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TITLE:  Courts Force Brazil Govt To Retreat On Monsanto GMO Soy
SOURCE: Dow Jones Commodities Service, by Todd Benson
DATE:   August 17, 2001

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Courts Force Brazil Govt To Retreat On Monsanto GMO Soy

SAO PAULO -(Dow Jones)- 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; 55-11-3145-1480; 
todd.benson@dowjones.com



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