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Courts Continue Ban on GE Soybeans in Brazil

Courts Continue Ban on GE Soybeans
in Brazil

Courts Force Brazil Government To Retreat On Monsanto GMO Soy

Aug. 20, 2001


By Todd Benson
From: DOW JONES NEWSWIRES

SAO PAULO -- Brazil's agriculture minister apparently overstepped his bounds
when he said he'd let U.S. biotechnology giant Monsanto Co. (MON) sell
genetically-modified seeds to the world's second-biggest soybean grower.

The unexplained attempt by Agriculture Minister Marcus Vinicius Pratini de
Moraes to trump a three-year court battle sent Monsanto's shares rallying,
but a subsequent legal filing has cut short the company's celebration by
forcing the dispute back into the courts.

And the outlook for Monsanto getting GMO approval in Brazil looks
increasingly bleak. Besides the legal battle that consumer and environmental
groups are fighting here, reports that European researchers found
unidentified genetic material in the soybeans provided local activists with
further ammunition.

On July 24 - just one day before Monsanto posted second-quarter results that
showed flat revenue growth - Pratini told investors in New York that Brazil
would allow the sale of Roundup Ready soybeans. Hopes of bigger sales in
Brazil helped Monsanto shares to spike 6.9% on July 25 to $34.26.

But a subsequent court filing by a public prosecutor dashed Monsanto's
hopes, at least for now. A federal judge asked Pratini to clarify his
position, pointing out the decision appeared to have ignored a court ruling
requiring environmental impact studies in such cases.

"I don't know what made the minister think he can just trump the justice
system, because he simply doesn't have the power to do so," said Aurelio
Rios, a federal prosecutor working the case.

An Agriculture Ministry spokesman declined to comment on Pratini's motives,
saying only that "the minister always intended to wait for a judicial
resolution before making a decision (on the approval of Monsanto soy)."

After being notified by the judge, Pratini reversed his position on Aug. 8
and said he would only register the herbicide-resistant soybeans when the
issue is eventually resolved in the courts.

News of the reversal sent Monsanto's shares plummeting the next day on Wall
Street, dropping 5.6% to $33.50.

Meanwhile, the obstacles facing Monsanto continue to mount. Earlier Friday,
Brazil's biosafety commission moved on reports out of Europe and said it
intends to request additional information from Monsanto about the make-up of
Roundup Ready following the discovery of an unidentified DNA sequence in the
product.

In a statement regarding the DNA sequence, Monsanto said that it stands by
the safety of Roundup Ready soybeans because the DNA sequence mentioned in
the scientific paper was already present in original crops subject to safety
tests when the product was launched.

Government Makes No Secret Of Support For GMOs

The pro-technology minister's move has opened a debate as to why he
apparently tried to sidestep the legal process. While the ministry keeps mum
on the matter, consumer protection activists and other observers have their
own theories.

"It was a bluff," said Andrea Salazar, an attorney for Brazil's consumer
protection agency, one of the petitioners in the original lawsuit against
Monsanto that ended up creating a de facto moratorium on GMOs in Brazil.

"From the beginning of this case Pratini has bent over backwards to try and
help Monsanto get their soybeans approved in Brazil, and what he said in New
York is just another example," she added.

Activists have long complained that Brazil's government has never been
neutral in the GMO debate. Rios, the federal prosecutor handling the case,
said Pratini's recent comments have only made matters worse.

"The minister was imprudent, and that's going to create an even bigger cloud
of suspicion over the government on this matter," he said.

Rios added that Monsanto recently asked the Agriculture Ministry's legal
department to review the case against them, possibly in an attempt to
pressure the ministry into speeding up the lagging approval process.

Monsanto officials in Brazil were unable to be reached for comment.

While Pratini's back-tracking is a setback to Monsanto's GMO quest in
Brazil, it doesn't appear to be a fatal blow.

In a recent research note, UBS Warburg said "we see the stops and starts as
signs the government is trying to put all its ducks in a row before granting
biotech commercialization," and that it has "no doubt that ultimately
biotech beans will be approved in Brazil."

If that is to happen, though, Monsanto will first have to conclude an
environmental impact study. The company has said it hopes to conclude the
study in time for Brazil's next planting season, in October, but most
analysts are now betting on 2002 at the earliest.

"When Pratini made those comments, the market assumed they (Roundup Ready
soybeans) would be approved before winter, but now that looks unlikely,"
said Sergey Vasnetsov, an analyst with Lehman Brothers in New York.

-By Todd Benson, Dow Jones Newswires <todd.benson@dowjones.com>


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