1. Brazil: A partner for the Chinese Fuel Ethanol Program Eduardo Pereira de Carvalho Brazil-China Trade Delegation May 26, 2004 – Shanghai, China

2. Fuel Ethanol Use in China Central Government included fuel ethanol use in the 2001- 2005 National Development Plan June 2001: E10 experimental use in 3 Provinces (Henan, Heilongjian and Jilin) March 2004: Central Government announces E10 implementation in 9 Provinces (3 previous + Anhui, Liaoning, Shandong, Hubei, Hebei and Jiangsu)  consumption of 1.3 million m 3 ethanol is expected by the end of 2005 Note: E10 is a blend of 10% ethanol and 90% gasoline

3. Fuel Ethanol Use in China Present potential market of fuel ethanol is about 4.5 million m 3, considering E10 use nationwide Reduction of grain stocks and increase of grain prices may limit ethanol feedstock availability and slow down program progress Price of fuel ethanol in China is differentiated China seeks energy diversification & security Note: E10 is a blend of 10% ethanol and 90% gasoline

4. What would be the role of Brazil ? Supply fuel ethanol to China, on a supplementary basis to domestic production, in order to: speed up and consolidate ethanol program reduce costs contribute to the sustainability of the ethanol program in the long run Can Brazil do it ? YES ! Brazil has a large experience with fuel ethanol and is the largest fuel ethanol producer worldwide!

6. Brazil: 1997/98 - 2003/04 Source: UNICA

7. ~ 10% of total cultivated land ~ 1% of total land available for agriculture SUGAR CANE - 5 million ha - 60,000 producers - all-year-round harvest C-S (80% land) harvest: april/november N-NE (20% land) harvest: sept/march

8. Brazil’s Center-South production capacity Sugar: 140 thousand tons/day Ethanol: 100 million liters/day Sugar cane mills operate approximately 180 days/year and most of them have an integrated sugar & ethanol production  flexibility of supply

9. (million hectares) Total Area ………………........... 204 Area good for agriculture...... 137 Area in use for cattle raising... (35) Occupied area (forests & plantations) (12) Available Area ……........... 90 BRAZIL: AGRIBUSINESS EXPANSION BRAZIL IS ONE OF THE FEW COUNTRIES IN THE WORLD WITH GREAT CAPACITY TO EXPAND ITS AGRICULTURAL PRODUCTION Expansion area in the “ Brazilian Cerrado” region Source: EMBRAPA

10. Brazil: 1997/98 - 2003/04 Ethanol production 15,4 13,9 13,0 10,6 11,5 12,6 14,7 0 2 4 6 8 10 12 14 16 18 97/9898/9999/0000/0101/0202/0303/04 Million m 3 Source: UNICA Crop season

11. 51,2% gain in productivity

12. SUGAR & ETHANOL PLANT IN BRAZIL Bagasse

13. The Brazilian Ethanol Experience % Ethanol in Gasoline (gasohol) 1977: 4.5% 1979: 15% 1981: 20% 1985: 22% 1998: 24% 1999: 20 to 24% SINCE 2002 20% to 25% - Brazilian ethanol, gasohol & Flex-Fuel vehicles - Imported gasohol vehicles

14. First Brazilian Flex Fuel Vehicle introduced in the market in March, 2003 Flex Fuel Vehicles can run on gasoline or on 100% ethanol or on any blend of ethanol & gasoline Until April 2004 over 80,000 units were marketed (operate mostly on 100% ethanol) Market projections indicate sales of about 250,000 Flex Fuel vehicles in 2004 FLEX FUEL VEHICLES

15. NEW MARKETS FOR ETHANOL AVIATION FUEL (100% ethanol airplane by Embraer. In process of homologation) Ethanol Vaporizer INDUSTRIAL FUEL 100% ethanol boiler (can operate also on CNG or LPG)

16. + SUGAR CANE SOY BEAN OR  PEANUTS, SUNFLOWER, CORN, COTTON, PALM TREE......ETC. Anhydrous Ethanol + Vegetable Oils = Biodiesel ETHANOL TO PRODUCE BIODIESEL transesterification ETHYL ESTER

17. AIR POLLUTION CO HC O3O3 PM NOx SOx R-CHO VEHICLES HAVE BECOME THE MOST IMPORTANT AIR POLLUTION SOURCE IN URBAN AREAS AND ETHANOL IS A FAST AND COST-EFFECTIVE WAY TO REDUCE POLLUTION CO 2 N2ON2O CH 4

19. SUGAR CANE, ETHANOL AND THE GREENHOUSE EFFECT The substitution of bagasse for fuel oil in the production of ethanol combined with the substitution of ethanol for gasoline avoids the emission of 2.6 t CO 2 equiv./m 3 of fuel ethanol Ethanol CO 2 is absorbed by sugar cane CO 2 photosynthesis Source: Macedo et alii, 2004

20. Existing Ethanol Production Capacity: 16 million m 3 Ethanol Production Units: 302 (252 sugar & ethanol, 50 ethanol) Productivity: > 3% per year Jobs: ~ 1 million Balance payment savings in the order of US$ 52 billion (period 1976 - 2002) Ethanol Consumption in Brazil: over 200,000 barrels/day of gasoline equivalent (at 28,000 fuel service stations)  ~ 40% of spark ignition vehicle consumption Estimated Fleet using Ethanol: 16,5 million gasohol vehicles, 3,5 million gasohol motorcycles & 2.4 million neat ethanol SUGARCANE INDUSTRY PROFILE Source: UNICA, DATAGRO

22. short term....................... 1.8 billion liters/year mid term ( 3 to 5 years).. 5 billion liters/year BRAZILIAN ETHANOL EXPORTS EXPORT INFRASTRUCURE IS BEING EXPANDED

23. European Union India Japan USA Canada China Thailand South Africa Peru Colombia Paraguay Australia* Mexico* Up to 5% Ethanol Up to 10% Ethanol More than 10% NUMBER OF COUNTRIES USING ETHANOL-GASOLINE BLENDS IS GROWING Brazil USA** Canada** Sweden** * Under discussion ** flex-fuel vehicles E85

24. FINAL REMARKS  Brazil produces large volumes of fuel ethanol with high productivity  Exports of fuel ethanol from Brazil to China are feasible and price competitive  Brazil could become a preferential supplier of fuel ethanol to China  China and Brazil should strenghten the ethanol cooperation agreement

25. Obrigado Xie Xie Thank You WWW.UNICA.COM.BR