Ricardo Mussa spoke about how the company was affected by the coronavirus, the increasing weight of ESG and about the future: new acquisitions and IPO in sight?’

“I have never seen how I am seeing the demand from our customers by genuinely paying premium for more sustainable products.” The statement is from Ricardo Mussa, CEO of Raízen, an integrated energy company that is among the largest private business groups in Brazil.

In an interview with InfoMoney, Mussa said that the greater importance of consumers to ESG (Environmental, Social and Corporate Governance) issues is something that is here to stay – and that can be a good deal for the company, which produces ethanol, sugar, distributes fuels and generates energy.

The executive also spoke about the tax exemption given by the Brazilian government to the import of corn ethanol from the United States, the lack of a more active policy in generating bilateral agreements that benefit Brazilian agribusiness, as Raízen was affected by the coronavirus pandemic and expectations of recovery, in addition to acquisitions and IPO.

See below the main parts of the interview.

How was Raízen’s operation affected by the pandemic coronavirus and what did the company do to deal with it?
The harvest started very lively, it was in the middle of the pandemic. We were very concerned mainly with the operational issue. As we have a lot of people at Raízen, more than 30 thousand employees, we were very concerned if the coronavirus issue would impact our operations.

We ended up removing a lot of people from the risk group, we did a lot of tests inside the company and fortunately we have had no impact so far. I mean, impact always has, but nothing that is very relevant to the operation. The pandemic started a lot in São Paulo, and our operation is more inland. We are also very large in several places in Brazil.

We operate in 70 terminals, we operate in Argentina, so obviously we were impacted, but in a better way than we imagined. I don’t know if one of the reasons [for that] is because Raízen has a low average age [of employees]. So, we did not have major consequences of the coronavirus in the operation.

But isn’t the sharp decline in the economy a reflection of lower demand?
The second concern in our business was the resumption of the economy. We suffered a lot at the beginning [of the pandemic] with two major factors. One is the volume, because the volume of [fuel consumption] has dropped a lot. And we also suffer with price, because at first it had a strong decline.

On the other hand, when it comes to price, the exchange rate devaluation helped a lot. As we are an export company, the exchange rate devaluation helps us a lot. In other words, we managed to keep prices in reals relatively healthy even with the crisis.

Another point that benefited us is that the sugar market is a more resilient market. Consumption has not dropped. If it fell, it fell very little, unlike fuel, which at the beginning of the crisis fell a lot. The sugar market is a market that has sustained more, both price and volume.

And the recovery of the economy came faster than we imagined. We imagined that a more gradual recovery would come. It is not yet a full recovery, but it is a recovery that, in relation to what we had in March and early April, is a better scenario than we had originally imagined.

Is the scenario still challenging?
So it depends a lot on the point of view. In relation to the previous year, it is still a challenging year, but in relation to the scenario that we originally had, the recovery was faster and more solid than we had imagined. Within this whole crisis, our business is very well positioned.

I see other sectors much more affected. We went through with a safe, with a very healthy financial situation. And now the operation is also going well. The year is in good weather, indicating a good recovery now in this second quarter [for the sector, the first quarter is from April to June and the second from July to September].

In a scenario like this, we had a huge cost-cutting job, but we don’t need to change the [staff]. The crisis mindset makes it easier for us to have more control over costs and people are more sensitive.

Our business was growing. We are looking forward to maintaining an upward bias in our business, which is more resilient. Lots of exports of ethanol, sugar, electricity. Even with the drop in fuel. The most affected business was aviation. It is a big business, but not as important in the complete picture of the company.

Does Raízen intend to make the entire sugar market chain until it reaches the final consumer?
Yes, that is our intention. In the ethanol market, for example, we have always been in all the links in the chain, which is not yet the case with sugar. We intend to go further to the destination, serve the end customer, do the logistics, add value to the customer and so on.

One thing that is happening now, in the sugar market too, is that these sustainability issues have taken on a huge body. In the sugar market, we have a business called Bonsucro certification – it is a certification of our plants and the entire chain that it is sustainable. We have the highest Bonsucro certification in the world. We have always had and it didn’t make much difference, but this year the award we are achieving for having this certification has been much higher. Something we had never seen.

Did the pandemic collaborate to increase society’s concern for sustainability?
What the pandemic is doing in all markets, like food and energy, is giving greater importance [to the sustainable issues of business operations]. So, part of our comfort during this crisis is that we see much more interest in ESG issues [Environmental, Social and Corporate Governance, in the acronym in English].

Back in 2008, there was a boom of sustainable concern in the ethanol market in the world, but this time it is different. At that time, the scenario was of high oil prices, I remember that [former US President George W.] Bush said “the US is addicted to oil”. But right now, now, it’s society asking.

