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UNCLAS SECTION 01 OF 02 SAO PAULO 001137 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR WHA/BSC, WHA/EPSC, S/P MANUEL 
NSC FOR FEARS 
STATE PASS USTR: SCRONIN/MSULLIVAN 
 
E.O. 12958:  N/A 
TAGS: EAGR ENRG ETRD EINV BR
SUBJECT:  AMBASSADOR SOBEL'S MEETINGS ON ETHANOL IN SAO PAULO 
 
 
¶1.  Summary: During his October 4-10 visit to Sao Paulo, Ambassador 
Sobel met with the new country president of Archer Daniels Midland 
(ADM), who advised that prospects for new infrastructure investment 
in Brazil are poor and that the company does not plan to produce 
ethanol outside the U.S.  The Ambassador also met with Rubens Mello, 
CEO of Brazil's largest sugar company, and toured a sugar/ethanol 
mill.  Mello advocated for the lifting of the U.S. import levy on 
Brazilian ethanol exports. He expressed some doubts about the 
prospects for developing biofuels industries in third countries. 
End Summary. 
 
---------------- 
MEETING WITH ADM 
---------------- 
 
¶2.  Ambassador Sobel met October 5 with Domingo Lastra, the new 
president of Archer Daniels Midland (ADM) in Brazil. Lastra provided 
an overview of the company's activities in Brazil, Paraguay and 
Bolivia and noted that the Brazil unit is responsible for activities 
in all three of those countries.  He further noted that ADM's 
activities are overwhelmingly focused on origination, processing and 
sales of soy, grains, and some other primary commodities, as well as 
grower financing and input distribution. 
 
¶3.  The Ambassador asked about the possibilities for further 
development of transport infrastructure and the prospects for 
Public-Private Partnership (PPP) development projects.  Lastra 
replied that investment in infrastructure has been negligible over 
the past few years, and that prospects for new investments are poor 
due to lack of government funding and lack of adequate guarantees of 
public contributions in PPP projects. 
 
¶4.  Ambassador Sobel further noted that ADM is the U.S.'s largest 
ethanol producer and asked if the company has interest in producing 
ethanol either in Brazil or in third countries.  Lastra responded 
that as far as he is aware, ADM has no plans to produce ethanol 
outside the U.S.  He also noted that ADM's new CEO, Patricia Woert, 
would visit Brazil October 18-20 to discuss the ethanol market with 
Development and Trade Minister Furlan and others. 
 
------------------------------------ 
COSAN: SUGAR AND ETHANOL DISCUSSIONS 
------------------------------------ 
 
¶5.  On October 9, the Ambassador, accompanied by DPO and ATO 
Director, visited the corporate headquarters of Cosan in Sao Paulo 
and the Costa Pinto sugar/ethanol mill in Piracicaba in the interior 
of the state.  Cosan is the largest sugar company in Brazil, 
producing about eight percent of Brazil's sugar and ethanol.  The 
Ambassador was hosted for the day by COSAN CEO Rubens Mello and 
Eduardo Carvalho, President of the Sao Paulo State Sugar Industry 
Association (UNICA). 
 
¶6.  The day began with a meeting at Cosan headquarters.  Mello gave 
an overview of his company's activities and size in relation to the 
Brazilian industry as a whole.  Cosan is Brazil's largest production 
group, with 17 sugar mills and interests in two sugar/ethanol export 
terminals in the port of Santos.  Dr. Carvalho emphasized the 
importance of Sao Paulo state in national sugar production.  About 
65 percent of Brazilian sugar is produced in the state.  The 
Ambassador asked what the key is to building a world ethanol market. 
 Both responded that lifting of the $0.54/gallon import levy on 
Brazilian exports would be the key to building volume and allowing 
the market to develop.  With respect to prospects for developing 
biofuel industries in third countries, Mello said that the 
possibility exists, but that third country sugar industries are 
often propped up by artificially elevated local prices and 
preferential access to markets such as the U.S. or the E.U.  As a 
result, ethanol is not a cost-effective use for local cane in these 
countries. 
 
------------------- 
VISIT TO SUGAR MILL 
------------------- 
 
¶7.  The group then proceeded to Piracicaba and toured the Costa 
 
SAO PAULO 00001137  002 OF 002 
 
 
Pinto sugar mill.  Costa Pinto was built in 1946 and crushes 
approximately 1.5 million tons of sugar cane per year, producing 
both sugar and ethanol.  The Ambassador and his delegation were 
driven to the canebrakes and observed manual harvesting of sugar 
cane, which is still needed for cane planted in rough terrain, as 
well as mechanized harvesting at cane planted in level terrain. 
Afterward, the group followed the progress of cut sugarcane through 
the delivery and crushing areas.  At Costa Pinto, two lines with 
five mills each crush sugarcane 24 hours a day from April through 
November.  The group also visited the ethanol production line, 
receiving an explanation on the fermentation and distillation 
process. 
 
¶8.  Following the mill visit, the group transferred to the Mello's 
Campo Alto farm for lunch.  Discussion centered on Brazil's desire 
for access to the U.S. ethanol market, prospects for development of 
sugar/ethanol industries in other countries, and new investor 
interest in the Brazilian sugar industry.  Mello will be traveling 
to Washington in the near future, and Ambassador Sobel recommended 
that he meet with several people in Washington including both IDB 
and Department contacts.  Post will forward Mello's agenda to Greg 
Manuel (S/P) for follow-up. 
 
¶9.  This cable was coordinated with Embassy Brasilia and cleared by 
Ambassador Sobel. 
 
MCMULLEN