By on March 7, 2015

corcel5

As I pulled into the gas station last week, I faced a decision. Regular gasoline was on sale for R$3,199 a liter, while ethanol (or “álcool” as we old timers insist on calling it) was R$2,299. That meant the sugarcane derived fuel was 71.8% of the price of gasoline. Bearing in mind that gasoline in Brazil is actually E25 and will soon be E27, the rule of thumb is that if the price of ethanol is 70% that of gasoline, it compensates to pump it in spite of the mileage drop.

I decided to go for it. It was the first time in more than 9 years that I enjoyed the result of a program instituted 40 years ago.

In 1973 the first OPEC embargo hit Brazil with devastating force. Between 1968 and 1973, the country lived its “Milagre Econômico” (Economic Miracle). In those years, GDP growth went from 9.8% a year to 14%. In the next period (1974-1979), growth still existed, but at half the previous levels (6.5% a year on average). Inflation more than doubled. The balance of trade was extremely affected and the government decided to attack importations. As the economic miracle in Brazil had been inspired by CEPAL and its substitution of importations policy, this line of thinking was quite natural. It also made sense to reduce petroleum imports as that was responsible for a little over half the trade deficit.

In this context, the Pró-Álcool program was seen as a solution. Launched by then president Ernesto Geisel in 1975 with “unlimited funding”, it set about looking for a renewable source of fuel. Initially, various vegetable sources were studied. However, sugarcane was soon chosen as the one. This decision had a technical base as sugarcane has one of the highest yields per hectare. Its weakness is that it is a commodity in a highly volatile market, being that sometimes it is better for the grower to sell sugar and not fuel. Being that in the mid 70s sugar was very cheap, a political decision was made to use it as it would benefit the already extensive sugarcane culture and industry chain in Brazil.

The Pró-Álcool program provided subsidies for increased planting, distribution and storage networks. It also showered money at universities and car makers in Brazil so that they could overcome the technical difficulties of running a car on ethanol. Still in debate today, those effects were largely neutered and overcome.

And that constituted the first phase of Pró-Álcool. Technical solutions in motor vehicles and increased production to gradually add and then increase ethanol content in gasoline. This phase was successful and ethanol production grew from 600 million liters a year in 1976 to 3.4 billion in 1980.

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The launch of the Fiat 147 “a álcool” marks the next phase of the program. That Fiat was the first mass-produced car run exclusively on ethanol. Launched in 1979, it showed the way and soon the other makers then present in the market (Volkswagen, General Motors and Ford) launched their ethanol enabled engines. In spite of the novelty, the much lower price of ethanol virtually guaranteed that ethanol-powered cars took over the market. By the mid 80s, brand-new, gasoline-powered cars were virtually extinct (alcohol-powered cars went from a participation of just 0.46% in 1979, of 26.8% in 1980, their first full sale year to a peak of 95.8% in 1985).

On the government side, the program was hugely successful. Due to the second OPEC shock in 1979 and the attendant Brazilian balance of trade payments crisis (petroleum once again made up almost 50% of that deficit), runaway inflation and flat growth (the 80s are the lost decade in Brazil), the government showered even more incentives towards the use of ethanol. Production reached 12.3 billion liters a year, beating the official 10 billion liter target.

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In 1986, the petroleum counter-shock took place. That year the price of the barrel dropped from around US$30-40, to a level fluctuating between US$12-20. In Brazil that was felt hard from 1988 on. Due to the government loosing its capacity for investments (due to the payments crisis), the availability of ethanol dropped slightly or held steady, while the demand for it increased. The government chose to continue giving incentives to ethanol to keep Pró-Álcool’s credibility. It maintained the price difference between ethanol and gasoline by raising taxes on gasoline. It also paid growers artificially low prices on ethanol and unstimulated exports by placing price controls on sugar exports.

This all resulted in the ethanol supply shock of 1989 and 1990. While production remained relatively stable and sugar exports were indeed curtailed, the continued growth of the fleet caused the system to near its breaking point. During harvest time ethanol was plenty. But during the growth season, stocks were insufficient, resulting in long lines at gasoline stations. Too young to have waited in line during the 70s Arab shock, I did wait, sometimes over an hour, in line, to get my ethanol´powered Fiat Uno’s tank filled. Additional measures were taken such as closing gas stations at night and forbidding them to open on weekends. The effectiveness of such measures has always been contested as people would fill up their tanks to the brim when alcohol was available, buy extra ethanol to keep in gallons at home. I remember traveling with plastic gallons filled with ethanol in the cargo hold of our Volkswagen Quantum station wagon on weekend trips…

All of that crumbled Pró-Álcool’s credibility. From fully embracing the technology, the market shunned it. In spite of government measures, incentives and pressures, car makers also turned their backs on the ethanol-powered car. Engine management systems meanwhile improved and gasoline-powered cars in Brazil slowly got new engines. This made the artificially-instituted, tax-driven price difference between gasoline and ethanol irrelevant. Due to lack of interest, these technologies did not make their way into ethanol engines. So, the market turned.