I have never seen how I am seeing the demand from our customers by genuinely paying premium for more sustainable products. If there is a big change in this market, which I think is here to stay, it is this issue of sustainability. And that for all markets. People tend to connect a lot to renewable energy, but in the sugar market it’s the same.

And how is Brazilian sustainability in the sectors in which Raízen operates in comparison with other markets?
In the world sugar market, we compete with other countries that have different standards. Brazil is the country that has the most legal reserves. Our entire area is certified that it is not a deforestation area, we do not burn cane, etc. When you take competitors like Thailand and India, they can’t offer that kind of standard. Of course, within Brazil there are companies that are more responsible than others.

We have second generation ethanol, biogas. All of this also counts to increase the quality of our sugar market. When you have a sugar by-product, for example, bagasse, you can convert it into ethanol. Or the vinasse that you make the biogas. This makes your sugar more sustainable. It is a complete chain. That is why I say that I am really feeling differently since 2008, because the market is moving [to increase its sustainability] and there is a prize on the table.

It is good to be concerned with sustainability for the obvious reasons, it is good for the environment and for society, but it is also good business. In addition to being good for society, it is also good for the company because it results in better prices, more loyal customers and so on. We consider ourselves to be one of the leaders of this [ESG] movement, so this change [in thinking] of society is very good.

How does Raízen see the exemption given by the Brazilian government for the importation of ethanol from the United States?
This is an old fight. Today, the United States is an importer of sugar. It is a country that needs to import cane sugar and it favors, in this market, Mexico over Brazil. In this story, the Brazilian government would do well to ask for a counterpart.

We always defend the free market and everything at Raízen, but this is a very unilateral relationship. The United States has an import tax of 140% on our sugar and we have a quota [example] for importing their ethanol, and without the quota the tax would be 20%.

I think that the Brazilian government needs to position itself very well. Brazil over the years has not, in my personal opinion, done a good job of bilateral agreements. If you look today, we have very few bilateral agreements. We only have Mercosur. We go there to sell our sugar and ethanol in Asia, Thailand, Indonesia, Malaysia, and we lose to competitors with products of inferior quality to ours. American corn ethanol is less sustainable than Brazilian cane ethanol.

Do you think that the Brazilian government’s efforts to achieve better bilateral agreements for our industry have been lacking?
The Brazilian government and the minister [of agriculture] Tereza Cristina, while doing a very good job, I had never seen a minister so active, she still hasn’t managed, we still haven’t managed to reach good agreements. In this case of ethanol [from the USA], it is a clear question here to ask. They also need to open the sugar market to Brazil so that we can also justify giving some kind of benefit to American corn ethanol.

This quota [of tax exemption on imports of American ethanol into Brazil and which was renewed this month ] had hoped that this was not a political movement because of the elections in the United States, with Trump seeking re-election. What we believe is that it is a move by Itamaraty to try to achieve a good deal for our sugar. If this is feasible, it is good for the sector. Now, what cannot happen is to renew this type of quota indefinitely without having a counterpart for our sector here.

There is no need for the American government to tax Brazilian sugar by 140%. Why does he give some privilege to Mexicans and not to Brazilians if we are giving them a benefit in importing ethanol? It is a conversation that has to be done from the point of view of the country and not to help one government, to help another government.

Why, in your opinion, do we still have this type of situation where the Brazilian product is better, but less competitive internationally?
My personal opinion is that Brazil is far, but far ahead of other countries in terms of sustainability. We are one of the few countries in the world that has an obligation to legally reserve their rural property. Other countries do not. You take a Midwestern American corn producer, he doesn’t have to protect a hectare of his land. Here, the sugarcane producer in São Paulo has to protect 20% of its area. It cannot produce.

This has to be explored from the diplomatic point of view, this quality of our product from the environmental point of view. What we do in relation to the environment is much greater than other places. But I think we say little [about it]. We have little pride. We always enter into conversations, owing, for example, because we are burning the Amazon.

Do we need to educate foreign consumers about our products?
We had to enter the conversations asking: why don’t you, the United States, protect 20% of your area? Why don’t you in Europe, in the Netherlands, in England, wherever you are, not protect? Why do I only have to do this job? Acknowledge our work. The image of Brazil abroad is distorted, in my view, which I know well about agribusiness. If the consumer abroad understood that the Brazilian product is much more sustainable than the product of other large countries, we should have a higher premium.

It could facilitate these bilateral agreements. I think it was a lack of focus from previous governments. In my opinion, we should focus a lot now on the Asian market, which is a very strong and consumer market for Brazilian products, to make bilateral agreements in this region. We are importers of them for other raw materials.

It is necessary to organize missions by members of the government and the sector to the countries in question. It takes time, it depends on negotiations and conversations, but there is a good unlocking of value for our sector. Speaking of ethanol and sugarcane again, we have a much lower production cost than any other country in the world. They can only survive because they have commercial advantages that we don’t have.

