High interest rates make investment unviable, Ometto says

Mr. Ometto also mentions Cosan’s loss in its investment in Vale, a personal project of his to engage in the management of one of the world’s largest mining companies. “What hurt the most was that it was a personal endeavor. Vale is a fantastic company, a national pride. I had a lot to contribute.”

According to Mr. Ometto, the current interest rate level of 14.75% makes investments unviable. Cosan has an ongoing capex plan of R$10 billion to R$12 billion for the year. “If interest rates don’t come down, we will hold back on investments,” he warned.

Although he was critical of the government’s economic policy last year, Mr. Ometto said his relationship with President Lula “has always been very good.” “My criticism is intended to contribute to what’s best for the country. Lula is a consensus builder and will manage to align everyone’s ideas.” Read below the main excerpts from the interview with Valor:

Valor: How is Cosan’s restructuring process being conducted?

Rubens Ometto: The group is doing very well in the lubricants business (Moove), in logistics and railways (Rumo), in gas (Compass), and in land assets (Radar). In Raízen’s case, we are focused on correcting mistakes we made. We got distracted, and [the company] went down the wrong path.

Valor: What distractions?

Mr. Ometto: Raízen invested heavily in second-generation ethanol, acquired Biosev, and bought a fuel distribution refinery in Argentina. That increased leverage significantly. And with today’s high interest rates, this leverage greatly impacts Raízen’s balance sheet, and consequently, Cosan’s.

Valor: What measures are being taken?

Mr. Ometto: We are executing a turnaround. We replaced the entire executive board and brought in our best talents: Nelson Gomes [now CEO], Rafael Bergman [CFO and head of investor relations], and Leonardo Gadotti [vice president of mobility]. With this excellent team, results will follow soon. We are studying ways to address the company’s financial structure.

Valor: What does the solution involve?

Mr. Ometto: First, we are overhauling governance and improving workforce productivity. There was a lot of redundant work, and that is now being reorganized. Raízen had expanded into many areas, such as trading and electricity. We are refocusing on fuel distribution under the Shell brand and on sugar and ethanol production, along with power cogeneration. We are streamlining the company. As part of this strategic plan, we will divest non-core assets. That’s the focus.

Valor: Is the group moving away from its M&A-driven DNA?

Mr. Ometto: No, it’s the same. But today, with interest rates at 15%, M&A and asset purchases are unfeasible. Regardless of anything else, you have to be rational about where to invest. You can’t justify paying 15% interest; nothing yields a return over that. So, for now, we’ve paused, because it doesn’t make financial sense.

Valor: Part of the current leverage is attributed to the Vale investment.

Mr. Ometto: We got into trouble with the Vale deal. It was a personal investment project, and it hurt deeply. Not just because of the interest rates, the entire business became unviable. Cosan lost money. What hurt the most was that it was a personal endeavor. Vale is a fantastic company, a national pride. I had a lot to contribute, but I was blocked.

Valor: How?

Mr. Ometto: The shareholders were mostly from the financial sector. None had an entrepreneurial or industrial background, which is our expertise. There were top-tier investors, like Bradesco, Mitsui, a small government share through Previ, and other silent partners. I thought there was room to do a lot. I believe we made contributions, especially in governance ideas. But I had to step back, because there’s no way to sustain that kind of financial equation with 15% annual interest rates.

Valor: There was also controversy around the choice of president.

Mr. Ometto: I prefer not to discuss that.

Valor: How have high interest rates impacted the group’s businesses?

Mr. Ometto: All our businesses are well-structured, with leverage below 2, except for Raízen, which is around 3. Cosan can manage itself with the dividends it receives from its subsidiaries.

Valor: How is the U.S.-China trade war affecting the group?

Mr. Ometto: First, I think this trade dispute is absurd. But for our businesses, it’s actually beneficial.

Valor: Why is that?

Mr. Ometto: In agribusiness, Brazil is highly valued. The U.S. imposes tariffs on China, so China buys from Brazil instead. Rumo’s trains are overloaded. It generates huge demand. Agribusiness as a whole benefits.

Valor: How do you and your industry peers view the macroeconomic outlook?

Mr. Ometto: Everyone sees that interest rates must come down. No one thinks taxes should be increased. Fiscal balance is necessary. Those in government who have access to all the data must find a solution. Without fiscal discipline, interest rates won’t drop. I believe that’s what the government is working on. If rates come down in a technically sound way, the country will boom.

