May 24, 2010
Most Large Sugar Operations in Brazil Owned by Foreigners
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
Over the last five years there has been a radical change in ownership of some of the largest ethanol/sugar producing operations in Brazil. According to Eduardo Chaim of the consulting group Dextron Management, in Brazil today, four of the five largest ethanol/sugar producers are owned or controlled by non-Brazilians - Cosan, Louis Dreyfus, Bunge, and Guarani. Five years ago during the 2005-06 growing season, the ownership landscape was very different. During that year, the top five ethanol/sugar producers were all owned or operated by Brazilian entities - Copersucar, Cosan, Crystalsev, Sao Martinho, and Grupo Carlos Lyra.
The international ethanol boom and Brazil's strong biofuel program has attracted a lot of international investors to the ethanol/sugar sector in recent years. If anything, this trend is actually accelerating. Other multinational companies who are either entering the Brazilian ethanol/sugar sector or are expanding existing operations include ADM, British Petroleum, and the Noble Group.
These multinational organizations have a distinct advantage over solely Brazilian companies due to their existing international operations and their access to international markets. These companies are well positioned in foreign markets to take advantage of the increased interest in biofuels. These companies have also purchased or built some of the most modern and efficient ethanol/sugar operations in Brazil. They also have the advantage of accessing their own financial resources to invest in the ethanol/sugar sector.
Sugarcane cultivation and sugar processing is a very old industry in Brazil and many of the existing operations are old and inefficient. The operators of these older facilities also have difficulties accessing enough credit to upgrade and expand existing operations. In times of economic turmoil, many of the operators of Brazil's 430 ethanol/sugar operations viewed being bought out by multinational corporations as the only viable alternative.