IstoE Dinheiro Rural (a major Brazilian finance magazine)
by Fabiane Stefano and Lívia Andrade Go to original
George Soros is a changed man. The investor who once made a big-time bet against the Bank of England, and reaped a big reward, is now investing in Brazilian agribusiness - even though he also bet against the Brazilian currency in 2002.
At 76, with a net worth of approximately US$ 7.6 billion, Soros joins a distinguished team of foreign billionaires who are investing in Brazilian ethanol.
The team includes Microsoft’s Bill Gates, Google’s Sergey Brin and Larry Page, and venture capitalist Vinod Khosla.
Like them, Soros has been touched by the magic of the green fuel from Brazil. He is investing in three sugar and ethanol plants in Mato Grosso do Sul state, currently under construction. The investments total US$ 900 million; the plants will have a joint processing capacity of 11 million tons of sugarcane per year and will produce 1 billion liters of ethanol.
In addition to ethanol, the Hungarian financier’s company, Adeco, is also investing in cotton and coffee in Brazil. “When the company becomes fully operational, revenues from Brazilian operations will equal those coming from Argentina”, says Marcelo Vieira, Soros’ main partner in Brazil. The billionaire’s rural operations in Argentina have already reached US$ 30 million in earnings.
Soros’ foray into agribusiness is recent and began in Argentina. In 2001, the financier followed his gut feeling and began buying Argentinean land in the middle of the economic crisis that crippled the country. He quickly became one of the biggest individual land-owners in the country. In 2002, along with American investors, Soros bought Pecom Agribusiness (the rural subsidiary of Perez Companc) for approximately US$ 25 million, giving birth to Adenco. Today the company has over 100,000 hectares for beef and dairy cattle, soy, corn, wheat, rice, and sunflowers, producing over 200,000 tons of grain per year.
It wasn’t long before the company from Argentina took interest in its South American neighbor. Adeco landed in Brazil in 2004 and, since then, has been making inroads into the Brazilian countryside with the same appetite that he displays at stock exchanges around the world. The first acquisitions in Brazil took place in the states of Tocantins and Bahia, where 27,000 hectares produce mostly cotton and coffee.
“We invest in the crops in which Brazil is the most competitive”, explains Leonardo Berri, Adeco’s general manager in Brazil. “That is why we have a five-year expansion plan for cotton and coffee”. Adeco’s biggest bet, however, happened in February 2006. Soros’ company associated itself with Usina Monte Alegre, which belongs to the Vieira family, a traditional coffee-growing clan from Minas Gerais state. Located in the southernmost portion of that state, the unit can mill one million tons of sugarcane annually. When acquiring the plant, part of the family’s shareholders became partners at Adeco and began managing the company in Brazil. Among them was Marcelo Vieira, a mechanical engineer with over thirty years’ experience in the sugar and ethanol business. Today he is a considered a role model for new leaders in Brazil’s countryside. He began an initiative to bring together a group of coffee growers from Minas Gerais state to produce and market premium coffee. Mr. Vieira founded the Brazil Specialty Coffee Association (BSCA), in 1991, an organization that actively marketed the fallen image of Brazilian coffee and helped spark a renaissance in the area. “Mr. Vieira is changing the industry by adopting modern managerial practices”, says Luiz Hafers, the former president of the Brazilian Rural Society. According to Mr. Vieira’s handbook, Adeco needs to invest in areas that have great potential for developing new technologies. He also takes corporate governance issues into consideration. “We have a great concern for sustainable production, and we strive to be correct in both the social and environmental dimensions”, says Mr. Vieira. “We believe in direct planting and use pesticides as sparingly as possible”, explains Leonardo Berridi, Adeco’s general manager in Brazil.
Vieira remains at the head of the group’s sugar and ethanol activities. He is currently supervising the group’s expansion in Angelica, in Mato Grosso do Sul state. Sugarcane has already been planted this year; a seedbed that occupies 900 hectares will supply the material for planting 6,000 hectares next year. Factory construction will begin in 2007, with operations scheduled to begin in 2008. The Monte Alegre plant, in Minas Gerais state, should reach full capacity in two years. At that point, the company’s four plants in Brazil will be milling 12 million tons. Recent international focus on renewable fuels has added momentum to Adeco’s operations. At the end of September, Soros’ company announced in New York that it will begin construction on a plant for corn-based ethanol.
50 million tons of corn will be processed, harvested from an area of 50,000 hectares, generating 200,000 cubic meters of ethanol. The possibility of building similar plants in Argentina is also being probed.
In spite of Soros’ great leverage in Latin American agribusiness, his personal participation in the company’s day-to-day affairs is small. “He is a shareholder and has great enthusiasm for the project”, says Mr. Vieira. “But he does not take part directly in the company’s affairs”.
Mr. Soros has recently turned his attention to philanthropy. Through the Soros Foundation Network, he created the “Open Society Institute”, which acts all around the world in education, health, and culture.
Follow what's happening in the Brazilian ethanol market on Ethablog, the only blog in English dedicated to Brazilian ethanol.
