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São Martinho Announces the Operational Shut-down of the Subsidiaries
Usina Santa Luiza S.A. and Agropecuária Aquidaban S.A.

São Paulo, December 10th, 2007 - SÃO MARTINHO S.A. (Bovespa: SMTO3; Reuters: SMTO3.SA and Bloomberg: SMTO3 BZ) hereby announces the operational shut-down of the subsidiaries Usina Santa Luiza S.A. and Agropecuária Aquidaban S.A.,located in the municipality of Motuca−SP.

In addition, Etanol Participações S.A., a holding company set up in April, 2007, by Usina São Martinho S.A.(41.67%), Cosan S/A Industria e Comercio (33.33%) and Usina Santa Cruz S.A. Açúcar e Álcool (25.00%) for the acquisition of Santa Luiza and Aquidaban, will be extinguished (spin-off followed by incorporation).

The purpose of the decision is to maximize operational and managerial synergies for the parent companies and their respective groups.

As of the 2008/09 harvest, the sugarcane previously processed by Santa Luiza will be rerouted to the facilities of the controlling groups proportionate to their capital interest. Usina São Martinho, of the Grupo São Martinho, will receive approximately 750,000 tonnes of cane.

Land leasing contracts and contracts with cane suppliers will also be divided proportionally among the controlling groups.

Industrial assets and agricultural machinery, including sugarcane harvesters, may be sold to one or other of the controlling groups or to third parties.

Employees can opt for relocation to the controlling group companies or for a benefit package.

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