Prevailing low international petroleum prices also made the government look favorably on gasoline. As such, it again extended incentives to makers. But this time it was to make very low displacement gasoline engines. Thus, the 1.0 L engine was introduced in Brazil (and was so successful it reached a market participation of almost 80% in the late 90s). The crisis in production continued as the government slowly turned off some of the subsidies to the sugarcane industry. During the 90s, Brazil actually had to import ethanol for internal consumption.

After 1995, Pró-Álcool program entered a new phase. Brazil fully deregulated the sugarcane industry. It lived on a true market basis. Sugar exports were freed and from 1 million tons in the regulated market before, Brazil was soon exporting 10 million tons a year. This satisfied sugarcane growers as external prices for sugar were much better than internal ethanol prices. During this phase 1995-2000, roughly 1% of cars sold in Brazil ran solely on ethanol (mainly government purchases to keep growers interest in producing ethanol).

In 2000, we entered a new phase in the Pró-Álcool program. At first, in an effort to regulate the market and avoid wild fluctuations in fuel prices, the government learned to manipulate ethanol content in Brazilian gasoline. From the 70s original level of 18%, it gradually increased, first 22%, then 25% and now 27%.

This gave growers incentive to privately invest in the market. New refineries were built. A technological breakthrough (largely developed by EMPRABA, the government’s agricultural agency) permitted the growth of sugarcane in the “cerrado” (Brazilian savannah) opening up large tracts of land in the Mid-West region of the country to the sugarcane culture. Also state governments moved in on the act as the Federal government adopted a more distant approach to the program. São Paulo state, the richest and most populous in Brazil, stepped in and granted local sugarcane growers incentives and reduced taxes on the fuel in the state. It is a major producer and as such defends its position in this way.

In 2003, Volkswagen do Brasil launched what it touted as the first flex fuel mass produced car in the world, the Gol. Technically, this was simply not true. The first flex fuel or dual fuel vehicle to be mass produced was the Ford T. And though the technology was developed locally, it improved upon a development that also came from the T’s homeland. Due to evermore stringent emission standards in the US (and most especially California), car companies were forced to develop this technology again. Aided by the greater computational power available in engine control systems, blends of ethanol/gasoline became the norm. The consumer hardly notices the difference.

In Brazil flex cars became all the rage. In a few short years they decimated the gasoline-powered car. So much so, that exclusively gasoline cars (that can’t run on E100) are only available in this country as imports. The technology meanwhile has been improving. At first, cars with they system would add an auxiliary tanks (usually in the engine bay) that would have to be filled up with gasoline to aid cold starts should the tank be filled with E100. Presently, some cars are using a system that does way with that by pre-heating the ethanol before fire-up. This is done in milliseconds and is hardly noticeable, and eliminates the need for popping the hood and feeding the gas tank.

Over the years, the Brazilian government has defended the need for the Pró-Álcool program in Brazil citing that it creates technology in the country, stimulates job creation and is a technology that shields us from external shocks (price or supply). Detractors of course abound and point the finger at the high prices of gasoline in Brazil as a consequence of the program. They usually attack the program by means of economic reasoning accusing that it only serves to transfer income from consumers to growers and is not financially feasible unless petroleum prices are very high.

In my personal experience and not living in São Paulo state (where it has been advantageous for most of the flex fuel car era), I have only made use of the flex technology for a couple of years, maybe from 2005 to 2006. Ethanol was more advantageous for most consumers in this country only for a brief period, maybe 2004 to 2006. Nowadays, in the midst of corruption scandals at the state petroleum company Petrobras, a tax reform to make up for lost revenue coming from an economy stagnated by governmental overspending in the last few years and a crisis of credibility, ethanol may be turning into a viable option again. For how long is anybody’s guess, especially in an international scenario where traditional producers are trying to price out shale oil.

As to me I managed to save a couple of cents. My last gasoline tank returned 12 km/l. The current ethanol tank full revealed a 9.1 km/l consumption. A 75.8% return. So I gained about 4%. I’ll be rich soon…

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68 Comments on “Dispatches do Brasil: 40 Years Of Pró-Álcool...”


  • avatar
    thx_zetec

    Brazil if sometimes used at example of successful ethanol program. But Brazilian demand is only 1/10 US demand, and they produce ethanol more cheaply, and they also have significant domestic petroleum.

    I am not against “food as fuel” per se. If one bushel of corn could fuel the entire US fleet for a year that would make sense. The problem is that ethanol is purely political and can’t come close to competing, hence mandates.

    • 0 avatar

      When oil goes high it can and does. Also, everybody is chasing the next technological hurdle. That of turning the crushed sugarcane into fuel too. If this is done ethanol would compete with oil even when the dino juice is relatively cheap. Or so I hear.

      Another thing going for sugarcane growers is sugar. That is consumed at very low levels in India and China and demand could easily double or triple in a short time.

  • avatar
    319583076

    This was a great read. I was aware of the sugarcane derived ethanol in Brazil, but knew very little about it’s history, politics, and effects. I appreciate your insight.

    • 0 avatar

      Thanks for the kind words, 319583076.

