 billion, involving a total of 1,617 deals.

These results are still below those recorded in 2022. From January to October of last year, there were transactions totaling R$ 260 billion. The year-over-year decrease was 31.5%.

In October alone, this year’s performance represents a 28.6% decrease compared to the R$ 27.8 billion moved in the same month in 2022. The volume of transactions fell less, by 12%, compared to the 164 transactions in 2022.

The information is part of the monthly report on the sector from TTR Data ( in collaboration with TozziniFreire Advogados (

The Internet, Software & IT Services sector is the most active with 308 transactions, despite a 26% decrease compared to 2022, followed by the Business & Professional Support Services sector with 254 transactions.

Contrarily, two sectors, however, showed positive performance.

Private Equity transactions reached R$ 22.8 billion, a 41% increase in mobilized capital, although with a 15% reduction in the number of transactions.

The Asset Acquisitions segment recorded 233 transactions and BRL 26.3 billion until October, reflecting a 26% growth in operations compared to the same period last year.

The transaction highlighted by TTR Data in October 2023 was the completion of the acquisition of 51% of the Bluefit gym network by MC Brazil Fitness Holding, a subsidiary of Mubadala. The transaction value is R$ 464.1 million.

Brazilian companies turned primarily to the United States, conducting 28 transactions totaling R$ 4.7 billion until October 2023, followed by the United Kingdom with nine operations.

On the other hand, the United States and the United Kingdom led investments in Brazil, with 137 and 43 transactions, respectively.

What the market thinks about the error in Magalu’s financial statement

Nov 16, 2023 – Denyse Godoy

The week has been full of intense emotions for the Magazine Luiza investor.

On Monday night (13), along with the disclosure of the third-quarter financial results, the company reported having identified errors in accounting entries totaling nearly R$ 830 million. According to a public statement, the inclusion of so-called “bonuses in certain commercial transactions” in the balance sheet was incorrect. In response, the retailer’s stocks plummeted by 9.7% shortly after the opening of the Brazilian Stock Exchange on Tuesday (14). Following a holiday on Wednesday (15), the shares surged by 24.4% on Thursday.

So, what is the market thinking now about Magalu? The main analyses at this moment are:

  • The “accounting errors” of Magalu are different from those of Lojas Americanas.

The strong negative reaction of Magalu’s stocks on Monday (13) is mainly explained by the fear that it might be a problem similar to what Lojas Americanas had. Lojas Americanas, which released its financial results on Thursday (16), explicitly stated that they had experienced fraud by the previous administration. In the case of Magalu, after the initial scare, the conclusion is that indeed an error occurred. “The accounting issue with Magalu doesn’t seem to be problematic going forward. As Wando would say, what’s done is done, and what will come, will come,” says Felipe Pontes, a partner at L4 Capital. However, this does not mean that the case will have no consequences. “What happened resulted in bonuses to executives who were paid based on fictitious profits. And now? Will the minority bear this or will they get it back?” Pontes questions. According to his calculations, in 2022 alone, the six statutory directors of the company received about R$ 5 million in participation in the retailer’s results that were inflated.

Update: Magalu disputes these claims. According to its press office, the retailer incurred losses throughout 2022. “Furthermore, the investigation of the complaint, approved by an audit, ruled out any bonuses paid to executives because of such bonuses,” the press office said in a message to Capital Aberto.

  • The financial and operational improvement displayed in the balance sheet is more important.

Magalu’s net revenue in the third quarter of this year was R$ 8.6 billion, representing a 2.6% decrease compared to the same period last year and a 0.1% decline from the second quarter of 2023. Compared to the market’s average projection, according to Bloomberg’s survey, it was only 1.5% below. The adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) totaled R$ 487.5 million, with a 0.7% year-on-year decrease, a 3% quarter-on-quarter decrease, and 7.8% below the market consensus according to Bloomberg. The net debt/EBITDA ratio fell to 1.9x from 3.6x in the third quarter of 2022 and 2.2x in the second quarter of this year. “Undoubtedly, in quarterly terms, this was a strong result for the company. In our analyses, we always pointed out that Magalu operated with a much lower margin compared to its main competitor, Casas Bahia (BHIA3) – which, in its ‘golden times,’ maintained a profitability above 30%. However, in recent quarters, while the competitor has been undergoing a heavy restructuring, with inventory clearance and a sharp drop in profitability, Magazine Luiza is moving in the opposite direction: capturing growth in the marketplace and bringing profitability into the group,” says Iago Souza, a retail sector analyst at Genial Investimentos.

All things considered, the prevailing view is one of caution.

“We see good margin evolution, a good pace of growth in the 3P segment, and sequential leverage reduction. However, we remain cautious regarding the recovery of discretionary consumption and await a better understanding of the mitigation of risks associated with new accounting reclassifications and controls established for supplier funds. We maintain a neutral recommendation,” said Carlos Soares, an analyst at Mirae Asset Wealth Management.

“The results of the third quarter reinforce our cautious view on Magalu, especially regarding the cash flow dynamics – because cash burn remains a concern – hence our neutral recommendation for the stock,” said Vitor Pini, an analyst at Banco Safra.

Fitch: Private credit market experiences “significant improvement” in Brazil

Nov 16, 2023

The private credit market in Brazil has largely overcome the restrictions caused by the crisis initiated with the default of giant retailer Americanas in January.

In the third quarter of the year, issuances reached R$ 72 billion ($17.4 billion), a value 46% higher than in the second quarter.

In comparison with the third quarter of 2002, there is still a decrease of 11%. However, on a monthly average, the period from July to September already surpasses that of the entire previous year.

These data are from the report “Indicators of Credit for Brazilian Companies” by the credit rating agency Fitch Ratings.

According to the report, “spreads are gradually decreasing but remain above historical levels for more vulnerable companies and sectors, as creditors are selective.”

“The local debt market has improved significantly after months of restrictions, opening up space for refinancing and reducing liquidity risks,” says Fitch director Renato Donatti.

According to Donatti, positive data such as controlled inflation, lower interest rates, and a resilient job market have not yet translated into demand, which remains weak.

“Fitch predicts fewer downgrades in the coming months, after the peak in 2023,” adds the executive.

The fundraising of Brazilian companies has also improved in the foreign market.

According to Fitch’s report, bond issuance in the third quarter reached US$ 9.5 billion ($1.9 billion), more than double the US$ 4.5 billion from the same period in 2022.

Despite this, Fitch believes that international bonds will continue to be volatile in the coming months due to an adverse external environment characterized by high-interest rates and turbulence in the Middle East.

For the Brazilian economy as a whole, Fitch has raised the GDP growth projection for 2023 from 2.3% to 3.2%.

The revision is supported by the strong performance of agricultural production, the resilience of the job market, and the expansion of social spending, including an increase in the minimum wage.

S&P Global Outlook: Brazilian companies plan to increase investment in 202

Nov 14, 2023

The decrease in interest rates promoted by the Central Bank and predictions of relatively controlled inflation have left Brazilian companies more optimistic and with plans to increase investments in 2024.

This is the conclusion of the October edition of the S&P Global Brazil Business Outlook quarterly report.

According to the survey, “hiring plans, capital expenditure, and budgets allocated for research and development (R&D) were revised upward.”

“Some companies intend to open new offices, while others aim to allocate resources for product diversification, new technologies, and artificial intelligence,” commented Pollyanna De Lima, Associate Director of Economics at S&P Global Market Intelligence.

There is also, according to Pollyanna, a greater willingness of companies to conduct recruitment rounds next year, “with stronger hiring intentions in manufacturing companies and their service providers.”

Despite the optimism, however, the report notes that “concerns about competitive conditions dampened sentiment regarding profitability.”

The positive sentiment among Brazilian companies that make up the S&P panel is the second-highest among the 12 countries with comparable data.

In Brazil, the net balance of panelists predicting growth is 40%, a figure second only to that recorded in Russia.

Optimism is higher among goods producers, with a net balance of 49%, the highest value since June 2022, than among service providers.

According to the report, manufacturers highlight, among the positive factors, tax reform, new product releases, investment plans, efficiency gains, price stability, and accommodative monetary policy.

“The trajectory of inflation expectations seems to point towards overall stability in 2024,” argues Pollyanna.

“If this materializes, consumers could plan spending with greater certainty, businesses could commit to long-term investment decisions, and the Central Bank could continue reducing the benchmark policy rate to more business-friendly levels.”

Buena Vista and Vórtx launch the first international dividend ETF

Nov 14, 2023

On this Tuesday, the Brazilian market welcomed the first international dividend ETF, SPYI11, launched by Buena Vista Capital in collaboration with the administrator Vórtx and with Guide Investimentos as the lead coordinator of the offering.

The index is composed of companies such as Apple, Disney, Berkshire Hathaway, Walmart, Pepsico, and Nike, among others, and the shares are available on the market starting at R$ 100 each.

The ETF offers the possibility of receiving monthly dollar-denominated dividends, which can be an interesting alternative for investors looking to protect their capital against currency fluctuations. This also opens the opportunity to benefit from global companies that offer attractive yields.

“This launch is aligned with our innovative DNA. In 2022, looking at the growth of the ETF market in Brazil and its potential, we invested in creating the ‘Vórtx ETF Platform,’ an ecosystem designed to serve this industry,” explains Marcelo Cherri, head of solutions at Vórtx.

“We structured the first ETF in Latin America that invests 100% in Bitcoin, the first Ethereum ETF in Brazil, the world’s first DeFi ETF, and it was only natural for Vórtx to be the administrator of the first local ETF with international exposure and monthly dividend payments to investors,” he adds.

“In the United States, ETFs with covered call strategies (products that trade options contracts to generate monthly income) are already a well-established class with several examples of such ETFs managing billions of dollars. The SPYI11 will be the first in this category in Brazil to generate this ‘synthetic dividend,’ explains Renato.

According to Renato Nobile, manager and analyst at Buena Vista Capital, SPYI11 was designed to track the performance of the 500 largest companies in the United States while generating monthly revenue distributed directly to the investor’s account.

“In this way, investors can diversify their portfolios, gain access to international markets, and generate extra income more conveniently and efficiently,” says Nobile.

For Guide’s Head of Investments, Luis Gustavo Pereira, the innovative nature of the ETF is an excellent option for those looking to generate recurring income.

“The exposure to large companies in the American market, liquidity equal to stocks, and competitive product cost are factors that make it even more attractive,” says Pereira.

In the company’s history of pioneering and innovation, there is also the milestone of being the first national independent fiduciary administrator to enter the liquid fund fiduciary administration market.

Among the main advantages, it is important to highlight that

Like other investment products, it also has an administration fee of 0.83% per year, and taxes are the same as those for variable income assets.

15% IR on capital gains on the sale of shares, paid by the investor through DARF in the month following the sale of the shares;
15% IR on monthly dividends charged directly at the source

Inflation forecast within the target range and decreasing for the fifth consecutive week

Nov 13, 2023

The median inflation forecast, measured by the National Consumer Price Index (IPCA), from financial market analysts for 2023, dropped from 4.63% last week to 4.59% this Monday.

The forecast is from the Focus Bulletin, a survey released weekly by the Central Bank (BC) with the expectations of financial institutions for key economic indicators.

It is the fifth consecutive week in which the inflation forecast for this year remains within the inflation target range, set at 3.25% with a variation of 1.5 percentage points up or down.

For 2024, the inflation projection according to the Focus Bulletin had a slight increase of 0.01 percentage point, going from 3.91% to 3.92%. However, it is the third week in which the index shows an increase.

Inflation ForecastFor 2025 and 2026, the forecasts are 3.5% for both years. The inflation target for the next three years is 3%, also with a margin of 1.5 percentage points up or down.

Last week, IBGE released the October IPCA, which was 0.24%, below the market forecast of 0.29%. For the year, IPCA has accumulated an increase of 3.75%, and in the last 12 months, it’s 4.82%, below the 5.19% observed in the immediately preceding 12 months.

“The highlight of the month was the benign behavior of prices in the service sector,” says Rachel de Sá, chief economist at Rico Investimentos.

“Inflation in the service sector is one of the factors most closely watched by the Central Bank because prices in the sector tend to be more difficult to control once disseminated throughout the economy,” explains Rachel.

For the financial market, the Selic, the basic interest rate of the economy, is expected to end 2023 at 11.75% per year, assuming a reduction of 0.5 percentage points in the next Copom meeting in December.

For the end of 2024, the market estimates the Selic at 9.25% per year.

The projection of financial institutions for the growth of the Brazilian economy this year remains at 2.89%, unchanged from the previous estimate.

For 2024, the expectation for the Gross Domestic Product (GDP) – the sum of all goods and services produced in the country – is a growth of 1.5%.

For 2025 and 2026, the financial market projects GDP expansion of 1.93% and 2%, respectively.

The forecast for the exchange rate is R$ 5 for the end of this year.

For the end of 2024, the forecast is that the U.S. dollar will be at R$ 5.08, an increase of three cents compared to last week’s forecast.

See which investments have outperformed inflation in recent years

Nov 13, 2023 – Denyse Godoy

On the last Friday (10), the IBGE (Brazilian Institute of Geography and Statistics) reported that the IPCA (Consumer Price Index), the country’s official inflation indicator, was 0.24% in October. The variation was lower than the market expected, which was 0.26%.

Surpassing inflation – or protecting the purchasing power of money – is the primary goal of any financial investment. See below how 14 types of investments have performed in this mission in recent years, according to calculations by Einar Rivero, one of the country’s leading experts in financial data. Only in the longer term do the majority of investments outperform inflation, and in the three intervals, there are three applications that always lost: currencies (dollar and euro) and stocks of smaller companies (small caps) traded on the Stock Exchange.

12 months – IPCA: 4,82%

  • Bitcoin: +112,99%
  • BDRs: +25,24%
  • CDI: +13,38%
  • IMA geral: +12,65%
  • IDIV (Índice de Dividendos): +12,51%
  • Poupança: +8,43%
  • IFIX: +7,03%
  • Ibovespa: +4,8%
  • IHFA: +3,84%
  • Ouro: +1,81%
  • Euro: +1,41%
  • Dólar: -5,08%
  • Small caps: -9,01%

3 years – IPCA: 23,51%

  • Bitcoin: +118,45%
  • IDIV (Dividend Index): +34,27%
  • CDI: +31,02%
  • IMA: +26,16%
  • IHFA: +25,8%
  • Savings account: +19,21%
  • BDRs: +15,82%
  • Ibovespa: +14,99%
  • IFIX: +13,37%
  • Dollar: -7,22%
  • Gold: -12,82%
  • Euro: -15,94%
  • Small caps: -17,43%

5 anos – IPCA acumulado: 31,61%

  • Bitcoin: +655,45%
  • BDRs: +123,71%
  • Gold: +92,31
  • IDIV (Dividend Index): +81,91%
  • IMA geral: +49,77%
  • CDI: +43,36%
  • Índice de fundos multimercados IHFA: +43,16%
  • IFIX: +40,59%
  • Ibovespa: +38,99%
  • Dollar: +30,66%
  • Savings account: +27,56%
  • Small caps: +24,49%
  • Euro: +23,43%

Moderate inflation reinforces market optimism about interest rates

Nov 10, 2023 – Denyse Godoy

The future trajectory of interest rates in Brazil and the United States is one of the main concerns of the financial market at the moment due to the high degree of uncertainties.

After three consecutive cuts of 0.5 percentage points since August, the Selic, the Brazilian benchmark rate, is at 12.25% per year. There is an almost consensus among experts that, in its December meeting, the Copom (Monetary Policy Committee of the Central Bank) will make a new reduction of 0.5 pp, bringing the country’s reference rate to 11.75% per year. The biggest question at the moment concerns the level of the Selic at the end of the current easing cycle, in the middle of next year. Although most analysts expect it to be at 9% per year, there are optimists betting that interest rates could fall to as low as 8.5% per year in 2024.

The group with more positive expectations gained arguments this Friday (10) with the release by IBGE (Brazilian Institute of Geography and Statistics) of the IPCA (Broad Consumer Price Index) for October. The indicator recorded a 0.24% increase in prices last month, less than the 0.29% projected by the market and the 0.26% in September.

Read below analyses on the IPCA, with projections for the index:

Andréa Angelo, inflation strategist at Warren Investimentos:

“The reading of the October IPCA brought widespread bearish surprise and showed good qualitative openness in the cores and in the main service measures. We highlight that the seasonally adjusted and annualized average of the cores in the last three months is at 3%, in the center of the inflation target. Among the bearish surprises, we highlight ride-sharing, personal hygiene (we suspect there may be anticipation of Black Friday discounts), and automobiles. On the other hand, fresh foods, especially fruits and tubers, brought a bullish surprise. We saw a turnaround from negative to acceleration of these prices since mid-October, for November we have a significant increase in home food, but we can already identify that vegetable prices in wholesale collections have started to stabilize. Looking ahead, we see downside risk in our projection for the 2023 IPCA, which is at 4.5%, due to the possibility of a reduction in gasoline prices. For 2024, we maintain our projection of 4.4%.”

Alexandre Maluf, economist at XP Investimentos:

“In our opinion, the underlying measures of the October IPCA confirm that the second phase of disinflation in Brazil has progressed more quickly than expected. Were it not for fiscal uncertainties and the rise in interest rates in the U.S., the Central Bank would have room to accelerate the pace of the Selic rate reduction. Even so, we maintain our forecast that the Copom will act cautiously and deliver cuts of 0.50 pp in the coming meetings. Finally, we maintain our IPCA projections at 4.5% in 2023 and 3.9% in 2024.”

