Read this Wednesday’s edition of the FolhaMercado newsletter (31) – 05/31/2023 – Market

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CEOs and Scientists Warn of Danger of AI

Sam Altman, CEO behind ChatGPT, and Demis Hassabis, head of Google DeepMind, are among the 350 executives and scientists who signed a one-paragraph manifesto on the risks of AI (artificial intelligence):

• “Mitigating the risk of extinction from AI must be a global priority, alongside other risks on a wider societal scale, such as pandemics and nuclear war.”

The Center for AI Safety, the nonprofit that released the statement, told the New York Times that the short statement was intended to build consensus among all signatories while keeping the message straightforward.

who signs: In addition to executives, researchers such as Geoffrey Hinton and Yoshua Bengio, who received a Turing Award for their work on neural networks and are often described as the “godfathers” of AI, also subscribe to the document.

Another sign is Mustafa Suleyman, co-founder of DeepMind who now runs the startup Inflection AI, which answers questions with new questions and was praised by Bill Gates.

It is not the first time industry heavyweights sign a manifesto warning of risks related to the rapid advancement of AI, a movement that reached the general public thanks to the popularity of ChatGPT from the beginning of the year.

In March, Elon Musk and more than 1,000 researchers and executives called for a six-month pause in the development of advanced AI systems, to stop what they described as an “arms race”.

• This letter, however, was not signed by any of the startups that started at the head of the race for the great language models.

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Why gasoline should rise again

The drop in the price of gasoline at the pumps observed in the last two weeks is likely to be short-lived. The change in the ICMS collection model begins to take effect in June, which now has a single rate of R$ 1.22 per liter in all states.

In numbers: the increase will reach 22 states and the Federal District, which today have a lower rate compared to the established standard.

• BRL 1.22 per liter is BRL 0.20 higher than the current average, according to consultant Dietmar Schupp.

The ICMS change should interrupt the recent cycle of low gasoline prices, a reflection of cuts promoted by Petrobras in its refineries.

Which explains: the new state tax levy was approved by Congress in March 2022.

It replaces the rule in which each state charged a different rate and on top of the pump price, which generated a chain readjustment when gasoline became more expensive, according to the fuel sector.

Here comes more: in July, the full collection of federal taxes on fuels also takes effect, which were partially re-encumbered in March.

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default risk

The number of Brazilian companies downgraded to the default risk level by the risk rating agency Fitch Ratings went from 4 for 10 in the last six months.

• Three of these companies are at level “D” (default). As of December 2022, there are none in that class.

Fitch did not reveal which companies are in each level, but it recently announced that it had downgraded the ratings of Americanas and Light, currently undergoing judicial recovery, to the “D” level.

Understand: According to the agency’s notes, as of “CCC”, the company already has a substantial credit risk, that is, with a real possibility of default and a low margin of safety.

• Until you reach the “D”, you still have the levels “CC”, “C” and “RD”.

Ratings from rating agencies like Fitch matter because many large international funds use them as a criterion for investing in a particular company or country.

• Some pension funds, for example, are prohibited by statute from investing at levels below a certain degree of risk.

Which explains: a greater number of companies at risk of default comes in the wake of high interest rates and episodes that tightened the granting of credit in the country.

While the first factor makes the liability more expensive to be paid, the second makes it difficult to renegotiate with creditors of companies that have the noose around their necks.

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Banks tighten oversight of slaughterhouses

Brazilian banks will start checking whether slaughterhouses have bought cattle from deforested areas in the Legal Amazon and the rest of Maranhão before approving loan applications.

The agreement was put together by Febraban (Brazilian Federation of Banks) and involves, for the time being, 21 financial institutions (see which ones here), but the number should increase, according to the entity.

Understand: Participating banks will ask slaughterhouses to implement a traceability and monitoring system for items produced and sold in the area.

The businesses involved will have until December 2025 to comply. In case of non-compliance, banks may suffer sanctions, from the payment of a fine to the exclusion of the entity.

Which explains: The movement takes place amid pressure from investors and abroad for the financial and business sector to adopt concrete practices in favor of the environmental agenda.

The European Union, for example, last month approved a rule that prohibits the sale on the continent of products derived from deforestation.

• Among the products cited in the rule are cattle, wood, soybeans, coffee, cocoa, rubber and palm oil and the derivatives of each.

In response to protocol of the banks, the association of meat exporters stated that it does not accept that “other sectors outsource their responsibilities”.

The entity claims that it supports initiatives that increase sustainability standards in the livestock chain, but demanded that the demands made by banks to slaughterhouses be adopted “to all their account holders”.