    • 0 avatar
      jhefner

      +1 Marcelo. I was born and raised in central Louisiana; southern Louisiana was/is a major sugarcane growing area. During the 1980s; several ethanol pilot plants were built near New Iberia, LA. But, like many such economic developing projects in Louisiana; it did not last long-term; and I remember those plants rotting/rusting away in the cane fields for many years after that. Obviously Brazil managed to do it right; I too have heard about it. I am guessing because the Brazilian government worked independently from the sugarcane lobby; unlike the U.S. where ethanol promotion is coming out of big corn’s back pocket.

      Many fond memories of going to visit relatives during the cane season; including the dense smog that was smoke from the burning cane fields mixing with the coastal fog. Oh, the crushed cane that is left over is called bagasse; it was mainly burned in the sugar factories’ boilers to power the crushing/refining operation (and even the steam locomotives that brought in the harvest back in the day); though I am not sure that is case in modern operations.

      Look! There is the Corcel II again! :)

      • 0 avatar

        Hey jhefner! I chose that pic because of Senna and the relevance to the theme, but I did think you’d like it should you see it.

        It would seem not much has changed from what you remember. It is backbreaking work for the “bóias frias” (cold grub guys) who harvest the crop, though especially in São Paulo measures have been taken to minimize some of the nastier bits like the use of machinery and limits to the fires.

        And don’t kid yourself, UNICA, the planters union is one of the most influential groups in the country though the relatively more market oriented state of Pro Alcool in the present has changed that relationship somewhat. It was more successful here plainly because it was a need. A real response to a real necessity.

        Thanks for the tip on bagasse. Our word for it is bagaço. If they manage to turn it into fuel and not only steam at the plants, the whole economics of the sugarcane chain will be changed and a whole new ballgame will start.

        • 0 avatar
          jhefner

          Marcelo;

          Thank you for thinking of me, and for the Corcel II picture. The sugar cane harvest process has been highly refined (pardon the pun) in Louisiana as well; they have machines that cut the stalks and strip the leaves without having to burn the fields first. And since there are fewer and more modern sugar factories than in the past, much of the cane gets loaded into open top containers on flat cars, and taken to the factory by regular trains; instead of slow cane wagons and trucks that dropped stalks everywhere. And the most recent factory I have seen open does not appear to use bagasse for fuel; though I don’t know what else they use it for. Louisiana should be in the forefront of bagasse-to-ethanol research; but it probably takes a back seat to its massive oil industry.

          I went searching through the Hot Wheels displays of my local stores on my way home from work yesterday; hoping to find an Australian Falcon XB that I passed up last year because I had no room for it in my timeline. No luck, but I did find a 1965 Ranchero, which is based on the 1964-1965 U.S. Falcon. As I placed it in my timeline near the 1963 Falcon and the Corcel I; I can even more picture Ford executives rubbing their chins and thinking “hmm, this could be a Falcon for the Brazilian market” as they watched the Project M drive around Dearborne.

          • 0 avatar

            Seems like Lousiana and São Paulo at least have similar conditions though we don’t use trains I think. If I’m not mistaken bagasse is used in animal feed too.

            Your collection is beautiful. And yes, Ford was very successful in turning the originally Renault Corcel into a coherent Ford designwise.

  • avatar
    RogerB34

    The electorate in majority over many years voted for a dysfunctional government.
    Same as the USA.

  • avatar
    highdesertcat

    Bravo, Marcelo!!! Great writing, informative dissertation and educational for even the lay automotive enthusiast.

    My personal belief is that Brazil did an outstanding job of utilizing an existing, renewable resource to generate its primary automotive fuel (alcool).

    This in contrast to the US where the government chose to subsidize corn farmers to turn feedstock into an automotive fuel additive.

    • 0 avatar
      FormerFF

      Don’t forget the alcohol producers subsidy.

    • 0 avatar

      Hey highdesertcat! Thanks for the kind words. My opinion is that though costly, it’s a net posivite and ongoing studies have the potential to turn even the by products into fuel. That would really be something (from what I hear).

      • 0 avatar
        highdesertcat

        I agree. There are so many products that can be used to create fuels, without involving feedstock.

        What appears to be catching on is natgas converted into motor oil. Nice oil too. A friend of mine uses it.

        Another could be gassified coal converted into oil and gasoline.

        Yet another would be a wide-scale adaptation of recycled cooking oil into bio-diesel, aka Willie Nelson fuel.

        It’s not like these technologies aren’t available. The Nazis did it back in the 1940s, and went full-scale when the Allies blew up Ploesti.

        Hell, my wife’s grandfather used such manufactured fuels to fuel the V1 and V2 rockets.

        In Arizona, there used to be miles and miles of fields in the desert that grew grasses and jojoba, specifically to be used for ethanol fuels. It didn’t catch on because the corn-hole lobby won the war.

        I think there is a place for ethanol. It is an alternative fuel. But let no one think that somehow dino-oil is a declining commodity. We’re swimming in it, even without the Keystone Pipeline.

        We’ve got plenty of oil in the known fields. And we haven’t even probed for oil everywhere yet on the planet.

