CanPack plans to invest R$250m to produce 37 billion caps a year by the end of 2023
06/24/2022
With CanPack’s cap factory, the capital of Amazonas now houses four such units in its industrial district — Foto: Reprodução/CanPack
CanPack, a Polish company that makes aluminum cans for beverages, will invest R$250 million in the construction of a cap factory for cans in Manaus. The company already produces cans in two units — one in Ceará and another in Goiás.
With CanPack’s cap factory, the capital of Amazonas now houses four such units in its industrial district. Companies typically set up these operations in Manaus to take advantage of the Free Trade Zone’s tax breaks.
Currently, three multinationals already operate in the city of Manaus — Ball Corporation, a leader in the cans market in the country, the also U.S.-based Crown Embalagens and the Irish group Ardag, through its subsidiary AMP.
According to a note by Abralatas, the manufacturers’ trade group in Brazil, the first can factory was installed in Manaus in 2006. With the arrival of the others, the industrial hub in the capital is already part of the largest production cluster of this product in the world.
AMP’s unit, for example, is reaching a capacity of 5 billion units, and this figure is expected to double in two years to meet its expansion program in Brazil.
“The can market is in a unique moment. And Manaus is the city that has become the world’s producing hub for can caps, and it will become even stronger with this new unit in 2023,” said Abralatas head Cátilo Cândido in the note.
With 25 manufacturing units installed, the Brazilian production reached 33.4 billion packages of several sizes last year. The most recent investments are three units in the state of Minas Gerais — Frutal (Ball), Uberaba (Crown) and Juiz de Fora (AMP).
CanPack, according to Abralatas, informed that it will start assembling the cap factory in 2023. According to Mr. Cândido, Manaus is also logistically important for the manufacture of caps. “The city already accounts for more than 80% of the total production of this packaging component,” he said.
Manaus is now expected to jump to 37 billion by the end of 2023 from the current 25 billion caps produced per year.
The sales of aluminum cans for beverages in Brazil grew 81% in the last decade (2011 to 2021) with an average growth of 8% per year in the past five years, says Abralatas. One advantage of this segment is the high rate of recycling — almost 99% last year, the highest in the world.
In 2021, R$3.8bn were spent in this field; in 2010, amount was R$15.3bn, highest in the series
24/06/2022
A central theme in the negotiations for Brazil’s admission to the Organization for Economic Cooperation and Development (OECD), environmental protection received last year, under President Jair Bolsonaro, the lowest amount of funds in 12 years, according to data from the National Treasury Secretariat: R$3.87 billion. In 2010, under Luiz Inácio Lula da Silva, the federal government disbursed R$15.34 billion on this front, the highest in the series.
Spending on environmental protection in 2021 was equivalent to 0.04% of the GDP, while spending on military defense, for example, reached 0.56% of GDP. With civil defense, the expense was 0.01% of the GDP.
The data are in the Central Government Expenditure by Function (COFOG), which organizes federal government spending according to the methodology developed by the OECD with the United Nations. This data allows for comparisons with other countries.
According to COFOG’s data, total central government expenses reached R$2.7 trillion last year. It was down in comparison with the previous year, when the pandemic impacted public accounts. As a proportion of the GDP, total spending fell to 31.43% from 36.61%.
In the comparison between 2021 and 2020, the only government function that registered an increase was public services, which reached 12.03% of GDP, compared to 11.64% of GDP in the previous year. According to the National Treasury, the main reason is interest on public debt, which reached 6.93% of the GDP.
Another justification is transfers between different levels of government, which reached 4.18% of GDP. The figure reflects a larger volume of money distributed by the federal government to states and municipalities, according to the rules set out in the Constitution. Revenues from income tax and the Industrialized Products Tax (IPI) are shared.
Of the 10 functions that make up total spending, the largest is social protection, which consumed the equivalent of 39.9% of GDP last year, compared to 47.6% of GDP in 2020. The National Treasury reports that this is due to the maintenance of part of the measures to tackle the Covid-19 last year.
