Finance & Market Bulletin - February/March 2023

22 Mar

22Mar

By Daniel Christian Henrique

The fiscal framework: it sounds like a series name and almost became a

The maintenance of Selic at 13.75% (in addition to the nod to other possible increases), with consequent real interest of 8%, by the Central Bank did not leave the federal government satisfied, which maintains its continuous pressure and conversations with the BC for future rate drops. But the month of February and March was marked by negotiations for approval in April only of the new fiscal framework, which has been demanded by the market to calm it, given the insecurities that a financial disorder in the government could cause in the future. On the penultimate day of the month, the discussed fiscal framework was announced, eliminating the always leaky "spending ceiling" by linking spending to the primary surplus. The government, therefore, expects that this reformulated framework will bear fruit in reducing the basic interest rate using common sense (EXAME, 2023; AGÊNCIA BRASIL, 2023; E-INVESIDOR, 2023b; INFOMONEY, 2023c).

Many analysts, however, considered the framework to be somewhat optimistic, without delving too deeply into the nebulous international and even internal environments, always counting on the inflow of revenue and linking expenses to tolerance bands for these revenues until 2026 - but without situations in which the expense decreases. However, the disclosure of the delayed framework was enough to appease the market, generating good initial acceptance, even bringing an increase in the Ibov on the day.

Ibovespa fell, then surpassed the symbolic mark

Speaking of Ibov , it fell 7.5% in February. It was the biggest drop since June last year. Local political-economic instability and prospects for further increases in US interest rates were the levers (EXAME INVEST, 2023a). In the month of March, the index recovers, surpassing the symbolic mark of 100,000 points at the end of the month, but in anticipation of the publication of the new fiscal framework by the federal government (MONEYTIMES, 2023c). The blessed announcement, with good initial acceptance, Ibov confirms its good performance with closing at 103,267 points on March 30th. On the last trading day of the month, however, it operated downwards with a correction of the previous day's optimism and the realization of profits by companies that were coming from several consecutive increases. It closed the month with 101,882 points (UOL ECONOMIA, 2023 )

And the crisis arrived in Big Techs

During the pandemic there was a boom in hiring by Big Techs , it was the wave of hiring. Once the pandemic had eased, a war came in Europe accompanied by inflation and a global economic slowdown. They didn't escape. The dismissal processes began to readjust their profitability, with thousands of terminations of employment contracts in 2022 and took on an even greater volume between January and March of this year. This month, Meta terminated 11 thousand employment contracts (13% of employees). Microsoft follows with 10,000 layoffs, along with Amazon , which totaled 27,000 layoffs. Also in line are Google, Microsoft, Twitter , SpaceX , Tesla, Spotify , Pinterest and PayPal (ÉPOCA NEGÓCIOS, 2023; OLHAR DIGITAL, 2023; GZH, 2023). Even Wall Disney, which had been moving into technological areas with the metaverse , streaming and other adventures in the sector that required emptying Scrooge McDuck's coffer, ended the month of March announcing the end of its metaverse , dismissal of its team and others 7 thousand people planned in order to restructure and get their costs in order (MONEYTIMES, 2023a).

Collapse in Silicon Valley bank

It took just two days of chaos for one of the largest startup credit banks in the world to go bankrupt: Silicon Valley Bank, in California. With the increase in North American interest rates by the FED, reaching 4.75%, there was a significant increase in withdrawals from technology companies at the bank due to the greater difficulties in obtaining credit in the market . But as these deposits were invested in long-term Treasury bonds that lost value with the rise in interest rates, the bank took a loss on the sale of the bonds, which reached US$1.8 billion. The news went viral and the bank run began , two days were enough to liquidate the bank and melt its shares (E-INVESTOR, 2023). In federal courts, however, the bank's controlling shareholder in the request for judicial recovery claims to have US$2.2 billion in liquidity to evaluate its strategic alternatives (INFOMONEY, 2023a). First world countries that are now experiencing higher interest rates are beginning to learn lessons that have long been known here. At the end of March, FED President Michel Barr , gave his opinion on the SVB case: the bank went bankrupt because its managers were unable to measure the risks of high interest rates and liquidity problems. Period (INFOMONEY, 2023b).

Interest rates in Brazil: a 'death penalty' for Stiglitz

If American banks don't quite understand how to deal with high interest rates yet, it doesn't mean that an American with a Nobel Prize in economics can't have an opinion on the country with the highest interest rates in the world. For Joseph Stiglitz ( 2011 Nobel Prize), Selic at 13.75% in Brazil, with real interest rates of 8% (discounting inflation) is shocking, a 'death penalty' for the country, which considers that it only survives due to existence of the BNDES, which offers more attractive interest rates for the most productive companies (CORREIO BRAZILIENSE, 2023).

Meanwhile, on payroll interest...

