He noted that investment costs have risen in recent years due to greater competition between buyers and sharp rise in sugar and ethanol prices. Even so, US agribusiness giant Cargill on Monday bought a 63 percent stake in the Cevasa ethanol distillery, grabbing a share in the boom in the world's No. 1 sugar and ethanol producer.

Despite increased interest, foreign companies still account for less than 5 percent of Brazilian production. Andrea Vergueiro, manager at PricewaterhouseCoopers, said the number of deals could increase when sugar and ethanol prices cool and the cost of mills drops.

"Many investments are being made in production and this will increase supplies in a couple of years and pressure prices," said Vergueiro, who does a lot of consultancy work in the sugar and ethanol sector.

But she said the long-term outlook remained positive due to growing world demand for fuel ethanol and a recovery in domestic demand with the development of flex-fuel cars.

European Union sugar reforms, involving subsidy cuts, should result in a sharp reduction in exports from the bloc, creating opportunities for Brazil, the world's biggest and most competitive sugar and ethanol producer.

INVESTMENT HURDLES

But foreign investors face various obstacles. Many Brazilian mills are family owned, have complicated structures and unprofessional management, Vergueiro said.

The need to lease land and to know local cane growers may also discourage foreign investors, she added.

"It's difficult to start from scratch...crushing capacity is not so much of a problem as to ensure raw material supplies," she said.

For this reason many investors choose to link up with associations having local members or to buy operating mills.

"Foreigners aren't involved in any new mill construction project," said Antonio de Padua Rodrigues, technical director of the Sao Paulo Cane Agroindustry Union (Unica).

There are more than 90 projects to build or expand mills.

European companies have been prospecting the Brazilian market for years and several have made purchases, such as French sugar group Tereos and French trader Louis Dreyfus.

US-based Bunge, the world's largest soybean processor, said in March it was seeking to buy a sugar and ethanol mill in Brazil.

Investment funds have recently moved in. At the beginning of this year Adeco Agropecuaria, composed of US and Argentine investors, bought a mill in Minas Gerais.

At the end of 2005, the London-based investment fund Evergreen bought an ethanol distillery.