Health spending reached 2.43% of GDP last year, compared to 2.67% in the year before. In this group, the biggest item was hospital services, with 1.18% of GDP in 2021.
On the Education front, spending reached 2.15% of GDP in 2021, compared to 2.16% of GDP in 2020. The largest share, 0.81%, was spent on higher education, while education at the junior high school and high school levels received 0.35% of GDP. Spending on basic and elementary education was 0.75% of GDP.
The COFOG analysis combines the economic and functional classifications of expenditure, so that it is possible to evaluate which inputs were used to perform the functions. In this cut, the most relevant expense is employee payments, which accounted for 11.4% of total central government spending last year.
Future mill will have a capacity of 2.5 million tonnes of eucalyptus pulp per year and is expected to start operating in 2028
06/23/2022
With an average distance of 150 kilometers between the plant and the forests, the unit will be the most competitive of the Chilean group — Foto: Divulgação/Zig Koch
Arauco signed an agreement with the government of Mato Grosso do Sul on Wednesday to build a mega pulp mill in the state. With investments of $3 billion, the new unit will be located in Inocência, 337 kilometers far from Campo Grande.
The future mill, which still depends on certain conditions to get off the drawing board, will have a capacity of 2.5 million tonnes of eucalyptus pulp per year and is expected to start operating in the first quarter of 2028. A second phase of the project is planned for the future.
After the signing of the agreement, in a ceremony attended by Arauco CEO Matias Domeyko Cassel and Governor Reinaldo Azambuja Silva, the company will seek an environmental permit, which is a condition for the investment to be executed.
“There are legal proceedings to fulfill. This is the beginning of a journey,” said Carlos Altimiras, Arauco CEO in Brazil. The project is expected to be submitted for approval by the board of directors in the second half of 2024, with construction starting in January 2025.
In addition to environmental permits and confirmation of the investment by the board, the execution of the project relies on the availability of wood for pulp production.
According to Mr. Altimiras, the project requires nearly 380,000 hectares of gross area to be developed. Arauco already has 60,000 hectares, 40,000 of which are planted with eucalyptus, and has several negotiation fronts open to ensure enough wood to start operations in 2028. The company expects to reach 2024 with 70% to 80% of the total area needed.
With an average distance of 150 kilometers between the plant and the forests, the unit will be the most competitive of the Chilean group. Installed on the left bank of the Sucuriú River, it will have quick access to pulp distribution channels, including the MS 377 highway, the Paraná River (100 kilometers away) and the railroad network (47 kilometers away).
The logistical structure was key in choosing the location, said Mario José de Souza Neto, Arauco’s head of development and new business in Brazil. “We are evaluating the alternatives to see which are the most viable,” he said.
The future mill will be self-sufficient in energy, using a renewable source, with the capacity to generate 400 megawatts from the reuse of biomass. The surplus energy, or 200 MW, will be sold in the free market.
The implementation of the Sucuriú project will mark the arrival of the Chilean group to the pulp industry in Brazil – Arauco was already present in the country with forestry operations and four wood panel plants.
In addition, it will increase by about 50% its production capacity of the raw material, from 5.2 million tonnes per year, including the expansion underway in Chile, the Mapa project, to 7.7 million tonnes per year.
With Mapa, which is expected to go online in the second half of the year, Arauco will become the second-largest market pulp producer in the world, only behind Suzano. The group has fiber mills in Chile, Argentina and Uruguay, where it is a partner of Stora Enso in the Montes del Plata joint venture.
During construction, the Sucuriú project will employ more than 12,000 workers, benefiting around 20,000 families in the region, according to the Chilean group. In operation, the unit will employ 2,350 people, 550 of which in the plant, between direct and indirect jobs, and 1,800 in forestry.
The governor of Mato Grosso do Sul highlighted that the project will be located in a region that is part of the state’s Forest East Coast, but has not yet had a pulp mill.
“This plant shows the confidence of investors in Mato Grosso do Sul, in our tax incentive policy, in the legal security of those who invest, and in the logistical structure we are creating for those who need to distribute their output,” he said.
