Read this Thursday’s edition of the FolhaMercado newsletter (20) – 04/20/2023 – Market

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EU approves law against items linked to deforestation

This Wednesday, the European Parliament approved a rule that prohibits the sale on the continent of products derived from deforestation.

Understand: the law bars the commercialization in the block of any crop that is linked to the cutting of forests –illegal or not– after 2020.

• There is a list of primary products in the law: cattle, wood, soybeans, coffee, cocoa, rubber and oil palm. Its derivatives also appear, such as leather, chocolate, furniture, charcoal, etc.

How will it work: after a transition period, which is expected to end in August 2024, European companies will have to guarantee with an audited document that the imported product does not come from land that has been deforested.

• The word is not enough. Suppliers will need to track their supply chain and provide information such as location coordinates for the EU to verify the origin of the products.

• Countries will be classified as low, medium or high risk of deforestation, which will determine the level of inspection of products from these countries.

• The European company that does not comply with the law may pay a fine of 4% of its annual turnover.

Reaction: in an interview with the Reuters agency, the president of Abag (Brazilian Agribusiness Association), Luiz Carlos Corrêa Carvalho, stated that the European legislation seeks to supersede the Brazilian one.

• He referred to the national forestry code, which provides for legal deforestation by allowing certain areas of the property to be used for agriculture and livestock.

• Even so, the sector believes it is capable of complying with the general lines of the new standard.

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Tok&Stok: Sale and closed stores

In a measure to reinforce cash, Tok&Stok is closing stores in several states, most of them in shopping malls, and offering discounts of up to 50% on the stock of the units that will be closed, according to reports from customers.

• In recent days, stores in Fortaleza (CE), Vila Velha (ES), Rio de Janeiro (RJ) and Campinas (SP) have liquidated, and the queue to enter the locations reaches two hours, according to publications on social networks. .

• According to the Union of Commerce Workers in São Paulo, the volume of dismissals is not above the conventional level.

Understand the Tok&Stok crisis: the complicated situation of the furniture and decoration items retailer became public in February, when a real estate fund filed a lawsuit requesting the eviction of the company from a logistics warehouse for non-payment of rent.

• Among analysts, the assessment is that, after the boom in orders generated by the effects of the pandemic, the company continued to spend high and did not prepare for the current sour scenario.

Tok&Stok: Founded in 1978 with a focus on the A and B classes, the chain has stores in 22 Brazilian states. In addition to the Debrule family, founders of the brand, the company has the SPX fund as a relevant shareholder.

• In 2020, a year of rain of offers on the Stock Exchange, the company even filed an IPO request, but did not go ahead with the plan.

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Influencers in CVM’s sights

The CVM, sheriff of the Brazilian capital market, wants companies and financial influencers to make it clear to their followers when their publications are sponsored by companies.

• The proposal is part of a study on the regulation of the role of influencers that still needs to go through a public hearing before it becomes effective.

Understand: the aim is to provide greater transparency about the content published on social networks.

• CVM’s proposal is that companies or funds listed for investments inform when they are financing an influencer, who would also have the role of saying that a certain publication is sponsored.

Why it matters: the number of finance influencers in Brazil exploded from 2020 onwards, when interest rates were 2% per annum and investors previously used to good returns guaranteed in fixed income had to look for opportunities in variable income.

• In a study last year by Anbima, a self-regulating entity for the capital market, 73% of respondents said they learned to invest by following YouTube channels or influencer accounts.

• With the boom of new individual investors on the Stock Exchange and of influencers, some regulation of the activity became necessary to guarantee transparency to this universe.

CVM also says that it has been working on mapping influencers and atypical movements in negotiations made in the market by some profiles.

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Dollar returns to BRL 5

The Brazilian financial market started sour this Wednesday with the news from abroad, and the bad mood among the agents only widened during the day, making the dollar surpass the barrier of R$ 5.

In numbers: US currency advanced 2.17% before the real, for BRL 5.08while the stock market fell 2.12%, at 103,912 points. In future interest, the rate for the 2025 contract rose from 11.98% to 12.11%, and for 2027 it went from 11.82% to 12.07%.

What explains

Campos Neto: the president of the Central Bank said, at an event in London, that core inflation is still resilient and reinforces the diagnosis that the battle against rising prices has not been won.

• The statement sent the message to analysts that the Selic could take longer to fall than expected and put pressure on future interest rates, which ended up hitting the Exchange’s assets.

Framework: presented yesterday to Congress, the text brought as a novelty the list of 13 expenditures that will not be considered for the expenditure limit of the new rule.

• The proposal did not surprise investors so much, who question the government’s tax collection capacity to get the deficit to zero by next year, even more so after the retreat in the measure that ended the exemption on international purchases.

Strengthening the Dollar: British inflation data ended up valuing the US currency against emerging currencies, but the real ended the day as one of the worst currencies against the dollar, reflecting risk aversion here.

Another negative highlight of the day was Vale, the second largest company on the Exchange, which recorded production in the first quarter below expectations. Its shares fell 2.92%.