Bunge will invest US$ 400 million in Brazil

The recent sale of Bunge’s potassium mines in Brazil to Vale will help funding the company’s ambitious plans for investment of approximately US$ 300 million a year in the sugar and ethanol, informed Bunge’s CEO, Alberto Weisser. The executive said that, together with plans for other business of Bunge in Brazil, the investments should totalize approximately US$ 400 million annually over the next five years.

“In 2012, we will be producing 30 million tons of sugar cane”, Weisser predicted. This amount is more than double of the current capacity of Bunge, after the purchase of Moema, the third largest producer of sugar and ethanol in Brazil. Cosan, the largest producer, is responsible for the grinding of about 60 million. Weisser emphasized that, although signed, the agreement to purchase Moema it may take between “two to three months”, to be completed in details.

In January, Bunge signed a contract with Vale to transport ethanol from its current plant in Tocantins to the port of Itaqui in Maranhao. Weisser believes that soon the US demand will absorb the share of corn’s ethanol from local producers and will import a large quantity. “We’re in the distribution and commercialization market in the U.S., and I imagine that in the medium term, we import, from the Caribbean and Brazil”, he said. “The problem in Brazil in the short term is that local demand is greater than the supply”, he says, ensuring that Bunge will work with the government to create a buffer stock of alcohol.

“It is in everyone’s interest, industry and government, to seek price stability”, he said. On the executive’s forecasts, sugar and alcohol should represent, by the end of the year, 15% of the company’s global operations; the biggest part, 50%, will remain in the activities of the grain and oilseeds sector, the food production (margarine, mayonnaise, oil) will occupy 30% and the activities with fertilizer, will be the lowest, 5%. Bunge recently bought Petrobras facilities in Argentina, with the production of nitrogen and, despite the sale of the potassium mines for Vale, the company intends to continue in the Brazilian fertilizer sector.

“The sale of the potassium mine was a very logical move, the large mining companies made a lot of money by selling iron ore, and they are diversifying and willing to pay a good price for mines in the fertilizer sector”, sums up. “It was a unique opportunity for Bunge, as we predicted the entry of large production and a market with strong competitors”.

In Brazil, as in Argentina, with the purchase of local distributors, Bunge held mixers, ports and brands Manah, Ouro Verde and Serrana. “Staying in the Brazilian and Argentine retail markets, we may have one or more other plant”, he announces. Weisser attributes “misinformation” for the recurrent allegations in Congress against the “cartel of fertilizers”, responsible for one of the main costs of agriculture in Brazil.

He says the sector has participated in sessions at the Congress and opened numbers to the Council for Economic Defense, to dispel accusations of cartel. “We are small on the world’s market, we are price makers”, he says. “The fertilizer market has international prices and follows trends in China, India, Canada and Russia. It is different from soybeans, where Brazil makes its prices, and the international price follows the needs of the Brazilian producer”.

Of the US$ 3.8 billion made from the sale of mines and the participation of potassium mining share for Vale, a party (small, the total was not determined) will be reserved for the payment of debts, to strengthen the company’s balance sheet. The executive estimates that after paying taxes, the income from the sale will be around US$ 3.5 billion.

Weisser says the company plans to continue the modernization of its factories, mills and ports in Brazil, where the planned investments just for maintenance and expansion of the existing facilities costs, in real terms, over US$ 54 million approximately, per year. “We built a mill in the port of Suape, we are renewing the Moinho Fluminense in Rio: we always want the state-of-the-art, we do not get left behind”, he said. He advises that the investments made by industry in ports and railways had largely eliminated the infrastructure bottlenecks that have threatened the flow of the 2003 crop, but regrets the remaining high cost of infrastructure in Brazil, the complex tax system and the excessively valued exchange rate. “It is not the case, but Brazil is no longer competitive”, says the executive.