Brazil was the center of attention March 29 in London where the Financial Times sponsored &ldquo;Spotlight on Brazil,&rdquo; an event organized to present this South American agribusiness giant from its best side.
Representatives of Brazil&rsquo;s orange juice, edible oils and meat sectors, as well as government agencies and others, exposed their arguments in front of an exclusive, by-invitation-only audience of investors and executives. Ethanol was represented by Marcos Jank, at the time president and CEO of UNICA, the Brazilian sugarcane industry association.
The opening speech came from Mendes Ribeiro, Minister of Agriculture in Brazil, followed by sessions with high-level officials. John Clarke, director of international affairs and agriculture with the EU Commission, caught everybody&rsquo;s attention as he declared the European Union has plans to establish a free-trade agreement with Mercosur, a trade center encompassing Argentina, Brazil, Chile, Uruguay and Paraguay. As Clarke was asked about European import barriers for sustainable ethanol, the EU official sounded as if he wasn&rsquo;t paying mere lip service to the subject, but this trade agreement is something I have to see to believe. The Biofuels Crossroads Even with peak oil and painful crude prices since January 2011, countries like Germany, the biggest biofuels producer in Europe, or Brazil, one of the biggest biofuels producers globally, still have not implemented efficient measures to consolidate biofuels in their internal markets.
It is astonishing that with gasoline (E5) reaching record prices in Germany at $8.60 per gallon, that E10, usually some 20 cents per gallon cheaper, remains second choice and E85 almost fully rejected. In the meantime, over 5 percent of the mills in Brazil&mdash;26 confirmed out of 460 mills&mdash; are so seriously in trouble that they were forced to announce they will stop activities during harvest 2012-&rsquo;13. How can all this be?
UNICA&rsquo;s Jank really touched the center of the question when he mentioned that ethanol is still subject to restrictions and import taxes&mdash;a rough contradiction in comparison to oil&mdash;while stable policies for biofuels are missing. Jank also reminded everyone that 46 percent of Brazil&rsquo;s energy comes from clean sources compared to only 8 percent in the Organization for Economic Cooperation and Development countries, which include 34 mostly well-developed countries in Europe, North America and Asia. He further mentioned the potential of bioelectricity and the boost cellulosic ethanol will cause.
After being in charge for six years, Jank recently resigned from his position as CEO of UNICA, one of the biggest renewable fuels associations. Regardless of who could be Jank&rsquo;s successor, major questions remain unanswered. With 30,000 jobs already at risk, Brasilia should very soon find applicable solutions if they don&rsquo;t want to see the ethanol industry layoffs worsening or a once-booming sector sliding towards the edge of collapse.
One thing is sure: the current moment is a turning point for renewable fuels both in Europe and Brazil. The markets will react depending on how public policies are set up for these solutions. Many biomass-based technologies, from cellulosic ethanol to waste fuel, are still in their early stages and proper encouragement will result in invigorating economic rewards. The Glory: Cane Ethanol, BP&rsquo;s Biofuel of Choice Philipp New, CEO of BP Biofuels, was last to deliver his presentation before lunch on Duke Street in London. The interaction of BP with the world of sugarcane can already be felt at London&rsquo;s Heathrow airport where, for the first time, I saw huge ads of athletes running through cane plantations. But still, on the streets not a single taxi driver could tell me of a gas station selling biofuels.
BP is firmly investing in Brazil. According to New, each BP ethanol mill in Brazil represents a source of 9 million barrels compared with crude, but with an important difference: Ethanol plants have practically inexhaustible resources compared to oil wells drilled. The CEO of BP Biofuels is enthusiastic, since he knows the advantages of sugarcane in relation to other renewable sources and can&rsquo;t wait to see cane double its potential as soon as cellulosic ethanol production is a reality. New was so passionate in his speech that one could think he is not bothered at all by the discrepancy between the government and the ethanol industry in Brazil. Economically vulnerable mills could definitely fit in any expansion plans. Challenges in Sustainability When speaking about Brazil and agribusiness, discussions inevitably end up talking about sustainability and the Amazon. Many were surprised when Pat Venditti, Greenpeace&rsquo;s forest network director, said he was very pleased about the progress achieved in Brazil in terms of environmental protection.
Daniel Nepstadt, Amazon Environmental Research Institute director, noted that Brazil is a world champion in environmental conservation, reducing deforestation by 68 percent. Nepstadt stressed the country has REDD-policies (Reducing Emissions from Deforestation and Degradation) fully assimilated in its laws, but still gets nothing in return for being a role model for the international community. He also remembered that Norway has pledged one billion dollars in the form of incentives for preservation but not a penny of it has been spent so far in Par&aacute; or Mato Grosso, regions that have delivered sensible results in ecological contexts.
Discussions heated up when Bryan Weech, director of commodities at WWF, expressed criticism of the new forest code approved in Brazil. Osmar Fernandes Dias, agribusiness vice president at the national bank Banco do Brasil, asked Weech to specify which articles of the code had flaws so that he could personally intervene by ensuring they are corrected. The WWF official was forced to publicly admit he did not know the forest code in detail, thus revealing that his accusations were just empty words. Not surprisingly, Weech&rsquo;s arguments ended right there.
