Ministry of Agriculture, Livestock and Food Supply - Embrapa

medium-size farmers by favoring sugarcane production in the sugar mills'
lands. This trend encourages increased concentration of land ownership and
the prevalence of monocultures, which have ruinous socio-economic and
environmental effects. A reversion of this process tends to create market
structures with a small number of buyers, who can only be somewhat
neutralized by some degree of government intervention or supervision to
increase the bargaining power of sugarcane suppliers.
Law nº 9.478 of 6 August 199714 and Constitutional Amendment n° 33 of
11 December 200115 , later complemented by laws n° 10.336 of 19 December
200116 and n° 10.453 of 13 May 200217 , were the mainstays of the sugar &
alcohol regulatory framework that governs the establishment of a free market
environment (end of the State's monopoly of the petroleum industry) and
defines the tax model to be used for fuels.
The government has two other mechanisms to intervene in the fuel
alcohol market. The first mechanism is fixing the anhydrous alcohol contents
of gasoline, which can vary between 20% and 25% depending on the
availability of the product. The other mechanism is a more structural intervention
into the tax load on automobiles, whereby lower rates of the Tax on
Industrialized Products are set for alcohol fueled vehicles, with the exception
of those with piston displacement of up to 1000cc.
Another institutional aspect relevant to the agroenergy sector is the
National Program of Incentives for Alternative Electric Power Sources (Proinfa),
whose purpose is to increase the share of alternative sources of energy in
the energy matrix. These sources include wind energy and cogeneration from
biomass residues in small hydroelectric power plants. Nevertheless, despite
the remunerative prices, the sugar & alcohol sector has not shown much
interest in the program, particularly because they are focusing their investments
on increasing sugar and alcohol production while waiting for the outcome of
the research on the utilization of sugarcane bagasse. Since they would have
to accept long-term contracts with large fixed-capital investments most units
have preferred to act cautiously.
14 Law nº 9.478 establishes provisions for the national energy policy and activities pertaining to the
petroleum monopoly and institutes the National Council for Energy Policy and the National Petroleum
Agency.
15 Constitutional Amendment n° 33 amends articles 149, 155 and 177 of the Federal Constitution and defines
the basis for the creation of a Contribution on Intervention in the Economic Domain (Cide).
16 Law n° 10.336 establishes the Contribution on Intervention into the Economic Domain (Cide) on imports
and commercialization of petroleum and its byproducts, natural gas and its byproducts, and fuel ethyl
alcohol.
17 Law n° 10.336 defines the set of economic policy instruments through which the government can
intervene in the production and commercialization of fuel alcohol.
74