• Categories
  • Archives

Brazil Expects Half of Its Ethanol Industry to Be Foreign Owned

An ethanol distillery in the state of Paraná, south of Brazil

An ethanol distillery in the state of Paraná, south of Brazil The participation of foreign capital in the Brazilian ethanol industry should reach 50% in 10 years or less. The forecast was made by the president of the AgroEnergy and Bio-Fuels Committee of the Brazilian Rural Society (SRB), MaurÀ­lio Biagi Filho, given the expected boom in the global market for alcohol fuel.

"This is on the verge of happening," Biagi said. The sugar and alcohol industry generates 40 billion reais (US$ 18.9 billion) per year in Brazil and one million direct jobs, according to the Brazilian Ministry of Agriculture.

In 2006, according to Biagi, foreign participation in the sector was 3.4% and should reach 6% this year. In addition to the domestic market, where 80% of new automobiles sold are bi-fuel – that is, they run on alcohol, gasoline or any mix of the two -, investors are also eyeing the international demand created by high oil prices and concern over reducing pollutant gases. "Foreign investors will only enter the market if they notice an international trend regarding ethanol," he said.

And for this market to consolidate, alcohol must become an actual commodity, with large-scale production not only in Brazil and the United States, which are the two largest producers in the world, but in several countries, as is the case with soy, sugar and coffee.

"This opens up opportunities for partnerships in the field, allowing other countries to export too. The United States are not our competitors, because Brazil is not interested in being the sole producer, it is interested in the emergence of other players, so that ethanol can become a major commodity," said the general manager for Sugar and Alcohol at the Brazilian Ministry of Agriculture, Alexandre Strapasson.

The subject should be the focus of the visit that the president of the United States, George W. Bush, will pay to Brazil on March 09. Bush recently became a big enthusiast for agroenergy, leading the sector further into the spotlight.

In addition to a continental partnership to be discussed for the sector, involving production incentives in other American countries, Brazilian businessmen expect a debate over the rates imposed on Brazilian ethanol by the United States.

Despite being the world's largest ethanol producers, the United States must import in order to cater to the domestic market. Of the 3.4 billion liters exported by Brazil last year, 1.7 billion went straight to the United States, paying a 2.5% rate and an additional US$ 0.54 per gallon (one gallon is 3.785 liters).

Still, according to Strapasson, Brazilian alcohol reached the United States market costing US$ 1.75 per gallon, which is cheaper than the US$ 1.90 charged for ethanol produced in the United States, which is made of corn and receives "massive subsidies." In Brazil, the raw material for the fuel is sugar cane.

Capital from Abroad

Even before the anticipated transformation of ethanol into a big commodity, the sugar and alcohol sector attracted the interest of foreign investors, not only because of the fuel, but also for the international sugar market, which is quite heated.

Last year, Biagi himself sold the ownership of the Cevisa plant, in the interior of the southeastern Brazilian state of São Paulo, to multinational company Cargill.

Another company to announce recent investments was Louis Dreyfus, from France, which acquired four plants and a distillery from the Tavares de Melo group, based in the state of Pernambuco (northeastern Brazil).

One of these plants, Usina Esmeralda, in the state of Mato Grosso do Sul (midwest Brazil), is under construction. The company already owned three other plants, two in the interior of São Paulo and one in Minas Gerais.

Another example is that of company Açúcar Guarani, which currently belongs to French group Tereos. The company has three plants in operation and another under construction, all in the interior of São Paulo.

Regarding new investments, according to information provided by the government of the state of Tocantins (northern Brazil), a consortium consisting of natural gas sector giant Sempra Energy, from the United States, Man Ferrostaal, from Germany, and the Etanalc holding, from Brazil, announced its intention to invest US$ 4.2 billion in the construction of 12 alcohol distilleries in the state.

A second phase should include the establishment of 12 other plants, probably in the states of Mato Grosso, Mato Grosso do Sul and Maranhão, driving the investment up to US$ 8.4 billion. When all plants become operational, the output should be 5.7 billion liters of ethanol, according to a forecast of the government of the state of Tocantins.

Additive

Besides Brazil, alcohol is used as a combustible in the United States, Colombia and some European countries. Japan has already approved the use of the mix, China is conducting tests, and the entire European Union should adopt it in the near future. Other countries will tend to do the same. "Ethanol is the best oxygenator for gasoline, it pollutes less and improves the octane number (quality)," Biagi said.