And another story that came and went between February and March was the new interest rate for loans granted to INSS retirees and pensioners. On March 13, the National Social Security Council approved a reduction in the rate, from 2.14% to 1.70% per month. Ok. But apparently no one consulted the other parties involved: ministries and banks... It was a general outcry and the public and private banks simply decided not to offer this loan anymore. Simple exit for a simple decision. The deal was to renegotiate and reach a "middle ground". Almost at the end of March, the new rate comes out, now at 1.97% per month (REDE JORNAL CONTÁBIL, 2023; DIÁRIO DO GRANDE ABC, 2023)

Beef embargoed and unembarked

Beef protein producers are already starting to get used to the market opening and closing to China. Now it's the mad cow that was scaring us. It was a single sporadic case that appeared in the southwest of Paraná, but enough to cancel via auto embargo on February 22nd all meat shipments to China, buyer of 60% of our protein. A month later, after completing the entire protocol for these cases, it was canceled and exports resumed. Financially, between 15 and 20% of shipments in the first quarter will be lost (CANAL RURAL, 2023).

Meanwhile, in chicken meat in Santa Catarina...

There is nothing wrong here. In the first two months, shipments of poultry meat from Santa Catarina to China increased , generating an increase in revenue of around 78.4%. A similar situation occurred with Saudi Arabia, increasing its revenues by 57.5% during the period. Overall, the state raised a 27.8% increase in its revenue from poultry protein (GOVERNO DE SANTA CATARINA, 2023).

Brazil and China negotiating without the dollar

Speaking of Brazil and China, in the last days of March, both countries reached an agreement so that trade and investments between them can be carried out without using the US dollar, but directly with the real and yuan. Experts indicate the possibility of reducing costs for exporters and importers with the new agreement, as it will eliminate losses from exchange rate variations in the dollar, as the yuan varies less, allowing for greater predictability. The international issue is also at stake: China's geopolitical dispute with the USA has led to the need to reduce the country's dependence on trading in dollars (DIÁRIO DO GRANDE ABC, 2023 )

Inflation impacted by education and fuels

Based on the IPCA index, it increased by 0.84% in February (after an increase of 0.53% in January). The main person responsible for the most significant increase was the Education group, which, with the increases in monthly fees, managed to achieve its biggest increase since 2004 (IBGE, 2023; CNA, 2023). And while the final inflation result for March is not out, let's go with its preview based on the IPCA-15, which is expected to be 0.69% in the month, with emphasis on fuel increases (UOL ECONOMIA, 2023) . After the fifth COPOM meeting, it was decided to maintain the basic interest rate at 13.75%. Inflation expectations for 2023 released by the Focus Bulletin then underwent a small adjustment downwards, going from 5.95% to 5.93% (UOL, 2023a, 2023b).

Petrobras reduces diesel

Still in the conversation about fuels, a relief in the price of diesel. This fuel was reduced by R$0.18 by Petrobras on March 23 with the aim of maintaining its competitiveness despite existing alternatives on the market. Gasoline, with the March increases, remains 3% above the international price (E-INVESTOR, 2023a).

Serasa: liquidated overall

Serasa carried out a joint effort in March with mega-sales to clear its name. Discounts reached up to 99% or even payment of the debt for R$ 1.00 (1.5 million debts), R$ 10.00 (20.9 million debts) and R$ 100.00 (156 million debts). debts). Payment via Pix was accepted with a guarantee that the name would be cleared at the same time. Of course, to make this endeavor possible, there were more than 500 Serasa partner companies that agreed to the action to offer a financial fresh start to millions of Brazilians (MONEYTIMES, 2023b; EXAME INVEST, 2023b).

Cars and sales are not matching

If business was already not doing well in January with the rise in car prices, February completes the package with the lowest production of vehicles in the last seven years, decreasing 2.9% compared to February last year - despite producing 5. 6% more compared to January this year. (REVISTA OESTE, 2023; FORBES, 2023). For used cars it was bad overall: it fell 6.7% compared to January and 2.3% compared to February 2022 (FENABRAVE, 2023).

References:

ÉPOCA NEGÓCIOS. Demissões em massa custarão até US$ 4,7 bilhões para Amazon, Google, Meta e Microsoft (2023)

OLHAR DIGITAL. ‘Big Techs’ já realizaram quase 100 mil demissões; 40 mil apenas em 2023 (2023)

GZH. Amazon anuncia demissão de outros 9 mil funcionários (2023)

E-INVESTIDOR. Crise nos bancos: saiba tudo sobre a falência do Silicon Valley Bank (SVB) (2023a)

E-INVESTIDOR. Arcabouço fiscal cumpre o que o mercado esperava; veja as análises (2023b)

INFOMONEY. Controladora do Silicon Valley Bank, SVB Financial pede recuperação judicial (2023a)

INFOMONEY. SVB quebrou porque sua direção falhou em medir riscos dos juros, diz Barr, do Fed (2023b)

INFOMONEY. Arcabouço fiscal é insuficiente para equilibrar contas e joga incerteza sobre reforma tributária, diz deputado (2023c)

EXAME INVEST. Ibovespa cai 7,5% em fevereiro e tem pior mês desde junho do ano passado (2023a)

EXAME INVEST. Feirão Limpa Nome faz "liquidação" e permite pagamento de dívida por R$ 1 (2023b)

CANAL RURAL. China derruba embargo e volta a importar carne bovina do Brasil (2023)