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PP RUEHRG
DE RUEHSO #0754/01 2541904
ZNR UUUUU ZZH
P 111904Z SEP 07
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 7440
INFO RUEHBR/AMEMBASSY BRASILIA 8553
RUEHRG/AMCONSUL RECIFE 3764
RUEHRI/AMCONSUL RIO DE JANEIRO 8307
RUEHBU/AMEMBASSY BUENOS AIRES 2860
RUEHAC/AMEMBASSY ASUNCION 3100
RUEHMN/AMEMBASSY MONTEVIDEO 2432
RUEHSG/AMEMBASSY SANTIAGO 2134
RUEHLP/AMEMBASSY LA PAZ 3477
RUCPDOC/USDOC WASHDC 2896
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHRC/USDA FAS WASHDC 0687
RHMFIUU/DEPT OF ENERGY WASHDC

UNCLAS SECTION 01 OF 03 SAO PAULO 000754 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/BSC, WHA/EPSC FOR FCORNEILLE 
STATE ALSO FOR E FOR GMANUEL AND EEB/ESC/IEC FOR BHAENDLER 
STATE PASS USTR FOR KATE DUCKWORTH 
STATE PASS FED BOARD OF GOVERNORS FOR ROBITAILLE 
STATE PASS EXIMBANK 
STATE PASS OPIC FOR DEMROSE, NRIVERA, CMERVENNE 
NSC FOR TOMASULO 
TREASURY FOR JHOEK 
USDOC FOR 4332/ITA/MAC/WH/OLAC 
USDOC ALSO FOR 3134/USFCS 
DOE FOR GWARD AND CGILLESPIE 
USAID FOR LAC/AA 
 
E.O. 12958: N/A 
TAGS: EAGR ECON PGOV ENRG ELTN BR
SUBJECT: BRAZIL'S RIBEIRAO PRETO: SUGAR AND ETHANOL BRING PROSPERITY 
TO INTERIOR 
 
Summary 
------- 
 
¶1.  (U) During an official visit to Ribeirao Preto, an agri-business 
center in northeastern Sao Paulo state, the Consul General visited a 
sugar mill and met with the Mayor and the President of the City 
Council.  Once part of the state's coffee belt, the Ribeirao Preto 
area is now best known for its sugar and ethanol production, much of 
it increasingly mechanized.  The Mayor boasted of Ribeirao Preto's 
export industries and said the city is actively seeking more foreign 
investors for its agro-industrial plant.  End Summary. 
 
Copersucar: Principal Sugar Cane Producer 
----------------------------------------- 
 
¶2.  (U) On August 29-30, the Consul General (CG), accompanied by 
USDA Agricultural Trade Director, Poloff, and Econoff, visited 
Ribeirao Preto, a city of about half a million people approximately 
300 km north of Sao Paulo.  The municipality of Ribeirao Preto is 
the acknowledged center for ethanol production, accounting for more 
than 10 percent of Brazil's annual sugar crop and boasting at least 
21 ethanol plants.  The CG visited the Pedra Agroindustria sugar 
mill and ethanol processing plant. 
 
¶3.  (U) The Pedra plant director, Luiz Roberto Kaysel Cruz, 
explained the company's operations and led a tour of the facilities. 
 Pedra is one of five mills in the region belonging to the private 
Copersucar cooperative formed in 1959, which today has 85 member 
companies and 31 active sugar and ethanol production facilities. 
Copersucar produces about 15 percent of total cane production in 
Brazil's south-central region, which encompasses Sao Paulo, Parana, 
Goias, Mato Grosso, Mato Grosso do Sul, and Minas Gerais states.  In 
all, Copersucar was responsible for 7 percent of world sugar exports 
last year.  Unlike Copersucar's other mills, Pedra exports most of 
its sugar because Pedra has a dedicated railway to transport sugar 
to Santos, Brazil's largest port on the coast of Sao Paulo state, 
where the cooperative has exclusive port facilities for its sugar 
exports. 
 
¶4.  (U) Pedra's producers harvest 85 percent of their sugar cane 
mechanically, and hope to have the entire harvest mechanized within 
3 years.  Mechanically harvested cane is much less labor-intensive 
(6-7 workers can replace about 100) and less destructive to the soil 
than hand-cut cane.  Mechanization, however, requires much closer 
attention to logistics, as mechanically harvested cane must be 
milled within 24 hours, while manually harvested cane has a shelf 
life twice that long.  This just in time mechanization process has 
resulted in Pedra developing an intensive training program. 
Employees spend three hours a day learning to read and write and 
three hours a day training alongside more experienced colleagues. 
When asked about the social impacts of needing fewer laborers for 
the mechanized operation, Cruz commented that the sugar/ethanol 
sector actually needs workers, but many do not want to accept formal 
employment because the income would render them ineligible to 
receive Bolsa Familia (BF) payments. 
 
Ethanol Production Expanding 
---------------------------- 
 
¶5.  (U) Pedra almost evenly splits its cane production between sugar 
and ethanol production.  Coperasucar supplied about 3 billion of the 
16 billion liters of ethanol produced last harvest in Brazil's 
south-central region, and exported about 20 percent if its ethanol 
production.  Most of Copersucar's ethanol exports go first to the 
 
SAO PAULO 00000754  002 OF 003 
 
 
Caribbean for further processing.  This allows for duty-free access 
to the U.S. market under the Caribbean Basin Initiative.  Unlike 
sugar, ethanol currently has no specific Brazilian export terminal, 
and the cooperative exports via a variety of smaller locations in 
Santos.  Pedra has discussed the possibility of building a terminal 
as the ethanol export market expands.  At the moment, however, its 
principal concern is keeping Petrobras, Brazil's parastatal oil and 
gas company, from controlling ethanol exports.  Petrobras currently 
dominates Sao Sebastiao, the primary port where Brazil's oil and gas 
trading occurs, and Cruz told the CG's delegation that Pedra fears 
it could do the same for ethanol exports if the proposed ethanol 
pipeline also uses Sao Sebastiao. 
 
