Cosan Climbing on Prospects of Green Silva Presidency

Sept. 4 (Bloomberg) — Cosan SA, co-owner of the world’s
biggest ethanol producer, is surging on the prospect of a
victory by Marina Silva in Brazil’s presidential election.

The company controlled by billionaire Rubens Ometto has
climbed more than 26 percent, the most among 157 global peers,
since Silva was unexpectedly thrown into the race, replacing
Eduardo Campos who was killed in a plane crash Aug. 13.

A former environment minister, Silva vowed to boost ethanol
consumption in her official governmental plan released Aug. 29.
Polls show her leading over incumbent President Dilma Rousseff,
whose efforts to contain inflation by blocking state-run
Petroleo Brasileiro SA from raising gasoline prices are also
depressing demand for the sugar cane-derived biofuel.

“There is a Marina effect,” said Sandra Peres, chief
analyst at the brokerage Coinvalores in Sao Paulo. “She carries
the renewable flag and the market expects incentives for the

Only 25 percent of Brazil’s flex-fuel cars were filled up
with ethanol last year, down from 82 percent in 2009, as the
fuel has become relatively more expensive than gasoline in most
parts of Brazil, according to a December report from the sugar
and ethanol consulting company Datagro. Ethanol provides less
energy than gasoline, and drivers typically prefer it when the
price is less than 70 percent that of gasoline.

Silva has said she would consider tax incentives to aid
ethanol suppliers, and has made reviving the industry a key part
of her campaign. Ethanol production “cannot be sacrificed in
its ability to compete in the fuel market because of a policy of
controlling gasoline prices that undervalue” the renewable
fuel, according to her governmental plan. Her press office
didn’t respond to requests for comments.

Gasoline Prices

Ethanol prices at the pump in Brazil are tied to the price
of gasoline. Silva has said that she may lift the current cap on
gasoline prices, a move that would make ethanol more attractive
for drivers of flex-fuel cars that can run on either type of

“With a different policy, ethanol prices could rise in
Brazil,” Artur Losnak, an equity analyst at brokerage firm
Fator, said by telephone. That will drive up profits for
producers, and is unlikely under the current government.
“Nobody believes that Dilma will change the current gasoline

Plane Crash

Silva had been Campos’s vice presidential running mate and
became the Brazilian Socialist Party’s presidential candidate
Aug. 16 after the plane crash in the southeastern city of Santos
that killed Campos, four members of his staff and two pilots.
The nine-seat plane went down after an aborted landing because
of bad weather.

Campos had been polling third in the presidential race,
trailing Rousseff and Senator Aecio Neves of the Brazilian
Social Democracy Party.

Her entry upended the race. A Datafolha poll of 2,874
people published Aug. 29 showed Silva would have 50 percent of
voter support in an October second-round vote against Rousseff,
who would have 40 percent. In the 2010 presidential election,
Silva came in third, with 19.6 percent of the votes.

Since the crash, Sao Paulo-based Cosan SA Industria &
Comercio has climbed the most among 157 large fuel distributors
worldwide, according to data compiled by Bloomberg. Cosan and
Royal Dutch Shell Plc jointly own Raizen Energia SA, the biggest
ethanol producer. Raizen accounted for 14 percent of the
Brazilian company’s sales last year. A spokesman for Cosan
declined to comment on the share movement.

Ethanol Producers

All four of Brazil’s publicly traded producers are rising
on the so-called Marina effect. Cosan’s surge trails only Biosev
, which has climbed 34 percent, buoyed by both the political
situation and its own efforts to restructure its debt. Sao
Martinho SA
has gained 17 percent and Tereos Internacional SA is
up 14 percent, beating the 10 percent gain for Brazil’s Ibovespa
index. Cosan may also be getting a lift from plans to spin off
its logistics operations Oct. 1.

Predictable pricing for ethanol is essential for the
industry’s rebound, according to Rodrigo Aguiar, chief executive
officer of Tonon Bioenergia SA, a closely held ethanol producer.

“If prices are not at the right place, you are stimulating
the use of gasoline rather than ethanol,” Aguiar said in an
interview. That’s “contrary to policies to fight pollution and
to what we expect from Silva, an environmentalist.”

To contact the reporters on this story:
Vanessa Dezem in Sao Paulo at;
Gerson Freitas Jr. in São Paulo at

To contact the editors responsible for this story:
James Attwood at;
Reed Landberg at
Will Wade

About BloombergNEF

BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
Sign up for our free monthly newsletter →

Want to learn how we help our clients put it all together? Contact us