Investment funds lose R$ 4.7 billion in October

Nov 10, 2023

Investment funds closed October with R$ 4.7 billion ($960 millino) in net outflows, according to the balance sheet released by Anbima (Brazilian Association of Financial and Capital Markets Entities). With this result, the industry accumulates a year-to-date net outflow of R$ 70.2 billion ($ 14.3 billion).

The movement interrupts a recovery that had been occurring since July but was caused by the negative performance of multimarket funds, which alone recorded a loss of R$ 13.37 billion ($2.73 billion).

Nevertheless, in the opinion of Anbima’s Vice President, Pedro Rudge, the contraction in the industry was circumstantial.

“The October result reflects the worsening of the economic scenario, especially internationally, and not a structural outflow of resources from the industry as occurred in the first half of this year,” said Rudge.

Despite the industry’s negative result, two classes recorded the highest monthly inflow of 2023: FIDCs (Credit Rights Investment Funds) and equity funds, with R$ 11.1 billion ($2,26 billion) and R$ 10 billion ($2.04 billion) in net inflows, respectively.

Pension funds, with R$ 1.5 billion ($306 million), and FIPs (Private Equity Funds), with R$ 282.9 million ($57,7 million), also ended October in the black.

Multimarket funds had a negative performance for the second consecutive month, recording R$ 13.4 billion ($2,73 billion) in net outflows. Year-to-date, net redemptions were R$ 64.9 billion ($13.2 billion).

In addition, fixed income returned to negative performance after three months in the black, with R$ 11.6 billion ($2,37 billion). Funds investing in medium and high credit risk assets recorded R$ 15.5 billion ($3,16 billion)  in net inflows; however, the rest of the class pulled the overall result down.

The accumulated amount for FIDC in 2023 and in the last 12 months was R$ 16.3 billion ($3,32 billion) and R$ 31.8 billion ($6,49 billion), respectively. FIPs, in turn, recorded a gain of R$ 283 million ($57,7 million) and maintain a positive inflow of R$ 42.4 billion ($8,6 billion) this year.

Among the types with the highest net assets, fixed income funds investing in short-term government bonds (low-duration investment-grade type) had a return of 1.02% in October.

On the other hand, freely managed equity funds, which do not have a specific concentration strategy, had a negative return of 4.35%. Despite this, the year-to-date registers gains of 5.69%.”

Tax reform advances in the Senate; understand the impact on the marke

Nov 8, 2023

The Senate votes on the Constitutional Amendment Proposal for Tax Reform this Wednesday, after Senator Eduardo Braga’s base text was approved by a vote of 20 to 6 in the Constitution and Justice Committee.

The proposal transforms five taxes (ICMS, ISS, IPI, PIS, and Cofins) into three: Goods and Services Tax (IBS), Contribution on Goods and Services (CBS), and Selective Tax (IS).

The CBS (federal) and IBS (state and municipal), which tax consumption, are forms of Value Added Tax (VAT) that apply only to the stages of commerce that add value to the product or service, avoiding double taxation.

Each new tax will have a transition period, and the tax rate will be determined later through ordinary legislation.

The government estimates that to maintain the current tax burden, the rate should be around 27.5% of the product’s value.

Capital Aberto spoke to five experts about the potential impact of the new law on the financial market and companies in the sector.

Serur Advogados

The reform is expected to benefit industries more in the short term, as it eliminates issues in the sector, such as restrictions on the use of tax credits that increase the cost and reduce profitability of industrial activities.

The export market is also expected to benefit for similar reasons, as the reform can eliminate some structural deficiencies that have a fiscal impact. This could bring advantages to sectors like agribusiness. In terms of sector impact, the reform eliminates some distortions in consumption taxation in Brazil, benefiting sectors with higher production costs or those focused on exports.

Additionally, some sectors may benefit from more favorable regimes. For example, hotels and amusement parks may have a lower tax rate. The exact impact is not yet clear, as many details will be determined later through complementary legislation.

In the case of the financial market, which includes financial services and insurance companies, they may receive differentiated treatment regulated by subsequent legislation. While these sectors may not have a lower tax rate, they could have specific provisions that align with their unique characteristics, similar to practices in other countries. Therefore, it’s not possible to estimate the exact impact of the reform on these specific sectors yet.

Aristóteles de Queiroz Camara, Partner

Machado de Carvalho Advocacia

It’s important to keep in mind that the tax reform is still subject to debates and negotiations in Congress, which means its provisions may change before final approval.

The reform could influence the dynamics of the capital market by altering the tax burden on financial transactions. For instance, a potential reduction or simplification of taxes on capital gains and dividends could encourage investment in stocks, promoting the capitalization of companies through the stock market.

Sectors heavily reliant on external financing, such as technology and infrastructure, may become more attractive to investors, as a reduced tax burden increases the potential return on investments. Moreover, simplifying the system could lower compliance costs, making Brazilian companies more competitive.

As for the taxation of financial sector companies like brokerage firms and asset managers, a review of PIS/COFINS rates is expected, as these currently represent a significant portion of their cost structure. The reform may propose the consolidation of these contributions into a single, broader-based tax with a lower rate, potentially resulting in a more favorable tax regime.

Mozar Carvalho, Founder

Juveniz Jr Rolim Ferraz Advogados

Despite claims that the reform’s main objective is not to increase the tax burden, certain sectors of the economy could be affected. The intent to reduce the complexity of the tax system does not necessarily mean a decrease in the tax burden. Legal disputes, including those related to federal fiscal federalism renegotiation, the authority to levy and collect new taxes, and the control of the legality of tax imposition, may arise.

In the financial market, contrary to the proposed changes, there could be an increase in tax complexity and fiscal burden, as the reform is expected to benefit companies that can generate more tax credits from input purchases and offset them in subsequent transactions.

Unlike the manufacturing sector, brokerage firms and asset managers have a simplified production chain, with their largest expenses typically being payroll, which does not allow for tax credit.

Rangel Fiorin, Partner

Tortoro, Madureira e Ragazzi Advogados

The historic change in the tax system will bring Brazil closer to major economic powers and lead to a less complex tax system, ultimately improving the investment environment.

The concept of utilizing tax credits is one of the pillars of the tax reform and is expected to benefit primarily publicly traded companies in export sectors with domestic production and those in the “capital goods” category.

Furthermore, there are expectations of improvement in the agribusiness sector, particularly with a focus on exports, which will be exempt from certain taxes.

On the other hand, service sector companies may be more exposed to a potential increase in the tax burden, as the “personnel cost” will not generate tax credits and represents a significant portion of their expenses.

For companies in the financial sector, such as brokerage firms and investment managers, the Constitutional Amendment Proposal for Tax Reform proposes specific regimes (except for those remunerated through fees and commissions, which will remain under the general regime). However, clear rules on the topic have not been defined yet and will be determined by complementary legislation (defining the calculation base and rates).

Currently, some points require observation and critical analysis, such as shifting taxation to the destination (another pillar of the Reform) that may complicate the practical definition of who is the actual recipient of financial services, increasing compliance and regulatory costs in the sector.

It’s important to note that decisions regarding the abolition of JCP (interest on equity) and the taxation of dividends will likely be addressed in the next stage of changes.

Paola Andrade and Marcelle Lombardi, Tax Specialists

Five things that will show the way for the market until the end of the year

Nov 6, 2003 – Denyse Godoy

Will there be an end-of-year rally in the Brazilian stock market? Some investors and finance influencers are betting that the Ibovespa, the country’s main stock index, has the potential to rise by 10% in the next two months and reach the 130,000 point mark by the end of December. This percentage is higher than what the index has already advanced in 2023, which is about 7%.

Is this optimism exaggerated? To set expectations properly, experts point out the five main factors that will determine the direction of the market in this final two-month period. Here they are:

1 – Fiscal Target

After President Luiz Inácio Lula da Silva once again advocated for increased government spending, the market is anxiously awaiting the outcome of the efforts by Finance Minister Fernando Haddad to try to maintain a zero deficit in the public accounts, at least until March 2024. In that month, the Bimonthly Report on Revenues and Expenditures will be released, and the government will know for certain whether there will be sufficient revenue to cover the expenses projected for the year.

Last Friday (3), Lula stated, “For those in the Treasury, good money is money in the Treasury. For those in the Presidency, good money is money invested in infrastructure.” At the end of the day, Haddad had a meeting with the President at the Alvorada Palace, arguing that if the 2024 budget is too tight, the fiscal target could accommodate a deficit of up to 0.5% of the Gross Domestic Product (GDP).

It is still unclear how the change in the fiscal target would be submitted to the National Congress. While the Chief of Staff, Rui Costa, supports a modifying message to the Budget Guidelines Law (LDO), Alexandre Padilha, from institutional relations, wants an amendment.

2 – Interest Rate Reduction

The Brazilian Central Bank’s Monetary Policy Committee (Copom) began reducing the Selic rate, the basic interest rate of the economy, in August and still has one more meeting this year to decide how the rate-cut cycle will continue. The meeting will take place on December 10 and 11, and the expectation is for another 0.5 percentage point reduction, bringing the rate to 11.75% per year. The main discussion at this point concerns the level of interest rates at the end of this descent. According to the Focus Bulletin, a weekly survey by the Central Bank with market experts, the median projections are 9.25% by the end of 2024 and 8.75% by the end of 2025.

3 – US Interest Rates

While there is a solid consensus that interest rates in Brazil will continue to decline, the situation in the United States is much more complicated. In the meeting last week, the Federal Reserve’s monetary policy committee decided to keep the US basic interest rate unchanged in the range of 5.25%-5.5% per year, a level it has been at since July. Investors continue to closely monitor data on the state of economic activity to understand whether the peak of inflation has truly passed and whether interest rates may start to fall again in the first half of 2024.

4 – Conflict between Hamas and Israel

Despite popular and diplomatic protests in various parts of the world, Israel refuses to accept a ceasefire in the Gaza Strip to help the civilians affected by the armed conflict. Over the past weekend, Israel claimed to have isolated the City of Gaza after a strong attack. U.S. Secretary of State Anthony Blinken is making another visit to the Middle East in an attempt to find a solution to end the conflict, but a resolution appears to be far from reach. Uncertainties regarding future developments include the involvement of other parties in the war and the expansion of the conflict in the region.

5 – Tax Reform

The eagerly awaited proposal for tax reform, highly anticipated by the business sector, is expected to be discussed in a session of the Committee on Constitution and Justice (CCJ) of the Brazilian Federal Senate, called for this week by Senator Davi Alcolumbre (DEM-AP). The goal is to vote on the proposal in the committee and in the plenary of the Senate by the following Thursday (9/11) and then return it to the Chamber of Deputies the next day.

Market maintains its main predictions despite the debate about the deficit

Nov 6, 2023

The predictions of financial market analysts for nearly all major economic indicators remained stable or slightly changed compared to the previous week, according to the Central Bank’s survey consolidated in the Focus Report.

The report on this Monday was the first to capture the impact of President Lula’s statements on Friday, October 27th, which reopened discussions about the primary deficit target for 2024.

The market’s median predictions now point to a primary deficit of 0.80% of GDP in 2024. The number is slightly higher than last week (0.78%) but lower than the value recorded four weeks ago (0.83%).

The inflation forecast for this year remained at 4.63%. This is the fourth consecutive week in which the index has appeared within the tolerance range of the target, which is 3.25% with a margin of 1.5 percentage points up or down.

For 2024, the IPCA (inflation) forecast according to the Focus Report is 3.91%, slightly higher than last week’s 3.90%. For 2025, the forecast remained the same: 3.50%. In both cases, the target is 3%, with a tolerance range of 1.5 percentage points.

For this year, the expectation for economic growth remained at 2.89%. As for 2024, Gross Domestic Product (GDP – the sum of goods and services produced in the country) is expected to be 1.5%. For 2025 and 2026, the financial market projects GDP growth of 1.9% and 2%, respectively.

Finally, the financial market’s forecast for the exchange rate is R$ 5 for the end of this year. For the end of 2024, the forecast is that the U.S. currency will be R$ 5.05.

There were also no changes in the estimates for the basic interest rate of the economy. The market continues to work with a Selic rate of 11.75% at the end of this year and predicts 9.25% at the end of 2024 and 8.75% in 2025.

Light’s debenture holders will be able to vote via WhatsApp in the assemblies on the 8th and 9th

Nov 6, 2023

Holders of Light’s 15th and 22nd issuance debentures will be able to vote via WhatsApp at the Debenture Holders General Meeting (AGD) scheduled for this Wednesday and Thursday, November 8 (15th Issuance – LIGHA5) and 9 (22nd Issuance – LIDHD2).

The meetings are set for 2:30 PM, and voting is already open.

The WhatsApp voting service was launched by the fintech Vórtx to simplify the capital market even further.

The debut of WhatsApp voting in fixed income took place in October at the four debenture holders’ meetings of the Rio de Janeiro-based electric energy company, Light.

To participate, interested investors need to access the link on the Vórtx website for a WhatsApp chat with Vicky, Vórtx’s Virtual Assistant.

Vicky will request authentication through questions about personal data, present the privacy terms, which the user must agree to, and present the questions being voted on.

The investor can then choose from the provided alternatives by typing the number of the option they wish to select. The data is sent directly to a Vórtx platform, which tallies the votes alongside real-time votes received.

The items for voting on the Agenda at the meeting are as follows:

A. Ratify all measures taken by the Fiduciary Agent in defense of the Debenture Holders’ interests in the Judicial Recovery, whether in the judicial and/or extrajudicial sphere;

B. Ratify all measures taken by the Legal Advisors in defense of the Debenture Holders’ interests in the Judicial Recovery, whether in the judicial and/or extrajudicial sphere;

C. Authorize the Legal Advisor to vote for the suspension of the General Creditors’ Meeting (AGC) for a period of up to 45 (forty-five) days from the date of the AGC minutes if this resolution is submitted to the AGC;

D. Approve or reject the Judicial Recovery Plan (PRJ) presented up to the date of this notice’s publication, to be voted on in the Judicial Recovery proceedings and made available for the Debenture Holders’ analysis.

E. In case an Addendum to the PRJ is presented during the calling periods of this AGD and any reopenings resulting from a suspension, approve or reject the suspension of this AGD for a new resolution on a later date, to be defined by the President and Secretary of the AGD, in conjunction with the Legal Advisor.

The tool is subject to the same rules as the traditional distance voting bulletin, as established in Article 71 of CVM (Comissão de Valores Mobiliários) Resolution 81, for example, investors can send their opinions before and during the assembly.

Crisis of the Starbucks owner in Brazil reignites concerns about retail sector

Nov 3, 2023 – Denyse Godoy

Earlier this year, news of an apparent fraud in the balance sheet of Lojas Americanas raised concerns about the situation of retail companies in the country.

The concerns were further reinforced over the months by the crisis of the Tok&Stok furniture store chain, the bankruptcy of bookstores Cultura and Saraiva, and the devaluation of giants like Magazine Luiza and Renner in the Stock Exchange.

When the Selic interest rate began to fall in August, the financial market was relieved – the reduction in interest rates benefits both the companies themselves, which suffer less from the weight of their debts, and consumers who can buy more on credit.

However, the news this week that the operator of premium brands Starbucks Coffee, Subway, Eataly, and TGI Friday’s, SouthRock Capital, had filed for bankruptcy, made investors in the financial market once again uneasy about the prospects for commerce.

Three days after the filing, details of SouthRock’s financial situation are fueling considerations that the problem may be more related to the management of these businesses themselves rather than the sector as a whole.

The management company explained that its debts amount to approximately R$1.8 billion. The Covid-19 pandemic, inflation, and high-interest rates also affected operations in Brazil, according to SouthRock’s statement.

Therefore, they will restructure the businesses, reviewing the number of stores, the schedule for new openings, the size of the workforce, and renegotiating with suppliers.

Such measures are overdue, according to finance expert and strategist Julio Damião. “The problem was prioritizing revenue and scale over cash generation and profit. Why didn’t they reduce the number of stores, make adjustments to the structure, and prioritize products with higher margins (while there was still time)?” questions the executive.

In this scenario, Starbucks Coffee International Inc. requested the termination of the partnership with SouthRock, which had held the license to operate the brand’s stores in Brazil since 2018, leading to a potential legal battle.

Understanding the super week in the markets in Brazil and around the world

Nov 3, 2023

The U.S. jobs report, which showed the creation of 150,000 jobs (below the forecast of 180,000), released this Friday, concluded a week of positive news in the market’s view.

As a result, almost all the major market indicators ended Friday on the rise.

The Ibovespa closed the week with a gain of 4.29%. This number corresponds to more than half of the index’s appreciation from the beginning of the year until now: 7.68%.

The real also strengthened against the dollar, which ended the day with a 1.54% drop to R$4.89.

In the United States, the stock markets also closed higher. The S&P had its best week since November last year, with a 5.9% increase.

And the yields on two-year U.S. government bonds fell by 15 basis points. Overall, it was the best day in terms of reducing yields on U.S. government bonds since 2020.

In the opinion of Filipe Villegas, a stock strategist at Genial Investimentos, the main explanation for the market’s optimism is the change in the perception of monetary policy.

“The decisions on monetary policy ended up, in a way, surprising the market, conveying a message of more dovish monetary policies, that is, more inclined to not raise interest rates.”

According to Villegas, the movement began on Tuesday when Japan did not confirm the adoption of an interest rate control policy.

“The Japanese investor today is the one who holds the most foreign debt securities,” he explains. By not adopting a monetary policy, Japan “brought relief to global interest rates.”

The positive trend continued on Wednesday morning when the U.S. Treasury announced its new debt issuance policy.

On the same day, the Federal Reserve kept the basic interest rates in the United States unchanged, in the range between 5.25% and 5.75% per year.

However, what excited investors the most was the perception that the recent rise in U.S. government bond yields may be sufficient to prevent further increases in the basic rates.