Valor: You have been vocal with criticisms of economic policy. What’s your current assessment?

Mr. Ometto: My relationship with the president has always been very good. I respect him a lot. Of course, honest relationships sometimes involve disagreements. And all my criticisms are meant to contribute to what’s best for the country. Lula is highly experienced. He has the ability to do a good job. He is a consensus builder and will manage to align everyone’s ideas.

Valor: What are the critical issues?

Mr. Ometto: He has the ability to do a good job, and I hope he succeeds. But Brazil’s problems aren’t solely up to him. There’s judicial instability. It’s improving, but the judiciary tends to overreach into the legislative and executive branches. Each institution’s boundaries must be clearly defined. Public security is another issue.

Valor: What’s your view on that?

Mr. Ometto: Crime and militia activity are growing. They are even trying to infiltrate the legislative branch. We also suffer from widespread tax evasion. That’s why we are pushing Congress to pass the bill targeting habitual tax evaders. It’s unfair competition. Regulatory agencies must be active and technical to prevent this. Of course, companies may occasionally struggle to pay taxes, but when evasion becomes a business model, that’s unacceptable.

Valor: The habitual tax evader bill has been on the industry’s agenda for a while.

Mr. Ometto: It’s not just our sector. In fuel alone, tax evasion reaches almost R$20 billion. If you add cigarettes, beverages, and food, total evasion in Brazil amounts to R$120 billion to R$150 billion annually. That would practically solve the fiscal deficit.

Valor: Is there progress on this agenda?

Mr. Ometto: The bill is set for a Senate vote. I hope it gets approved in June. Then it will move to the Lower House. It’s crucial not just for our sector but for Brazil as a whole.

Valor: Are lawmakers receptive?

Mr. Ometto: There’s controversy, of course—some are in favor, some are against. However, I see broad societal support. I will speak with Lula. We maintain a relationship of respect and dialogue.

Valor: How would you define your current relationship with the government and President Lula after last year’s criticisms?

Mr. Ometto: I’m not a politician. I’m a businessman, a Brazilian, a patriot. I express my views, sometimes too openly for a businessman. But that’s my nature. My criticism is not personal or partisan. We made major investments during Lula’s first and second terms, as well as during Dilma’s government, and we are investing now under his current administration. Our capex is about R$10 billion to R$12 billion per year. It’s enormous. In railways alone, we’re spending R$6 billion. I would invest even more if interest rates weren’t so high. We must solve the financial equation.

Valor: Is Cosan considering reducing investments?

Mr. Ometto: If rates don’t come down, we will hold back on investments. We’re completing projects already underway. But starting new investments doesn’t make sense. Why work like crazy, hire people, and fight for returns when you can earn 15% by doing nothing, sitting in air conditioning? Paying interest doesn’t wait for weekends or holidays.

Valor: Do you have any specific agenda to discuss with the government?

Mr. Ometto: No. All our investments are financed through the market. Some have BNDES support, following the bank’s technical rules.

Valor: How is your relationship with the economic team?

Mr. Ometto: We speak often by phone. A good time to catch [Finance Minister Fernando] Haddad is on Sundays, when he’s in São Paulo. I also have a good relationship with [Aloizio] Mercadante [head of Brazilian Development Bank, BNDES] and [Alexandre] Silveira [minister of mines and energy]. I get along well with all of them.

Valor: Even after the harsh criticisms?

Mr. Ometto: They weren’t harsh; they were disagreements. I agree that I may have been a bit too eloquent.

Valor: Do you think the situation has improved compared to last year?

Mr. Ometto: Things are calming down. Take the controversy over the IOF [Tax on Financial Transactions], for example. It was rushed, not properly discussed, and people are rightly complaining because it raises financial costs even more.

Valor: So, you’re against the tax increase?

Mr. Ometto: Yes, I’m against it. But I recognize the government is trying to find solutions. It’s hard to give advice without seeing the full picture. They are working hard to figure it out. Lula has always been capable of building consensus and listening to different viewpoints. That’s a strength.

Valor: How do you see the outlook for 2026?

Mr. Ometto: I think we’ll see polarization again.

Valor: You don’t believe in a third way?

Mr. Ometto: It’s possible, but it’s tough. The forces will likely be split; one side with the Workers’ Party and the other with [Jair] Bolsonaro or whoever he endorses.

Valor: You’re one of the biggest campaign donors. How do you choose whom to support?