Brazilian Experience With Sugarcane Ethanol

¶ … Brazilian Experience with Sugarcane Ethanol

In 1976, the government of Brazil mandated that all vehicles run on a blend of ethanol and gasoline. It required not major changes to existing gas-powered automobiles; rather, only a minor change in gaosline motors was needed to adjust to the new fuel blend.

Brazil has a unique experience with for their automobile fuel model. They are the world's largest sustainable agriculture for sugarcane, which has a closed loop system for producing sugarcane ethanol. It is cheap to grow (large agricultural fields), cheap to produce (closed loop system of production), and required minimal changes to gas-powered vehicles to adjust to the change. Brazil is the world leader in the production of sugarcane ethanol (Moraes 2008).

During the 1970's, the world experienced a rising crisis in the price of crude oil, due in part to the instability occurring in the Middle-Eastern market. Iran had undergone a revolution and was longer an ally of the United States; indeed, they adopted an anti-American stance that to no small degree, continues to the modern day (Papageorgiou 2005).

The Brazilian car manufacturing industry has been a factor in the success, as well as a beneficiary of, the switch to using sugarcane ethanol. With the developmen to 'flex' vehicles, the market penetration by 2010 had reached an astounding ten million vehicles. The success of this marketing program lays in the fact that the flex vehicles can run on any proportion of ethanol and gasoline (Delgadoa, Araujo, & Fernandes, 2007).

The issues of ethanol use in Brazil are found both in the production side, and the marketing end of the business. On the production side, the sugarcane agribusiness that supplies the raw sugarcane for pressing is centered upon family owned enterprises. However, that trend is beginning to change with large global conglomerates coming into play as the successful model of ethanol-based energy becomes more widely known. Regardless, on the production side, issues within the family-owned sugarcane agribusiness include abuses of labor and unfair labor practices. As the business opens to more global influences, this issue of labor will demand attention. For an industry that is fast becoming a verifiable and sustainable model of energy development, the labor that supplies the demand will likely get its fair share of attention (Goldemberg, 2007).

On the marketing end of the industry, there is the automobile manufacturing boom of flex cars, and the new multi-billion dollar deals between the largest ethanol producer in Brazil, Cosan Limited, and Royal Dutch Shell. The most recent joint venture between these fuel giants is worth an estimated $12 billion dollars. However, Cosan has encountered pushback due to its treatment of employees, and even global market giants like Walmart have suspended contracts with Cosan until this issue is resolved. Additionally, the banks of Brazil have put holds on any future lending until Cosan deals with the labor issue (Martinelli & Filoso, 2008).

On the ethanol end of business, Royal Shell and British Petroleum are to date the only major global energy companies that have invested heavily in Brazilian ethanol. However, as will likely prove to bear, when the monopoly and squeeze that is used by the family owned enterprises on the cane producing end opens up to global agribusiness (Martinelli & Filoso, 2008).