alarm:clock

Alternative Energy - Tuesday, April 1, 2008

Brenco's Brazil Blowback Brutal For Khosla, Clinton, Case & Co.

About a year ago, power VC Vinod Khosla was kind enough to grant us an interview. Khosla had just made the news over a major investment ($200M) in Brazilian sugar cane > ethanol refinery Brenco (aka Brazil Renewable Energy Co.) One of the questions that we put to Khosla was this:
Do you any your fellow investors (Steve Case, former World Bank President James Wolfenson, "Hollywood Producer Steve Bink, etc.) in the new Brazilian ethanol refinary called Brenco have any concerns that you might suffer PR blowback from the risks of investing in Brazil? The country is known for political corruption, labor abuses, and the burning of forests to make room for cash crops."

Khosla's response was simply "We have a very professional management team." BTW, President Bill Clinton joined the party as a investor.

Unfortunately, Khosla, Clinton, Wolfenson, Bink, Case and Co. put too much faith in their very professional management team. Today the AP reports that a team from Brazil's Labor Ministry found "degrading" living conditions for 133 sugarcane workers. At five sites inspected, workers "complained they were suffering from hunger and cold, and all of the locations were overcrowded and with terrible sanitary conditions." Brenco has apologized and said it is fixing the problems.

Indeed Brenco has very seasoned management. It is run by Henri Philippe Reichstul, the former CEO of Brazil's state-run oil company, Petroleo Brasileiro. The problem is that Brazil's labor conditions, especially in the hinterlands, are generally awful. To comport with the standards that would not embarrass the likes of Clinton and Khosla, Brenco's operations would need to be a Brazilian Shangra La. The company is hiring up 3,500 workers to plant sugarcane on 86K acres in three central Brazil states. So it will require a massive upgrade to working conditions to prevent Brenco's American investors from being forced to withdraw.

Tough conditions are hard to hide.

Read - AP Story