Production and use of fuel ethanol in Brazil - BAFF

Today, 50 percent of the sugar-cane produce is used in ethanol production; since
that production tends to grow faster, it is estimated that for 2012 more than 60
percent of the sugar-cane supplies will be processed into ethanol.
The expansion is happening mainly in pasture areas, including partially degraded
areas to the West of the State of São Paulo, the region known as “Triangulo Mineiro”,
State of Minas Gerais, and the State of Goiás.
A5.4.
What is the investment level needed and who is
financing it?
The investment in one unit with capacity to process 2 million tons of sugar-cane for
one crop is around 140 million dollars (for both the farming and industrial parts).
The investments are of various origins and could be made out of the investors’
own funds and funds from the BNDES (National Bank for Economic and Social
Development), Regional Funds, trading operations, companies going public and
partnerships.
A5.5.
What are the assumptions for that expansion to
succeed relying on a steady ethanol market?
There have to be profitable prices for sugar-cane, sugar and ethanol. As to external
factors, the maintenance of mean international oil prices in excess of USD 45/
barrel (for the current state of the art in Brazil’s ethanol production) is an ethanol
production-inducing factor.
Access to export markets (although these are secondary compared to the domestic
market) requires the countries involved to adopt governmental policies providing
for the mandatory use of ethanol, bilateral agreements that may establish favorable
access conditions to the product and inhibit protectionist measures, reduction of
import tax rates for ethanol, maintenance of the favorable marketing conditions
such as the the Caribbean Basin Initiative, and the development of new technologies
aiming at a large-scale internationalization of ethanol production in the long term.
A. Fuel ethanol: Activities in Brazil and the world context
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