What is the expectation of resumption of the aviation business and how do you see Cade’s opinion about the distributors, among them Raízen, that are supposedly preventing the entry of other players in the fuel distribution pool at Guarulhos airport, in São Paulo?
On the resumption of the aviation business, it will be very slow. First because people have stopped traveling, they are prevented from entering various destinations. The hotel section was closed for a long time. The share of business travel also ended up decreasing because it has closed countries and people are working on the internet. This will recover much more slowly.

It is a segment that is already recovering. May was better than April, June was better than May, July was better than June and so on. It continues to resume, but aviation I believe will be the last sector to resume what it was before. The vaccine has to come out. You have to see if people will be willing to travel, will they travel more than ever after that or will they be more fearful? It is too early to say what the final effect [of the pandemic in the airline industry] is.

Regarding Cade’s opinion, it is still not definitive, it is just an opinion. There is a whole process of judgment that goes to a court. We still have very little to comment on this. A lot of water is going to flow in this whole discussion and we think that we are very well dressed for arguments to enter this discussion.

And what about acquisitions? There is Biosev and Repar , for example. Will they leave?
Due to our size, we are looking at several things. In a crisis there are always many opportunities. A very financially sound company like ours can look, but we have a lot of capital discipline. We are looking very carefully at all options, whether in the sugar and ethanol market or other. It is important to say that now there is nothing important defined, there are many conversations not only with these but with other companies as well. We are looking.

What I can say is this: we have a lot of discipline and will only do business if there is a strategic fit for the company, a correct value for the company to make this investment and the correct timing. In refineries, for example, we have such a presence in this market that it makes no sense not to participate in this type of discussion. But is it strategic for the company [to make acquisitions in this area]? No, it’s not.

In the sugar and ethanol market, we already have a very large size in this market, we see an opportunity to create value, but as long as it is in the correct value and more than that: that it has a commercial part. I am much more a fan of you having scale in the commercial part to go to attack some markets in the destination part than having a super scale in the production part. That’s a little bit of the message. We are very cautious with these negotiations that we look around and we have to be very surgical to do the operations.

Raízen does not want to be seen as a major consolidator. Now, it is a very unusual scenario, you have a lot of opportunity in the market and we are looking at all of them. And these are not the only ones you mentioned. But we have nothing concrete now, nothing binding.

And the IPO?
The main reason that the company does the IPO is usually capital structure. Our advantage is that we have capitalized partners, they are partners who look at the long term, it is never natural in this case to talk about making the company’s IPO. The partner looks and says: why am I going to sell my piece of it? We as management look at this and think it is always good for you to have another capital market tool, but it is not the only one.

Being the CEO of the company, I always like to have more options to access the capital market, be it the debt market, the injection of capital from the partners, or the IPO, in short. I, as a manager, would love to have more options at the table, but this is a discussion more about shareholders than management.

This is very good, the difficult thing is to be the other way around, when you have shareholders who want to go out of business. In our case, we are in a very comfortable situation because we have shareholders who like our business, look at it thinking about the long term and want to make it grow. For Raízen it would be a decision not out of necessity, but out of an option or willingness of shareholders.

Anderson Figo

sourcehttps://www.novacana.com/n/industria/usinas/otimo-preocupar-sustentabilidade-tambem-bom-negocio-ceo-raizen-220920

The São Paulo State Sugar Cane, Sugar and Alcohol Producers Council (Consecana-SP) released the Total Recoverable Sugars (ATR) data for August 2020.

The prices of the accumulated value were fixed at R $ 0.67794 per kilo, against R $ 0.6761, appreciation of 0.48%. The monthly ATR amount closed at R $ 0.6939 against R $ 0.6588 in July, an increase of 5.32%.

Partnership contracts based on the sugarcane field index were quoted in August at R $ 74.18 per ton. On the other hand, sugarcane matched the month at R $ 82.87 per ton.

source:https://www.novacana.com/n/cana/mercado/atr-sao-paulo-valor-acumulado-avanca-0-48-agosto-220920

President went to social networks to celebrate a temporary and seasonal measure, which does not represent a change in the bilateral relationship of countries

After the recent sequence of diplomatic defeats to the United States in bilateral trade, President Jair Bolsonaro went to Twitter on Monday, day 21, announced que the US will Increase the purchase of Brazilian sugar by 80 thousand tons , and together with the photo by Chancellor Ernesto Araújo, stated that this is “the first result of the recently opened Brazil-USA negotiations for the sugar and alcohol sector”.

The demonstration comes weeks after Brazilian steel has been cut in more than 80% of American imports and Brazil has renewed an exemption from tariffs on the entry of almost 200 million liters of ethanol  into the country, which the sugar and energy sector classified as “enormous sacrifice ”.