        • 0 avatar
          rpn453

          “What appears to be catching on is natgas converted into motor oil. Nice oil too. A friend of mine uses it.”

          That was what “synthetic” motor oil was up until 1997, when Castrol started marketing motor oil made from highly refined (hydroisomerized/hydrocracked) petroleum as synthetic. Mobil complained, but the arbitrator s1ded with Castrol, and now a synthetic may be made from petroleum, natural gas components, or a combination of the two. Since the stuff made from petroleum is much cheaper, that’s primarily what most modern mainstream synthetic motor oils are made from.

          caranddriver.com/columns/pat-bedard-synthetic-motor-oil-gets-all-new-semantics-column

          • 0 avatar
            highdesertcat

            rpn453, thanks for the back story. I remember reading about that decades ago but was fuzzy on the details.

            My point was, the tech had been around a long time and in ref to Marcelo’s comment that “though costly”, other methods and procedures for creating fuels and lubricants have been around for a long time.

          • 0 avatar
            rpn453

            Yeah, I was just adding a little story. Not trying to take away from anything you’re saying there.

  • avatar
    FormerFF

    Interesting that you can buy plain hydrated alcohol as a motor fuel in Brazil. Here in the U. S., some fool would try to drink it.

    I assume that’s a very young Ayrton Senna da Silva in the ad. Would he have been well known to the public at that point in his career?

    • 0 avatar

      FormerFF,

      this ad is likely from 1982 or 1983, as it mentions Senna’s Formula Ford championship (he won the 1600cc in 1981 and the 2000cc in 1982). back then, he was a rising star in Brazil and starting to be known outside racing enthusiasts’ crowd. I think he really broke into the Brazilian mainstream public only after the 1984 F1 Monaco Grand Prix.

  • avatar
    Pch101

    I’m surprised that the cars were not flex fuel from the onset. That would have made more sense.

    “Its weakness is that it is a commodity in a highly volatile market, being that sometimes it is better for the grower to sell sugar and not fuel.”

    This is a key point. There are times when sugar is a high-value crop. Ethanol should be used to reduce the impact of commodity shocks, not to increase exposure to them.

    • 0 avatar

      Hey Pch, as to cars not being flex, it has to do with greater computing power. The Ford T was brilliant in its capacity to burn both, but it was highly inefficient. When greater efficiency became a necessity, optimization started and gasoline won.

    • 0 avatar

      And in an alternative reading, now that I think of it, maybe cars should have been flex from the start of the program, but I can think of at least two reasons why it was not.

      The first technical. To run efficiently on gasoline or ethanol, engine compression must be different. Flex fuel cars have a higher compression than gasoline powered cars, but lower than ethanol ones. This relative inefficiency is made using computing power not available in the 70s. So to get any economy from an ethanol engine back then, it had to be optimized and in that instance ethanol won.

      The second reason is my speculation. If flex cars were available, the complete acceptance of ethanol might have been delayed. As the decision to go alcohol was partly dream/illusion/political directive/necessity to remunerate investors/hopes that it would work and the Program could be finished in a few years as the market made it work, no one thought we would oil in our matrix or that we would later find so much oil here, I guess no one even thought of it.

      • 0 avatar

        Thanks, Pch for raising these issues, and Marcello, for answering the questions. All fascinating.

      • 0 avatar
        Pch101

        “To run efficiently on gasoline or ethanol, engine compression must be different.”

        Ethanol is a higher octane fuel, so an engine designed to run on alcohol can run at higher compression and therefore be more efficient. But it isn’t essential to have the higher compression, it’s just somewhat wasteful in the sense that a flex fuel engine with lower compression that can run on regular gasoline is allowing the ethanol octane to go to waste. (Designing the motor to run on premium gasoline would mitigate this somewhat.)

        I don’t know the political history there, but I suspect that Brazil’s goal was to reduce dependency on oil imports as much as possible, not to strike a balance between oil and alcohol.

  • avatar
    MK

    I spent several weeks in the mid-2000s working outside Rio and our driver told us a lot about the fuel programs from his perspective in livery. Its been a while but if I recall correctly, his vehicle (a mid size sedan) could run on gasoline, ethanol or natural gas. He was constantly calculating which was the best deal and would switch fuels as needed.
    Maybe I’m misremembering but he switched while driving just to show how simple it was….. course the trunk was taken up with a gas cylinder.

    I found the whole thing quite fascinating but also seemed a lot of effort for prices that still seemed rather high to me.

    Thanks for the article, definitely a different perspective.

    • 0 avatar

      Thanks for the kind words. The car was probably a Fiat Siena tetrafuel that can run on pure gasoline e0, brazilian gasoline e25ish, ethanol e100 and natural gas. Due to its wealth in natural gas, the state of Rio de Janeiro offers incentives and tax breaks for those cars that can run natural gas. There are also a lot of aftermarket places that make the conversion. In my state the calculation is that you must drive about 150 km a day to make it wortwhile so some companies do it. My brother converted one of his cars back when that calculation was slightly under 100 km a day as it was worth it for him. Since then my state has backed off the incentives. However in Rio state it still makes sense at less km per day it would seem.

