Only in Brazil
By Frank Zaworski
Brazil's ethanol model is unlikely to be duplicated anywhere else on the globe.
The sound of the swish and chop of machetes, brandished by tens of thousands of migrant laborers, are muffled across Brazil's sugarcane-growing regions by the dense smoke of smoldering cane whose foliage is burned off to facilitate harvest. While mechanization has transformed agriculture in much of the developing world, Brazil's sugar and alcohol industry continues to mainly rely on the sweat of its immense population of poor laborers.
In recent years, Brazil has been boosted into the limelight by some governments and media as a shining example of how a nation can solve its dependence on foreign oil. The country's ethanol industry has been lauded, mostly by Brazilian politicians, as their answer to the global energy crisis.
But Brazil's ethanol model is peculiarly Brazilian, and unlikely to be duplicated anywhere else on the globe. Plus, no other country would likely be as willing to pay the human cost expended by the Brazilian system.
"The U.S. can look to Brazil as a helpful model for advancing the use of biofuels, but it is naive to think our political, economic, and environmental systems are congruent enough that we can completely duplicate what has occurred in Brazil," says Brian Jennings, American Coalition for Ethanol, Sioux Falls, SD.
"Further, while Brazil has made important strides with ethanol production, so has the U.S., and it is foolish for us to believe that our nation should adopt policies that favor the use of imported ethanol over U.S. produced ethanol here at home," Jennings said.
"There seems to be a general misconception in the United States that the ethanol industry in Brazil suddenly just happened," says Lane Lundeby, POET, Sioux Falls, SD.
In reality, Brazil has a long history with ethanol.
A group of Georgia researchers, business leaders, and economic developers conducted a mission coordinated by Georgia Tech to the state of Sao Paulo, Brazil in December 2007 to learn the status of ethanol production, distribution, use, and planned research and development in Brazil.
The group reported that the 359 sugar processing plants in operation in Brazil were processing 428 million metric tonnes (MM) of sugarcane annually. Increasing an average of 12 percent per year for the past several years, sugarcane production only continues to grow.
Seventy percent of processing plants in Brazil produce both sugar and ethanol, shifting to a max of 60 percent ethanol and 40 percent sugar, or vice versa, depending on which is most profitable. The demand includes two grades of fuel ethanol: hydrous, which is a mix of 96 percent ethanol and four percent water that is sold for flex fuel vehicles, and anhydrous, which is a mix 99.5 percent ethanol and 0.5 percent water that is blended into the gasoline supply. Flex fuel vehicles can use either hydrous or anhydrous ethanol in any blended percentage, making them very popular in Brazil.
While the rest of the world is becoming increasingly green, Brazil is as well. Several processing plants in Brazil use a natural source of power. Bagasse, the waste fiber from most sugar mills, is burned to provide electricity and steam for the plant. When additional electricity is produced in excess of what the plant needs it is sold to the electrical grid.
One of the main downfalls to the Brazilian ethanol industry is that production in the region is limited to the harvest period of sugarcane, only about 200 days. Since cane must be processed in the plant within two days of harvest to avoid sugar degradation the ethanol supply during the off-season must come from storage. In comparison, corn in the U.S. can be stored for extended periods without degradation.
PLANT DESIGN
There are three types of production facilities in Brazil: sugar only, ethanol only and combined mills (70 percent of all mills). The average modern ethanol mill produces 40-50 MGY and operates for eight or nine months per year, according to Lundeby.
In 2008, according to UNICA, there were 89 additional sugar/ethanol plants in the planning or construction stage. New plants are anticipated to be more efficient by making only ethanol and burning bagasse to generate power. New plants, the organization says, will have much higher boiler efficiencies producing higher levels of excess electricity to export to the grid.
There are also future plans to convert excess bagasse and sugarcane "trash" from the fields to cellulosic ethanol. An increase in ethanol yield of 26-35 percent is estimated possible by adding cellulosic ethanol conversion to the current process, UNICA said.
Nathan McClure, forest energy development director for the Georgia Forestry Commission, reported after visiting Brazil as part of the state's investigative mission that there are a number of barriers to greater success of the ethanol industry there.
In his report, McClure states that there may not be enough suitable land to meet Brazil's sugarcane/ethanol production forecast and that inefficient road and port systems need signifant capital investment. However, Brazil appears willing to make these investments.
"One of the great benefits of our visit was seeing and hearing the truth about some perceived impediments to the utilization of alternative fuels," reported McClure.
Some of these truths include the blend rate and transportation of ethanol. McClure and his team learned that conventional cars in Brazil run on 25 percent ethanol blends. They also learned that ethanol shares the pipelines with petroleum.