In the United States, the stock markets closed sharply higher, and the yields on long-term U.S. government bonds had their best results since 2020.

In Brazil, despite market players’ apprehension about President Lula’s statements regarding the primary deficit for 2024, the Ibovespa, which had started the week in the red, also ended with significant gains.

Much of this result is due to the positive data that came from the United States.

But the market also saw it as positive that the Copom’s statement indicated that the Central Bank is likely to continue reducing the Selic rate in the coming meetings.

“The market had priced in the possibility of a 0.25% cut at the January meeting,” says Villegas. “As the Central Bank left the door open for more cuts, this ends up reflecting positively on our interest rate curve, which is positive for the performance of domestic stocks.”

Central Bank and Fed meet in the shadow of ‘fiscal risk’ in Brazil and treasuries in the USA

Oct 31, 2023

The Monetary Policy Committee of the Central Bank and the Federal Open Market Committee of the Federal Reserve are meeting this Tuesday and Wednesday to decide the basic interest rates in Brazil and the USA. However, this time, the market’s focus won’t be on the rates themselves.

In Brazil, doubts about fiscal policy and public finances have gained more prominence. In the USA, attention is directed towards the behavior of government bonds.

There is little doubt in the market regarding the decision in both Brazil and the United States. The almost unanimous consensus is that the Central Bank will reduce the Selic rate from the current 12.75% to 12.25% per year. In the USA, the majority opinion is that the Fed will not change interest rates, which are currently in the range of 5.25% to 5.5% per year.

If the forecasts are confirmed, part of the attention will be focused on the post-meeting statements and speeches, looking for signals about the next steps in monetary policy in Brazil and the United States.

“The market will mainly want to understand how they (the Central Bank directors) view the country’s inflation and whether there are signs of economic weakening or not,” says Jonas, from Hike Capital, an investment consultancy based in São Paulo.

Since the last meeting, market inflation forecasts for 2023 have been decreasing week by week, although the same trend is not observed for 2024.

However, since last Friday, another factor has gained even more importance on the radar of fund managers and investors: where is the discussion about the 2024 primary deficit anchored, following President Lula’s admission of a primary deficit in 2024.

“The Copom meeting tomorrow (Wednesday) is undoubtedly important. But, looking ahead, we need to understand where the discussion of the 2024 deficit is anchored,” said Bruno Lima, equity analyst at BTG in the Morning Call podcast.

In the last minutes, the Central Bank had already drawn attention to its evaluation of “the importance of the firm pursuit of these (fiscal) targets,” considering their importance for “anchoring inflation expectations and, consequently, conducting monetary policy.”

The fiscal risk is also mentioned in the “Copom Preview” analysis released by XP: “Recent data on inflation and activity continue to suggest room for monetary easing, but we believe that an acceleration in the pace of rate cuts is increasingly less likely, in line with the rise in U.S. interest rates and persistent fiscal risks on the domestic front.”

As a result, the institution expects a 0.50 percentage point reduction in the Selic rate this week and a signal that the Central Bank will maintain the pace in the upcoming meetings. XP projects a reduction in Selic until June 2024, with the basic rate reaching 10%.

In the United States, analysts believe that the Fed’s meeting, which is expected to keep interest rates unchanged, will be overshadowed by the announcement on Wednesday morning of the profile of the issuance of government bonds.

On Monday, the Fed already announced that it would issue $776 billion in government debt securities. The proportion of the profile of each bond should be known on Wednesday morning and is important because it will determine the price and yields of the assets.

Since the last Fed meeting, yields on U.S. Treasury bonds have risen, with ten-year bonds exceeding 5% last week.

This behavior had an impact on markets worldwide and led Fed officials to state that it would help maintain the economy’s basic interest rates by effectively causing an economic slowdown.

Capital market reaches over 85,000 participants subject to regulation

Oct 31, 2023

The number of participants in the capital market subject to regulation reached 85,035 at the end of September, according to the CVM Bulletin.

This represents a growth of 5.6% compared to the number recorded at the end of last year.

The growth was driven by the securities consultants sector, which had the highest growth of the year among categories with over 100 participants: 21.4%, from 1,329 to 1,613.

In the first three months of the year, the number of primary issuances of securities reached R$ 421.5 billion, a slight decrease compared to the R$ 427.1 billion from the same period last year.

However, the number of issuances had a significant increase, up by 40%, from 1,651 to 2,314 operations.

Highlights were the issuances of FIP, FII, FIDC, and CRI, with the highest relative growth of 216%, occurring in FIPs (Participation Investment Funds).

The daily average financial volume in the secondary stock market is lower than last year. Conversely, the markets for FIIs and debentures are on the rise.

According to the CVM, in the third quarter of 2023, a slight increase in the liquidity risk indicator was also observed.

This movement is correlated with the slowdown in net inflows of foreign investors into the secondary stock markets.

This information is from the latest edition of the Economic Bulletin of the Brazilian Securities and Exchange Commission (CVM).

Starting from this edition, the CVM is making the Economic Bulletin available in an interactive format through the Power BI tool.

“The Power BI format allows the public to access the historical market information from the Economic Bulletin on a single screen,” says Bruno Luna, Head of the Economic Analysis, Risk Management, and Integrity Advisory (ASA) at CVM.

“With this new feature, users can apply filters and analyze long periods of the regulated markets, directly accessing charts and facilitating the understanding of market developments.”

Information such as the secondary stock market has data dating back to 1995. The CVM bulletin also provides data on real estate investment funds (since 2004), the secondary market for debentures (since 2009), public offerings (since 2010), and more.

For Inter Asset, fixed income is still more attractive than the stock market

Oct 30, 2023 – Denyse Godoy

November begins with expectations of a new interest rate cut in Brazil and the maintenance of the basic interest rate in the United States. However, according to Inter Asset, the asset class of fixed income is still more attractive than the stock market.

One of the main reasons for this is the recent increase in geopolitical risk, with the escalation of the conflict between Israel and the Palestinian group Hamas. Since Saturday, Israel has been increasing pressure by advancing into Palestinian territory in the Gaza Strip, bombing targets in Syria, and launching an incursion into the West Bank.

“These moments of conflict tend to be more inflationary. We are witnessing Israel vs. Hamas and Ukraine vs. Russia, and there is also Azerbaijan vs. Armenia, and the 2024 elections in Taiwan,” said Marcelo Mattos, CIO (Chief Investment Officer) of Inter Asset in an exclusive interview with Capital Aberto.

In such complex scenarios, the primary goal of the asset manager should not be to “play to hit, to seek the big opportunity of the moment,” but to avoid significant losses. “I protect myself, limit potential losses, and can achieve substantial gains,” explained Mattos.

Since August, the Copom (Monetary Policy Committee of the Central Bank of Brazil) has reduced the Selic, the Brazilian basic interest rate, by 1 percentage point to 12.75% per year. The majority of the financial market is betting that this pace will be maintained, with another 0.5 percentage point reduction in the central bank’s meeting taking place on Tuesday (31) and Wednesday (1). In the United States, the prevailing opinion is that the Federal Reserve, the American central bank, will not make changes to interest rates, which are currently in the range of 5.25%-5.5% per year, in the meeting that also ends on Wednesday (1).

In 2023, so far, Inter Asset has positioned itself in disagreement with the rest of the market. “What we have seen this year are very strong narratives, and the market’s positioning has been very intense in these narratives, and I think that has opened up an opportunity to go against the grain,” Mattos explained. “We have discussed a lot, in our committees, the difference between narrative and price.”

One example was the significant pessimism regarding the prospects of the Brazilian economy observed at the end of the first quarter of the year. “Managers were very pessimistic about the prospects, especially regarding the fiscal side when the federal government presented the general guidelines for anchoring. At that time, we took more positions, primarily in real interest rates in Brazil, and a little in stocks,” the director of Inter Asset explained. “In the middle of the year, I think the narrative changed because everyone was very optimistic, pricing terminal interest rates in the range of 8.75% per year, and at that time, we decided to reduce all positions.”

In the last 30 days, according to Inter Asset, both local and foreign investors have adopted a more optimistic stance regarding Brazil, while the perception of the external scenario is deteriorating.

Inflation forecast falls and remains within the target for the 3rd consecutive week

Oct 30, 2023

The analysts’ forecast for inflation this year in the financial market has dropped again this week, from 4.65% to 4.63%, according to the Central Bank’s Focus Bulletin.

This marks the third consecutive week in which the estimate falls within the target range for inflation, which is 3.25% for the year, with a tolerance of 1.5 percentage points up or down.

The projected inflation for 2024, on the other hand, increased from 3.87% in the previous week’s bulletin to 3.9% in the bulletin released this Monday.

As for 2025 and 2026, the predictions remain at 3.5% for both years. Starting from next year, the inflation target becomes 3%, also with a tolerance range of 1.5 percentage points.

The financial institutions’ projection for the growth of the Brazilian economy this year stands at 2.89%, with a slight decrease compared to 2.90% from the previous week.

The Focus Bulletin is a survey conducted among financial market institutions with the main economic indicators, released weekly by the Central Bank (BC).

For 2024, the expectation for Gross Domestic Product (GDP), the sum of all goods and services produced in the country, is a growth of 1.5%.

According to the Focus Bulletin, for 2025 and 2026, the financial market projects GDP growth of 1.9% and 2%, respectively.

The financial market analysts’ forecast is for the Selic rate to end 2023 at 11.75% per year.

By the end of 2024, the estimate is for the basic interest rate to fall to 9.25% per year. For the end of 2025 and 2026, the forecast is for the Selic rate to be at 8.75% per year and 8.5% per year, respectively.

According to the Focus Bulletin, the forecast for the exchange rate is set at R$5 for the end of this year. For the end of 2024, the prediction is that the U.S. dollar will be at R$5.05.

Week comes to an end under the impact of big tech companies, inflation, and Lula’s speech

Oct 27, 2023

Positive inflation in Brazil, but not so much in the United States, mixed reactions from investors to big tech companies’ earnings reports, and Lula admitting a primary deficit in 2024 were the highlights of the week in the market.

On Friday, the Bureau of Economic Analysis released the Personal Consumption Expenditure (PCE), the main measure of inflation in the United States.

The full result came in at 0.4% for September, similar to the variation in August and above expectations, which were 0.3 percent. The core index increased by 0.3 percent, in line with expectations but showing an acceleration compared to August’s 0.1%.

Over 12 months, the indicator shows accumulated inflation of 3.7 percent, which is below the 3.9 percent recorded in August but still well above the target of 2 percent.

The market’s assessment was that the data reinforces the perception that the Fed is likely to keep interest rates unchanged at the upcoming meeting next week but leaves open the possibility of rate hikes in subsequent meetings.

This view gained weight after the release of the U.S. GDP data earlier in the week, which gives an idea of the country’s economic growth.

The U.S. GDP growth in the third quarter was 4.9%, above the expected 4.3%, and significantly higher than the 2.1% growth in the second quarter.

As a result of these indicators, yields on U.S. government bonds rose again on Friday, although they remained below the 5% mark from earlier in the week. Around noon, the bond yields were at 4.858%.

In Brazil, there was also inflation data, but the perception is more positive.

The National Consumer Price Index 15 (IPCA-15) from IBGE, considered a preview of the official inflation rate in the country, increased by 0.21% in October. This represents a slowdown compared to the previous month when it recorded a decrease of 0.35%.

The week had already started with a reduction in the inflation forecast for this year, from 4.75% to 4.5%, according to the Focus Bulletin.

On Friday, XP, which had a more conservative stance, announced that it had lowered its projection from 4.8% to 4.5%. XP explained the change as a result of “short-term benign surprises and the reduction in gasoline prices by Petrobras.”

In addition to macroeconomic data, the week was also marked by important third-quarter earnings reports.

In the United States, four of the five Big Tech companies reported results, all of which were better than expected by market analysts.

However, the positive numbers were not enough to convince investors. Alphabet (Google and YouTube) and Meta ended the week in decline.

On Thursday, the Nasdaq recorded its worst two-day performance of the year, with a 1.8% drop on that Thursday alone.

The index partially recovered on Friday, driven by the rise in Amazon and Intel shares. Microsoft was another giant in the sector whose positive earnings results were reflected in the stock performance.

“Many of these technology giants were priced for perfection,” said John Lynch, Chief Investment Officer at Comerica Wealth Management, to the Wall Street Journal. “We are seeing imperfect performance.”

In Brazil, Vale released its third-quarter earnings report, which met market expectations.

The company reported an operating result (EBITDA) of 20.9 billion reais, a 14.1% increase over the same period last year. The net profit for the period was 13.9 billion reais, a -36.3% decrease compared to the third quarter of 2022.

The market reaction was positive. At the end of trading on Friday, Vale’s shares were outperforming the decline in the Ibovespa, rising more than 3%.

The Ibovespa, which opened with a slight increase, dropped more than 1% in the afternoon following comments by Lula to journalists, where the president admitted that the country is unlikely to achieve a zero primary deficit next year.

“We are unlikely to reach the zero target, because I don’t want to cut investments and projects. We don’t need that [zero fiscal target],” Lula said during a meeting with journalists at the Palácio do Planalto.

“I won’t establish a fiscal target that forces me to start the year with billions in cuts to projects. If Brazil has a 0.5% deficit, what is it? 0.25%? Nothing. We will make the right decision, and we will do what is best for Brazil.”

Despite the drop in interest rates, retail stocks have accumulated losses of over 10% this year

Oct 26, 2023

The two cuts in the Selic rate (Central Bank interest rate) and the prospects of further cuts in the upcoming meetings of the Central Bank have not been enough to boost the stocks of retail companies.

According to a study by Quantum Finance, as of October 20th, the ICON index of B3, which comprises the main companies in the sector, was down 12.42% for the year.

Since then, the performance has changed little. Compared to the closing on Wednesday, the year-to-date decline is 12.47%.

During the same period, the Ibovespa had a positive performance of 2.8% until the Wednesday close, always compared to the opening on January 2.

In general, market analysts attribute the poor results to the Brazilian interest rate curve, which saw a sharp escalation from March 2021, as well as the population’s high debt levels and increased competition among retail companies.

According to independent analyst Hulisses Dias, there are also individual company issues that have affected the sector in recent months.

“An example of this is the former Via Varejo, which has now become Casas Bahia, a company without a clear growth strategy and whose debt has eaten into many of the results the company could have had,” argues Dias.

Grupo Casas Bahia leads the declines in the ICON, with a decline of 78.33% as of October 18.

On the other hand, Construction company Tenda (TEND3) and C&A Modas (CEAB3) had extraordinary results, and their stocks rose by 150.47% and 114.8%, respectively, during the same period.

In Dias’ opinion, the trend was for the sector to benefit from the expected interest rate cuts, but this scenario became more uncertain due to the conflict in the Middle East and the recent rise in U.S. bond yields.

The ICON is the Consumption Index of B3, composed of the 71 main stocks of companies in the cyclical and non-cyclical consumption and health sectors.

Classified as a total return index, the ICON takes into account both stock price variations in the market and the distribution of profits to shareholders.

CVM establishes international standard ESG reporting

Oct 25, 2023

The Brazilian Securities and Exchange Commission (CVM) has issued a regulation establishing a sustainability-related financial information report (ESG report) based on the international standard issued by the International Sustainability Standards Board (ISSB).

For publicly traded companies, investment funds, and securitization companies, the preparation and disclosure of the report are voluntary and available from the beginning of 2024.

For publicly traded companies, the mandatory reporting will commence on January 1, 2026. The regulation was instituted by Resolution CVM 193.

“We are the first regulator and country in the world to adopt sustainability reporting rules, following the IFRS S1 and S2 standards,” says João Pedro Nascimento, president of CVM.

“We are starting with the voluntary disclosure of sustainable aspects by issuers, with greater transparency, standardization, and comparability.”

Through the international standardization of the information disclosed, the tool aims to allow for comparisons between companies and facilitate the assessment by global regulators and investors.

According to Nathalie Vidual, Superintendent of Investor Protection and Guidance at CVM, it is essential for Brazilian practices to be aligned with international practices of sustainability information disclosure.

ESG Report

The sustainability-related financial information report, based on the ISSB standard, must be objectively identified and presented separately from other entity information and financial statements.

According to Paulo Roberto Ferreira, Superintendent of Accounting and Audit Standards at CVM, the adoption of sustainability information disclosure standards issued by ISSB is a recommendation from the International Organization of Securities Commissions (IOSCO).

“The standards help capital markets assess the impacts of sustainability risks and opportunities on entity cash flows, contributing to the development of a sustainable and regenerative economy,” says Ferreira.

This new regulation is part of CVM’s Sustainable Finance Action Plan for 2023-2024, which includes goals, objectives, and compliance deadlines based on the guidelines outlined in the Sustainable Finance Policy.

Investment funds resume recovery after a pause in September

Oct 24, 2023

Investment funds have returned to showing a positive net inflow in the first half of this month, following the decline in September.

According to data from Anbima, there was a positive balance of R$21.7 billion (around $4.34 billion) in the first two weeks of the month.

This positive result was primarily due to inflows of R$25.4 billion ($5.08 billion) made in the second week of the month.

If this positive performance continues until the end of the month, the funds will have their recovery resumed after the decline in September.

Last month, the balance was negative at R$13.6 billion ($2.72 billion) after two consecutive positive results in July and August, a situation that hadn’t occurred since March and April of last year.

In the second week of the month, fixed income alone had R$28.2 billion in net inflows.

The fixed income class was followed by FIDCs (Credit Rights Investment Funds) with R$2.3 billion ($460 million) – R$2.4 billion in a single fund.

The following had net outflows: multimarket funds (R$4.1 billion), ETFs (Exchange Traded Funds) with R$606.9 million, pension funds (R$411.1 million), foreign exchange funds (R$57.1 million), and equity funds (R$27.7 million).

