SLC Agricola S/A

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	25900
Company name	SLC Agricola S/A
Country	Brazil
Sector	Agriculture and Forestry
Environmental category	B
Department	Agribusiness
Status	Pending Disbursement

Date SPI disclosed	December 12, 2007
Projected board date	January 14, 2008
Previous Events	Signed: March 18, 2008 Approved: January 28, 2008

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

SLC Agrícola S/A (the company or SLC Agricola) has an investment program to primarily expand its cotton production capacity:

- increasing the planted area by 52,000 ha by expanding its second harvest area (planting of two crops on a same plot within the same harvest year) and leasing areas adjacent to its current farms;
- adding a new farm already purchased in the Bahia state with a total 21,000 ha of planted area;
- adding two new areas in the Brazilian Savannah region to increase planted area by 42,000 ha; and - financing incremental working capital needs.

Anticipated development impact of the project

IFC will support the Investment Program of a competitive Brazilian company. It will support the continued growth of SLC Agricola by helping the company in the expansion of its farms and the development of new farms in frontier poor regions of the country. Overall, the company’s total planted area will increase by 111.9% and supplied volumes by 165.7% by the end of the Investment Program.

Other Benefits:

Employment. By the end of 2006, before the Investment Program started, SLC directly employed 800 people full time plus an estimated 485 seasonal jobs. As the Investment Program develops, the Company will hire new employees across its farms, and is expected to employ a permanent staff of 1,100 people (additional 300 jobs), who receive a number of benefits such as full medical insurance, life insurance, housing and food provided at the farm and profit sharing program (SLC Agricola is the only farming company in Brazil as of today that offers profit sharing to its employees).

In many regions where the company operates, formal employment is extremely limited and SLC Agricola sets new standards in the region and creates income where it was previously limited.

IFC's expected development contribution

IFC’s appraisal process and environmental and social standards are seen by the financial market as a step-up, which provides significant financial and reputational credibility value. The company has openly recognized these benefits during its successful IPO. Additionally, cotton is a highly cyclical commodity, and banks have historically been reluctant to provide long term financing. Since the banks see IFC’s partnership as a significant risk reduction, this relationship enables the company to access long term financing that is essential for such an extensive expansion plan. By helping to reduce the financing risk, IFC will continue to benefit the company.

- Regional economic development.

The investment program includes the purchase of farms in the frontier poor Northeast region. Development of the agricultural sector is key for the region’s development and access to financing in this region. The fulltime and seasonal employment generated by the company will have a positive economic impact in the region.

- Environmental and Social standards.

While the appraisal indicates the company handles Environmental & Social issues responsibly, IFC will add value to the company, and the sector, through the application of IFC's Environmental & Social Standards. As the cotton sector expands in Brazil, the project will provide an opportunity for IFC to apply lessons learned elsewhere in the agribusiness sector to create a demonstration effect in the Brazilian cotton sector.

- Additionality.

Without IFC’s participation, the full expansion program would not be possible, the IPO would likely have been somewhat less successful, and long-term financing opportunities would be substantially reduced. Also, the company wouldn’t improve its environmental and social policies and upgrade them according to IFC’s Environmental and Social standards.

Environmental and social issues - Category B

This is a category B project according to IFC’s procedure for Environmental and Social Review of projects because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria. IFC professional staff performed a physical evaluation of the project and environs, and reviewed relevant company and government documentation.

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