Commodities: Natural advantages should sweeten deals

Brazil’s capital-intensive sugar industry, which leveraged its expansion on cheap debt, has suffered under the weight of the credit crunch and low prices for most of 2007 and early last year.
Five sugar companies with total production of about 1m tonnes – about 4 per cent of the country’s exports – have applied in the past 18 months for “judicial recuperation”, the Brazilian form of US Chapter 11 bankruptcy protection. The sector is now undergoing a rapid consolidation, with companies such as Cosan SA Industria e Comercio, the world’s biggest sugar cane processor, buying troubled smaller rivals.
Another key problem is the lack of adequate infrastructure – particularly roads – to transport crops from the frontier areas of the cerrado, near the Amazonian forest, to export terminals on coast of the Atlantic. Although Brazilia has invested considerable amounts in logistics, traders say the country lags behind its neighbour Argentina on infrastructure.

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