“I think we went through a period of investor outflows that may have been one of the most challenging for all asset classes at the same time at the beginning of this year,” says Bruno Mérola, an analyst at Empiricus.

“This change obviously, in my view, has a strong connection with the interest rate decline,” he adds.

This assessment is shared by Mayara Ranni Sekertzis, head of funds and pensions at Manchester Investimentos.

“The fund industry as a whole, regardless of categories, suffered a lot in the first half of this year.”

“Now we are already seeing a bit of a reversal of this process. Fixed income, from April to May, started to offer very attractive returns due to all the movements, the spreads that opened up in the market.”

The pause in the recovery in September is explained by Kaique Fonseca, an economist and partner at A7 Capital, as a result, among other factors, of the increase in U.S. bond yields.

And going forward, in his opinion, this movement is likely to continue impacting the market.

“As the interest rate there (in the United States) has risen in the long term, all interest rates in the world rise. And this certainly alters the outlook for the performance of risk assets in the world, not only in Brazil but globally,” says Fonseca.

The market revises down its inflation forecast amid weaker economic activity data.

Oct 23, 2023

The financial market analysts’ forecast for inflation in 2023 has dropped again, from 4.75% to 4.65%, according to the Boletim Focus released on Monday by the Central Bank.

For the second consecutive week, the median of expectations for the IPCA (Consumer Price Index) remained within the inflation target range for the year, which is 3.25% with a 1.5 percentage point variation upward or downward.

For 2024, the inflation projection is 3.87%, a slight decrease from the previous week’s forecast of 3.88%. For 2025 and 2026, the predictions are 3.5% for both years. The target starting from 2024 becomes 3% per year.

The downward revision of inflation forecasts partly reflects the deterioration of economic activity indicators recently released.

Last Tuesday, IBGE (Brazilian Institute of Geography and Statistics) reported that in August, the volume of services in Brazil decreased by 0.9% compared to July, in seasonally adjusted series, after accumulating a 2.1% gain from May to July.

On Friday (October 20), the Central Bank’s Economic Activity Index (IBC-BR), considered a preview of the country’s Gross Domestic Product (GDP), indicated a 0.77% decline in August.

The financial institutions’ projection for the growth of the Brazilian economy this year is 2.9%, with a slight decrease from 2.92% from the previous week.

For 2024, the expectation for Gross Domestic Product (GDP) growth is 1.5%. For 2025 and 2026, the financial market projects GDP expansion of 1.9% and 2%, respectively.

“It seems that the restrictive monetary policy has finally started to impact the real economy, while the effects of the strong agricultural performance at the beginning of the year are dissipating,” says Agora Investimentos’ report released on Monday.

Agora, however, draws attention to the IGP-10, released on Tuesday by the Getúlio Vargas Foundation, which stands at 0.52%, the highest since July 2022.

“The IGP-10 came in stronger than expected, suggesting that wholesale inflation is back, although, for now, it is not a cause for concern in our opinion. For now, we should not expect changes in the upcoming Copom meetings,” adds Agora’s report.

According to Boletim Focus, the market expects the Selic rate to end 2023 at 11.75% per year. By the end of 2024, the estimate is that the basic interest rate will drop to 9% per year.

For the end of 2025 and 2026, the forecast is a Selic rate of 8.5% per year for both years.

Finally, the forecast for the exchange rate is R$ 5 for the end of this year. For the end of 2024, the prediction is that the US dollar will be at R$ 5.05.

Five asset management companies talk about opportunities and risks until the end of the year

Oct 19, 2023 – Denyse Godoy

After a turbulent first half for the domestic market, the conflict in the Middle East has become the primary focus of attention for Brazilian investors in this last quarter of the year, while the domestic scenario seems to have calmed down.

See where five asset management companies are currently placing their bets – and what are the main risks on their radar:


“In general, we are more optimistic about fixed income and credit in this last quarter. I believe that the main risks we face today are from the international arena – mainly due to new prospects of conflict in other regions, as we do not know the extent it may take. The worst phase in the local market has stabilized to some extent. The greater pressure ends up falling on interest rates, the speed at which we will be able to implement a reduction in the face of a more adverse external scenario, with upward pressure still in the American market.”

Leonardo Calixto, CEO of Empírica Investimentos


“In general, given the conditions in the external environment, with high interest rates and inflation, combined with events in Russia, Ukraine, and now conflicts in Israel, the manager’s tendency will be to adopt a more conservative strategy in pursuit of safety. In the U.S., the much-anticipated soft landing may take longer than expected, but that doesn’t worry us too much. What we have on our radar is the structural aspect of the U.S., with a growing deficit, a possible drop in economic activity, and trade relations deteriorating, which would lead to a deterioration of the U.S. financial situation. However, the fact of the war in Israel ended up benefiting Treasuries, which saw a significant increase in demand due to the increase in risk aversion. In Brazil, fixed income securities remain in the spotlight, although interest rates have fallen but remain at a high level. Regarding the Brazilian stock market, although few assets show good prospects, top-tier banks stand out with attractive multiples. The domestic economy is doing well, but elevated international interest rates for a longer period may impact the continuity of the Selic rate decline. For now, there is not enough data to make us believe in this hypothesis, but it does exist. Finally, we cannot forget that in Brazil, we are always exposed to political risks, and these should always be on our radar.”

Maria Levorin, Director of Distribution and Suitability at Multiplica Crédito e Investimento


“The main event in the first semestre concerning the world of private credit was Americanas and Light, which stirred the secondary market and led to a significant repricing of all private credit papers. A good part of this distortion has already reversed, and what remains, we believe should return by the end of the year. Besides that, when we talk about prospects, the main event currently underway, affecting private credit, is the drop in the Selic rate. For higher-quality companies, the drop in Selic is almost automatically transferred to improvements in credit metrics. When we talk about credit, we are usually discussing this microeconomic world. Macroeconomic or geopolitical concerns affect this market much less.”

Ulisses Nehmi, CEO of Sparta Fundos de Investimento


“In terms of strategy going forward, essentially what we did and continue to focus on is an increase in high-grade assets. After the American events and the stresses from March/April onwards, we significantly increased this allocation. The review we made for this quarter was an increase in risk, especially in fixed income and NTN-B, after these interest rate hikes. In the stock market, we are quite neutral; we had a larger cash position, and now we are gradually allocating some of that cash. Considering the aggregate stock market, we had 15% in cash and are moving to 10%. Risks on our radar: I think the main one is that we are returning to an environment of great uncertainty with another war, in addition to those we had already been monitoring, and they were not few. In Brazil, there is the issue of the Legislature, some issues related to taxation and fiscal matters. Abroad, the issue of interest rates in the U.S. and Europe, where inflation will end up.”


“Regarding our investment strategy for the last quarter and the risks on our radar, as a quantitative analysis firm, we do not work with macro scenario forecasting because our mathematical models are designed to react to current market conditions, without assuming predictive capability. A recent example is the terrorist attack in Israel and its repercussions on global markets. Before the conflict, the fund had some positions identified as the most relevant. However, with the start of the war, some positions had their directions altered.”

Sergio Rhein Schirato, Co-Founder of Daemon Investments”

Optimism about Brazil, Cheap Stock Market, Fear of War: How Asset Management Firms View the Last Quarter

Oct 18, 2023 – Denyse Godoy

After a significant shock in the private credit market due to crises in major companies like Lojas Americanas and Light, the decline in interest rates in Brazil, and signs of the end of rate hikes in the United States and Europe, there were expectations that risk assets, such as stocks traded on the stock exchange, could have a very positive end to 2023.

However, the attack by the Palestinian group Hamas against Israel and the fear of a broad Middle East war are dampening expectations. Nevertheless, asset management companies are still finding good profit opportunities when carefully analyzing the assets.

See how five firms see the opportunities and challenges in the capital market:

Kínitro Capital
“The multi-market fund of the firm has been acting in a more tactical manner regarding its exposure to equities, maintaining a more negative bias towards international markets and a more constructive stance towards Brazil. In the international fixed income segment, the team maintains a scenario of rising US interest rates. Geopolitical risks, as well as a resurgence in global inflation, are currently the main focus of attention.”

Carlos Carvalho, CIO of Kínitro Capital

Urca Partners

“The manager’s strategy for this last quarter will be to focus on resolving all the issues in the fund’s portfolio, particularly completing the ongoing operations and accelerating sales. On the risk side, we see rising construction costs and credit quality. The portfolios have been quite resilient, but the variability of receipts has increased, indicating that families have been facing difficulties in making their payments.”

Caio Braz, partner at Urca Capital Partners

Mantaro Capital

“Our funds are positioned for an improvement in Brazil over the next 12 months, with controlled inflation, allowing the central bank to continue reducing interest rates. There are high-quality companies in the stock market at very attractive prices. The strategy is to keep trying to capture those who benefit from the normalization of the Brazilian macroeconomic scenario. It doesn’t need to be explosive; the country won’t grow significantly, but interest rates will fall to more civilized levels.”

Leonardo Rufino, partner and equity manager at Mantaro Capital

Jive Investimentos

“We remain vigilant about macroeconomic developments and how they impact liquidity and windows of opportunity within the capital markets for new issuances. Our focus is to keep finding companies with good businesses, valuable assets, and a need for capital, either to repair their balance sheets due to excessive debt that became unsustainable after the interest rate hike or for new projects.”

Guilherme Ferreira, partner at Jive Investments

Manatí Capital

“In this last quarter, we have continued to focus almost 100% on fixed income. It is still possible to achieve excellent returns with well-balanced risks, especially due to the collateral composition and the reduction of bank credit. We have noticed that the real estate development sector is in great need of resources. The main risks ahead, in our assessment, are the increase in global interest rates, war, and domestic fiscal issues.”

Eduardo Mekbekian, co-founder of Manatí Capital

Central Bank survey predicts that inflation will be within the target again

Oct 16, 2023

The median inflation forecast for this year has returned to within the target range for the first time since June of last year.

According to the Focus Report, the financial institutions surveyed by the Central Bank estimate an IPCA of 4.75% by the end of the year.

The value is at the upper limit of the target range set by the National Monetary Council, which is 3.25%, with a 1.5 percentage point margin.

Among the institutions classified by the Central Bank as the Top 5 in terms of projection accuracy, the index is even lower: 4.69%.

Last week, the market projected an annual inflation rate of 4.86% for 2023.

According to Jonas Carvalho, founder of Hike Capital, “these revisions probably reflect the current inflation being lower than expected and the high probability of a reduction in gasoline prices.”

September’s IPCA announced last week was 0.26%, lower than the market’s forecast of 0.33%.

“All prices are falling, except for administered prices, which are controlled by the government. It’s a price that is easier to act upon,” he added.

For the coming years, when the inflation target becomes 3%, the forecasts also indicate rates above the center of the target but within the variation range: 3.88% for 2024 and 3.5% for 2025 and 2026.

According to a note from the American bank Goldman Sachs, the projection of inflation above the target center for the coming years “probably reflects the market’s expectation that the government will have difficulties in achieving the announced fiscal goals and will be inclined to tolerate inflation above the target.”

The bank also believes that the projection is influenced by the market’s belief that “the upcoming changes in the composition of the Copom may make it more favorable to more flexible monetary policies.”

The Focus projections for other important indicators remain unchanged compared to last week.

The median market projections for the growth of the Brazilian economy in 2023 remained at 2.92%, according to the Focus.

For 2024, the median expectations for Gross Domestic Product (GDP) growth remained at 1.50%. For 2025, it stayed at 1.90%.

For the basic interest rate (Selic), the median estimates remained at 11.75% at the end of 2023, 9.00% in 2024, and 8.50% in 2025.

Interest rate cap causes a 27% decrease in consigned loans for retirees

Oct 13, 2023 – Denyse Godoy

The CNPS (National Social Security Council) approved on Wednesday (11) another reduction in the cap on interest rates that can be charged by financial institutions for consigned loans to beneficiaries of the national public pension system.

The cap will be reduced from the current 1.91% per month to 1.84% per month for payroll-deductible loans. For consigned credit card, the maximum rate, currently at 2.83% per year, will be reduced to 2.73% per month. 

The cap has been reduced since the beginning of the year and has been criticized by financial institutions as “artificial and arbitrary.” Cuts in the maximum rate made by the Ministry of Social Security “do not take into account any technical criteria and the cost structure, both in funding acquisition and in granting loans to retirees,” according to a press release from ABBC (Brazilian Banking Association) and Febraban (Brazilian Federation of Banks).

The sector records various metrics indicating a reduction in the volume of consigned loans granted to retirees in recent months as the cap was compressed:

The average monthly grant fell from R$ 7.3 billion between May and August 2022 to R$ 5.3 billion in the same period this year, a decrease of 27%, according to data from the Central Bank.

The volume of average monthly grants between May and August 2023 is the lowest since 2018 when it stood at R$ 5.5 billion.

Dataprev reports a reduction in the average monthly grant from May to September by 12%, decreasing from R$ 4.5 billion in 2022 to R$ 4 billion in 2023.

The number of operations with retirees over 70 years of age, which pose higher risks, decreased by 35% in the same period.

“The setting of the cap at an economically impracticable level has hindered the service of those presenting higher risk, with advanced age, as well as operations for lower-income retirees,” says the statement from ABBC and Febraban.

Brazil capital market has its best result of the year in September

Oct 13, 2023

Brazilian companies raised R$ 57.1 billion ($11.3 million) in the capital market in September, according to information compiled by Anbima (Brazilian Association of Financial and Capital Markets Entities).

It was the best result of the year, and the volume represents a growth of 23.1% compared to September 2022.

In the cumulative total from January to September, the total issuance reached R$ 290.5 billion ($57.4 billion).

This corresponds to a reduction of 28% compared to the same period last year, but the entire decrease is a reflection of the market’s contraction in the early months of the year.

“The data reinforce the trajectory of a gradual recovery in the capital market, with this rebound also influenced by the economic environment with lower interest rates,” says José Eduardo Laloni, vice-president of ANBIMA.

“It’s interesting to note that the monthly average capital raised in the last four months, from June to September, reached R$ 45.8 billion ($9.06 billion), a level similar to the monthly average for the entire year of 2022.

Debentures lead the capital raising. In September, the offers amounted to R$ 31.8 billion ($6.3 million), with a 46% increase compared to the same month in 2022.

In the year-to-date, the volume of these operations reached R$ 142 billion ($28.1 million), a decrease of 30.2% compared to the same period in 2022.

The energy sector leads in issuances, with R$ 44.6 billion ($8.8 million) in issuances for the year. Following that are transportation and logistics (R$ 15.95 billion, $3.16 million) and sanitation (R$ 15.7 billion, $3.11 million).

“It’s worth noting the extension of the average maturity of debentures, which went from 6.1 years in the first nine months of 2022 to 8.3 years in the same period of 2023, reflecting greater confidence in the capital market,” says Cristiano Cury, coordinator of the Fixed Income Committee of ANBIMA.

CRIs (Real Estate Receivables Certificates) account for the second-largest volume of offerings in 2023 (R$ 31.7 billion, $6.29 million), with a 3.5% growth compared to the same period in 2022.

Real estate funds (R$ 16.4 billion, $3.23 million) and Fiagros (R$ 7.2 billion, $1.42 million) also showed positive variations in this comparison, with an increase of 23.3% and 46.9%, respectively.

In the stock market, there were follow-on operations (subsequent offerings of shares) for the seventh consecutive month, and the result in September (R$ 6 billion, $1.19 million) represents a high of 133.8% compared to the same month in 2022.

However, in the year-to-date (R$ 29.3 billion, $5.79 million), there is still a decrease of 46.5% compared to the same period in 2022.

Net assets of FIDCs surpass R$ 400 billion

Oct 11, 2023

The net assets of Funds of Investment in Receivables (FIDCs) have reached R$416.7 billion (around $82 billion), according to a Quantum Finance survey.

In total, there are 2,600 available funds with 4,600 active series, as reported by the data company specializing in the capital market.

The ranking of managers with the largest net assets is led by Oliveira Trust, which holds a portfolio of R$61.5 billion.

Oliveira Trust’s size is nearly double that of the second-place firm on the list, BB Asset Management, with net assets of R$34 billion.

However, Tercon Asset Management leads in the number of registered FIDCs, with 163 in its portfolio, more than three times the number of the second-place REAG Investimentos among managers with the ten largest net assets.

According to Quantum’s findings, the net assets of FIDCs exceed the volume reported by Anbima, which considers only its associated managers.

According to the latest Anbima statistics as of October 4, the total net assets were R$393.6 billion, higher than the R$386.7 billion reported at the end of September.

Funds of Investment in Receivables (FIDCs), which were previously only authorized for professional and qualified investors, have been made available to the general public, provided they meet certain criteria.

This change is one of the provisions of CVM Resolution 175, the new regulatory framework for funds, which came into effect on October 2.

Funds of Investment in Receivables consist of company receivables such as rent, checks, invoices, and payments in installments through bills and credit cards.

Under the previous rule, only professional investors with specific market certifications recognized by CVM and qualified investors with at least R$1 million in investments could access this type of asset.

For retail investors, the only way to access FIDCs was through investment funds that purchase FIDCs, provided that their portfolios contained no more than 20% exposure to this category of investment.

ANBIMA starts to publish remuneration of financial bills.

Oct 11, 2023

ANBIMA has begun to publish the interest rates for four classes of financial bills.

According to the association, this is the first time the market has a reference for these values.

The indicative rates will assist both companies by providing a market benchmark and investors by offering price transparency.

The first day of interest rate calculation for financial bills, released on Tuesday night, reported rates between 0.5% and 1.1% for papers with a one-year maturity.