In Brazil, 23% of alcohol is added to gasoline, in the United States the amount varies from state to state, and Biagi believes that in other countries it may reach 7%.

He highlights, though, that if the global average for use of alcohol as a combustible reaches 10%, an annual global production of 150 billion liters will be required, which is three times more than the amount produced in the world today. That figure can be achieved, but not overnight.

But Brazil is getting ready. According to Alexandre Strapasson, of the Ministry of Agriculture, 77 new plants should be ready to operate in the country by 2010. According to Biagi, within five years there will be 100 new plants. They will add up to the 360 existing ones, most of which are capable of producing both sugar and alcohol.

Strapasson believes the forecast for new plants to be a conservative one, since the Brazilian sugar and alcohol industry has been growing above 10% per year since 2001. He claims that the industry growth will probably remain at the same level over the next few years.

Besides, the planted area for sugar cane should leap from current 7 million hectares to 10 million by 2013. Currently, Brazil produces 425 million tons of cane, which yield 29.5 million tons of sugar and 17.25 billion liters of alcohol. At the same time, production, which is presently concentrated in the state of São Paulo, should spread out to other states, such as Minas Gerais, Mato Grosso do Sul, Goiás, Tocantins, Piauí­, Maranhão and Bahia.

Advantage

The amount of areas available in Brazil is a major advantage over other agricultural countries. In the United States, for instance, the area destined to corn planting should grow to cater to the demand for ethanol, thus leaving less room for soy plantations. That opens up new opportunities for Brazilian soy farmers in the international market.

Other advantages include the climatic conditions of Brazil, which is almost entirely a tropical country, a favorable feature for agricultural activity, as well as a 30-year experience in large-scale ethanol production.

"The Brazilian market is now mature, there has been a great deal of professionalization, companies are opening their capital and obtaining environmental certificates," Strapasson said.

Biagi points out, though, that ethanol will not replace petroleum. The only country that uses alcohol in large scale as a bio-fuel, in addition to mixing it with gasoline, is Brazil, and it should remain that way.

"Outside of Brazil, alcohol will always be an additive, and by adopting it as such, the countries will be prolonging the life of petroleum reserves," he said.

Anba – www.anba.com.br

Tags:

  • Show Comments (3)

  • aesaac

    Mafagafo from Brazil Magazine April 2006 Made in Brazil by SLave Labor
    World Should Ban Goods Made in Brazil by Slave Labor
    Written by CecÀƒ­lia Jorge
    Wednesday, 19 April 2006
    The international market needs to adopt an instrument of selective trade restrictions on Brazilian products as a way to combat the use of slave labor.

    This measure is defended by the Brazilian political scientist, Leonardo Sakamoto, who is a member of the National Commission for the Eradication of slave Labor in Brazil (CONATRAE).

    At the end of last month, he presented this proposal to the German government and entrepreneurs. Sakamoto was invited to expatiate on this theme before a parliamentary commission in Berlin. It was there that he called for a selective trade ban.

    “The same way the whole world checks sources to see whether a product is contaminated by hoof and mouth disease, the idea is for them to check on the use of slave labor, too,” Sakamoto explained in an interview.

    The political scientist recommended that foreign businessmen who buy raw materials from Brazil first check the list of farms and ranches where workers subjected to slave working conditions have been found. This is the so-called black list, available on the Ministry of Labor’s website.

    According to Sakamoto, for purchasers of manufactured items, the guideline is to demand that, on their invoices, their suppliers provide information on the sources of their raw materials. This will make it possible to determine whether a product originated on a farm or ranch where slave labor is employed.

    A study conducted in 2004 by the non-governmental organization, Brazil Reporter, at the request of the Special Secretariat of Human Rights, traced the destination of products from farms and ranches on the blacklist and discovered that part of this production was destined for export.

    “We identified over 200 Brazilian and transnational companies that made use of slave labor or did business with companies that made use of slave labor,” Sakamoto affirmed.

    The survey found slave labor present in cattle-ranching (beef and viscera), soybeans (beans, oil, and feed), sugarcane (fuel alcohol and sugarcane liquor), coffee, cotton, black pepper, and charcoal for steel-making.

    Even though they were not part of the study, other supply chains, such as tomatoes, fruits, and wood, also evidence the problem. Since the study was based only on the blacklist, these areas were omitted.