      Abd yes with a good conversion or the Fiat factory setup transition is seemless. But besides losing the trunk you do lose hp.

  • avatar
    jimbob457

    I know fracking may seem a strange thing from a Portugee point of view, but it is for real a very big deal here in west Texas. Don’t even dream of $100 a barrel oil again.

    • 0 avatar

      I would hope so. For now Petrobras and the national petroleum governing agency is directing efforts to drlling and exploration to the deep water presalt oil fields off the coast of southeastern Brazil. Very expensive now, each new drill and technology drives the price down. Hoewever with continued low international and a potential return to more conservative governance and monetary policies one does have to wonder how long that will last.

      That being said there is plenty of shale sand in Brazil. We will eventually get to them i’m sure.

      • 0 avatar
        jimbob457

        I recall my Dad advocated a Spanish language edition of the Oil & Gas Journal. One of his arguments was that if you could read Spanish you could read Portugese. In those days nobody thought that English would become a lingua franca.

        My advice, amigo. Get focused on fracking. The sooner, the better.

  • avatar
    cargogh

    Thank you. That was so interesting.

  • avatar
    fincar1

    Thanks for the concise, well-written history of Brazil’s use of ethanol as motor fuel. It does seem that it’s been good for Brazil on the whole, a statement that can’t be made here in the United States.

  • avatar
    Big Al from Oz

    Hey Marcelo,
    Great story with a lot of history and technical info. Love it!

    I do think a problem Brasil has encountered is largely corruption or the “Iberian” ruling class syndrome that has affected large parts of Latin America.

    India has a more pronounced problem of the “Ruling Class Syndrome”, India should be better off than what it is.

    For a developing nation Brasil does have a formidable range/strata of taxes that impede growth and development. Brasil needs to streamline and simplify it’s taxation system with more transparency from government and large business on how and where the tax dollars are spent. In other words I do think Brasil doesn’t offer the best governance for its people.

    This is holding back the country. Several years ago at an airport I helped an elderly women with her luggage. I think she was working in Timor as the Vice Consulate General, if you don’t know, Timor was a former Portuguese Colony. After chatting to her whilst I carried her luggage from terminal to terminal I asked questions regarding Brasil’s situation economically and politically.

    She stated what is holding back Brasil economically was it’s massively complex system of taxation and re-distribution of wealth. A cumbersome system from what she told me.

    And Brasil lacked the political will to make the necessary changes because the “Ruling Class” have their hands in the politicians pockets.

    This occurs in any nation to a degree, but it appeared to be a systemic problem in Brasil. A lack of accountability.

    It’s a pity that Brasil continually hits a brick wall whenever it seems to be gaining traction.

    As for the fuel. I don’t believe in subsidised/protected anything. I believe market forces should dictate the direction of an economy.

    I’m a great believer that food, should be food. If it is profitable to use food for an alterantive energy other than powering humans then do it, but do it without subsidies.

    There is no reason why Brasil shouldn’t have a standard of living as good as any Western Nation. It has the talent and resources to be there already.

    • 0 avatar

      Hey Big Al! Thanks for reading and the well-thought out comments.

      Let’s go by parts.

      “I do think a problem Brasil has encountered is largely corruption or the “Iberian” ruling class”
      Very strong yes as evidenced by the corruption scandals in Petrobras with ramifications deep into Congress, the ruling party and the business elite.

      The next paragraph on taxes again a strong yes. A good way to eliminate that would be to substitute the complex ICMS (tax on circulation of merchandise) and other taxes on production to a more straightforward sales tax. But interests impede. As it is ICMS is paid where the product is produced and another part where it is consumed. So the stronger, producing states get a bigger part of the pie (São Paulo, my state of Minas Gerais etc.), so that won’t happen. Also labor is taxed heavily in Brazil but not investment, which penalizes workers and companies, but not the rich. Income tax has only three brackets so solid middle class people pay as much on their salary as high level executives (27.5%), airplanes, helicopters and boats are not taxed, but cars and motorcycles are (heavily), there is no estate tax (only a 4% tax on transmission of physical goods, mainly real estate, from the deceased to the survivors) and so on. So yes, the ruling class cries bloody murder, but they are less taxed than in most developed countries.

      “She stated what is holding back Brasil economically was it’s massively complex system of taxation and re-distribution of wealth. ”
      Fist part true, second part I’m not so sure. During the heady days of the 70s for example (and most of the 60s, while the 50s was a bit different, all decades with strong growth), the Gini index in Brazil got worse. I remember well the all powerful Finances Minister Delfim Netto justifying this as the need to let the “cake grow and then distribute”. As history has so often shown, after the cake has been split, you can only re-divide it via very violent measures. As such, part of the ruling class have acknowledged that division must be done while the cake is growing. And it has worked. Our Gini index is now back where it was in the 60s(0.5 in 60s to 0.6 in 70s to 0.5 again today). So cumbersome it is and many scream bloody murder and the middle class thinks they are getting ripped off, but the situation has improved dramatically for many poorer folk. The last decade has seen greater consumption than ever and that is reflected for example in the car market that went from under a million (in the 70s) to a height of 3.7 two years ago, far outpacing natural population growth. Imagine what could happen if the Gini improved to 0.4.

