Brazilian Biofuels Programmes from the WEL Nexus Perspective

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Brazil’s biofuel programmes viewed from the WEL-nexus perspectiveThe development of Proalcool followed a trajectory similar to that of other large-scale, capitalintensiveagricultural efforts, and Brazilian policy-makers believed it was failing to reducepoverty and social inequities, which were among the explicit objectives of the programme (Hallet al., 2009). This perception is largely because large economic groups dominate theproduction of biofuels in Brazil and the small distilleries in the case of ethanol, and theinvolvement of family farmers in the case of bio-diesel is very small (Santos and Rathmann,2009).Although one might have expected PNPB to have explicit environmental goals, the Decree thatimplemented PNPB is based on the viability of the production and use of bio-diesel, but doesnot mention sustainability concerns. Also, in defining vegetable oil as the primary material forbio-diesel production, the Decree demonstrates a proclivity towards Brazil’s agriculturalexpansion (Garcez and Vianna, 2009).The comparison between the two programmes suggests that, despite the differences in theirchange models, action models and maturity of the programmes, the outcomes to date are verysimilar. These reflect the general type of results observed in developing countries, with astrong focus on large-scale, capital-intensive agricultural sectors, which affects to some extentthe ISG principles.Besides trespass of ISG principles, the usual barriers for economic development in mostdeveloping countries, such as macroeconomic deficiencies, regulatory problems anduncertainty, precarious infrastructure, poor public services, informality, among others, thereare five factors to be taken into account in feasibility evaluations for such agricultural systems(GTZ, 2005):1 Land with soil and climate suitable for the crop to be planted2 Enough capital, even subsidised, in the first phase3 Suitable technology4 Management knowledge in order to turn productive resources into economicallysustainable activities5 Inclusion in a productive chain of agribusiness (value-systems investments)40
Brazil’s biofuel programmes viewed from the WEL-nexus perspective6 Final considerationsAn analysis of the sustainability of the expansion of Brazil’s biofuel (ethanol and bio-diesel)production programmes requires an integrated evaluation of the water, energy and land-useaspects (Harmsen, 2011). The issue is to verify whether the sugar cane and soybean cropsystems confront limitations in creating a different and sustainable development path as theyexpand (BRASIL, 2011b) with respect to: (a) water availability and its consequences; (b) theimpacts of the existence of economically viable land to be incorporated into the crop system;(c) the expansion of the rural workforce; and (d) energy efficiency in the biofuel productioncycle, as well as other environmental considerations.First, it was observed that in Brazil, the availability of agricultural land does not present alimitation to the expansion of the planned ethanol and bio-diesel production. Using the mainsugar cane and soybean-producing states as a proxy, namely SP and MT, the main limitationto incorporating land is not its physical existence but rather the impact of the increased costresulting from its appreciation, over time, on the profitability of the crops, and consequently onfinal prices for ethanol and bio-diesel.Moreover, a second-order effect of the impact of the increased cost of land is the use ofmarginal lands (pasture and rough land). These areas require more use of agricultural inputs(fertilisers, correctives, herbicides, among others) per hectare cultivated, which areresponsible for significant environmental impacts.In the case of ethanol, the sharp fall in the profitability of the business explains why theindustry is increasingly focused on producing sugar, to the detriment to ethanol; this ispushing up the price charged by the plants to fuel distributors in Brazil. In this context, theindustry argues for the export of ethanol (UNICA, 2011b); but despite such public statements,its strategy is to obtain more profit than the domestic market offers. On the other hand, on 17August 2011, the government obtained approval in the Chamber of Deputies of ProvisionalMeasure 532/11, which, among other provisions, reduces the mandatory percentage for theaddition of anhydrous ethanol to gasoline from 25% to 20%. Moreover, it intends: (a) toincrease Petrobras’ participation in the Brazilian ethanol market from the current 5.3% to 12%by 2015; and (b) to create incentives for investments in expanding the captive capacity forethanol production by the private sector directed to the domestic market (Câmara dosDeputados, 2011). These measures are geared to holding back ethanol prices, and avoiding apossible supply shortage. On the other hand, in the case of bio-diesel, although the soygrowingbusiness shows a positive profit margin, the final product is still not competitiveagainst its substitute, in this case, mineral diesel. However, the maintenance of the bio-dieseladdition to mineral diesel at 5% in volume up to 2019 may also be attributed to thecompetition of the raw material (soybeans) as a foodstuff for domestic and internationalmarkets.Despite the impact that the increase in biofuel production has had on agricultural production,and hence on the demand for rural labour, in SP there has been a rise in workers’ real averageremuneration. This occurred even with the fall in the profitability of the sugar cane business,and resulted from the imminent prohibition of burning sugar cane straw prior to harvesting,which relates to manual harvesting (IEA, 2002). The adaptation of the sector to mechanicalplanting and cutting techniques requires higher-paid specialised labour. In the long term, thiswill probably lead to unemployment among temporary workers, which is not yet occurring inthe SP sugar cane sector. In fact, despite the decrease in the manually harvested area, from55% in 2005 to 49% in 2010, there were more jobs in the sector during the last harvest,explained mainly by the start-up of 10 new ethanol and sugar plants in 2010. That is to say, ifthe rise in average remuneration is explained by the increased number of qualified workers inthe sector, the short-term rise in the total payroll is explained by the growth in sugar caneproduction in view of the increase in its opportunity cost, as a consequence of both the sugarprices in the international market and domestic demand for ethanol.41
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Brazilian Biofuels Programmes from the WEL Nexus Perspective

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