Despite Crisis Brazil to Invest US$ 9 Billion in New Ethanol Plants in 2009

Ethanol plant in Brazil Whatever hardships the next sugarcane crop may undergo "the solidness of the sector fundamentals guarantees that they will be controlled," according to Wagner Rossi, the president of the National Food Supply Company (Conab). December 15, his organization presented the sugarcane production result for 2008: 13.9% over 2007, with 571.4 million tons of processed sugarcane.

"It is a regular market, without great problems, but that counts on permanent following of the government, which is trying to become certain of the offer and demand," said Rossi.

To the Conab president, the price of alcohol was very favorable in 2008 and should be close to that next year, there being no danger of large hikes, as the price of the barrel of oil is low on the foreign market.

With regard to investment in the sugar and alcohol area, Rossi does not discard the possibility of problems due to the crisis in the global credit area, as it affects all sectors. But he believes that light adjustment may be made in the sector, without great trauma for national production.

In 2008, in some areas of the country, the ration between the price of ethanol and gasoline was between 55% and 65%, which was very favorable. "It is advantageous to alcohol up to around 70% of the price of gasoline. This price relation is always important in defining the level of demand," said Rossi.

The president of the Conab stated that the government is aware of the low remuneration obtained by small producers and has already taken rapid measures to support this contribution, which is essential to the alcohol market.

He preferred not to make estimates about production next year, adding that five harvests are made each year in some regions and in the southeast there are up to six. For this reason, it is hard to forecast, although each year growth of 10% is expected in production of sugarcane.

The director of the Sugarcane department at the Ministry of Agriculture, Livestock, and Supply, Alexandre Stratasson, informed that next year, 30 new complexes for alcohol manufacturing are going to be installed. The average cost of each complex is around 300 million reais (US$ 126.6 million), according to him.

"The injection of 9 billion reais (US$ 3.7 billion) into the sector is very positive," said Stratasson. Each of these plants has capacity for processing two tons of cane, ensuring an annual output of an additional 560 million tons.

He forecasts that in 2009, the price of alcohol should remain in line with the current situation, although there should be a slight increase in the price of sugar in the international market.

Alcohol production tends to grow more than that of sugar, especially due to the forecast of increase in manufacture of vehicles that use both alcohol fuel and gasoline. Currently, 7 million alcohol-fueled autos are circulating in the country, and the fleet should increase in 2009.

ABr

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