Group says adoption would be “monumental setback for human rights”
06/23/2022
A group of independent experts from the United Nations released a statement in Geneva on Wednesday urging the Brazilian Senate to reject a bill on pesticides, warning that its adoption will mean a “monumental setback for human rights in the country.”
The experts are Marcos A. Orellana, special rapporteur on the implications for human rights of the environmentally sound management and disposal of hazardous substances and wastes; Melissa Upreti (chair/rapporteur), Dorothy Estrada Tanck (vice-chair), Elizabeth Broderick, Ivana Radačić, and Meskerem Geset Techane, with the Working Group on discrimination against women and girls; Michael Fakhri, special rapporteur on the right to food; Francisco Cali Tzay, special rapporteur on the rights of indigenous peoples; and Claudia Mahler, independent expert on the enjoyment of all human rights by older persons.
Ahead of the key Senate hearings on the bill PL 6,299/2002, which the report says is better known as the “poison package,” these experts warned that if the legislation is adopted, it will weaken regulations governing pesticide use in Brazil and expose people of all ages, including farmers, workers, indigenous peoples and peasant communities to hazardous substances with potentially devastating consequences for their health and well-being.
For them, it will mean a step backward in environmental regulations in the country. And they say they are alarmed by the bill’s provisions “that would allow the use of carcinogenic pesticides and those that carry a greater risk of reproductive and hormonal problems, and malformations in babies.”
In the statement, these experts call it a “myth” that pesticides are necessary to feed the world. “Pesticides present serious risks for human health and environment at a local and global scale,” they say.
The experts consider that the approval of the bill would aggravate the serious human rights issues in Brazil related to pesticides and call on the Brazilian government to approve and effectively enforce measures including a ban on aerial spraying and on the use of pesticides near housing, schools, water resources and other protected areas.
“Without further measures to ensure businesses respect human rights and the environment, abuses will continue to proliferate if this draft bill is adopted,” they said. The statement said these experts are in dialogue with the Bolsonaro administration on the issue.
The special rapporteurs, independent experts and working groups are part of what is known as the Special Procedures of the Human Rights Council. Special Procedures, the largest body of independent experts in the UN Human Rights system, is the general name of the independent fact-finding and monitoring mechanisms that address either specific country situations or thematic issues in all parts of the world.
The United Nations explains that the Special Procedures’ experts work on a voluntary basis; they are not UN staff and do not receive a salary for their work. They are independent of any government or organization and serve in their individual capacity.
Lawsuit is against Norwegian Norsk Hydro for pollution in Pará
06/23/2022
Tailings treatment system at the Hydro Alunorte mining facility that caused a spill in Barcarena, Pará — Foto: Igor Brandão/Agência Pará via AgênciaBrasil
The courts in the Netherlands will decide this Friday whether to accept the lawsuit filed by quilombolas and indigenous people from the municipality of Barcarena, in Pará state, against Norwegian aluminum manufacturer Norsk Hydro.
In the lawsuit, a group of nine people and the Association of Caboclos, Indigenous, and Quilombolas of the Amazon (Cainquiama) — which represents 11,000 people — allege that the toxic waste pollution from the aluminum manufacturer’s operations in Barcarena has caused health problems for the inhabitants, besides economic losses.
The litigants are seeking compensation for the damage caused. The victims are represented by PGMBM, a firm specializing in collective environmental litigation, the Brazilian law firm Ismael Morais Advocacia, and the Dutch law firm Lemstra van der Korst.
In the petition, Norsk Hydro is accused of being responsible for at least 10 environmental disasters caused by its mining and aluminum production activities. The company operates a refinery, a smelting plant and a bauxite mine in Pará.
The most recent disaster, in February 2018, caused toxic sludge to spill into the reservoirs of the Alunorte and Albrás operations, turning the rivers red. Brazilian authorities investigated the case and discovered three covert pipelines that dispensed toxic waste in the environment, according to the petition.
