Raizen SA is exploring the sale of its Argentine oil refinery and gas stations, having hired JPMorgan to manage the sale. This move comes amidst a trend of multinational companies divesting from Argentina, despite efforts by President Javier Milei to enact economic reforms. Raizen is facing challenges due to rising borrowing costs and is considering slowing its expansion plans.
Brazil’s Raizen SA is currently considering the sale of its oil refinery and network of gas stations in Argentina, according to sources familiar with the situation. The company, a collaboration between Shell Plc and Cosan SA, has engaged JPMorgan Chase & Co. to oversee this potential sale, though both Raizen and JPMorgan have declined to comment on the matter.
Raizen’s exit from Argentina would mark a significant trend, joining other multinational companies like Exxon Mobil and HSBC Holdings Plc, which have also recently sold operations in the country. This trend persists despite growing investor optimism regarding President Javier Milei’s economic reforms.
As Brazil’s largest ethanol producer, Raizen is contemplating divestments and slowing expansions due to rising borrowing costs that have started to impact its financial stability. Its Dock Sud oil refinery in Buenos Aires, the oldest in Argentina, has a capacity of 100,000 barrels per day and is only surpassed by two facilities operated by the state-owned YPF SA. Raizen also owns approximately 700 gas stations, which represent 18% of the country’s gasoline and diesel sales.
Raizen acquired these assets for nearly $1 billion in 2018 from Shell during a period of market-oriented reforms in Argentina. Following a phase of extensive government control from 2019 to 2023, voters recently elected the libertarian Milei, who is actively pursuing the deregulation of the economy, especially within the energy and oil sectors.
This divestment aligns with Milei’s decision to eliminate price controls on crude and fuel, which had been implemented to combat inflation but were detrimental to refiners and drillers at different times. Current domestic fuel prices are now reflecting those of the international market.
In summary, Raizen SA’s potential sale of its oil and gas assets in Argentina underscores a trend of multinational companies withdrawing from the region despite reformist leadership under President Javier Milei. With rising borrowing costs impacting operations and the shift towards deregulation in the energy sector, Raizen’s divestment could indicate broader market challenges. The developments will be significant for both investors and consumers as they navigate this evolving economic landscape.
Original Source: www.livemint.com