Making Environmentally Friendly Plastics From Sugar 
--------------------------------------------- ------ 
 
¶6.  (U) Cruz also introduced the CG to PHB Industrial, S.A., the 
newest arm of Pedra, still in the testing phase of developing a 
biodegradable plastic polymer, Biocycle, made from sugar cane. 
According to two PHB managers, Eduardo Brondi and Sylvio Filho, the 
sugar-based product is a white powder which can be used to 
manufacture a variety of environmentally friendly plastic products 
that biodegrade within 120 days.  In the production phase, Biocycle 
actually reduces carbon emissions both as a derivative of sugar cane 
byproducts and by virtue of its biodegradability.  In addition, it 
has the potential of reducing plastic buildup in landfills.  Filho 
explained that the goal is to diversify the company's production mix 
to include this value-added niche product to minimize its exposure 
to commodity price fluctuations.  Three kilograms of sugar cane 
produces one kilogram of the biopolymer powder.  PHB outlined 
potential markets for Biocycle including Europe, which prizes 
products derived from clean energy, and Japan, given that country's 
limited space for waste disposal.  PHB produces Biocycle more 
cheaply from Brazilian sugar cane than similar corn-based products 
developed in the U.S., but, as is usually the case with Brazilian 
products, higher transportation costs reduce the advantage. 
 
Mayor Wants More Investment 
--------------------------- 
 
¶7.  (U)  Following the sugar mill tour, CG's delegation and Pedra 
management lunched with Welson Gasparini, Mayor of Ribeirao Preto; 
Jorge de Oliveira, his Chief of Staff; and Wandeir Silva, President 
of the City Council.  Mayor Gasparini, a lawyer and educator who 
began his political career in 1959 when he was elected to the 
Ribeirao Preto City Council at the age of 23 and is now in his 
fourth term as Mayor - he was elected in 1963, 1972, 1988, and 2004 
- said the city's economy is strong, the workforce well educated, 
and the poverty rate relatively low.  He said the city is always 
looking for more investment for its export industries and asked the 
CG to encourage potential U.S. investors to visit.  (Note: In 
November, Florida Governor Crist is leading a large private-sector 
group on a visit to Sao Paulo, Sao Jose dos Campos, Ribeirao Preto, 
and Rio de Janeiro.  End Note.)  He also noted that AMCHAM Brasil 
has a chapter in the city. 
 
¶8.  (U)  The Mayor outlined Ribeirao Preto's importance as a 
regional hub; some of the principal cities and economic centers of 
the interior of Sao Paulo and Minas Gerais states are located within 
a 200-km radius of Ribeirco Preto, including Araraquara, Campinas, 
Franca, Limeira, Sao Carlos, Sco Jos do Rio Preto, Uberaba (MG), 
and Uberlandia (MG).  This is due to the city's accessibility, which 
is facilitated by its high quality rail system; unusual in Brazil. 
Overall, the Mayor pointed out that Ribeirco Preto's convenient 
 
SAO PAULO 00000754  003 OF 003 
 
 
location, positive social indicators, rich agricultural land, and 
well-developed infrastructure have made it a magnet for commercial 
investment in Brazil.  In addition to sugar cane, the region 
produces soy beans, citrus products (especially oranges), peanuts, 
and other fruits and vegetables.  Agriculture makes up about 19 
percent of the municipaity's GDP, with 26 percent devoted to 
commerce ad the rest to other services.  The sugar and ethanl boom 
has generated complementary industries, sch as agricultural 
machinery and factory equipmet. 
 
Not Immune from Poverty 
---------------------- 
 
¶9.  (U) Though Ribeirao Preto has less povety and more equal income 
distribution than many arts of Brazil, Gasparini acknowledged that 
the ity does have some urban slums ("favelas"), mostlypopulated by 
migrants from the northeast - princially Maranhao state - who came 
to work in the agricultural sector (mostly in sugar cane) and then 
don't leave.  The city also has a number of participants in the 
federal government's "Bolsa Familia" (BF) cash-transfer program, 
though the Mayor wasn't sure how many.  Gasparini said administering 
the program represents a significant burden for the municipal 
government and is probably even more challenging for smaller, less 
prosperous towns with fewer government resources.  In addition to 
registering applicants, municipalities are responsible for reporting 
on beneficiaries' compliance with BF's conditions, such as 
children's school attendance and vaccinations.  Beneficiaries also 
rarely remove themselves from the program due to gainful employment, 
he said.  Gasparini added that it is very difficult and 
time-consuming for the government to remove a recipient from the 
rolls due to excess income or non-compliance with the conditions. 
 
 
Comment 
------- 
 
¶10.  (U) The Pedra ethanol operation is impressive, both in size and 
efficiency.  The plant is clean and working conditions appear to be 
good.  The city and surrounding region also appear to foster a 
generally high quality of life, which it should be able to sustain 
as long as demand for sugar and ethanol continues to grow.  End 
Comment. 
 
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