“Until now, those affected have had no voice in the current actions in Brazil. We want to change that to ensure they are protected and receive the justice they deserve. It is clear that Norsk Hydro carried out risky contaminating activities in a vulnerable region of Brazil, in a way that violated the law and caused catastrophic effects for the nature and the people who live there,” said Pedro Martins, partner and founder of PGMBM, in a statement.
Norsk Hydro said in a statement that the allegations are already being discussed in Brazilian courts. The opening of the lawsuit in the Netherlands generates a risk of duplication of actions and incompatible decisions. “We believe that these issues should be addressed locally and request that the Dutch court suspend the matter until a final decision is reached in the Brazilian cases. The Brazilian judicial system is robust and accessible, backed by constitutional guarantees of full right to defense and due process of law. Furthermore, Brazilian court orders can be executed in the Netherlands,” it added.
Norsk Hydro also stated that the public agencies have carried out more than 90 inspections and audits that attested that there was no transshipment of the waste deposits at Alunorte. Other allegations, according to the company, are unfounded and there is no evidence of contamination in communities caused by Alunorte, related to the February 2018 rain.
The company also said that its operations in Brazil “are in full compliance with the environmental permits required by law.” And it adds: “In addition, our operations have international management certifications, proving excellence in socio-environmental management. Therefore, Alunorte, Albras, and Hydro will continue to provide facts and clarifications necessary for the trial of the allegations, which they consider that should happen in Brazil.”
Talks have also begun to increase emergency aid, plans are underway to increase gas voucher
06/23/2022
Rodrigo Pacheco — Foto: Roque de Sá/Agência Senado
Pressured by the crisis of high fuel prices and the preventive detention, on Wednesday, of former Education Minister Milton Ribeiro on suspicion of corruption, the federal government and the governing coalition in Congress have accelerated the formulation of vote-getting measures. Behind the scenes, the trucker voucher had its value raised to R$600 from R$400. Furthermore, talks have begun to increase the emergency aid and plans are also underway to increase the gas voucher.
The plan is to include all these measures in the constitutional amendment proposal (PEC) 16, which is being analyzed by the Senate. In its current version, the PEC authorizes the federal government to pay up to R$29.6 billion to states that reduce to zero the sales tax ICMS rate on diesel and cooking gas and sets a 12% rate for ethanol.
These negotiations are seen with concern by the economic team, given their impact on public accounts. The R$600 trucker voucher will cost R$3 billion; doubling the value or range of the gas voucher would cost nearly R$2 billion. The idea of raising the emergency aid surprise the government’s technical staff, although the political team never gave up the plan of raising the value to R$600.
All these additional expenses go in the opposite direction of the goal of closing the public sector accounts in the black and setting a downward trajectory for the public debt.
In relief to the economic team, Senate President Rodrigo Pacheco (Social Democratic Party, PSD, of Minas Gerais) said Wednesday that it is necessary to have responsibility with the spending cap. “Issues related to the fuel PEC must be preceded by impact studies and election-related barriers,” he added.
Behind the scenes there is a discussion about the feasibility of launching these aid measures, because of the electoral legislation. One hypothesis raised would be the decree of a new state of calamity. There is, however, no consensus on this. Economy Minister Paulo Guedes has been fighting this idea in recent months.
Ítalo Franca, with Santander’s team of economists, pointed out that “there is some doubt about the legal possibility” of implementing aid to truck drivers this year “even through a PEC, because electoral legislation restricts the creation of new benefits,” he said.
Gabriel Leal de Barros, a partner and chief economist at Ryo Asset, has a similar view. The trucker voucher would cost R$1.8 billion from July to December of this year if it were fixed at R$400 and R$2.7 billion if it were R$600, according to his calculations.
Mr. Barros says he has “reservations” about the proposal. “It doesn’t make economic sense to subsidize fossil fuel and still allocate taxpayer money that don’t benefit the poorest,” he said, also citing “the risk of loss of control” over spending during the analysis of the proposal, especially in an election year.
