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Long-Term Investors In Brazil Ethanol Unfazed By Dollar Crash
By Mr Ethanol | October 11, 2007
CNNMoney:
The dollar broke the 1.80 Brazilian real mark on Thursday for the first time in seven years, but Brazil ethanol investors are relatively unfazed and said the sector’s expansion will continue, weak dollar or not.
“The dollar decline really doesn’t concern us, or affect our investments,” said Aureo Luiz de Castro, president of Etanalc SA, a new ethanol company.
The group signed a 20-year supply deal with Sempra Commodities, the commodity marketing unit of Sempra Energy (SRE) on Oct. 8. The Royal Bank of Scotland ( RBS.LN) is part of the new Etanalc-Sempra joint venture, called RBS-Sempra Commodities LLP, Castro said, adding that capital won’t be a problem.
“The mid- and long-term prospect for ethanol looks very good. Consumption will rise around the world and everyone is betting on that,” said Marcelo Coelho, a partner in E-Machine, an ethanol company consulting group.
“The big players are hedged, but the smaller players that announced investments just won’t be able to follow through on these tight margins caused by the dollar,” said Coelho.
He estimated that of the roughly 80 ethanol mills that were announced to be built in the 2007-08 market year, 11 of them have already stepped away from their plans.
“The dollar could slow expansion a little bit, but expansion is going to happen,” said Paulo Giminez, a risk management consultant at FC Stone in Sao Paulo.
Brazil has seen billions of dollars in local and foreign investment in its ethanol industry. Billionaire U.S. investors such as Vinod Khosla, co-founder of Sun Microsystems, and Ron Burkle, a Beverly Hills supermarket magnate, have invested in new Brazil ethanol company Brenco this year. Full article.
Topics: Brazil, Ethanol, Investing, Market |
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