Ethanol Market in Brazil
Ethanol is one of the products from sugarcane, which by itself is one of the main products that put Brazil in the international market. In this article you will learn more about the country numbers, imports and exports in the sector.
Background
Brazilian ethanol is produced from the plantation of sugarcane – unlike in the United States, where it is produced from corn crops. In Brazil, however, the main product that has stimulated sugarcane cultivation was sugar. In fact, by the 17th century, Brazil was one of the main sellers of sugar in the whole world – a position that the country lost a few years later.
Ethanol itself played a minor part in the production until recent years, more precisely in the decade of 1970, especially after the Oil Crisis in 1973. By that year, petrol barrels had their prices extremely increased and ethanol started to be used as an alternative fuel which was both cheaper and less polluting than petrol.
Studies from 2007 showed, however, that alcohol is not as clean as was originally thought. In laboratory simulations, North American researchers discovered that if there were only cars powered by ethanol, by 2020 the air quality would be threatened due to the presence of ozone in high quantity – which is harmful for the respiratory human system.
Pró-Álcool, the Brazilian Alcohol Program
In 1975, during the Brazilian dictatorship, president Ernesto Geisel established a project named ProÁlcool or Programa Nacional do Álcool, in an attempt to stimulate the use of ethanol as a replacement for the products derived from petroleum. This initiative was created in a time when the world was searching for new and more environment-friendly fuels.
The primary object of the project was to produce anhydrous ethanol in order to mix it with petrol, which would make the price of the fuel less expensive. However, after 1979, when petroleum prices rose again, and later, with the Iran-Iraq war between 1980 and 1988, Brazilian production of alcohol was totally set to hydrated alcohol production, which would be no longer mixed with any other type of fuel.
PróÁlcool also offered fiscal incentives and loans with rates lower than the market rate to the sugarcane producers and to automobile companies which invested in the development of alcohol powered vehicles. The first alcohol powered vehicle was launched in 1979 by FIAT. Volkswagen, Ford and General Motors also started launching cars whose tanks could be filled by ethanol.
Flex Vehicles
What differentiates the fuel-flex vehicles from usual vehicles is that they can be powered with both petrol or ethanol, which became a successful system in Brazil. They were introduced in Brazil in 2003, and ten years after the insertion of the bi-fuel technology in the country, 92% of the vehicle fleet is constituted of flex-fuel vehicles, not including the ones ran by diesel.
All the light commercial vehicles produced in Brazil have this bi-fuel technology, and at least 17 new models imported from Argentina, China, Mexico, Korea and Thailand were adapted with this system in order to maintain the Brazilian demand.
Market
Brazil and the United States are the countries that dominate ethanol production, being responsible for 90% of the whole production of the good worldwide.
The Brazilian ethanol sector has suffered problems since 2009. Climate changes, investment reduction, high production costs, among other reasons, made the total production decrease almost 12% from 2009 to 2011.
Advertisements which emphasized the importance of ethanol consumption in terms of job creation and economic movement in the country were in place to try and avert the crisis. The ads began airing on TV in November 2012 and were supposed to last one month – but in 2013 the campaign was still ongoing.
The initiative achieved good results: in June 2013, the ethanol consumption in Brazil increased 24% in comparison to the previous month. The change in consumer's habits when filling up their vehicles' tanks will help lowering not only the amount of exceeding sugar in the international market, but also the country's dependence on imported gasoline.
Main Producers
The state of São Paulo is the main producer of ethanol, responsible for 51% of the national production – 15 billion liters in 2009 and 11,8 liters in 2011. The other 9 main producer states are Goiás (11,7% of the national production), Minas Gerais (9,1%), Mato Grosso do Sul (7,1%), Paraná (6,1%), Mato Grosso (3,5%), Alagoas (3,4%), Pernambuco (1,6%), Paraíba (1,43%) and Espírito Santo (0,86%).
Exports
In 2012, the United States opened their market and this combined with low ethanol prices, made Brazilian exports of ethanol increase 55,3% compared to 2011. According to the Ministério da Agricultura, Pecuária e Abastecimento, known as MAPA, which is the Ministry of Agriculture, Livestock and Food Supply, the volume exported went from 1,96 billion liters to 3,05 billion liters of ethanol.
In 2013, exports had already surpassed 1,5 trillion liters by July. The volume is 50% superior to the volume exported between January and July 2012 and 90% superior to the same period of 2011.
Imports
Brazil imported 553 million liters of ethanol in 2012, and practically all the volume imported came from the United States. The numbers are half of what had been imported in 2011, when a record of 1,6 billion liters came from abroad.
The country imports ethanol produced from the corn crops in order to fill the tanks of the vehicle fleet. The national production isn't enough because ethanol production still loses its competition against sugar production, which dominates 70% of the sugarcane cultivation.