He also says that it is “very negative” the fact that “we are amending the Constitution every six months,” since the aid would be implemented by means of a PEC. “This is not good for the fiscal framework and for the predictability needed by economic agents,” he said.
The R$400 voucher was called “alms” and a “joke” by truck drivers’ leader Wallace “Chorão” Landim. The same comment had been made by him and other unionists last October, when the idea was unveiled by President Jair Bolsonaro.
By Renan Truffi, Lu Aiko Otta, Estevão Taiar, Raphael Di Cunto — Brasília
Consistent delivery of business jets during Covid-19 pandemic, increasing use of fleet contributed to decision
06/22/2022
In the next three years, 150 new workers are expected to join the center’s current 150 employees — Foto: Celso Doni/Valor
Embraer, the world’s third-largest commercial plane maker, doubled the useful floor area of its service center in Sorocaba, São Paulo, in order to follow the advance of business aviation in Brazil. The expansion required investments of R$10 million.
“It is a natural growth, especially because of the business jet sales growth,” said Johann Bordais, CEO of Embraer Serviços e Suporte. The consistent delivery of business jets during the Covid-19 pandemic and the increasing use of the fleet contributed to the decision of moving forward with the project, the executive said.
The center, which started operating eight years ago and is 100 kilometers far from São Paulo, now has 40,000 square meters of useful floor area and four hangars, three of which focused on maintenance, repair and overhaul of components for Embraer planes. The fourth hangar is focused on supporting fixed-base operation.
Considering the services provided in Gavião Peixoto (São Paulo) as well, the company executes around 600 maintenance procedures a year. These procedures are expected to grow 5% to 10% a year. After the expansion, the service center in Sorocaba is now able to handle future demand and receive larger aircraft, including KC-390 Millennium.
Embraer’s center in Sorocaba offers from maintenance and overhaul services to airport services through workshops authorized for different aircraft components. The facility is also able to modify jets, including the conversion of Legacy 450s into Praetor 500s.
In the next three years, 150 new workers are expected to join the center’s current 150 employees.
In the three first months of the year, the segment of support and services contributed with revenues of R$1.4 billion, almost 46% of Embraer’s net revenues – the slice was so representative partly because commercial aviation has not resumed the pre-pandemic levels yet.
Still, this division, which currently accounts for 25% of revenues on average, is expected to gain more prominence, Mr. Bordais said. “This reflects our focus on supporting our clients.” The company expects this business to grow 10% to 15% a year around the world.
Policymakers seem to hope that situation will improve to the point of making additional hike unnecessary
06/21/2022
Central Bank’s building in Brasília — Foto: Jorge William/Agência O Globo
Central Bank’s Monetary Policy Committee (Copom) is now considering the possibility of maintaining interest rates at a high level for longer to meet the inflation target. This would complement or replace the previous strategy of raising the Selic, Brazil’s benchmark interest rate, to even higher levels in the final leg of the monetary tightening cycle.
In the minutes of last week’s meeting unveiled Tuesday, the policymakers say they analyzed this possibility. They have also discussed which message to send about monetary policy for the next meeting, to be held in August.
As the inflation environment has deteriorated, the Copom decided that it was about time to raise the interest rate even more last week, to 13.25% a year from 12.75% a year. The policymakers have also signaled that they will keep interest rates at a high level for longer than the markets have been expecting in order to complement the necessary tightening dose. “The strategy of convergence around the target requires a more contractionary interest rate than that used in the reference scenario for the entire relevant horizon,” the minutes say.
In last week’s meeting, the reference scenario provided for an interest rate of 13.25% at the end of 2022, 10% at the end of 2023 and 8.5% at the end of 2024. This way, considering what the minutes say, the Copom seemingly believes that the interest rates must be above each of these percentages at the end of each year.
The minutes could not make it clear how a higher interest rate at the end of 2023 or 2024 will help to meet the inflation target on the relevant horizon, which is 18 months ahead. The interest rates in 2023 will impact inflation more in 2024 than in the current monetary policy horizon.
