Brazil's sugar and ethanol export industries, already the world's biggest, are expected to grow even bigger as foreign investors fuel expansion into freer world markets, producers and analysts said on Friday.
As the world's lowest-cost sugar and cane-based ethanol producer, with almost limitless farmland and favourable climate, Brazil is a magnet for European sugar producers looking for new opportunities when EU subsidies are phased out.
Last week the World Trade Organisation ruled against the aid system in the EU, the world's No. 2 sugar exporter.
Brazilian producers estimate that shipments could fall by nearly 5 million tonnes a year and Brazilian producers, who already supply about 40 percent of the world sugar market, anticipate filling about 3 million tonnes of the shortfall.
"I expect increased investment from foreign and local investors, but it won't be rushed and only start to be seen from next year," said Jose Pessoa, one of Brazil's biggest sugar and ethanol producers with 10 mills crushing 8 million t/yr of cane.
Pessoa said that investors will look for confirmation of the WTO decision and how long it takes to implement.
Pessoa expected strong investment in ethanol to meet growing external demand, noting that Brazil was exporting in large volume for the first time this year.
Centre-south exports surged to 1 billion litres between January and July 16, from 460 million litres in the whole of 2003.
Maurilio Biagi, adviser to the Sao Paulo Cane Agroindustry Union (Unica), said that the WTO decision was expected.
"Brazilian producers already have plans to expand," said Biagi, who is also a major sugar and ethanol producer.
Biagi shrugged off US complaints about Brazilian aid for ethanol, saying that production costs were much lower than for US corn ethanol.
Other industry leaders also expected higher investment.
"A new wave of investment with foreign investors is building," Luis Carlos Correa Carvalho, President of Brazil's Chamber of Sugar and Ethanol, told Reuters by phone.
Speaking from Piracicaba in Sao Paulo state's cane belt, Carvalho said that low-cost Brazil was best-placed to fill the gap left by an expected decline in EU exports.
"We're constantly receiving inquiries from European and Asian investors, especially Japanese and Chinese," said Carvalho, who is also director of Canaplan consultancy and director of Alto Alegre milling group which crushes 7 million tonnes of cane a year.Analysts said that new investors could include British sugar and sweeteners group Tate & Lyle Plc. and Europe's largest sugar refiner, Suedzucker AG.
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