Author: Antonio Guerrero



New fields: Increasing
demand for biofuels
is fueling investment
in Brazil's ethanol

Higher oil prices continue to boost demand for biofuels, making Brazil’s ethanol sector a prime investment target. While annual global ethanol exports total some 6.5 billion liters, McKinsey & Co. predicts these could reach 50 billion to 200 billion liters by 2020. “To supply the demand, Brazil’s companies will have to ramp up their export capacity significantly, which would require investments of as much as $100 billion in land, distribution infrastructure and new mills,” says a report by the management consulting firm.

Etanalc, a Brazilian ethanol producer, is reportedly in talks with US-based Sempra Commodities to build 24 ethanol production plants in Brazil in a deal estimated at $4.2 billion. Sempra would purchase ethanol from the new plants for 20 years for export primarily to the United States. São Martinho, a local sugar and ethanol producer, raised $175.6 million via an IPO on São Paulo’s Bovespa stock exchange in February.

The Republic of Brazil issued R$1.5 billion ($721 million) of 21-year 10.25% bonds in February, extending the curve for local currency-denominated global bonds. The yield on the bonds, which mature in 2028, had initially been expected at 10.7%, but R$4 billion in demand prompted a tightening to 10.68%.

Egyptian telecom firm Orascom Telecom is hoping to take a slice of the Brazilian telecom market. Orascom is bidding for control of Brasil Telecom by submitting offers to the target’s four main shareholders—Telecom Italia, Citigroup, Banco Opportunity and local pension funds. Orascom is also seeking stakes held by Citigroup and pension funds in Telemar, Brazil’s largest phone operator, and is reportedly interested in a stake in Telemig, a telephone company in the state of Minas Gerais.

Antonio Guerrero