Cargill, the U.S. agricultural company, has taken a minority equity stake in Zucarmex, one of Mexico's largest sugar producers, in the first foreign investment in the sector since the Mexican government decided to nationalise half of the industry in 2001.

Zucarmex is one of the three largest Mexican sugar producers that remain in private hands and accounts for about 9 per cent of the nation's annual sugar production. The company, which was advised by Mexican investment bank Protego, intends to use the money to clean up its balance sheet by replacing debt with equity. It also hopes to benefit from Cargill's help in marketing, logistics and quality control. Full financial terms were not disclosed.

Cargill also signed an agreement action to make exclusive sales of sugar in the Mexican market. Jonathan Drake, its head of international sugar operations, said that the company saw a long-term strategic future in Mexico, and that it could improve standards of quality and service to sugar buyers. Mexico is the world's second-largest market for soft drinks after the US, and has sugar consumption of about 5m tonnes per year.

Cargill, which has a sugar unit based in Geneva, is one of several large international producers eyeing the Mexican market for opportunities, although further moves will depend on the speed with which the government privatises the sugar companies currently in its possession.

The government expropriated 27 sugar refineries in September 2001, equivalent to roughly half the nation's production, in an effort to rescue the debt-laden sector and avoid a disaster in that year's November harvest. At that point, they hoped to sell them back to the private sector within 18 months.

The move will also help both Zucarmex and Cargill prepare for the final lifting of tariffs on sugar in trade between the US and Mexico, due in 2008.