Obama & Lula Discuss Ethanol

Highlighted is Cosan Limited (CZZ - Analyst Report).

This weekend Brazilian President Luis Ignacio Lula da Silva was in Washington D.C. meeting with President Barack Obama. Among many different issues, they talked about biofuels and the use of ethanol. There were some tensions concerning the ethanol trade, as the U.S. continues to subsidize local production and block Brazilian exports. President Obama said "It's not going to change overnight, but I do think that as we continue bold exchanges of ideas, commerce (and) trade around the issue of biodiesel that, over time, this source of tension can get resolved."

As we have been saying, it is hard to expect that ethanol barriers would be lifted overnight. Even if they were, there would be not enough production in Brazil to supply the North American demand. Nevertheless, we continue to believe in a negotiated agreement in the following years, including investments to increase Brazilian production and increasing quotas. In such a scenario, we are keeping our Buy recommendation on Cosan (CZZ - Analyst Report).