“This is an important step toward the maturation of the fixed income market,” says Luiz Masagão, president of ANBIMA’s Trading Forum.

“In recent years, we have been working to promote this segment through the disclosure of information, keeping the investor at the center of the discussions.”

The daily rates are published on the institution’s website after 8 PM.

So far, 14 institutions have been selected to provide data daily, following various fundamental criteria to ensure fair and market-relevant pricing. One of these criteria is the submission of average buying and selling rates of letters traded on the secondary market.

There are four priced classes: LF (senior financial bills), LFSC (complementary financial bills), LFSN 5- (with a maturity of up to five years), and LFSN 5+ (with a maturity of over five years).

The first day of calculation recorded rates between 0.5% and 1.1% for the senior letters with a one-year maturity. The buying rate for these assets had a range of 0.5% to 1.2%, while the selling rate showed figures between 0.4% and 1%.

For the subordinated letters, LFSN 5+ had rates of 1.3% and 1.8% for assets that are three years away from maturity. Meanwhile, LFSN 5 reported a single rate of 1.9% for the same period.

In the case of complementary letters, those with a repurchase date in four years recorded a minimum rate of 1.9% and a maximum rate of 2.9%.

In addition to these data, ANBIMA also prices a range of assets: government bonds, debentures, CRIs (Real Estate Receivables Certificates), CRAs (Agricultural Receivables Certificates), FIDCs (Credit Rights Investment Funds), and indexes.

Investors in fixed income are now able to vote in assemblies using WhatsApp

Oct 11, 2023 – Denyse Godoy

Investors in fixed income securities, such as debentures, can now use WhatsApp to vote in assemblies called to address their assets. This service is being launched by the fintech company Vórtx, which already offers this tool for assemblies of investors in variable income.

The debut of WhatsApp voting in fixed income will occur in the four debenture holder meetings that electricity company Light will hold this month. Vórtx is the trustee for the debentures and is responsible for organizing the meetings.

Investors interested in participating must access the link on Vórtx’s website for a WhatsApp conversation with a chatbot. The chatbot authenticates the investor’s identity through questions about personal data, then presents the privacy terms that the user must agree to and presents the questions up for voting. The investor then selects from the provided options by typing the number of the desired choice.

The data is sent directly to a Vórtx platform, which tallies the votes alongside those received live. The tool is subject to the same rules as traditional distance voting, as established in Article 71 of CVM (Securities and Exchange Commission) Resolution 81. For example, investors can submit their opinions before and during the assembly.

“It’s a much simpler process than the banker seeking out the investor, presenting the legal documents of the assembly, requesting a power of attorney, asking the investor for a digital signature, and sending the power of attorney,” says Marcio Teixeira, responsible for the trustee agent offerings at Vórtx.

“This is a tool that streamlines the process and promotes the democratization of voting. More people will be voting and participating in decisions regarding their assets.”

Before the Covid-19 pandemic, assemblies for fixed income investors were rare. However, in recent months, with the increase in inflation and interest rates worldwide, more companies have faced difficulties in meeting their commitments and have called upon the buyers of their debt securities to renegotiate payment terms.

This is the case with Light, which seeks the approval of approximately 25,000 investors in meetings on the 20th, 24th, and 25th of October, to confirm the declaration of early debt maturity and legal advisors’ actions, such as the objection to the recovery plan, among other issues.

Initially, WhatsApp voting is being offered to individual investors because aggregating their votes is the biggest challenge in organizing fixed income assemblies – these investors are widely dispersed. The next step, Teixeira explains, is to offer the same solution for legal entities, such as investment funds.

China: Giant in the Real Estate Market Fails to Pay Debt

Oct 10, 2023

Country Garden, one of China’s largest property developers, announced on Tuesday that it failed to make a payment on an international debt worth $60 million, deepening China’s real estate crisis.

The company also stated that it doesn’t expect to meet its upcoming international obligations on time, indicating that a default may be imminent.

According to the company, which was once the largest in its sector in China, its sales are facing “remarkable pressure.”

Since June, the company’s property sales have seen monthly drops exceeding 50% compared to the same period last year.

In August, sales fell by 71%, and last month, they plummeted by 81%.

Real Estate Crisis in China

In its Global Economic Outlook report released on Tuesday, the IMF mentioned Country Garden, stating that the liquidity crisis the company is facing is “a sign that real estate distress is spreading to stronger developers, despite policy easing measures.”

According to the IMF, “property developers face severe funding constraints, preventing them from completing presold homes, undermining home buyer confidence.”

The IMF also issues a warning about the risks of China’s real estate crisis to the global economy.

“The crisis in China’s real estate sector could deepen, with global spillovers, especially for commodity exporters.”

This assessment is supported by Fabrício Gonçalvez, CEO of Box Asset Management, who stated, “An economic slowdown in China could reduce demand for Brazilian commodities such as soy, iron ore, and other agricultural products.”


Country Garden’s difficulties add to the crisis of another giant in the Chinese real estate sector, Evergrande, which has been ongoing for nearly two years.

Fifteen days ago, Evergrande announced that it had been unable to meet the rules imposed by Chinese authorities for the issuance of foreign bonds.

The purpose of the fundraising was to raise capital to pay off part of the company’s $20 billion debt in the international market.

On the same day, the Beijing-based news website Caixin Global reported that Xia Haijun, the former CEO, and Pan Darong, the former CFO of the company, had been detained by Chinese authorities.

Hengda Real Estate, a subsidiary of Evergrande, is under investigation by the China Securities Regulatory Commission for alleged violations of disclosure rules.

IMF Sees a Global Scenario Consistent with a Soft Landing

Oct 10, 2023

The projections in the IMF report are increasingly “consistent with a scenario of a soft landing, with declining inflation but without a significant contraction in activity.”

This statement is from the Global Economic Outlook report, released today at the annual meeting of the IMF and the World Bank in Marrakech.

The report also revised upward the growth projection for Brazil for this year, from 2.1% in the July forecast to 3.1%.

For 2024, the fund estimates that Brazil will grow by 1.5%, 0.3 percentage points higher than the previous forecast.

Here are some of the key points from the report:

IMF Report – General Overview

According to the IMF, the global economy continues to recover slowly from the effects of the pandemic, the Russia-Ukraine war, and the inflation that followed both events.

While the global economy has avoided stagnation, growth remains slow and uneven.

A full recovery to pre-pandemic growth levels still seems distant.

This assessment particularly applies to so-called emerging economies and developed countries, especially in Europe.

An exception among developed countries is the United States, where the resilience of consumption and investment is surprising.

Global Growth

In the IMF’s projections, the global economy is expected to grow by 3% this year. This is the same level as in the previous report from July.

This represents a drop of 0.5 percentage points compared to the 3.5% of the previous year.

For 2024, the IMF reduced the growth forecast by 0.1 percentage point, from 3% to 2.9%.

This would signify a slight deceleration compared to this year.


In the fund’s view, global inflation is expected to continue its downward trajectory from the 9.2% in 2022.

The forecast for 2023, year-on-year, is a rate of 5.9%.

For 2024, the IMF expects further slowing of price increases, but at a slower pace, to 4.8%.

Core inflation, which excludes food and fuel, is also expected to continue on a downward trajectory, albeit more slowly.

The IMF’s projection for global core inflation in 2024 is 4.5%.


The IMF points to three global factors that help explain the current state of the world economy.

The first is the behavior of the services sector, whose recovery is almost complete, according to the fund.

Strong demand in the sector has helped countries like France and Spain, which have a strong tourism sector, compared to nations with economies more dependent on industry, such as Germany and China.

However, this demand is starting to weaken, suggesting a reduction in inflation and labor market pressure in the sector.

High Interest Rates

The report attributes part of the economic slowdown to the restrictive monetary policy adopted by central banks to curb inflation.

The fund states that the tightening of monetary policy is beginning to weigh, but “the transmission is uneven among countries.”

According to the report, the tightening is more strongly felt in countries with adjustable mortgage rates or lower levels of household savings.

Moreover, countries are also at different stages of the interest rate adjustment cycle.

The fund mentions Brazil, along with Chile, as countries where monetary policy has already begun to be eased, compared to advanced economies where interest rates are close to their peak.

Price Shock

The third factor shaping the global economy in the IMF’s view is the price shock caused by the Russia-Ukraine war.

Economies more dependent on the import of oil and gas from Russia experienced a more acute rise in energy prices and a sharper economic contraction.

According to studies conducted by the IMF, the transmission of the rise in energy prices was the main cause of the increase in core inflation in the eurozone.

In the United States, however, the increase in core inflation is likely to be a reflection of a more pressured labor market.

IMF Report – Brazil

The IMF revised its growth forecasts for this year and 2024 upward compared to the July report.

Now, the IMF believes that Brazil will grow by 3.1% in 2023, one percentage point higher than the forecast from three months ago.

According to the fund, the revision was driven by the strong performance of agriculture in the first quarter and the resilience of the services sector.

For 2024, the estimated growth is 1.5%, 0.3 percentage points higher than the previous forecast.

Brazilian Central Bank Survey Predicts Dollar at R$ 5 by Year-End Amid U.S. Interest Rates

Oct 09, 2023

After two weeks of stability, the forecast for the year-end value of the dollar jumped from R$ 4.95 to R$ 5.00, according to the Focus Bulletin released by the Central Bank on Monday.

In the spot market, the currency has already accumulated a 6.4% increase since September 16, when the most recent upward trend began.

During this period, the value of the U.S. currency went from R$ 4.86 to R$ 5.17, the rate recorded on Monday morning.

The increase mainly reflects the rise in yields on U.S. government bonds, which reached 4.8% for the ten-year maturity last week, the highest level in nearly 20 years.

As the survey was closed last week, it does not take into account the likely impacts of the Hamas attack on Israel, which began early Saturday.

Other financial market forecasts for key economic indicators in 2023 remained stable.

The expectation for GDP growth remained at 2.92% for 2023 and 1.5% for 2024.

For 2025 and 2026, the financial market projects GDP growth of 1.9% and 2%, respectively.

The forecast for inflation measured by the National Broad Consumer Price Index (IPCA) also remained the same as last week: 4.86% in this edition of the Focus Bulletin.

The index is 0.11 percentage point above the upper limit of the target set by the National Monetary Council, which is 3.25% with a tolerance of 1.5 percentage points.

For 2024, the inflation estimate increased by 0.01 percentage point, rising from 3.87% to 3.88%. For 2025 and 2026, the forecasts are 3.5% for both years.

According to the financial market, the Selic rate is expected to end 2023 at 11.75% per year, the same level as forecasted last week.

For the end of 2024, the estimate is that the basic rate will drop to 9% per year. For the end of 2025 and 2026, the forecast is for the Selic at 8.5% per year for both years.

The Middle East War Takes Priority Over Data Releases

Oct 09 , 2023 – Denyse Godoy

This week includes the release of the minutes from the recent interest rate-setting meetings of the Federal Reserve (the U.S. central bank) and the European Central Bank (ECB). However, all the agenda of economic indicators and events has taken a back seat due to the outbreak of a new war in the Middle East. The Palestinian group Hamas launched a surprise attack on Israel on Saturday (7), sparking an armed conflict in the Gaza Strip that has already claimed the lives of at least 1,200 people on both sides.

Subsequently, Israel imposed a total blockade on Gaza, preventing Palestinians from accessing water, food, and fuel. Around 150 Israeli citizens of all ages were taken hostage by Hamas.

The human tragedy is immeasurable. From an economic perspective, the global financial market’s concern revolves around oil prices in case other countries in the region become involved in the war. Shortly after 10:30 AM (Brasília time), a barrel of WTI crude oil was trading up 3.8% on the New York Stock Exchange at $85.81 per barrel.

“The risk of an escalation in the conflict, involving other countries, is the main point to be monitored in the coming days. Although neither of the two countries is a major oil producer, the conflict is happening near major oil producers in the Middle East,” said Fernando Siqueira, an analyst at the brokerage firm Guide. “In Brazil, the reaction is expected to be negative in general, in line with what we are seeing around the world. Oil producers and export-oriented companies are likely to perform relatively better. More cyclical companies focused on the domestic market are likely to have weaker performance.”

Week’s Schedule

Wednesday (11)

09:00 AM: Brazil – IPCA, from IBGE

03:00 PM: USA – Minutes from the September Fed meeting

Thursday (12)

Holiday in Brazil (Our Lady of Aparecida Day)

08:00 AM – Europe: Minutes from the September ECB meeting

09:30 AM: USA – Consumer Price Inflation (September)

10:30 PM: China – Consumer Price Inflation (September)

After a Rush to Register Investment Funds, Managers Adapt to Resolution 175

Oct 6, 2023 – Denyse Godoy

Resolution 175 of CVM (Securities and Exchange Commission) was highly anticipated.

After two years of discussions, it effectively came into effect on Monday (2nd), establishing a new regulatory framework for investment funds by consolidating 38 regulations into a single rule.

The days leading up to this change were hectic for asset management companies and administrators.

As the funds registered before the 2nd of the month have until December 2024 at most to fully comply with the new rules, those who already had products in progress accelerated their preparations.

Registration requests to CVM reached a record of 656 in September, which is 43% higher than in August and the highest for the month in the regulator’s historical series. Of these requests, only 80 were in normal operation, accounting for 12% of the total; in August, this portion was 44%.

Now, the sector’s expectation is a slowdown in registrations to allow internal teams at asset management companies to organize and adapt.

The priority is to adjust the funds that have already been registered to the new rules according to the different validity dates of each regulation.

The first major deadline is in April of next year, affecting changes related to improving communication with the manager, class names, and FIDCs (Fundos de Investimento em Direitos Creditórios – Investment Funds in Credit Rights). These are priorities for asset managers. Then, the other points need to be complied with by the end of 2024.

Drex: Understanding the Evolution of the Brazilian Digital Currency

Oct 6, 2023 – Jéssica Araripe e Nei Zelmanovits

In the context of the global economy’s digitization, the Central Bank of Brazil (BACEN) has its own initiative in the cryptoeconomy: the creation of a Brazilian sovereign digital currency renamed Drex. With a shift in focus towards wholesale interbank operations, the project is currently in the testing phase and will preserve financial intermediation.

The primary goal of Drex is to enable financial transactions with digital assets and smart contracts that have legal validity, with the possibility of programming transactions and the potential to reduce their cost. BACEN has also indicated that Drex could contribute to the enhancement of Open Finance. When purchasing a product with Drex, financing options may be offered based on data analysis shared by institutions, potentially reducing credit costs.

These points differentiate Drex from PIX, which focuses on instant transactions. DREX operations will be settled through an authorized financial intermediary, such as a bank, within the Drex Platform, which utilizes distributed ledger technology (DLT).

Initial Actions

BACEN has been preparing the ground for the creation of a Brazilian sovereign digital currency for several years. The effort began with the establishment, through BACEN’s Ordinance 108,092, of an interdepartmental working group composed of representatives from all its areas.

With the aim of studying the potential issuance of a Brazilian digital currency, their work resulted in three initial actions: 1) the publication of the Real Digital guidelines, in line with the BC# Agenda, which took place in May 2021; 2) discussions with society regarding potential applications of Real Digital, in a series of webinars held in the second half of 2021; and 3) the Lift Challenge Real Digital, to evaluate use cases for the sovereign digital currency and its technological feasibility, at the end of 2021.

Since the beginning of 2023, BACEN has taken concrete steps to bring the project to life. It launched the Real Digital pilot project (Piloto RD), as approved in Resolution 31/2023–BCB on February 14, 2023, and updated the guidelines for the sovereign digital currency. BACEN also shifted the project’s focus to wholesale interbank operations, excluding the initial plan for retail payments.

A two-layer model will be adopted: the Central Bank will issue Drex, and, in turn, financial institutions and payment institutions will provide support for custody and distribution activities by issuing tokens known as Real Tokenized, representing demand deposits or electronic money, respectively. The goal is for Drex to function similarly to bank reserves or settlement accounts.

Testing Environment

The RD Pilot began in July 2023 with 14 approved projects, predominantly proposed by private institutions, under the coordination of BACEN’s Executive Management Committee (CEG) and following the RD Pilot’s regulations. In this testing environment, which does not involve real transactions, the initial focus is on simulating the buying and selling of federal government bonds, in partnership between BACEN and the National Treasury. The aim is to test the programmability of the currency. In September 2023, one of the participating banks successfully tested this functionality, indicating that progress is well underway.

In addition to federal government bonds, the RD Pilot aims to simulate transactions involving the issuance, trading, transfer, and redemption of other predetermined assets, such as Central Bank currencies, demand deposits, electronic money, with the possibility of expansion in the future, preferably to financial assets and securities. According to the schedule, Drex is expected to be available to the public in 2024.


The RD Pilot must adhere to the Real Digital guidelines, as updated, with a focus on finding solutions for security and privacy preservation. This is of fundamental importance. BACEN needs to ensure compliance with the legal privacy requirements applicable to the National Financial System, in accordance with the General Data Protection Law and the Banking Secrecy Law, to ensure the legality of Drex.

Regarding the legality issue, according to Article 164 of the Federal Constitution and considering BACEN’s authority to issue paper and metal currency, under the conditions and limits authorized by the National Monetary Council, as provided for in Article 10 of Law 4,595/1964, which was received as a Complementary Law by the Federal Constitution, expanding BACEN’s authority to issue digital currency requires legislative authorization.

In this regard, the Complementary Law Bill 9/2022, presented on February 24, 2022, by Federal Deputy Aureo Ribeiro, which proposes to regulate the issuance of the national currency in digital format, is currently under priority consideration in the National Congress. The bill is being examined by specific committees in the Chamber of Deputies and has already been approved by the Consumer Defense Committee.

