Sucre Ethique - Brazil office seeks to keep Cosan on black list

Reuters - mercredi 13 janvier 2010

SAO PAULO, Jan 12 (Reuters) - Brazil’s attorney general’s office said on Tuesday it will seek to annul an injunction that allowed sugar and ethanol producer Cosan (CSAN3.SA) (CZZ.N) to be removed from a government labor black list.

The labor ministry on Dec. 31 included the world’s largest sugar cane producer on a list of companies whose workers endured "slavelike" conditions after a 2007 inspection found cane cutters being mistreated.

The company had its name cleared from the list late on Monday thanks to the injunction.

"As the injunction was ruled by a labor judge in the first instance in Brasilia, the attorney general’s office will take the proper measures" to abrogate the injunction at a regional court, the office said in an e-mail statement.

The injunction should remain valid until a final ruling, which may take place within five to six months, Cosan said. The Superior Labor Court could at some point be asked to rule on the case, a spokesman at the attorney general’s office said.

Should Cosan remain on the list for a longer period, commercial relations with customers from Wal-Mart Stores Inc (WMT.N) to oil majors Royal Dutch Shell Plc (RDSa.L) and Petrobras (PETR4.SA) could be damaged, analysts said.

Sugar prices are hovering at 29-year highs and ethanol prices are rising in Brazil’s market.

Workers found in substandard conditions in June 2007 had been hired by a third-party cane-cutting company working for Cosan. Among the irregularities, inspectors found at least one minor working and the company did not supply fresh, potable water at the workplace, according to the labor ministry.

On a conference call with investors on Monday, Cosan said its inclusion on the list "was totally arbitrary and unfair."

Cosan fell, shedding 1.7 percent to 23.35 reais — the lowest level since Dec. 22. The stock has tumbled 8.8 percent since the start of the year.

After winning its removal from the list, state development bank BNDES, Brazil’s largest source of long-term corporate loans, resumed loan transactions with Cosan. Wal-Mart also reestablished sugar purchases, interrupting a short-lived ban. (Additional reporting and editing by Guillermo Parra-Bernal, editing by Gerald E. McCormick)