Brazil made progress in reforms, despite polarization, says chairman of the board of Gerdau – 08/28/2021 – Panel SA

In the 120 years of Gerdau, which began with a nail factory in Porto Alegre and continued to focus on steel, diversification into other activities took off later and should advance in the wake of Gerdau Next, the company’s new business arm launched in 2020 .

Guilherme Gerdau, now chairman of the board of directors, says that the company made a wise and mature decision in 2017 by placing an executive who does not belong to the family as director for the first time.

The businessman says that the moment is now of an intensity that she has never seen in the markets in which it operates, with factories operating at full capacity. On the construction sector’s complaints against the rise in the price of steel, he says he is starting to see accommodation.

The moment of economic and political turmoil in the country, according to him, can be seen through the glass that is half full or half empty. “We have had advances in the last three, four years in Brazil. These were important reforms, regardless of polarization”, he says.​

How was the company’s history?It started in Porto Alegre, with the nail factory. At the time, the wire was all imported. And the idea was always to have security in the supply of wire for the production of nails. We were quickly entering the integration with the steel industry, we started to produce steel always with scrap. So, we went from a situation of dependence on imported wires to one in which we ourselves were able to produce our steel. gave us competitive advantage

My grandfather, Curt, spoke little Portuguese. He was going back to Germany but decided to stay. He always had a lot of engagement with the community and made the company grow.

He had four children. After the last child, who was my father, and already working for Banco Alemão in Buenos Aires, they had the idea of ​​returning to Germany. But at that time, when World War II came, ships were at risk of bombing when approaching Europe. So my grandfather decided that he would stay and undertake in Brazil.

With that accounting and financial head, and all that background he brought from the bank, he took over the nail factory and began to develop the business, ensuring that in a bag of nails there really was a kilo of nails, because, in competitors, sometimes sometimes the bag did not have a kilogram. And this is a big deal. It has to have the exact weight. He said ours always had a pound. Effectively it was our guarantee. Thus began the business.

He liked to organize everything and had a great operational discipline, despite not knowing much about steel, nails and wire at the time.

As the children grew, everyone joined the business. He always raised the bar very high, and the business was getting stronger in southern Brazil. It grew nationally. Then, in the first expansion, it was: “look, maybe we know this scrap and long product business well, let’s expand to Uruguay”. It was very close, and maybe we were a little afraid of what could happen in Brazil.

Then, in 1989, the business is doing well in Brazil, it is restricted to continue growing here, the markets are not growing at the same speed as our ambition. So, we went to Canada, at Courtice Steel, it was an opportunity we found. People were not doing well there. We knew about scrap, the people, the electro-intensive steelmaking process. We decided to buy, and it was our platform for growth in North America.

Then we entered the United States. There, one of the points where we were successful was that we started buying unionized plants, and always with the concern for people’s safety. We were gaining the credibility of the operators, with the unions and growing through acquisitions. That’s how the growth started in 2000 and 2001. We went public there too. It was always a strategy of acquisition and investment in plants in North America.

Our focus has always been on steel. There were some diversifications in the financial system and some other activities. At that time, the company was not prepared to advance in sectors other than steel. Today, the situation is quite different. With the creation of Gerdau Next, we see the possibility of looking at other things, opening our minds to innovation. And we are seeing that internally this generates a lot of energy in the teams.

Mr. 50 years ago now. What memories do you have of the company’s 100th anniversary celebration?At that time, we were already beginning to rehearse the first steps of trying to understand the long steel market based on scrap outside Brazil. This year, we had scheduled a face-to-face party, but due to the pandemic, it can’t be done. Maybe we’ll wait a few months. I think we are almost at the end of this.

The return to offices today is gradual. We monitor and encourage vaccination.

Perhaps another point about the return, especially regarding Brazil, is that with the high exchange rate and interest rates still in transition, we see clients with an ability to export that they did not have before. You see industries going about exporting.

We feel that the real estate market is heated, real estate funds are really capitalized, a hot market for residential developments. Infrastructure starting to come back, stopped falling. There’s this combination of markets.”

The case of Operation Zealots by the Federal Police, which involved the company in 2015 must have been a heavy moment. How was it going through that?During all these years, difficulties happen. That was a difficult time for the company and for the family, but I’m sure we’ve gotten over it.

In 2017, for the first time, the company had a CEO who is not from the founding family. How was this transformation?It was a big transformation. And we managed to prepare an executive, who is Gustavo Werneck, to take over all the operations. He graduated here, knows our way of working, shares our development values. It was great luck to have Gustavo at the right time.

From the point of view of André, Claudio and mine, who are the members of the family on the board, we face it naturally. We are still close to the operation, with a pulse on the business, on development and with our main function today, which is to seek to put the right people in the right seats. It was the right decision, which reflects the maturity of the company, the family, with the sole objective of continuing to grow.

What is the challenge of ESG in such an old company and in this sector?I don’t think we could reach 120 years stronger than ever without having the ESG agenda as central to the strategy. In the social issue of the pandemic, we managed to invest more than R$20 million. And we will continue to invest in the agenda of collaborating in the communities where we operate. We have important plans coming along this line.

On the issue of inclusion, we are also looking for women and black leaders. And in the environment, Gerdau’s emissions are much lower than the global average in the steel industry. and we want
reduce more.

The construction sector has complained about the high price of steel. How is it?When the pandemic started, the market went into shock. Companies held back cash and production, expecting demand to collapse. The incentives provided by the most diverse governments, in the different markets where we operate, were decisive in the demand curve. So demand did not fall in proportion to supply. We were surprised by the strength of the demand.

We also saw a strong restriction on investments that had already been repressed, mainly in the mining market and in some other commodities. When demand came, supply didn’t keep up, causing prices to rise so sharply that we had never seen them before. We are starting to see accommodation now, but still at a much higher level.

In this sector, where we also see higher prices, investments, mainly in some global commodities, were repressed. We are now noticing a slightly tighter, more restricted offer, but we are also beginning to feel the companies reacting.

They say the solution would be to import. What do you think?In markets, in general, importation is open. Now, when we look at the availability of steel in the world, it is very small today. China is eventually reducing production. So, that availability we saw, that excess capacity and overproduction, we are not feeling now.

How are you seeing the water crisis?We are watching the water crisis closely. Now, 70% to 80% of our energy is already contracted. So, we can safely see the next steps in our capacity.

How do you assess the Brazil of today, the institutional turmoil, the erratic behavior of the president and the economic difficulty with fiscal risk?We have been discussing in the council, and with some leaders, the situation in the country as a whole. I think we have to look too, perhaps, not only with a critical eye, but with the achievements we’ve had so far. You can look at the glass as half full or half empty. We have made progress in the last three, four years in Brazil.

These were important reforms, regardless of the strong polarization that is taking place in Brazil, and that we see in other Latin American countries and even in the USA. We feel this political polarization growing stronger. But I think we also have to look at what is important to people, which is actually our ability to implement the reforms that will ensure the ability of companies to continue to compete in the increasingly global market. That, yes, I think should be our priority within the political and economic situation.

Do you have the environment for this?The political environment for reform will always be an environment that is not absolute. The reform agenda, I think this is important for us to be able to conquer and try to move forward.

It was founded in 1901 as a nail factory by João Gerdau and boosted by the next generations. In the 1940s, it entered the steel sector and in 1970 and 1980 it expanded throughout Brazil, before internationalization in the following decades to countries such as Argentina, Uruguay and Canada