Among the proposals of this Complementary Law Bill, it highlights the prohibition for BACEN to directly offer credit, banking products, or financial payment and investment services to consumers. The measure aims to preserve banking intermediation, benefiting the economy, privacy, and the general population as consumers and citizens.

The prohibition also seeks to shield against the risk of nationalizing the banking market that a sovereign digital currency could bring in a one-tiered model. In such a model, the Central Bank would be responsible for issuance, custody, and distribution of the currency to end-users, which could be detrimental to the stability of the system and the efficiency of capital allocation and credit provision.

Global Agenda

It is worth noting that the initiative to create a sovereign digital currency is not an isolated effort by the Brazilian government. On the contrary, it is a governmental response to the growing use of cryptocurrencies and stablecoins for financial transactions, especially involving digital assets. Additionally, it gains prominence in the context of the increasing popularity of electronic payment methods.

According to a study by the Atlantic Council, an American think tank, currently, 130 countries representing 98% of the global GDP are exploring sovereign digital currencies. Of these, 64 countries are in an advanced stage of exploration (development, pilot, or launch), with 11 launches to date, especially in Central America[1].

This plan is part of a global agenda with extensive discussions and knowledge exchange over the past few years among central banks of major economies worldwide, within the framework of the Bank for International Settlements (BIS). This international organization brings together central banks from various countries and has played an important role in advancing the project by organizing forums and working groups to discuss the technical, regulatory, and security challenges involved in implementing sovereign digital currencies, known internationally as Central Bank Digital Currencies (CBDCs). BACEN has actively participated in international discussions, particularly within the BIS, seeking knowledge and experience exchange with central banks from other jurisdictions.

CBDC projects around the world are gaining relevance as regulators from various nations express concerns about the potential systemic risk that widespread use of alternative exchange means to sovereign currencies, such as cryptocurrencies or stablecoins, could pose to the financial system.

However, given the global scale of this phenomenon, there are still significant operational and regulatory challenges ahead. To keep pace with the alternative and decentralized cryptocurrency system, regulators face the challenge of developing a transnational sovereign digital currency system with usability, efficiency, effectiveness, security, privacy, and broad public acceptance.

[1] Cf. Atlantic Council. Central Bank Digital Currency Tracker. Available at: Accessed on October 2, 2023.

Oct 05, 2023

Senate approves project that creates carbon market in Brazil

The Senate Committee on Environment (CMA) unanimously approved on Wednesday (4) Bill 412/2022, which regulates the carbon market in Brazil.

The substitute proposed by Senator Leila Barros (PDT-DF), President of CMA and rapporteur of the matter, exempts agribusiness from obligations set forth in the Brazilian Greenhouse Gas Emissions Trading System (SBCE).

Now, the matter is expected to move to the Chamber of Deputies, and the President of the Chamber, Arthur Lira, has already stated that he wants to vote on it before COP 28, at the end of November.

Understand the key points of the project:


According to Bill 412/2022, the governing body of SBCE must develop the National Allocation Plan (PNA), which will determine the amount of emissions each operator is entitled to.

This amount is represented by Brazilian Emission Allowances (CBEs).

Each CBE (equivalent to 1 tCO2e) is considered a tradable asset, which can be received for free by operators or purchased to “offset” emission targets.


In addition to CBEs, the project creates the Certificate of Verified Emission Reduction or Removal (CRVE).

Another tradable asset, the CRVE represents the carbon credit generated by the actual reduction or removal of 1 tCO2e of greenhouse gases.

The certificate can also be purchased by companies and used in calculations to demonstrate compliance with their targets.

Furthermore, the CRVE can be used, with authorization, in international transfers under the Paris Agreement.


According to Bill 412/2022, companies and individuals emitting more than 10,000 tons of carbon dioxide equivalent (tCO2e) per year are subject to SBCE.

These operators must monitor and report their annual greenhouse gas emissions and removals.

Those with emissions exceeding 25,000 tCO2e must prove that they hold CBEs and CRVEs equivalent to their emissions.


These assets can be traded on the stock exchange according to regulations to be established by the Securities and Exchange Commission (CVM).

Income tax is imposed on the profit resulting from sales, calculated on the net gain when the transaction occurs on the exchange, or on capital gains in other situations.

Transactions are not subject to taxes such as PIS/Pasep or Contribution to Social Security Financing (Cofins).

The use of CBEs and CRVEs to offset emissions allows for the deduction of related expenses in the calculation of taxable income and the calculation base of the Social Contribution on Net Profit (CSLL).


Non-compliance with SBCE rules can lead to penalties such as fines of up to R$ 5 million or 5% of the company’s gross revenue. An act of the governing body of SBCE will define punishable offenses. Other sanctions include:

  • Embargo on activities;
  • Loss of tax benefits and financing lines;
  • Prohibition of contracting with the public administration for three years; and
  • Cancellation of registration.

Individuals and Traditional Communities

The project stipulates that individuals and legal entities not required to participate in SBCE can voluntarily offer carbon credits.

This rule applies to credits generated from projects or programs for the reduction or removal of greenhouse gases, such as the restoration of permanent preservation areas or legal reserves.

If they comply with the system’s rules, these credits can be converted into CRVEs and sold.

Indigenous peoples and traditional communities, such as quilombolas, can also generate CRVEs from projects carried out in the territories they occupy.


Bill 412/2022 establishes a transitional period for the implementation of SBCE-related rules.

According to the text, the governing body will have up to two years to regulate the system.

After regulation, operators will have an additional two years before they are required to meet their targets—within this period, they must only submit plans and emissions reports.

According to the rapporteur, Leila Barros, the carbon market generated approximately $100 billion in 2022, with systems in operation in various countries.

With information from Senate Agency

Oct 05, 2003

Point by Point: The Legal Framework for Credit Guarantee Approved by the Chamber

The Brazilian House held the final vote on the credit guarantee and loan legal framework project this Tuesday. The text now goes to the presidential sanction.

Bill 4188/21 reformulates rules regarding real guarantees given in loans, such as mortgages or fiduciary alienation of real estate, among others.

The law has the potential to bring about significant changes in the sector.

In an interview with the newspaper Valor Econômico, the Secretary for Economic Reforms at the Ministry of Finance, Marcos Pinto, even stated that “the problem of credit with guarantees in Brazil is solved.”

Pinto believes the change should reduce the banking spread and have an impact equivalent to a tax reduction, without the fiscal impact of tax concessions.

Below are some of the main points of the approved text:

Extrajudicial Recovery

One of the Senate’s amendments to the project, which was maintained in the Chamber, creates the possibility of using extrajudicial measures to recover credit through notaries.

The creditor can propose a discount through protest notary offices.

With simple letter communication, email, or instant messaging app, the notary will inform the debtor about the proposal.

The acceptance period is up to 30 days. If the debtor does not accept, the notice will be converted into an indication for protest.

Encouragement for Renegotiation

Another provision allows the creditor to delegate to the notary the proposal of incentive measures for renegotiation.

The notary can even receive the value of the already protested debt and indicate any criteria for updating that amount.


Another approved change allows the protest notary for any type of unpaid debt to send a notice to the debtor through instant messaging applications (e.g., WhatsApp).

This notice will be considered fulfilled only with the acknowledgment of receipt on the platform.

Proof of Life

Regarding notaries, another accepted amendment changes the law on public records to allow notary offices for civil registration to issue certificates of life, marital status, and physical or electronic domicile of the interested party.

For this, there must be an agreement with the interested institution and immediate electronic communication of the attested proof of life.


Another possibility of using extrajudicial enforcement will be to recover debts related to motor vehicles alienated fiduciarily.

Procedures will be carried out before the Detrans (State Departments of Transit), through specialized companies in centralized registration, which will perform all the acts of enforcement processing.

Second Alienation

According to the text, a second debt can be secured by real estate being purchased with the fiduciary alienation instrument in the name of the real estate financing creditor.

However, its effectiveness will depend on the cancellation of the one constituted earlier.

If there are previous fiduciary alienations, they will take precedence over newer ones if the guarantee is executed (sale of the property).

From that moment on, the guarantee for subsequent creditors will be applied to the price obtained from the sale, and the registrations of the respective fiduciary alienations will be canceled.

For the fiduciary creditor who pays off the entire debt of the debtor secured by the property, the text provides that they will be subrogated in the credit and in the fiduciary ownership, meaning they will acquire the fiduciary rights of other creditors.

The rule of early maturity of the entire debt if any installment is not paid will apply even to the second fiduciary alienation.

Same Creditor

The proposal also allows the debtor to incur new debts with the same creditor as the original fiduciary alienation.

The project’s rapporteur, João Maia, established an exception to this rule of the same creditor by choosing another institution as long as it is part of the same cooperative credit system as the original creditor institution.

For example, if the value secured by a property in the first loan is up to R$ 100,000, and the original debt is R$ 20,000, the debtor can take out a new loan with the same creditor for an amount of up to R$ 80,000.

However, there cannot be operations secured by the same property with other creditors, and all secured operations can only be transferred by the creditor collectively and to a single new holder.

Guarantee Agent

Bill 4188/21 also creates the figure of the guarantee agent, which will be designated by the creditors and will act in their own name and for the benefit of the creditors.

They may register the encumbrance of the property, manage the assets, and enforce the guarantee, even making use of extrajudicial enforcement when provided for in the special legislation applicable to the type of guarantee. They will also have the power to act in judicial actions regarding the guaranteed credit.

This agent may be replaced at any time by the decision of the sole creditor or the holders representing a simple majority of the guaranteed credits.

After receiving the value from the sale of the guaranteed property, the agent must make payment to the creditors within ten business days.

With information from Câmara Notícias Newswire.

After the purchase of Órama by BTG, how many independent brokerage firms are left?

Oct 04, 2023 – Denyse Godoy

On last Monday (2), BTG Pactual, the largest investment bank in Latin America, announced the acquisition of Órama Investimentos, a brokerage firm based in Rio de Janeiro, in a deal worth R$ 500 million.

This acquisition was the latest in a series of moves by major financial institutions to acquire independent brokerage firms in Brazil, many of which have decades of history and tradition in the market.

BTG had recently incorporated the retail operations of Nécton, Fator, Elite, Planner, and Magnetis, while Itaú acquired Ideal and Avenue, and XP acquired Rico, Clear, and Banco Modal.

The goal of these giants in the Brazilian market is to rapidly expand their customer base, especially among retail investors, who, prior to the recent interest rate hikes, realized that there are more options to invest their money than the banks where they hold their checking accounts and receive their salaries.

Over the past decade, according to data from the Central Bank, 52 independent brokerage firms ceased operations, reducing the total in Brazil by half. Instead of just facilitating the trading of stocks, the remaining traditional brokerage firms have started offering investment funds, government bonds, private fixed-income securities, and real estate funds.

Now, according to research conducted by Capital Aberto based on Central Bank information, there are 19 national independent brokerage firms operating in the stock market:

1 – Amaril Franklin

2 – Ativa

3 – Codepe

4 – Genial

5 – Geral

6 – EQI

7 – Euroinvest

8 – IB

9 – ID

10 – Levycam

11 – Mundinvest

12 – Nova Futura

13 – Novinvest

14 – Reag

15 – RJI

16 – Singulare

17 – Sita

18 – Trinus

19 – Terra

After two years of high Selic rates, the Copom (Central Bank’s Monetary Policy Committee) started lowering the interest rate in the second half of this year and is expected to continue cutting rates, according to expert projections. This move is likely to attract more investors to equity investments and further consolidate the brokerage sector.

BTG Pactual buys Órama brokerage for R$ 500 million ($100 million)

Oct 02, 2023 – Denyse Godoy

BTG Pactual, the largest investment bank in Latin America, has reached an agreement to purchase 100% of the share capital of the brokerage firm Órama Investimentos. The acquisition was reported earlier on Monday (2) by Capital Aberto and later confirmed by the bank.

This is another step in BTG’s plan to expand in the retail market. In a market statement, the bank mentioned that the transaction is part of its “strategy to expand its digital platforms, increase its customer base, and advance the offering of products and services for individuals.”

The deal also allows for economies of scale, resulting in fixed cost dilution, efficiency gains, and productivity improvements, according to the announcement. The completion of the agreement is subject to regulatory approval, including that of the Central Bank of Brazil.

Órama was founded in Rio de Janeiro by Selmo Nissenbaum, Guilherme Horn, Roberto Rocha, and Habib Nascif as the country’s first platform exclusively dedicated to distributing investment funds.

In addition to these partners, Rede D’Or and Globo Ventures are also selling their 25% stakes in Órama. Rede D’Or, which acquired the entirety of its stake in Órama after purchasing the health insurance company SulAmérica in 2022, and Globo Ventures, the investment vehicle of the owners of the Globo Group of communication, which had entered the brokerage in 2017.

Currently, Órama has 370 employees and 300 registered investment advisors with Ancord, managing approximately R$18 billion in assets under custody and serving 360,000 clients, who will gain access to BTG’s banking products such as current accounts and credit cards.

The management team of Órama is not included in the transaction with BTG. Part of the group of founding partners will now focus on an Investment as a Service (IaaS) business, providing solutions for retailers and companies in various sectors that want to offer investment products to their customers, according to the announcement.

Markets watching PMIs, employment, and central bank presidents’ speeches

Oct 02, 2023

Attempting to predict interest rate trends worldwide, investors eagerly await the release of economic activity indicators like PMI (Purchasing Managers’ Index) in various countries this week, along with labor market data and statements from the presidents of the American and European central banks.

PMI indicators are calculated by different consultancies in each location but use a similar methodology: essentially, surveys answered by professionals responsible for managing supply chain procurement in companies. The surveys include questions about production volume, raw material orders, input and finished goods prices, among other aspects of business. These numbers help determine the economic trend: results above 50 points indicate expansion, while results below indicate contraction.

On Monday (2), the Eurozone’s industrial PMI, measured by Markit, the industrial PMI of Brazil, measured by S&P Global, and two indices from the United States, one from Markit and another from the ISM institute, will be released. On Wednesday (4), the Eurozone’s composite PMI and the services and composite PMIs of Brazil and the United States, all from S&P Global, will be published. All of these data pertain to the month of September.

Regarding August, the employment evolution index from Brazil’s Ministry of Labor and Employment, known as Caged, will be released on Monday (2). In the United States, the JOLTS job survey for August will be released on Tuesday (3), the private ADP employment survey for September on Wednesday (4), weekly jobless claims on Thursday (5), and the September payroll report on Friday (6).

Two weeks ago, during their respective periodic meetings to decide interest rates, the monetary policy committees of the central banks of Europe, the United States, and Brazil made it clear that they are closely monitoring all economic activity indicators to ensure that the worst of the current inflationary wave is behind us. The size of future interest rate hikes in the United States, the end of rate increases in Europe, and the continued decline of Brazil’s basic Selic interest rate depend on this.

As for expectations, the financial market hopes to glean some clues from the speeches that Jerome Powell, the Chairman of the Federal Reserve (the U.S. central bank), and Christine Lagarde, of the European Central Bank (ECB), will give on Monday (2) and Wednesday (4), respectively.

CVM Resolution 175: Six Key Changes to Investment Funds in Brazil

Sep 29, 2023

CVM Resolution 175, which brings significant changes to the investment fund market in Brazil, comes into effect on Monday, October 2.

The regulation was published in December 2022 and has undergone some changes since then, many of them resulting from suggestions from market representatives.

“CVM Resolution 175 set records for contributions in public hearings held by CVM. It is the result of a collaborative effort,” said João Pedro Nascimento, the president of the regulatory agency.

Capital Aberto has outlined six key points of the main changes brought by the new regulation. Check them out:


Prior to Resolution 175, fund administrators were the only essential service providers, responsible for hiring all others, including fund managers.

With the new regulation, fund managers are also considered essential service providers, alongside administrators. As a result, fund managers share responsibilities with administrators.

This means that administrators will no longer hire the services of fund managers, and both will be responsible for selecting and hiring other service providers.

The hiring of distributors, rating agencies, and investment consultants, for example, shifts from administrators to fund managers.

Classes and Subclasses

Funds can now be divided into classes and subclasses, with each class having its own separate assets, rights, and obligations.

The fund’s classes represent the assets, and the subclasses can accommodate various target audiences, terms, investment conditions, amortization conditions, redemption requirements, and administration and exit fees.

With different subclasses, the same assets can be associated with different liabilities. In other words, within a single class within a fund, it is possible to have groups of investors with different profiles.

With this change, the segment is moving closer to international practice, and there is an expectation that, in addition to efficiency gains for fund managers, the new model will facilitate the understanding of foreign investors.


Resolution CVM 175 also opens up the possibility of investments in FIDCs for retail investors.

Until then, the product was only open to qualified and professional investors, those with at least BRL 1 million in financial investments.

However, retail investors’ access is limited to FIDCs composed of senior shares (with higher credit quality, superior to mezzanine and subordinated shares).

Fundos de Investimento em Direitos Creditórios are composed of receivables from companies such as rents, checks, promissory notes, and installment payments in installments and credit cards.

Investing Abroad

Resolution CVM 175 allows retail investors to invest in funds that allocate up to 100% of their net assets in foreign assets.

The limit under the previous rule was only 20% of net assets.

However, the manager must ensure that a series of additional requirements are met, including that the assets are also intended for the general public or equivalent in the originating jurisdiction.

The assets must also follow a calculation methodology for asset pricing and leverage, as well as concentration rules for assets recognized and monitored by the local supervisor.

Limited Liability

With Resolution CVM 175, fund investors gain more protection.

The regulation provides for a class of shares in which the investors’ liability is limited to the value of their shares.

This applies to classes of shares with the designation “limited liability.”

In these share classes, investors can no longer be called upon to replenish the fund if it becomes negative, as in the past.