      “And Brasil lacked the political will to make the necessary changes because the “Ruling Class” have their hands in the politicians pockets.” Yes and no, but the situation is changing. People love to despair, but, the scandal in Petrobras is being unraveled. For the first time in the history of Brazil there is a billionaire in jail and countless other top-level executives of private companies and the state oil company. 54 politicians whose names read like a who’s who of political power (long standing political family leaders – imagine a Kennedy or Bush -, governors, senators, deputies, the President of the Senate and the Chamber of Deputies) have been denounced by the Public Ministry and could be indicted if the Supreme Court accepts the charges. From a previous scandal most of the ruling party’s leadership was jailed. On a local level, my state has 850-ish municipalities, there are close to 200 mayors and councilmen in jail, countless other being persecuted. These things take time but are improving. We do need better legal mechanisms to get the stolen money back though.

      “As for the fuel. I don’t believe in subsidised/protected anything. I believe market forces should dictate the direction of an economy.” This would have never happened without government intervention. There are some things that just don’t happen if the government doesn’t take charge. That is my belief, and it is just a belief, the same as your statement is, just an article of faith, neither can be “proved”.

      “I’m a great believer that food, should be food. If it is profitable to use food for an alterantive energy other than powering humans then do it, but do it without subsidies.” As a general statement so do I. But at the moment, people go hungry, not because of a lack of food, but because of a lack of money. Sugarcane is better than corn in this regard because even the bagasse can be used to feed animals. At the moment, governments even have to buy and stock huge stockpiles of food to avoid price collapses. So at the moment, this is kind of a mute point.

      “There is no reason why Brasil shouldn’t have a standard of living as good as any Western Nation. It has the talent and resources to be there already.” I hope so and generally agree. But we do have the cultural issues touched on above and well as heavy historical legacies. We do need a tax reform, labor laws could also use some tinkering, the electoral system, too. However, as a lawyer, I don’t believe changing the laws does all that. The laws are in place and are relatively good. The thing is to keep it steady, spend more responsibly, continue fighting any excess (like corruption) and get credibility back. The country is not much different from what it was 2 years ago, but many have lost faith in the current leadership and are pressuring. And as always, the major roadblock, education, education, education.

      Thanks Big Al! That was fun!

    • 0 avatar
      dtremit

      Food should indeed be food — but I’m not sure the white sugar and corn byproducts that make up much of our modern diet really meet that standard. We might be better off with them off the table.

      • 0 avatar
        Big Al from Oz

        @dtremit,
        One thing I noticed when eating in the US is you can taste the differences in the same foods.

        Candy, or as we call them in Australia, lollies are the biggest difference. Australia has a relatively large sugarcane industry and we use sugar. You can actually taste the corn syrup.

        That taste is in a lot of American food, the highly processed food.

        I do prefer real sugar over corn syrup and corn byproducts used in many of your foods.

  • avatar
    Hummer

    I really enjoyed this article, very interesting.

  • avatar
    dtremit

    Thanks for an interesting read, Marcelo.

    Here in the US, in the (admittedly few) places where ethanol is available, it’s sold as E85. I would infer that the 15% gasoline content makes it much simpler to offer a flex fuel vehicle — none of those sold here have separate tanks or pre-warming systems or anything like that.

    Out of curiosity, is a high-ethanol blend like E85 typically available in Brazil?

    • 0 avatar
      jhefner

      I may be wrong, but I think E85 is 85% gasoline and 15% ethanol. But I stand ready to be corrected.

      • 0 avatar
        highdesertcat

        jhefner, in the Great State of New Mexico E-10 is 10% ethanol mixed into 90% of any of the three grades of gasoline (86 octane, 89 octane and 91 octane).

        E-15 is 15% ethanol, 85% gasoline of whatever octane.

        E-85 is 85% ethanol, 15% gasoline of whatever octane.

        FFVs have no problem running on anything ranging from PEMEX 100% pure-gas all the way up E-85. But the more ethanol content, the lower the efficiency and the lower the mpgs.

        We’ve only used Premium-grade hi-octane gasolines with 10%, 15% or 85% ethanol, depending on where we tanked up in New Mexico. None of our vehicles have suffered ill-effects using ethanol blends, but mpgs with E85 really and truly sucked in all of our vehicles (2008 Highlander V6, 2011 Tundra 5.7, 2012 Grand Cherokee V6, and 2015 Sequoia 5.7)

    • 0 avatar

      You can do whatever you like, but you’ll have to use two pumps. Gasoline here is always E25, soon E27. The ethanol pump is E100. Pumps that automatically mixes any blend a consumer might like exists and has been shown, but no one has installed them yet. Guess that is to serve the ild ethanol only cars running about but the same courtesy has not been extentended to old gas cars as there are no E0 pumps.

      Jhefner, E85 does mean 85 percent ethanol, 15 gasoline.

