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Notice to the Market

Declaration of Acquisition of Relevant Stake

São Paulo, December 14, 2007 − São Martinho S.A. (Bovespa: SMTO3; Reuters: SMTO3.SA and Bloomberg: SMTO3 BZ), one of the largest producers of sugar and ethanol in Brazil, based on information received from its shareholder HSBC Investments Gestão de Recursos Ltda on December 14, releases the following notice to the market:

Pursuant to Article 12 of CVM Instruction 358, we hereby inform that the funds managed by HSBC Investments Gestão de Recursos Ltda., with head offices in the city and state of São Paulo (Corporate Taxpayer ID - CNPJ/MF no. 06.071.726/0001-00), currently hold an interest of 5.73% in the capital stock of São Martinho SA (“Company”).

We further clarify that when it acquired the shares that compose the equity interest, HSBC Investments Gestão de Recursos Ltda. had no interest whatsoever in altering the composition of the controlling block or the administrative structure of the Company.

On the same date, the funds managed by HSBC Investments Gestão de Recursos Ltda. did not hold any other securities issued by the Company, nor had it entered into any agreements or contracts regulating the exercise of voting rights or the purchase and sale of securities in the Company.

Sincerely,

João do Val
CFO and Investor Relations Officer

Felipe Vicchiato
Investor Relations

Telephone: +55 (11) 2105-4100
E-mail: ri@saomartinho.ind.br
IR Website: www.saomartinho.ind.br/ir

About São Martinho

São Martinho S.A. is one of the largest producers of sugar and ethanol in Brazil. The Company’s current crushing capacity is of 11.0 million tonnes/year and by concluding the first phase of the construction of Boa Vista Mill, its third unit; the Company will increase its capacity by 3.4 million tonnes/year until 2010/11.The Company currently conducts its sugar and ethanol operations through its two mills, Iracema and São Martinho, and has recently acquired a 41.67% on the capital stock of Usina Santa Luiza and Agropecuaria Aquidaban. For further information, please visit the website www.saomartinho.ind.br.

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