Cryptocurrencies, ESG Funds, and Carbon Credits

Resolution 175 also addressed sustainability investments and new technologies such as cryptocurrencies.

The regulation sets rules to be followed by funds that claim to be ESG or sustainable.

There is also permission for investments in funds that make direct investments in assets such as cryptocurrencies and other crypto assets, carbon credits, decarbonization, and methane.

Previously, these investments could only be made through funds investing in futures contracts or similar assets in the regulated market or in ETFs traded in the American and European markets.

Investors will now have access to products that directly replicate an index of these types of assets in Brazil.

Tokenization: Galapagos, Kinea, and Honey Island invest R$ 13 million in Liq

Sep 29, 2023

Galapagos Capital, Kinea Ventures, and Honey Island have participated in a funding round of R$13 million for Liqi, a company specializing in tokenization and blockchain infrastructure solutions.

Last year, Galapagos had already partnered with Liqi for a token offering of service receivables.

Now, the asset manager is strategically partnering with the fintech to continue developing new solutions for the capital market.

In 2022, Kinea Ventures, the Corporate Venture Capital fund of Itaú Unibanco, Honey Island, and Oliveira Trust also made an investment of R$27.5 million in Liqi.

These investments are aimed at the growth potential of the tokenization sector.

Liqi has already tokenized over R$90 million and expects to end the year with a total of R$250 million in tokenized assets.

The tokenization of assets has been gaining traction in the financial market, as it allows real-world assets to be transformed into digital assets that can be traded on the blockchain.

The technology provides more transparency, security, greater access to investments, and lower costs for both investors and issuers.

“The world is moving towards financial decentralization, and we believe that, with the recent initiatives from CVM and the Central Bank,” says Thomas Averbuck, a partner at Galapagos Capital.

“The timing is ideal to invest in digital assets and decentralized finance to build a more dynamic and efficient capital market,” he adds.

“For Liqi, the entry of Galapagos is very significant, as we are jointly building a strategic agenda,” says Daniel Coquieri, CEO and founder of Liqi.

“Galapagos has a robust capital market operation, a large asset origination and distribution pipeline, which we need to be able to build and develop new instruments for the financial market,” highlights Coquieri.

Vórtx QR makes the first issuance of tokens for a multimarket fund

Sep 28, 2023

Vórtx QR Tokenizer has just carried out the first issuance of tokens for a multimarket investment fund in Brazil.

Each token represents a share of the fund and can be traded later on the Vórtx QR Tokenizer platform by the investor who purchases it. This issuance thus inaugurates a secondary market in the country for shares of multimarket funds, similar to what already exists for ETFs (exchange traded funds) and real estate funds, which can be traded on the stock exchange (non-tokenized).

The tokenized multimarket fund is the AGBI 3 Carbon Feeder, managed by AGBI Real Assets, an independent Brazilian real asset manager. Initially, 30,000 shares will be sold for R$ 1,000 each, totaling R$ 30 million.

Only professional investors, who have at least R$ 10 million available for investment, can purchase the tokens. Vórtx QR Tokenizer, a joint venture between infratech company Vórtx, which owns Capital Aberto, and QR Asset Management, specialized in crypto assets, operates in the regulatory sandbox of the CVM (Securities and Exchange Commission), an experimental environment for testing innovative financial products and services.

“We want Brazilian managers to know that they can now rely on this alternative fundraising channel,” says Fernando Carvalho, President of Vórtx QR Tokenizer. “The advantage is that when an investor wants to sell their fund shares, the manager doesn’t need to tap into cash or sell assets to provide liquidity. The token simply changes ownership.”

The token issuer has already issued approximately R$ 182 million in digital securities, including R$ 74 million in debentures from Salinas Participações, R$ 60 million in debentures from Pravaler, R$ 40 million in debentures from Indigo, and R$ 8 million in shares of QR Rispar Credit Crypto FIDC from QR Asset.”

The Central Bank projects a 5% IPCA for the year; IGP-M rises by 0.37% in August

Sep 28, 2023

The Central Bank has maintained its projection that the inflation for 2023, measured by IPCA, will close the year at 5%, more precisely 5.01%.

This data is in the Quarterly Inflation Report released this Thursday and is the same as the previous report from June.

The predictions for monthly inflation, always by IPCA, until then are as follows: 0.38% for September, 0.41% for October, 0.39% for November, and 0.53% for December.

Inflation for 2023

The 5% projected by the Central Bank would still keep the inflation for 2023 0.25 percentage points above the target ceiling, which is 3.25% with a variation of 1.5 percentage points up or down.

However, until August, the 12-month inflation measured by IPCA was 0.19 percentage points lower than what had been forecasted by the Central Bank.

The Central Bank expects an index of 4.81%, but the number reported by IBGE was 4.61%.

The report attributes the difference “mainly to the segment of food at home, especially lower variations than those predicted in semi-processed foods, such as milk, meats, and chicken.”

According to the Central Bank, “the underlying component of service inflation also showed a variation below what was anticipated over the three-month period. The downward surprises, strongly influenced by the evolution of residential rent, were concentrated in the months of July and August and offset the higher variation observed in June.”


The General Price Index – Market (IGP-M) recorded an inflation rate of 0.37% in September of this year. It is the first price increase of the indicator since March of this year.

In August of this year, there was a deflation (price decrease) of 0.14%. In September 2022, deflation was 0.95%.

Even with the inflation in September, the indicator, measured by the Getulio Vargas Foundation (FGV), accumulates deflation rates of 4.93% this year and 5.97% over 12 months.

According to André Braz, coordinator of Price Indices at FGV, the producer and consumer price indices were strongly affected by the increase in fuel prices that occurred on August 16th.

Will Brazil follow the European Green Deal?

Sep 28, 2003 – By Daniel Oliveira Andreoli and Paula Pinedo, respectively, a partner and lawyer in the competition law department of Demarest Advogados.

Around the world, it is possible to notice that large companies are investing in sustainable production and distribution methods. Apple, for example, has declared its intention to completely eliminate carbon emissions from its global supply chain by 2030. Braskem has public sustainable commitment goals to be achieved between 2025 and 2030, including expanding its portfolio with the marketing of thermoplastic resins and chemicals with recycled content, as well as plastic waste recovery. Measures like these make it clear that we are already experiencing the arrival of a new sustainable era.

Historically, all changes in the production process and, consequently, in the economy itself, bring not only benefits but also various challenges. They also require adaptations by companies, governments—through laws and regulatory processes—and even the population.

Not paying close attention to new market trends can be a risky strategy, not only for large companies but for the national economy as a whole. Large economic blocs, such as the European Union, will begin to require foreign companies to meet various sustainable requirements to export their products. Therefore, the Brazilian market, regardless of accepting bilateral agreements, will need to be prepared to face these changes.

Although large national companies are already moving towards adopting a new sustainable era, the absence of government incentives and regulations can leave the country at a disadvantage compared to major economies. Many of them have well-defined goals and strategies to meet environmental agendas.

Together for sustainability

With an ambitious plan to reduce net greenhouse gas emissions by at least 55% by 2023—and reaching climate neutrality by 2050—the European community is setting an example for the world on how to transform industrial production and the entire traditional economic chain into an integrated system aimed at combating environmental damage and preserving the ecosystem. Thus, recent moves by the European Union make it clear that the community is making every effort to implement its environmental plan.

On June 1st, the European Commission adopted a new guide to exemptions for horizontal agreements, that is, agreements between competitors, in the areas of Research and Development (R&D) and Specialization (R&D and Specialization Agreements – HBERs).

More specifically, the new rules exempt the application of competition penalties when agreements between competitors meet certain requirements, including providing social and environmental benefits.

Therefore, the new guide demonstrates that competition rules will not block agreements or cooperation between competitors aimed at a new sustainable era. Furthermore, the guidelines are quite clear. They provide an objective definition of “sustainability” based on the United Nations Sustainable Development Goals (SDGs), as well as illustrative examples of agreements that will become possible within the competitive sphere of the European Union.

Margrethe Vestager, Executive Vice President responsible for competition policy, emphasizes: “The revised rules on horizontal agreements provide clear guidance to help companies assess the compatibility of their cooperation agreements with our competition rules and include joint initiatives on sustainability. These updated guidelines are a fundamental tool for advancing ecological and digital transitions.”


The measures taken by the European Commission, therefore, recognize the importance of competition legislation in achieving climate goals. After all, the large companies affected by these rules are responsible for a significant portion of greenhouse gas emissions.

Thus, to enter the new sustainable era, national regulatory agencies, such as the Administrative Council for Economic Defense (CADE), will increasingly be called upon to establish parameters and limits for cooperation between competitors in pursuit of environmental impact reduction goals. With one of the most recognized competition authorities in the world, Brazil has great potential to lead the new era alongside major world economies and achieve promising sustainable goals.

AGBI Asset aims for R$ 1 billion under management through innovation in land recovery

Sep 28, 2003 – Denyse Godoy

AGBI, an independent asset management firm specializing in investments in real assets, is betting on innovation in the recovery of degraded farmland to reach R$ 1 billion (around $ 200 million) under management.

AGBI’s strategy since its founding in 2012 has been to acquire farms with degraded land in Brazil, support tenant farmers in soil recovery and mature crop establishment, and then sell them with higher added value.

Now, the asset manager has just entered into an agreement with Infrapar Sustainability, led by Marco Antônio Fujihara, former coordinator of the Brazilian Forum on Climate Change, to develop projects for the AGBI 3 Carbon Fiagro Verde fund.

These projects involve the generation and sale of carbon credits and the use of new land management technologies, such as regenerative agriculture, which can boost the farms’ value.

Launched last year, AGBI 3 Carbon Fiagro Verde has already raised $16 million. The manager’s goal is to reach $60 million with local investors and increase the amount to up to R$ 1 billion ($200 million) with the participation of foreign investors. At least five farms, totaling around 30,000 hectares, will be acquired.

In recent years, the asset manager has developed a methodology to map and assess lands that can be part of its portfolio. With a team of about ten professionals, including in-house staff and partner consultants, they have already registered 960 farms in all regions of Brazil.

The vast majority of these did not pass the initial technical scrutiny, which involves legal, environmental, and soil quality criteria. Although farms from all over the country are being considered, most of the ones actually purchased are in Mato Grosso state, where the agricultural tradition reduces risks.

In the first fund with this investment philosophy, a Mato Grosso farm of about 15,000 hectares was bought for R$8 million in 2013 and sold for $37,2 million in 2021. In the second fund, a similar-sized rural property in the same state was acquired in 2017 for $6 million and sold in 2022 for $29,2 million.

The end of credit card installment plans could harm innovation in the receivables market.

Sep 26, 2023 – Denyse Godoy

Since June 2021, when a new regulation from the Brazilian Central Bank for the credit card receivables market came into effect, the sector has flourished. The registration system has been improved, companies with different solutions for receivables negotiation have emerged, and FIDCs (Credit Rights Investment Funds) have multiplied. However, proposals to limit interest rates charged on revolving credit and to eliminate interest-free installment plans on credit cards could dampen this excitement.

In early September, the Chamber of Deputies approved the bill that created the debt renegotiation program for families and set a cap on interest rates for revolving credit on credit cards, which cannot exceed a total of 100% – currently, they can reach up to 440% per year. Now, the Senate is considering the bill, with Senator Rodrigo Cunha (Union-AL) as the rapporteur. In the context of discussions about solutions for Brazilian consumer over-indebtedness and high interest rates, the President of the Central Bank, Roberto Campos Neto, expressed discomfort with interest-free credit card installment plans that can last up to 13 months. In an August Senate hearing, Campos Neto stated the need to “discourage these very long interest-free installment plans.” “It’s not about prohibiting interest-free installment plans. It’s simply an attempt to make them a bit more disciplined,” said Campos Neto.

Retail associations immediately voiced opposition to the idea, fearing a negative impact on consumption. Installment plans are a convenience offered by merchants to customers to encourage purchases. Without this tool, consumption could decline in the country, affecting the entire economy. “Retailers rely on installment plans to make sales. If this option is not available on credit cards, they will have to find another way,” says Edson Santos, founder of the consultancy Colink Business Consulting and one of the leading experts in the country’s payment industry. He has worked for various companies in this ecosystem and authored the book “From Barter to Financial Inclusion.”

As possible alternatives to credit card installment plans, experts point to electronic installment payments, pre-dated debit card transactions, and even checks. The first option has not yet become widespread, the second, introduced more than ten years ago, has never been popular with the public, and the third is nearly obsolete. They do not (yet) support the creation of FIDCs.

They also lack a sophisticated registration system that enables them to be transacted. This registration has enabled the creation of services like the one offered since 2021 by fintech Marvin. “Retailers are increasingly selling with credit cards. Credit card networks grow every year, with new issuers, new acquirers, and sub-acquirers providing access and ease of card usage,” says Ricardo Figliolini, Chief Operating Officer and co-founder of Marvin. “We allow retailers to use these receivables balances, with high credit quality, to pay their suppliers, and we do not charge any fees to the retailer. These receivables, which were a problem and a cost for retailers, ‘frozen money in the future,’ have become a strong currency to pay suppliers and access the best credit terms, prices, and deadlines.”

Market’s Focus for the Week: Key Data Shaping Interest Rate Decisions

Sep 25, 2023

After the European, American, and Brazilian central banks signaled that interest rates could remain at a high level for longer than the market would like, depending on temperature of some indicators, the economic data due this week are the main focus of market participants.

Investors eagerly await the release on Tuesday (26) of the minutes from the last meeting of the Copom (Monetary Policy Committee of the Brazilian Central Bank) in which the members unanimously decided to reduce the basic Selic rate by 0.5 percentage points to 12.75% per year. On the same day, the IBGE (Brazilian Institute of Geography and Statistics) will release the IPCA-15 (Broad Consumer Price Index). The Central Bank publishes its quarterly inflation report (RTI) on Thursday. Taking all this information into account, the market wants to gauge the bets for the next committee meetings — which indicated that more 0.5 percentage point cuts are on the way, but some see the possibility of deeper reductions.

In the United States, the D-day is Thursday (28), when in the morning, the GDP (Gross Domestic Product) and the personal consumption expenditures index (PCE) for the second quarter are released, and in the afternoon, Federal Reserve President Jerome Powell makes a statement during an event with educators.

In Europe, the big expectation revolves around the consumer price index (CPI), to be released on Friday (29).

Drex and Market Regulation: Between Revolution and Evolution

Sep 25, 2023

There is little or no doubt that Drex, the digital real, is poised to revolutionize financial transactions and the capital market.

To address these changes, market capital regulation will also need to adapt.

The big question is the extent of these changes. In other words, whether investment regulation will undergo a revolution or simply evolve to incorporate the advantages of this new tool.

With the use of digital currency associated with a digital distributed ledger technology (DLT) system, many of the information currently controlled by service providers are recorded directly on the blockchain.

As participants in this network include the Central Bank, regulatory agencies, and major financial institutions, the system is fraud-proof.

This is possible due to certain characteristics of the technology.

Once information is recorded in a blockchain block, it cannot be altered or deleted without the consensus of the majority of the network. This ensures that data remains intact and reliable over time, reducing the risk of tampering or corruption.

Protection against Fraud: Since blockchain uses advanced encryption to ensure the authenticity of transactions, it is extremely difficult to counterfeit or commit fraud.

The decentralized nature of blockchain makes it highly resistant to cyberattacks, as an attacker would have to compromise the majority of the network to succeed in an attack.

Blockchain is a transparent technology. All transactions are recorded in a public ledger, and the information can be audited and verified by anyone.

Identity information can be stored in an encrypted form on the blockchain, accessible only to the legitimate owner.

According to Juliano Cornacchia, CEO and founder of Vórtx, Drex combines the advantages of blockchain with the security of the existing regulatory ecosystem.

“When I bring banks, financial institutions, as the gatekeepers of this business, you maintain the security of the existing regulation.”

In theory, some instances of control, regulation, and oversight that are currently performed by independent service providers could be moved into the blockchain.

Today, these service providers are required by regulators, who need someone to centralize this information. In Cornacchia’s opinion, the role of some of them is threatened.

“Today, I have separate clearinghouses, separate custodians, separate depositories, separate registrars, everything is decentralized,” explains Cornacchia.

One of the businesses at risk, according to Cornacchia, is registration. “There is no longer a need for Vortex or any other registrar. I have a ledger that lists all the holders of those assets. With blockchain, anyone can go there and access it.” In his opinion, the same reasoning applies to custody.

In CVM’s sandbox, an experimental environment where participants have temporary authorization to develop innovations in regulated activities, there are tests with the elimination of both the central depository and custody.

But Bruno Gomes, Superintendent of Securitization, Structured Investments, and Agribusiness at the commission, believes that this does not necessarily mean that providers of these services will disappear.

“It may be that we will still have the figure of the custodian, but working in this network, in a cheaper and more efficient way,” argues Gomes, “with more competition, reducing prices, for example.”

According to Gomes, these tests are currently being conducted in the CVM’s sandbox environment. “There are four projects there, all of them are testing this possibility,” he explains. “To what extent does this network replace, complement, or improve efficiency?”

Regulatory issues aside, João Pedro Nascimento, President of CVM (Securities and Exchange Commission), agrees that Drex will boost tokenization and the capital market.

“DREX has the potential to address issues related to the crypto economy.” And “we understand that the crypto economy and tokenization segment offer opportunities for the growth of the capital market,” he says.

In Nascimento’s view, the relationship between DREX and the programmability of money in the capital market should lead to a reduction in transaction costs.

“The creation and release of shares and other securities given as collateral will be more efficient, facilitating the execution of transactions and creating a more dynamic and inclusive capital market.”