    AgÀƒªncia Brasil

    Comments (8) >>

    But why dont you free them ?
    written by Guest, 2006-04-19 13:39:36

    why accusing the world, foreign companies as you are accustomed to do when you are noit willing to put the budget to aplly your own laws….for the last 118 years, since you eliminated slavery in your constitution but still have them by a far higher number that you want to recognize just to hide to the world how unwilling and unable you are?????

    Are you nmot the government who wants to develop ever more your ethanol industry.
    this year your production of sugar cane will be around 443 millions tons.
    40 % of the cane are harvested manually by the sugane cane cutters.Most of this industry is controlled by Brazilians, not foreigners.
    These 177 millions harbevested manually, represents more than the total of all your grains produced.

    Dont you see your own contradiction with your ethanol ?
    To hide yourselves you will annouce these new “jobs” as positive for the economy, for the jobless rate, you will even name these news workers “green workers” because it is trendy while in fact they will be the “new green slaves”

    Shame on you.
    You remain a medieval country.

    Enlighten us please…
    written by Guest, 2006-04-19 14:29:52

    Let us be so advanced as you who invade foreing lands and kill innocent lives (obviously, if it done by you, it cannot be named “medieval” can it?)

    We should do this to China
    written by Guest, 2006-04-19 14:53:13

    but then Wal-Mart would have to close, and where would we get our $40 DVD players?


    written by Guest, 2006-04-19 15:45:37

    Having worked in Mato Grosso, and having seen slave laborers first-hand, I think it should be a mandatory school course credit that most Paulistas, get off their fat asses, travel their own country, and see the conditions states like Para, Mato grosso, et.al inflict on their Brasilian brethren (as well, it should be mandatory that self-loathing Liberal Americans wishing to live here, do the same). Comparing WALMART (conditions at home or abroad) to the realities of those truly suffering at the hands of pistoleiros in remote regions of Brazil is the apogee of ignorance, and you do those in dire need of help a considerable disservice.

    Our DVD !

  • mafagafo

    Re: the price of ethanol
    Sugar cane tropical land = less cost to produce alcohol. Brazil will beat the price any day. Now, if we in the US really are concerned about low wages in Brazil, then we should kill the US$ 0.54/gallon tax and negotiate a higher pay in Brazil for brazillian farmers, which then will be able to reduce labor and add more automated crop machines…with even less cost. Either way, low wages don’t matter.

  • aesaac

    The price of ethanol, the price of slavery
    At some point the slave labor used in the production of sugar cane will become an issue with the U.S. The price of ethanol in Brazil is predicated upon the sub poverty wages of laborers. When the U.S. becomes aware of how the fuel arrives at such prices, congress will put restrictions on the imports.

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Brazil to Harvest 450 Million Tons of Sugar Cane for Fuel, Sugar and Cachaça

Brazil’s sugar cane crop in the 2005/2006 growing year should reach 450.2 million tons, ...

Exports Up 32% in Brazil

Brazil’s cumulative trade surplus so far this year stands at US$ 22.501 billion. This ...

Brazil Ready to Produce Bird Flu Vaccine in Two Months

Isaias Raw, president of the Butantã Institute, in São Paulo, informed that within 60 ...

Bet on Weak Dollar Brings Brazil Firms Billion-Dollar Losses

The Brazilian central bank left the basic Selic interest rate unchanged for the first ...

Now, President’s Son Is Latest Suspect in Brazil’s Corruption Scandal

There seems to be no end to the barrage of accusations against Brazilian President ...

Brazil Set to Make Large Helicopters. Government Will Be Client

A Brazilian-French cooperation agreement in the military aerospace sector has just been signed between ...

Chavez Compares Brazil’s Lula to Jesus and Sees Venezuela in Mercosur

There was a love fest this Friday between presidents Luiz Inácio Lula da Silva ...

Brazil Will Play Tit for Tat with US and EU on Import Duties

The Brazilian proposal to lower import duties on industrial goods will only be decided ...

Venezuela in Protest Against US Leaves CAN to Join Brazil in Mercosur

The Andean Nations Community (CAN) secretariat received last weekend Venezuela’s official relinquishment from the ...

Brazilian Foreign Reserves at Record US$ 233 Billion

Foreign reserves for Brazil reached US$ 232.9 billion at the end of October, up ...