      • 0 avatar
        FormerFF

        I’m fairly sure you won’t see E100 sold in the states. When I was in high school, our chemistry lab had what was called denatured ethanol, which had five percent gasoline added, to make sure no one tried to drink it.

        • 0 avatar

          Your questions made me do a quick internet research here and from I can tell it is drinkable. However, you will surely get very sick and potentially so intoxicated you’ll die as its concentrated. Even found some reports of homeless people doing it, when it is cheap, adding water, and drinking it.

          BTW, you could buy liquid alcohol here (not anymore) and people would do the same and drink it. That I had heard before. And also of people diluting it with water and putting it in their cars.

  • avatar
    Dan R

    So that’s where the rainforests went.
    Up the tailpipes of FIATs.

    • 0 avatar

      In the traditional place sugarcane was grown, the NE of Brazil is semi arid so scrubland mostly. Recently the cerrado biome in the midwest has been tamed for sugarcane culture, but that’s a savannah. In São Paulo it’s more of a transition are, but it’s also basically grassland.

      They have tried in the Amazon but it has always failed. Seems sugarcane is completely inadequate for rain forest areas, but they might one day crack it like they did the cerrado.

      So, basically, no, :).

      • 0 avatar
        jhefner

        That is basically what sugarcane country in Louisiana and SW Texas looks like; it is coastal flatlands between the Gulf of Mexico and the piney woods starting just south of Alexandria, Louisiana. (The northernmost sugar factory is in ruins; but is a few miles south of Alexandra. That also describes Cuba; and maybe the cane growing regions of Indonesia.

        Sugar cane needs abundant rainfall; but I don’t think the roots should be wet all the time, or rot would set in. My guess is that the rainforest area suffered from too much rain, as well as too many bugs and other things that would feed on the cane. Just as Henry Ford’s rubber plantation could not thrive; though some of that was a poor understanding of how to plant and raise rubber trees.

        • 0 avatar

          Yep. All correct

          As to Fordlândia, when the British stole the seringueira trees and planted them in Malaysia they thrived. As they were transplants they had no natural predators in that rain forest. So, they can be planted there plantation style. Here, when Ford tried to do it, the trees fell victim to insect predators quite easily as they occur naturally in the forest very spaced out one from the other of the same kind (and that how the Brazilian rubber boom was done, by collecting from natural occurring trees, before Malaysia became the source). It would also seem the exact location Ford bought was not that suited to seringueira trees (this is the story I have always heard here in Brazil, might be accurate or not).

          Anyway, the project was doomed after 1945 when synthetic rubber became cheaper, partly as a result of the war effort (on the part of various nations).

    • 0 avatar
      Hummer

      That’s basically all we learned of Brazil in grade school, “This is Brazil, it has rainforests with high biodiversity, all the rainforests will be gone by 2005 because big corporations cut down 1,000 acres a day, illegally.”

      Didn’t exactly pan out fortunately, but as usual they would take every issue and explode it out of proportion.

  • avatar
    cRacK hEaD aLLeY

    Nice article. Thank you. When I lived in Brazil I had a 1986 Escort XR3 Ethanol-only and later a 1989 Chevrolet A-10 stove-bolt inline 6, also Ethanol only. Both worked flawlessly with Ethanol. Both hated cold starts and fuel consumption on the 250 CID GM was a cruel joke. It burned SO MUCH FUEL. Water would pour from the exhaust in the AM as it warmed up and form a puddle in the garage. 7-8 mpg on a good day. I remember oil changes were not nearly as frequent on the ethanol cars compared to regular gasoline engines.
    The gas that went into the start-up reservoir would go stale, rot and stink. ended up disconnecting the thing on both cases. Those were carburated engines btw.

    • 0 avatar

      Hey thanks Crack Head. I had an Escort XR3, too. Ethanol-powered. So sweet. And I remember the A10 too. My granddad had one. Often rode between him and my grandmother on trips to the farm. But even being young (this was before I could drive) and the truck being an older model than 1989, I heard granddad complaining of the consumption the whole trip. Fun times!

      As to current flex cars. It has been ages since ethanol was advantageous in my region. As such, the systems have not been used or lubricated. The plastic bottles and hoses will go brittle or even disconnect (as has happened in the engine bay of her Renault Logan, I checked because I recommended to her to use ethanol, but I’m aware of the problem and was worried and bingo! – if she had put gasoline in the extra tank in order to use E100 more effectively, that disconnected hose would have sprayed the gasoline directly on the engine, so FIRE!). I forecast many engine fires sadly.

      So to any Brazilian reader out there, if you have not been using your supplementary gas tank frequently or recently, proceed with extreme caution if you begin using alcohol and the flex system again. Or do like I do. I will fill the tank with alcohol the next couple of times, but when the level goes down, I will head to the gasoline station and throw in some 20 reais worth of gasoline. That will help in cold starts and avoid fires. It’s a serious problem.

  • avatar
    Driver7

    Interesting post, Marcelo.
    A few years back, the Financial Times argued that the most economically efficient way for the U.S. to acquire ethanol was to purchase it from Brazil.
    I wonder how that would work out if circumstances in the U.S. permitted it.