According to sources with direct knowledge of the negotiations heard by BBC News Brasil, the Foreign Ministry reportedly took steps to try to collaborate with President Donald Trump’s reelection campaign, which has steel workers and corn farmers as part of its base. electoral.

Officially, Chancellor Araújo stated that the concession was necessary to open negotiations to open negotiations that could result in a reduction of the 140% tariff barriers that the Americans have imposed on Brazilian sugar for decades.

But the negotiations went down badly politically and generated criticism of the country’s subservience to its preferred ally. The tension still increased after Araújo served as a cicerone to US Secretary of State Mike Pompeo on a lightning visit to Roraima last Friday, when the American criticized the Venezuelan regime.

“In general, there is a perception that Brazil is not being treated fairly before the United States, so the government is trying to advertise something trivial and expected, to seek a balance in this image for its public”, an ambassador specialized in international trade privately told BBC News Brasil.

According to the diplomat, this is “trivial” and “expected” because, although the president suggests that there was a permanent increase in the amount of sugar that Brazil could export to the Americans, what actually happened was a temporary relocation of suppliers made by Americans.

The United States imports more than 3 million tons of sugar annually – and gives preference to sellers from Africa or Central America. But, if these usual suppliers do not sell the necessary quantity and there is an under-supply of the American market, the United States Department of Agriculture informs the country’s commercial representative who redirects their purchases to other producers, such as Brazil.

The same thing has happened twice this year , without Bolsonaro making the fact a cause for celebration on the networks on those occasions.

“The United States did Brazil no favors, just reallocated some volume (of sugar) to Brazil, within their general mercantilism. This needs to be clarified, so that it does not look like a diplomatic victory that was not, ”said ambassador Paulo Roberto de Almeida.

But the current political moment may have led to this change in the president’s stance. Last weekend, the president of the Chamber of Deputies, Rodrigo Maia, criticized Pompeo’s visit to Roraima and accused his presence as a voter and an affront to the country’s autonomy.

“The visit of the US Secretary of State, Mike Pompeo, this Friday, to the facilities of Operation Welcomed, in Roraima, near the border with Venezuela, at a time when there is only 46 days before the American presidential election, it is inconsistent with good international diplomatic practice and is contrary to the traditions of autonomy and pride in our foreign and defense policies, ”said Maia.

His criticisms were endorsed in a letter by all former chancellors of the democratic period: Fernando Henrique Cardoso (Itamar Franco government), Francisco Rezek (Collor government), Celso Lafer (Collor and FHC governments), Celso Amorim (Itamar Franco and Lula governments) , José Serra and Aloysio Nunes Ferreira (Temer government).

The political climate became so difficult that on Monday senators even considered postponing the hearing of more than 20 Brazilian candidates for ambassadors around the world, who await confirmation by the House of their posts. The boycott was demobilized after Ernesto Araújo agreed to appear in the Senate next Thursday to explain in detail the visit of Mike Pompeo.

The main stakeholders in Bolsonaro’s announcement, the sugar producers, did not consider the increase in quota to be a victory either. According to data from the Chamber of Foreign Trade, Brazil has exported an average of 25.6 million tons of sugar in the last five harvests . In this universe, the 80 thousand tons that the United States must buy now represent only 0.3%.

In a note, the Union of the Sugarcane Industry (Unica) and the National Sugar-Energy Forum (FNS) stated that “this additional sugar quota is considerably lower than the monthly ethanol quota that Brazil again offered to the United States in September” And reaffirmed that the measure is not “an American concession”.

“We must clarify that this is a normal procedure adopted by the United States in recent years, without representing any structural progress towards greater access for Brazilian sugar to that country”, say the producers in the note.

BBC News Brasil consulted the Itamaraty regarding negotiations with the Americans and the sugar quota, but did not receive a response until the publication of this report. Within the body, aides to the minister affirm that commercial relations along these lines are normal, but that it is difficult to understand these movements from a perspective “in which Brazilian concessions represent absolute submission from Brazil while any American measure is a ‘consolation prize’”.

Since taking office, Bolsonaro has brought about a profound change in Brazilian international politics, making the United States his preferred ally.

The trade expert ambassador privately heard by BBC News Brasil states that quotas and concessions are common in international relations, but that in polarized environments, where this type of transaction has attracted attention, it has led politicians to try to exploit them in their favor.

“In this case of sugar, there is nothing to be said about diplomatic victory, it is a circumstantial issue. Itamaraty and the productive sector know this. But the rest of the population, especially the president’s supporters, don’t know. And they will be satisfied with his message ”, he says.

source:https://www.novacana.com/n/etanol/politica/anuncio-bolsonaro-cota-acucar-eua-brasil-nao-vitoria-diplomatica-220920