The alternatives between raising the interest rate to a higher level now or keeping the rate higher for longer were also analyzed when the Copom discussed future monetary policy signals for the next meeting, in August.
Here again, the Copom concluded that keeping interest rates high for longer will not be enough to meet the inflation target. As a result, the chosen strategy was to signal a 50-basis-points hike or a 25-basis-points hike, depending on the inflation rates until there.
In a very important point to consider regarding future signals of monetary policy, the Copom said the perspective of maintaining the Selic rate for a sufficiently long period would not assure, “at this moment,” the convergence of inflation around the target in the relevant horizon.
It has been a while since the Copom used this phrase when talking about future steps – the intention, historically, has been to highlight that any signal is reliant on the evolution of the economic scenario. If the committee considered it better to include the expression “at this moment” now, it probably sees chances of positive evolution of this scenario by August, in a way that allows meeting the target by only keeping the interest rates at the current level, of 13.25% a year.
On the other hand, the Central Bank made a point of reinforcing, as it had already done in May, that the outlook is very uncertain, so it requires caution. When they presented their inflation projections, the policymakers said that uncertainty “has increased since the previous meeting.” Caution, in this case, is related to the risk of setting a higher-than-necessary dose of interest rate.
The debate about the Copom’s decision started with the directors saying they have already done a lot. “It was emphasized that the current monetary tightening cycle was quite intense and timely and that, due to monetary policy lags, much of the expected contractionary effect and its impact on current inflation are still to be seen.”
All things considered, the Copom is moving to stop raising interest rates and to keep them high for a sufficiently long period. It signaled a new hike for August, but it seems to hope that the situation will improve to the point of making an additional hike unnecessary.
Will the Central Bank be able to stop raising the interest rates? The Copom has been signaling the end of the cycle since March, but it was not possible. This time, the policymakers decided to keep raising the rates because the “Copom observed deterioration in both the short-term inflationary dynamics and the longer-term projections.” The reaction function still seems to be in place: if more negative surprises come, the Central Bank will keep raising the interest rates.
Indicator was up 0.3% in comparison to Marchand 1.8%
06/21/2022
The Brazilian economy grew 0.3% in April compared to March, with increases of 1.8% in the quarter ending in April compared to the previous quarter, and of 2.8% compared to the same period in 2021, according to the GDP Monitor reading, announced on Monday by Fundação Getulio Vargas (FGV).
According to FGV economist Claudio Considera, in charge of the indicator, the good results were driven by strong increases in household consumption and demand for services. But, for him, the intense increases in these sectors are not very sustainable because they are influenced by effects that will not last over the long term, such as repressed demand for services, which was low during the two years of the pandemic; and by additional income, which is concentrated in the second quarter. So, for the specialist, the GDP growth in 2022 is heading for a rate of up to 2% in comparison to 2021. Last year, GDP was up 4.6% in relation to 2020.
When detailing the behavior of the economy outlined by the April GDP Monitor, Mr. Considera pondered that the numbers show a clear reaction, both in household consumption and in services, compared to the same month in 2021. In April this year, household consumption grew 7.6% compared to March, the best result since May 2021 (12%). In the same period, service activities advanced 4.1%. In the quarter ending in April, compared to the same period in 2021, the advances in these two topics in the indicator were 4.8% and 4.1%, respectively.
He recalled that in April people were more inclined to face-to-face activities as well as social circulation when compared to the same period last year. The progress of vaccination against Covid-19 since then has allowed the rate of deaths from the disease to decrease and, with it, people’s fear of going back to the streets. This favors an increase in the consumption of services, such as bars and restaurants, which could not be accessed at a high rate last year, due to a worse scenario in the pandemic compared to the one observed today.
At the same time, April saw the beginning of the payment of the R$1,000 withdrawal from the Workers’ Severance Fund (FGTS) accounts, as well as the early payment of the 13th salary, a year-end bonus, for retired workers and pensioners, actions adopted by the government to boost the economy. This generated greater family consumption in the month, he noted.