    • 0 avatar

      Now that would probably have affected food production in Brazil as every available inch of land in this country would be converted to growing sugarcane for the US, :).

      Seriously now, your own ethanol based on sugarcane production seems to be bigger than Brazil’s. That does not mean that some importation from Brazil would not make sense.

      As to the American sugarcane ethanol I see two major questions. Will bagasse be turned to fuel? And will Cuba become the 51st state? both would radically change the whole sugarcane ethanol picture.

      • 0 avatar
        jhefner

        “As to the American sugarcane ethanol I see two major questions. Will bagasse be turned to fuel?”

        Marcelo;

        Yesterday, in the Wikipedia entry for Bagasse under Fuel; there is the following:

        “Ethanol produced from the sugar in sugarcane is a popular fuel in Brazil. The cellulose-rich bagasse is being widely investigated for its potential for producing commercial quantities of cellulosic ethanol. For example, BP is operating a cellulosic ethanol demonstration plant based on cellulosic materials in Jennings, Louisiana.”

        I am not sure where that plant is. I do remember a research plant on the east side of Jennings that is now derelict; but I think it was a food type operations.

        “And will Cuba become the 51st state? both would radically change the whole sugarcane ethanol picture.”

        Annexing Cuba into the United States aside; Cuba stopped propping up their sugar industry shortly after Y2K. It was a popular place for gricers (folks who travel the world photographing the world’s remaining working steam locomotives) because the operations were frozen in the 1930s; with steam locomotives still being used to bring in the cane; and steam engines still powering the mills.

        (There was a serious proposal to build a steam locomotive with the latest technology, powered by bagasse; but it went nowhere.)

        Without the support; they could not compete in the world market; and many of the mills were shut down and scrapped. There are a few still being operated in part for tourists; but it is a shadow of it’s former self. So unless the United States pumped money into modernizing and kick starting Cuba’s sugar industry; it is not likely to be much of a world player; at least not until the bagasse-to-fuel process becomes perfected.

        Side note: I worked for five years as a computer contractor at a synthetic rubber plant that was one of the ones built during WWII after the Japanese captured the rubber plantations in the Southeast Asia. So I know what you are referring to. They were usually attached to a petroleum refinery because one of the main ingredients in making synthetic rubber comes from the oil refining process.

        • 0 avatar

          Yes, those kind of demonstrations have been done here, too. The other day I heard a debate on the radio about the tax hikes in gasoline and the greater use of alcohol and its consequences. There was a university professor talking about the use of bagasse as fuel. He said the horizon for it to become commercially viable was of two years. This is great news because whenever that was talked of before the horizon was always decades. Btw, he did cite US research and said this was partly why Brazil had sped up research. He said the Americans had solved some issues that permited this stage of research. He also mentioned that the government agency EMBRAPA was back in the game (and they are technically very good with a long and succesful track record) and that there was also private money via UNICA but not only.

          As to Cuba the comment was a bit tongue in cheek, but when the current leadership dies off, something will change, it has too, and the US will inevitably be involved. So US money will be thrown around and re starting the industry would be a cost effevtive way to do so. Hope that you will resist the temptation to indulge the Miami Cuban lobby of turning back the clock on property ownership. One only has to look at East Europe to see that those that used the transition to give people who already live in the places the property of the places are better off than those countries that tried to compensate those who lost properties when the revolutions became governments and nationalized all holdings.

      • 0 avatar
        28-Cars-Later

        “And will Cuba become the 51st state?”

        Come again?

        • 0 avatar

          Cuba is a small nation whose economic future is inextricably linked to the US. A large, vocal, rich Cuban American minority would love to call the shots on the island again. I would even go so far as to say many in Cuba would not be opposed either.

          A bit of a provocation 28, but the time is coming for a major change in Cuba and the US will be involved. And quite impossible to say how it will turn out.

          • 0 avatar
            Pch101

            The US already has more ethanol than it can use. The US doesn’t need to import more of it from Cuba or anywhere else.

            On the other hand, the Cubans import 80% of their food. They could do with some improvements to their own agriculture, which I presume is just as backward as the rest of their economic infrastructure.

          • 0 avatar

            Pch, I’m not saying the US needs Cuban sugarcane or wants to annex Cuba, but Cuban Americans and other Americans will pressure greatly to get their lost property back or at least get compensated. Cuban Americans could even start privateering in Cuba leading to a situation where the government would have to get involved (the British in India, Rhodes in Africa, the Americans in Texas) as well as waves of economic refugees washing up on Florida’s shores (like East Germans pouring into West Germany).

            All speculation of course.

          • 0 avatar
            28-Cars-Later

            I agree [much needed] change is brewing in Cuba and it is impossible to say what will happen.

  • avatar
    Magnusmaster

    Brazil´s history with alcohol is very interesting. Here in Argentina we used to make sugarcane alcohol during the 80s on the northern regions but it was shelved during the 90s.
    Now we make alcohol and biodiesel with soy, mostly to save hard currency we need for fuel, and our gasoline is 10% alcohol.

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