Brazilian Biofuels Programmes from the WEL Nexus Perspective

Brazil’s biofuel programmes viewed from the WEL-nexus perspectiveTable 4.3 Real average remuneration and real income (expressed as real minimumsalaries) for rural workers in the states of SP and MT, 1996–2010 (R$/month)São PauloMato GrossoYear Real minimumsalary(R$/month)Real averageremuneration(R$/month)Income inminimumsalariesReal averageremuneration(R$/month)Income inminimumsalaries1996 279 165 0.59 142 0.511998 303 203 0.67 155 0.512000 308 214 0.70 179 0.582002 325 237 0.73 216 0.662004 361 319 0.88 280 0.782006 450 440 0.98 387 0.862008 477 550 1.15 519 1.092010 528 668 1.26 696 1.32Change2010/1996+89% +306% - +392% -Source: The authors based on IPEADATA, 2011a, 2011b; IEA, 2011c; FGV Dados, 2010.In relation to the national trend – depreciation in rural income, which in fact led to intensivemigration from the rural areas to the cities – the states of SP and MT are exceptions. In both,agricultural income grew more than the national average; and to a large extent, this can beobserved since 2006 in SP, and 2008 in MT. Coincidentally, these are years in which thebiofuel production programmes, based on the predominant agricultural crops of each state(sugar cane and soy), led to a sharp increase in production.Finally, the real gain in income for the rural worker in the state of SP is negatively correlated (requal -0.94) to the business profit margin. Therefore, the hypothesis that sugar caneproducers reduced rural workers’ real wage levels in order to mitigate the effect of the declinein the profitability of their business is rejected. On the other hand, the correlation in the stateof MT is positive and strong (r equal to 0.92), to the extent that there was an increase both inrural workers’ income and in the profitability of the soy-growing activity. That is, the economicsurplus was, to some degree, redistributed to the rural workers.Limits to the expansion of biofuel production in BrazilThere are innumerable potential barriers to the expansion of a biofuel programme. This studyfocuses on analysing the limitations through arguments relating to the availability of arableland; the competitiveness of biofuel vis-à-vis fossil fuels; and competition for land for thepurposes of producing biofuel and/or food.Brazil has an arable area of approximately 340 million ha, distributed as follows: (a) 200million ha for pasture; (b) 55 million ha for cultivation; (c) 7 million ha occupied by plantedforests; and (d) 5 million ha in reforestation areas (Nassar et al., 2010). This means that 73million ha could be available for agricultural production, of which 31.8 million would besuitable, in terms of climate and soil conditions, for sugar cane, and 44.9 for soy (MAPA, 2006;EMBRAPA, 2008). Of these, 11.9 million and 3.4 million ha would be allocated to sugar caneand soy production respectively, in order to meet the biofuel production goals for the 2011–2019 period (BRASIL, 2011b).For the period 2011–2019, land does not therefore constitute a limit to the desired expansionin biofuels production. However, the objective of soy and sugar cane processing may be thefood industry. Therefore, the raw material opportunity cost needs to be analysed since thecompetition for raw materials for both sectors may pose a constraint on the expansion ofethanol and bio-diesel production.In the case of bio-diesel, the cost of raw material constitutes a large part of the final price.According to the IEA (2004), it represents between 85% and 92% of the total cost. Moreover,projections indicate that the prices of conventional oilseeds will continue to rise, resulting, in27