However, when asked about the sustainability of the economy’s high pace, Mr. Considera was cautious. He commented that both FGTS withdrawals and 13th salary early payments will not continue to happen throughout the year. At the same time, he does not see a continuation, in the same magnitude, of the demand for services until the end of 2022. There are limits to the impact of repressed demand for services, in consumer access to this activity, he noted.
“Those things run out, those extra sales. And we also have a reduction in the purchasing power of families with the rise of inflation,” he recalled.
Another important aspect in the activity mentioned by him is the behavior of investments in the economy, still on a weak trajectory. Investments are a great inducer of jobs, as well as a sustainable pace in the GDP growth rhythm, he recalled. The indicator announced on Monday shows that the Gross Fixed Capital Formation (GFCF), which represents investments in the economy, fell 4.6% in April year-on-year, the fifth consecutive drop in that comparison. “The machinery and equipment industry is very bad,” he said. In the FGV’s GDP Monitor, the volume of machinery and equipment fell 10.7% in the quarter ending in April, compared to the same period in 2021.
Mr. Considera said that, in his analysis and with the information so far, the projections for GDP growth for 2022 would be more between 0.9%, 1%, possibly reaching 2% — but not exceeding 2%. “It should not go beyond that,” he reiterated.
Operation may suffer new setback as Mitsui rejects format proposed for deal
06/22/2022
On the eve of decision of the antitrust regulator CADE on the acquisition of Petrobras’s 51% stake in Gaspetro by Cosan’s Compass, the R$2 billion operation may suffer new setbacks.
Valor has learned that Mitsui Gás e Energia, the state-owned company’s partner in Gaspetro, rejects the most recent format proposed for the deal. Compass would sell up to 12 of the 18 distribution companies in which Gaspetro holds a minority stake. Mitsui has also indicated that it is likely to exercise its right of first refusal.
Compass informed in March that it would not keep all the distributors, in a move to seek the approval of the CADE. In the same month, the General Superintendence of the antitrust body approved the deal without restrictions. According to a source familiar with the group, the company has already committed to sell seven distributors to one group and five to another.
In addition to Mitsui, local distributors have also signaled that they may exercise this right in relation to Gaspetro’s stake, should Compass decides to sell it after the acquisition.
Mitsui informed the antitrust agency that it had no interest in buying the Petrobras stake in August last year. However, after the change in the proposal of Compass, it appealed to the rapporteur of the case in CADE, Luiz Hoffman, asking that the right of first refusal can be evoked because the deal was modified. Under the new format, it jeopardizes its business strategy, the company said.
In the e-mail message, which is public but contains restricted excerpts, Mitsui asks that this right can be exercised by any partner of the local distribution companies. “At that time [of the option not to exercise the right of first refusal], it was unthinkable that the sale by Petrobras of its equity interest in Gaspetro to a third party — in this case, to Compass — could/would hinder the investments made by Mitsui Gás over the years,” it says.
If the CADE approves the deals, Compass would hold 80% of the natural gas distribution market, which increases market concentration, sources say. In addition to Gaspetro, the company owned by Cosan bought Sulgás, a gas distributor in Rio Grande do Sul, in a privatization auction held in October, for R$927.79 million.
Mitsui has direct participation of 41.5% in eight distributors: Algás (Alagoas), Bahiagás (Bahia), Cegás (Ceará), SCGás (Santa Catarina), Copergás (Pernambuco), PBGás (Paraíba) and Sergás (Sergipe), besides other participations. According to one source, in case Mitsui exercises its preference right, the result will be market concentration, giving rise to a monopoly in natural gas distribution.
Last week, Mitsui Gás CEO Tadaharu Shiroyama met distributors in Ceará and Pernambuco to talk about investments, which reinforced the perception that the Japanese partner would be willing to keep Gaspetro’s slice.
Mitsui Gás e Energia did not immediately reply to a request for comment. Compass and Petrobras declined to comment.