THE LABOR ISSUE
As in many developing countries, a vast dichotomy exists in Brazil between those who have and those who have not. According to the International Labour Organization, between 25,000 and 40,000 workers are still victims of forced or slave labor in Brazil.
In practice, teams of workers are recruited by a 'gato' or cat in Brazil's poor Northeast region and taken to plantations in the South where they are paid meager wages and quickly become indebted to company stores.
Under this debt peonage, an employer binds a worker to the job by paying him far too little for the employee to repay his ever-growing debt to the boss for food, lodging and transportation.
UNICA, as expected, said claims of slavery in the sugarcane/ethanol industry are false.
On January 22, UNICA told news sources that it rejected claims by a Brazilian watchdog group that ethanol producers subject workers to slave-like conditions.
It said a report issued by Reporter Brazil was based on "old myths" and out-of-context information.
UNICA admitted, however, that labor "irregularities" had been identified at some Brazilian ethanol mills. The existence of slavery is verified by the Brazilian Ministry of Labor which, since 1995, has operated an anti-slavery task force in an attempt to deal with the problem.
In January this year, the Ministry said that in raids in 2008 its task force freed 4,634 people who had been forced into slavery on 255 plantations and ranches.
Among the locations raided by the task force were facilities operated by Brazil Renewable Energy Company (Brenco) in the states of Goitas and Mato Grosso. The Ministry of Labor reported its task force liberated workers who were being subjected to degrading, slave-like conditions.
Speaking to the Brazilian press, Leonardo Sakamoto, a Sao Paolo political scientist said, "Brazil has a great climate, great land and technology, but a lot of the competitive edge for biofuels is due to worker exploitation, from slave work to underpayment."
BRAZIL'S ETHANOL FUTURE
During the last two years, Brazil has expended considerable energy to make ethanol a global commodity of greater importance. Agreements with countries in Asia for ethanol supply have been on the front burner.
Foreign investment in Brazil is also increasing.In September 2008, ITOCHU Corporation, Tokyo, Japan, announced that it had agreed to take a 20-percent stake in Brazil's Agroindustrial Santa Juliana S.A. owned by the Bunge Group, Boston, MA, which is building an $800-million dollar sugar processing and ethanol plant in Tocantins in southern Brazil. A number of other international companies are also looking to increase or begin investment in Brazil's sugar and ethanol industries.
But ethanol and sugar producers in Brazil have to be fickle about their business as their production of either product is dictated by global commodity prices.
Recent major oil discoveries off the coast of Brazil may also provide some dampening of ethanol production in the future.
"Brazil will domestically produce and utilize either ethanol or oil and sell the balance," Fran Swain , POET Senior Business Development Analyst, says, "whichever strategy enables the greatest gross domestic product."
One lesson that can be learned by other countries from Brazil is that early investment in the industry makes a difference. "If we want to import something from Brazil, it should be their successful commitment to energy independence. For decades, they protected their domestic ethanol producers and are no longer dependent on foreign oil," Jeff Broin, Chief Executive Officer for POET says.
Government Support
Government support for ethanol grew rapidly in Brazil in the early 1970s when President Ernesto Geisel encountered two huge issues. An oil crisis, due to the Arab oil embargo, had tripled the cost of Brazil's oil imports and world sugar prices were declining at a rapid pace.
So Geisel looked to ethanol and launched the Brazilian National Ethanol Program (ProAlcool) in late 1975 and implemented a mandatory blend of anhydrous alcohol and gasoline at a rate of 10 – 25 percent. At this point, pure gasoline was illegal to burn.
According to Ethanol: Lessons Learned from Brazil published by David Sandalow, Director of the Environment & Energy Project at The Brookings Institute, Geisel's government had various ways to promote ethanol. The government offered credit guarantees and low-interest loans for construction of new refineries, a state trading enterprise began purchasing ethanol at favorable prices, gasoline prices were set to give ethanol a competitive advantage, a marketing program was launched and the state-owned oil company, Petrobras, began making investments for distribution of ethanol throughout the country.
The results, from 1975 to 1979, included an ethanol production increase of 500 percent. But the government didn't stop there.
Launched in 1979, the second phase of the program included the Brazilian government signing agreements with major car companies to install assembly lines for 100 percent cars.
During this phase the government also set the retail price of hydrous ethanol to never exceed 65 percent the price of gasoline and low interest loans were given to agro-industrial ethanol firms. They also guaranteed a risk free market and purchased all the ethanol produced.
Through the next few phases of the program the government continued to offer help to the industry, but at much lower degree than in the '70s and '80s.
According to Sandalow, today the government requires a blend rate set just over 20 percent and provides a slight tax preference for the purchase of new flex-fuel cars (14 percent sales tax compared to a 16 percent tax on gasoline-only vehicles).
Frank Zaworski is an Illinois-based journalist specializing in biofuels.
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