Sen. K&aacute;tia Abreu, president of the National Agricultural Confederation, closed the meeting by inviting the EU Commission and government officials of the member states, nongovernmental organizations and investors to take a closer look at Brazil, to research, learn and discover the opportunities by themselves, rather than take for granted all the studies offered by different interest groups. In a nutshell, agribusiness must mobilize, do good and let people see it firsthand. This was the main assignment addressed during the Financial Times conference. The Neglect: Ethanol Struggles in Brazil, Europe Nothing justifies indifference towards clean and renewable alternatives to expensive, limited and pollutant sources. Many in the U.S. may think sugarcane receives lots of subsidies in Brazil, but as a matter of fact, it is gasoline that is artificially kept at a low price. With a new president and an economic crisis plaguing the world, the federal government has left the ethanol mills to their own fate, while gasoline prices were kept stable to hinder inflation. As a result, increased gasoline sales have inhibited ethanol consumption and Petrobr&aacute;s, at the limit of its refining capacity, was forced to import gasoline.
Interestingly, incongruities like these are not a geographical exclusivity. European governments also try to lower fuel prices, while local ethanol is left aside and higher blends in diesel or gasoline are consequently disregarded. All these circumstances ignore products that save between 35 and 90 percent on greenhouse gas emissions, and even the green parties on both continents&mdash;reputedly so committed to climate goals&mdash;are silent about it.
Back to Brazil: What we have is a &ldquo;predicted crisis.&rdquo; During the past years, we saw international investors purchasing weakened mills using financial resources originally intended for new developments. New projects decreased to three new mills per year at a time when Brazil would need at least 120 new mills by 2020 just to supply domestic demand. Now add bad weather conditions, higher costs, capital scarcity and loss of competitiveness versus fossil fuels to missing federal policies and you will have ideal conditions for an ethanol breakdown.
Brazil President Dilma Roussef&rsquo;s political karma, following after Luiz Inacio Lula da Silva&rsquo;s Golden Age of Biofuels, is continued economic growth. Some specialists suggest Brazil should stop E100 (hydrous ethanol) and introduce E40 at the pumps (producing just dehydrated ethanol for blending) or cut the value-added tax to curb the business. One way or the other, time is running out and Roussef must take action to avoid a bigger defeat.
An ethanol fiasco would be hard to explain in the nation hosting the Rio+20 climate convention. It all sounds quite irrational in the land of sugarcane, where biofuels have become more and more popular in the past 40 years, but it is pure reality. I wonder if a famous Brazilian saying could be right again, &ldquo;In the end, everything will be fine. If things are not fine now, it&rsquo;s also not the end.&rdquo; Where Two Quarrel, the Third Profits We all still remember well how an American renewables association would regularly publish warnings about the &ldquo;Brazilian threat&rdquo;. Back in 2010, during World of Ethanol in Geneva, I was convinced this message would soon prove to be wrong. Actually Brazil and the U.S. should rather join forces and show the world how viable biofuels are. At that time we were already foreseeing bottlenecks in domestic supply, observing Brazil would only wake up the day the first ship with ethanol from the U.S. arrived. Even if most people refused to believe it, that is exactly what happened a few months later.
Last year, the U.S. exported over 242 million gallons of ethanol to Brazil. December was a record month with 61.6 million gallons and between this January and February, Brazil exported something like 170,000 cubic meters (37.4 million gallons) and imported another 277,000 cubic meters. Free markets can be a good idea, Brazil will stay a good customer for the years to come.
If nothing changes dramatically, conservative forecasts expect Brazil to import almost 1 billion gallons from the United States within the next three years. To regain its old pace, cane fields in Brazil must be renewed and expanded, mills need financial aid, new projects must at least triple and, above all, new public policies must be approved. The necessary changes won&rsquo;t happen overnight.
On the other hand, Brazil continues to offer resources from which many American companies, big or small, already profit. The point remains, how many still believe the tale of Brazil being a potential threat?
The time is right to invest and expand internationally if anybody has those plans. And if you&rsquo;re in doubt, just ask BP, but it would be best if you came to see for yourself. Brazil harvests around 600 million tons of sugarcane. Something else that must be kept in mind is that a liter of very clean CO2 from fermentation is also produced for each liter of ethanol that is distilled from cane. This CO2 can be recaptured and used for beverages, foods, cryogenic cleaning or in other applications such as supercritical fluid. Furthermore, every 1,000 kilograms of sugarcane processed results in 250 kilograms of bagasse as a leftover and every 1,000 kilograms of bagasse brings about 300 kilowatts in a cogeneration plant.
According to recent studies from Marcos Fava Neves, professor, University of S&atilde;o Paulo, the state of S&atilde;o Paulo alone can provide enough bagasse to generate 15 megawatts&mdash;more than the full capacity of the planned Belo Monte power plant, the world&rsquo;s third-largest hydroelectric dam currently under construction on the Xingu River in the state of Par&aacute;. Author: Daniel Coelho Barbosa Germany-based Agribusiness Analyst +49 163 81 69 221 daniel@biosocial.net
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The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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A native of Brazil, Daniel Coelho Barbosa now writes about bioenergy and agriculture from Germany.

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Fueling stations in Germany prominently display fuel prices in Euros per liter. At this Shell station, prices (converted to dollars) are: diesel for $7.752 per gallon, E10 for $8.437 per gallon, super for $8.637, and racing for $9.432.

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Biofuels in the South American powerhouse waver between glory and neglect

Spotlight on Brazil

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