For those who follow the matter, the fact that Mitsui Gas will take Petrobras’s share in Gaspetro instead of Compass would be a “lesser evil,” since the Japanese company has business only in gas distribution while Cosan’s subsidiary has verticalized operations, and is no longer independent as recommended by the term of cessation of conduct signed between the CADE and Petrobras. Compass operates in the gas trading market, import infrastructure, with a liquefied natural gas (LNG) terminal under implementation, and transportation.
Compass faces resistance from associations of sectors with direct operations in the natural gas market, which intend to convince the CADE that the approval could pave the way for the formation of a monopoly in natural gas distribution.
Associations interested in the matter filed appeals against the deal. This was the case of the Brazilian Association of Large Industrial Energy Consumers and Free Consumers (Abrace), the Association of Gas Pipeline Transportation Companies (Atgás), the Brazilian Association of Oil and Gas Exploration and Production Companies (Abep) and the Brazilian Glass Industries Association (Abividro). On Tuesday, the Brazilian Association of Independent Oil and Gas Producers (ABPIP) filed a manifesto with the CADE against the acquisition by Compass, aligning itself to the other associations.
Even the National Petroleum Agency (ANP) appealed at the end of March against the deal. In the appeal, the agency said Compass would become the controlling shareholder of Gaspetro, inheriting all the prerogatives that previously belonged to the oil company, including the appointment of commercial directors of the distributors, from the respective shareholders’ agreements – a situation that would imply open conflicts of interest.
Despite the effort, the purchase must be approved with “cosmetic restrictions,” according to the evaluation of sources that follow the case, with a pessimistic tone in relation to the outcome of the deal. For these sources, who spoke on the condition of anonymity, the assessment is that any restriction imposed by the CADE will not mitigate the effects of the deal. The sale of the participation in Gaspetro, inclusive, is part of the agreement signed between the CADE and Petrobras to encourage competition in the natural gas market, which would no longer occur since then.
“It is a discussion contrary to the one taken in the past [by the CADE]. It ends with the integrated gas market,” says one of the executives heard by Valor. For another executive, who acts as one of the stakeholders in the issue, with the approval of the purchase, the country “will begin to see unbridled unregulated capitalism” in the gas market.
In its defense, Compass alleged to the antitrust agency that the operation is “unable to replicate the previous scenario, of Petrobras’s transversal dominance,” in particular because “it does not and will not operate in the structuring links of the natural gas chain (production and transportation), which represent the main barriers to the sector’s development.”
Another point to be observed, points out another source, is that the current president of CADE, Alexandre Cordeiro Macedo, should declare himself disqualified from judging the issue because he actively participated in the formulation of the agency’s term of commitment with Petrobras, an initiative from which the oil company made divestments in several fronts, including natural gas. In addition, when he led the agency, Mr. Macedo authorized the participation of the Cosan group in the Gaspetro auction.
*By Fábio Couto, Stella Fontes, Robson Rodrigues — Rio de Janeiro, São Paulo
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/b/f/6kb0UwTtulkaeDGnwnAw/canpack-reproducao-canpack.png)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/1/7/mBzJJ6TQA1ljxKyX5qWQ/52160595918-1e8d3592c8-h.jpg)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/S/G/DTM1fhTLq0dxBodGJqNQ/hydro-alunorte-igor-brandao-agencia-para-via-agencia-brasil.png)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/Q/6/P9DBuZSzS0XZCMEolBag/23pol-100-auxilio-a12-img01.jpg)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2022/B/W/7pnMoQTLCAdxL5G3hzJQ/embraer-celso-doni-valor.png)
/i.s3.glbimg.com/v1/AUTH_37554604729d4b2f9f3eb9ad8a691345/internal_photos/bs/2021/3/0/fkxtatRmAGxlMQeXUGrA/89263085-brasil-20-20bras-c3-adlia-20-20pa-20-2021-08-2020-20-20banco-20central-20do-20brasil-20no-20setor-20banc-c3-a1rio-20sul-20bras-c3-adli.jpg)
