Brazilian Gas Sector: Gas Distribution Sector in Brazil

Interview with Ueze Elias Zahran, President of Copagaz and Zahran Group

You are a very successful entrepreneur; many people have talked about your life. What do you identify as major success factors in your life? What is your life creed? How did you manage to create the company from nothing? What is your advice for the future generation of entrepreneurs?

My mother was crazy about the gas stove. We were living in South Mato Grosso (Mato Grosso do Sul); she came here (to Sao Paulo) once to see her relatives and saw them using a gas stove. Then, she went down to the city where I was living, Campo Grande, and asked me for a stove like that. So, I came here and bought one with four bottles because they had to send it by train and it took a lot of time to reach our city. She was so happy when she saw the blue fire below the pan of food; I saw a grown-up woman and mother happy with gas, which we didn’t have in our country.

So, I came to Sao Paulo to be a LPG reseller for a company called Supergasbras and I have been studying about gas since then. When I talked to the president of this company, I saw that I could be distributor too because I knew more than him about gas. I asked him what the weight of a bottle of gas was and he didn’t know, but I did. They were bottles of 13 kilograms and 5 kilograms. That day I told myself I was going to be a distributor too, I was not going to be only a concessionary. I worked a whole year to get an LPG company license – that was in 1955. Since then, I’ve been working in the field for 57 years.

At that time, here in the country we had 21 companies. Today, out of those 21 companies, there are only four left – 17 disappeared. My company is one of those four. I continue working to find a way to use gas safely. I used to go to Europe once a year and we would have what they call the World Forum of Gas. I used to go there and take ideas to use in my own business. The butane-propane gas is very dangerous, but they have laws that makes it safer. I worked for 23 years to put those laws in place here in Brazil and they started doing so last year; we start working and testing the gas bottles every ten years. Today I am working to make it safe, but I haven’t finished yet.

I would like to focus on a message about Mato Grosso. You started your business career in Mato Grosso. You’ve seen the evolution of the business over there. In your opinion, what is the future of Mato Grosso and can you speak a little bit about the business opportunities over there?

Mato Grosso is a big state – it spans about 1.5 million square kilometers. The rain happens when they say it is going to, and the land is very good and cheap. So, when the government divided the state into two states – Mato Grosso do Sul and Mato Grosso, all the European people from the south of Brazil – Santa Catarina, Paraná, Rio Grande do Sul – went to Mato Grosso and they bought everything – all the land – and they started producing cotton, soy beans and a lot of grains. The state is rich and very good now; I don’t think it has anything else to offer – only the land. Although, besides agriculture, there is also industry since Mato Grosso is in the middle of the country – we don’t have sea, but we have a river that flows straight to Argentina and Uruguay, so we can export from there.

What about tourism and culture in Mato Grosso?

They are crazy about the Pantanal. They say that it is from Pantanal that the moon appeared. It is a wild country with native grass and full of cattle. I’ve only been there twice. When the rain comes the Pantanal is a sea; we can’t see any land, only water. It certainly is a place to visit from a tourist’s perspective.

What is your vision for Mato Grosso?

Now, my vision is for the whole of Brazil because I started working with my factory. I am expanding the company all over the country. Brazil has 27 states and Copagaz is in 21. I don’t want to be in the other six because I call them water states; the Amazon and Maranhão are just water – there are no people over there, no people that use gas at least. Here, in the country, we have increased by 150,000 tonnes of gas – selling more every year. Overall, the gas companies in Brazil are selling 7,500,000 tonnes a year. My company sells 550,000. That’s good enough for me, but I am hoping to make it bigger and different. 550,000 is half of Argentina – Argentina uses 1 million tonnes of gas a year. So, I’m looking after this gas business (Copagaz) and my television network, and I’m trying to improve both of these businesses. I’m not trying to make another kind of business, I have enough already.

What is your opinion of the gas distribution sector? There are only 8 companies controlling the market, whereas there are 50 such companies in Mexico. Is it good or bad? What is your assessment of the gas distribution sector in Brazil?

For over 50 years, I had news on my desk about bottled gas killing families. Inside Brazil, I introduced a law regarding bottled gas safety in 1996 – I had to do this step by myself. You cannot play with bottled gas; it is serious and when you work irresponsibly with it, somebody will pay for it. We used to have whole families killed by bottled gas, and my company was working for more than 23 years to stop it. Finally, the regulatory agency accepted my idea and they put the law into practice. Today, we still have 31 million out of 100 million bottles that haven’t been tested yet. We have to test them every 10 years.

One statistic says that Petrobras supplies 70% of the gas needs of Brazil. What are your projections for the price of gas in Brazil and is it going to be affordable for the people?

Petrobras sells 100% of the whole gas in Brazil. They say they’re going to raise the price. I don’t know yet whether they’ll do it or not because the government is very careful with the price of bottled gas. They showed the government that the price here is the lowest in the whole world. They showed that it costs R$ 0.20 per person per day (in a family of five people), because a bottle of gas costs R$ 43 and it lasts 43 days so that’s R$ 1 a day. In a family of five people, that’s R$ 0.20 per person. There’s no other place in the world where the gas is being sold at such cheap price as here in Brazil. I don’t know how much they are going to sell it to us for and I’m not planning for it yet. Today, I’m taking care of the safety of the product and testing the bottles. We have tested 100 million bottles in 13 years and we used to lose 25% of them. In the country I went to in Europe, they tested the bottles by, what they called, requalifying the bottled gas, and they only lost 3%. Here, we lost more than 25%, so we had to replace 25 million bottles at R$ 100 each.

What would you identify as a major challenge for Copagaz?

I went to Madrid once and saw a man in a filling station, looking for the bottle he was trying to get filled. They put the bottle away because the test was out of date. So, they take care of each bottle. Here, in Brazil, we have lots of bottles that are out of date and Copagaz is working to rectify this situation.

What about your company? Copagaz is a family-owned company. Do you plan to list it on the stock exchange? Do you plan to partner with other companies? What is your strategy and vision?

For the first time, my company is all over the country and I’m growing. I’m selling more today than I was six months ago. Then, I have to sell 1 million tons a year – I’m trying to do this. My company has a good reputation; everyone knows Copagaz is a good company. I have to have enough bottles to meet the demand. I’m producing more than 1 million bottles a year at my factory Ibrava and I’m free to deliver it in other states.

Do you also have international ambitions?

No, not yet.

Finally, do you have a message about Brazil?

Brazil is doing well today. When President Luiz Inácio Lula da Silva and the government put the Bolsa Família (Family Allowance), 30 million Brazilians received this financial aid. We noticed this significant change because Copagaz is producing 150,000 tonnes every year. It is the people from Brazil who are doing it; those people who now have means to eat more are also contributing to the growth of Copagaz. Brazil is on a right path with President Dilma Vana Rousseff at its head;. I think her rule in Brazil will be successful.

What are your personal challenges?

I worked for 23 years every day to implement the bottled gas safety law. Today, I’m happy because everything has been completed and we have started to take care of the bottles that were killing people.