Sicredi, XP, and Genoa lead the multi-market fund inflow in 2023

Sep 22, 2023 – By Denyse Godoy

The financial cooperative Sicredi, based in the state of Rio Grande do Sul, is the institution that has attracted the most customer funds to the multi-market funds it manages in 2023, according to exclusive data from Quantum Finance for Capital Aberto.

Sicredi’s net inflow of funds this year until August (the most recent available data) was R$ 8.5 billion ($1.61 billion).

The month that recorded the highest net inflow of funds into Sicredi’s multi-market funds was indeed August, with an inflow of R$ 8.9 billion ($1.78 billion), coinciding with the start of the Central Bank’s Monetary Policy Committee (COPOM) cutting the basic interest rate of the Brazilian economy after three years of an upward trend.

In the annual ranking, XP Vida e Previdência comes in second place with R$ 4.77 billion ($954 million). Their best month was April, when they recorded a net inflow of R$ 891  million ($178.2 million).

In third place in the annual ranking is the São Paulo-based asset management company Genoa, with a net inflow of R$ 3.47 billion ($694 million) in the year-to-date of 2023 until August.

Their highest monthly inflow of funds occurred in June, amounting to R$ 1.27 billion ($ 254 million)

Brazilian SEC opens public consultation on changes to shareholders’ meetings rules

Sep 21, 2023

The Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários – CVM) intends to amend the rules governing shareholders’ meetings, as outlined in Resolution CVM 81. One of the main proposed changes under consideration is the expansion of mechanisms for remote participation and voting in shareholders’ meetings.

Starting from this Thursday, the topic is open for public consultation to gather input from those affected by the regulation and from CVM’s technical departments.

According to the President of CVM, João Pedro Nascimento, “the reform paves the way for modernizing and expanding the ways in which shareholders’ meetings are held, facilitating not only voting but also effective remote participation.”

Nascimento also states that one of the goals is “to promote greater engagement and empowerment of shareholders, especially retail investors.”

According to Antonio Berwanger, Superintendent of Market Development at CVM, with the reform, “the desired benefits of introducing the remote voting mechanism can fully materialize.”

Key proposed changes include:

  1. Expanding the scenarios where the disclosure of remote voting bulletins is mandatory for all types of shareholders’ meetings – general or special, ordinary or extraordinary.
  2. Innovating the way to participate and vote remotely, allowing companies to provide additional physical locations for shareholders to participate in real-time meetings.
  3. Enhancing the remote voting bulletin on various topics, incorporating CVM’s experience in applying Resolution CVM 81 in recent years.
  4. Adding cases where the obligation to provide the remote voting bulletin is waived, reducing compliance costs for companies when investors do not benefit from the mechanism.
  5. Adjusting the transmission flow of voting instructions to optimize the use of time for collecting, processing, and counting votes by the regulated entities involved in the process.

“This action is aligned with what I have referred to as Open Capital Markets, the democratization of the Capital Market, which aims to facilitate citizens’ journey with more understanding, confidence, and agility in their operations,” says Nascimento.

Suggestions and comments can be submitted until November 24, 2023, to the email [email protected].

Incentivized debentures gain ground and could get a new boost

Sep 21, 2023

In a year marked by complex credit conditions, incentivized debentures have carved out a prominent space in the financial market.These investment instruments offer bondholders income tax exemptions for individuals and reduced tax rates for corporations. The emitters are mainly infrastructure companies.

Experts estimate that the total funds raised through these operations could reach R$ 45 billion by year-end. This projection signifies a 10% growth compared to the previous year, inching ever closer to the record-setting figures of 2021 when the volume reached an impressive R$ 46.9 billion.

According to Eugenia Souza, who leads the Corporate Trust division and is a partner at Vortx Dtvm, “since the new government took office, the infrastructure and concessions sector has been buzzing with excitement over new investment opportunities and sectoral growth. This enthusiasm is largely fueled by the anticipation surrounding the government’s flagship initiative, the PAC.”

However, Souza notes that the results could have been even more robust if not for the market’s struggle with high interest rates.

On Tuesday, the Senate approved another bill that allows public service concession companies to issue debentures and deduct a portion of the interest payments.

Under the proposed changes, issuers will have the opportunity to deduct 30% of the amount spent on interest expenses from the calculation base for the Income Tax and Net Profit Contribution base.

According to PL 2.646/2020, these debentures must be issued by December 31, 2030, and their issuance must adhere to regulations outlined in the laws governing investment funds in the sector.

It’s important to note that while the bill has received approval from the Senate, it has undergone amendments and will require further scrutiny by members of the Chamber of Deputies.

Under the provisions of the bill, the funds raised through debenture issuance must be directed toward infrastructure investment projects or activities heavily focused on research, development, and innovation.

Furthermore, infrastructure debentures may even be issued by direct or indirect controlling entities of concessionaire companies.

Eugenia Souza offers insights into potential strategies, stating, “In our view, there may be a movement towards early debt settlement under the framework of Law 12.431, followed by the issuance of new debt to capitalize on the tax benefits. This is also an opportune moment for concessions that have changed their economic group to strengthen their financial positions while enjoying the potential for reduced tax liability in terms of income tax and net profit contribution.”

According to the Ministry of Finance, the volume of debentures in relation to Brazil’s Gross Domestic Product (GDP) currently stands at approximately 9%, significantly lower than the figures seen in the United States (30%) and the United Kingdom (15%).

Central Banks confirm expectations on interest rates; future depends on economic data

Sep 20, 2003 – Denyse Godoy

As widely expected by the global financial market, tthe Federal Reserve (Fed) kept the basic interest rate of the United States’ economy within the range of 5.25% – 5.5% per year, the highest level since the beginning of 2001.

 In Brazil, the Copom (Monetary Policy Committee of the Central Bank), on the other hand, reduced the Selic rate by 0.5 percentage points to 12.75% per year, marking the second consecutive cut.

Commenting on their decisions, both monetary authorities made it clear that the next steps depend on economic data to be released in the coming weeks, measuring the temperature of economic activity and prices.

In the United States, uncertainty and concerns that the inflation threat may not be over yet are greater than in Brazil.

 “Maintaining a cautious stance is less costly for the monetary authority than a scenario where there is a reduction in the expectation of the basic interest rate, and it appears to be more consistent in a context where there has been an increase in the GDP [Gross Domestic Product] growth projection and a decrease in the unemployment rate,” says Marianna Costa, chief economist at the TC trader community.

The Copom stated that the magnitude of the cuts adopted so far is “appropriate” for further reductions in the upcoming meetings and emphasized that the magnitude of the total monetary easing cycle will depend on a set of variables, primarily inflation dynamics and expectations.

“Even if the Copom continues to assess the balance of risks for inflation as symmetric (which is more likely), upside risk factors have recently become more of a concern for market analysts,” says Sérgio Goldenstaien, chief economist at the Warren Rena asset manager.

“Among them are the recent rise in oil prices, the increase in Treasury yields – the 10-year rate reached its highest level since 2007 – the global strengthening of the dollar, which has contributed to interrupting the real’s appreciation trend since early August; robust data on economic activity and the labor market in the country, which could lead to greater resilience in service inflation; and greater concerns about fiscal policy execution next year.”

Regulatory Challenges of Using Investment Robots in the Capital Market

Sep 20, 2023

Disruptive technologies have been impacting various economic and social sectors, and, evidently, it is no different with the capital markets. It’s not news that automation has been a part of stock market operations for quite some time. In fact, a significant portion of the market can only imagine what the floor trading was like on the old Bovespa and BM&F stock exchanges. In this environment of coexistence with technology, the capital markets are seeing a new alternative: the so-called “investment robots.”

Although popularly known by this name, investment robots are actually artificial intelligence services offered to investors by financial institutions. These are automated systems based on algorithms programmed to make investment decisions based on a set of information. For example, the investor’s profile, data on a specific asset, news that may influence its valuation, and trading history (machine learning).

The regular use of artificial intelligence for this purpose is subject to obtaining the appropriate registration with CVM (Brazil’s Securities and Exchange Commission), which may vary depending on the automated activity performed. Considering this difference, investment robots are divided into two main categories: robo-advisors and robo-traders.


Robo-advisors are those that base their decisions on the investor’s profile. They can be further subdivided into robo-advisors, which only recommend investments to be made by the investor themselves, and robo-managers, which execute investments automatically.

The use of robo-advisors aims to increase the efficiency of stock trading, optimizing investment exploration through quick analyses that minimize human effects (such as errors and biases, for example), while adhering to rules related to the adequacy of the investor profile analysis, also known as suitability.


On the other hand, robo-traders are those that base their decisions on pre-set price patterns by the investor and execute operations without human intervention.

They are often employed to implement the High-Frequency Trading (HFT) technique, which involves trading a high financial volume in order to execute multiple transactions within fractions of seconds and profit from fluctuations in asset prices.

Although HFT practice is not inherently harmful, it can clash with two important pillars of the capital markets: transparency and equity. This is because the speed of transactions combined with the ability to cancel orders can create a perception of artificial supply and demand, unduly interfering with the formation of asset prices and misleading investors. In this scenario, HFT can create conditions for the commission of the offense of price manipulation in the capital markets, especially in the forms of spoofing and layering.

Prohibited by Article 2, II, “b” of CVM Resolution No. 62/2022, spoofing and layering are terms that refer to the submission of orders without the intention to execute them, creating an appearance of liquidity for a specific financial asset. From this perspective, offers are sent both for buying and selling, with only one of them being desired while the other is purely fictitious.

The false offer creates pressure on that side of the order book, inducing other investors to modify their orders to follow the trading. After reaching the desired offer value, the artificial offers are canceled. Despite their common characteristics, spoofing and layering are distinct: the former is characterized by inserting a single fictitious offer in a significant batch; the latter involves inserting successive artificial offers in small batches.

Artificial intelligence has been widely used in the capital markets for some time now, and the trend is for this use to be increasingly explored in a creative manner. Therefore, the use of artificial intelligence in stock trading represents a regulatory challenge that has been around for some time, perhaps as enduring as creativity and the potential for innovation in the capital markets.

International mergers and acquisitions involving Brazilian companies totalled R$ 145 billion up to August.

Sep 20, 2023

The number of international mergers and acquisitions involving Brazilian companies amounted to R$ 145.5 billion from January to August.

According to a survey by TTR Data and Tozzini Freire lawyer firm, there were 1,282 transactions. This represents a 27% decrease compared to the same period last year.

In August, there were 151 mergers and acquisitions recorded, both announced and completed. These transactions totaled R$ 16.8 billion.

The sector with the highest number of deals was Internet, Software & IT Services, with 254 transactions.

Next came the Business & Professional Support Services segment, with 197 transactions.

The United States and the United Kingdom, with 108 and 35 transactions, respectively, were the countries that invested the most in Brazil.

Conversely, Brazilian companies also chose the United States as their main investment destination, with 19 transactions, followed by the United Kingdom with seven operations.

In the Private Equity sector, there were a total of 57 transactions, amounting to R$ 17.6 billion. This represents a 21% decrease in the number of transactions compared to the same period in 2022. However, the capital mobilized increased by 28%.

There were also 378 Private Equity investment rounds, 41% fewer than last year, with a total movement of R$ 12.2 billion.

According to Thomas Monteiro, a partner at Olimpia Partners, despite the predominance of operations in the IT and professional services sectors, Brazil is uniquely positioned to benefit from M&A transactions in the agribusiness and energy sectors.

This is primarily due to three factors: its abundant natural resources, favorable climate, and substantial market size.

The operation highlighted by TTR Data in August was the completion of the $2.5 billion sale of Aesop by Natura to L’Oréal.

Overindebtedness Leads Banks to Support the End of Revolving Credit on Credit Cards

Sep, 20 2023 – Denyse Godoy

The House approved on September 5th a bill that assigns the National Monetary Council (CMN) the task of setting limits for credit card interest rates. The Senate still needs to vote on it. The President of the Chamber, Rodrigo Cunha, who will be the rapporteur of the bill, has already stated his intention to address the matter with great “responsibility.”

According to leaders of large and medium-sized banks interviewed by Capital Aberto, the overindebtedness of Brazilians has led financial institutions to support the idea of self-regulation. “Of course, interest rates need to compensate for the credit product, but there is a lot of abuse on the part of financial companies that only deal with credit cards,” said an executive from one of the largest banks, who asked not to be named because they are not authorized to speak publicly on the matter. 

Credit card issuers and other post-paid payment instrument providers used in open arrangements (flagship cards) or closed arrangements (retail network cards) will be required to submit a self-regulation proposal to CMN regarding interest rates and financial charges charged on revolving credit and balance installment payments on credit card bills.

Brazilian Central Bank expected to reduce interest rates by at least 50 base points

Sep, 19 2023

The Brazilian Central Bank Monetary Policy Committee (Copom) is expected to reduce its the basic interest rate (Selic), which is currently at 13.25% per year, to 12.75% per year in its sixth meeting of the year in Brasília, which starts this Tuesday.

If confirmed, this will be the second rate cut since August when the monetary authority halted the tightening cycle.

In the statement from the last meeting in early August, Copom informed that the Central Bank directors and the president of the organization, Roberto Campos Neto, unanimously anticipated 0.5 percentage point cuts in the upcoming meetings.

According to the most recent edition of the Focus Bulletin, a weekly survey with market analysts, the basic rate is indeed expected to drop by 0.5 percentage points, although some institutions project a cut of up to 0.75 points.

The financial market’s expectation is for Selic to end the year at 11.75% per year. On Wednesday, the 20th, at the end of the day, Copom will announce its decision.

Challenges Faced by Casas Bahia Extend the Winter of Brazilian Retail

Sep, 19 2023Denyse Godoy

The decline in interest rates in Brazil after two years and the prospect of accelerated economic growth in the country have fueled speculation that the crisis in the national retail sector could be nearing its end. However, the growing challenges faced by Casas Bahia, an emblematic name in the industry, are discouraging the most optimistic investors.

The company’s last follow-on to raise funds and reduce debt disappointed. Casas Bahia sold new shares at R$ 0.80 ($0.16) each on Wednesday (13/09), which represented a 28% discount compared to the closing price on that date. Instead of raising R$ 1.1 billion ($220 million), the chain only managed to raise R$ 623 million ($124 million). In the following two trading sessions, it lost about 36% of its market value.,

Concerns about Casas Bahia’s ability to honor its financial commitments continue to rise.

The credit rating agency S&P downgraded it from brAA- to brA-. With this downgrade, investors holding R$ 420 million ($84 million) in CRIs (Real Estate Receivables Certificates) issued by the chain in 2022 could request the early settlement of that debt.

According to credit analysts, the number of stock market investors betting that Casas Bahia may enter recovery, like Lojas Americanas, another retail giant, is small, but growing. 

In the coming days, all eyes are on the unfolding of this situation, which could either increase or further reduce the financial market’s confidence in the entire retail sector.

Investment Funds: Anbima Publishes New Regulations and Reclassifies Real Estate Funds

Sep, 19 2023

he Anbima (Brazilian Association of Financial and Capital Markets Entities) has published a new Third-Party Asset Management Code with modifications to adapt the text regarding investment funds to CVM (Brazilian SEC) Resolution 175, which comes into effect on October 2.

Among the main updates, the document includes rules for funds with investments abroad, the inclusion of real estate funds and FIPs (Investment Funds in Participation) in sustainability rules, and a new classification for popular real estate funds.

With these changes, real estate funds will have three main classifications:

Brick (Tijolo): for products with more than two-thirds of their net worth, directly or indirectly invested in real estate and real property rights.

Paper (Papel): with more than two-thirds invested in investments in securities and/or values permitted by regulation.

Multi-strategy (Multiestratégia): not adhering to either of the previous two criteria.

For investments abroad, Anbima now requires the fund manager to provide information about the assets in the portfolio.

“The new rules, in addition to being in line with the regulator, aim to bring more transparency to the investor,” said Zeca Doherty, the association’s executive director.

The new version of the code comes into effect on October 2, along with CVM Resolution 175. However, the classification for real estate funds has a different deadline and will come into effect on April 1, 2024.

Existing funds as of this date will have until December 2024 to comply with the new regulations.

Fitch: Credit Recovery Expected to Stabilize Ratings of Brazilian Companies

Sep, 19 2023

The expectation of a gradual improvement in economic activity and the return of credit should enhance the ratings of Brazilian companies.

This assessment comes from Ricardo Carvalho, Managing Director and Head of Corporates Brazil at Fitch Ratings.

“We expect there to be a slowdown in credit rating downgrades in the second half of 2023,” Carvalho said. 

According to the executive, Fitch downgraded the credit rating of 25 companies in the first half of the year. This volume was higher than the total for the entire years of 2021 and 2022 combined.

The main reasons for these downgrades were disappointment in operational cash generation, high cash burn due to interest rates, increased leverage, and a sharp contraction in credit.

Selective Market

“Domestic issuances have contracted by 42% in the first seven months of 2023 compared to the same period last year. However, there are clear signs of the return of credit supply,” Carvalho said.

In his assessment, despite the return of credit and the improvement in the ratings of Brazilian companies, the market is likely to remain selective.

Therefore, the focus should be more on issuances by companies with higher credit quality, with AA (bra) ratings or above.

In the international market, the outlook is also positive.

According to Natália Brandão, Associate Director of Corporates at Fitch Ratings, the bonds market for Latin American companies is beginning to show a moderate recovery, which could benefit Brazilian issuers.

Bonds issuances by Brazilian companies totaled $8.4 billion in the year-to-date until the first week of September 2023, already surpassing the amount issued in 2022.

“There is an expectation of a gradual resumption of fundraising. However, Fitch believes that at this time, issuances should focus on traditional bond issuers and those with ratings in the BB category or above,” Natália said.

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