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Sugar Cane and Ethanol Boom Drives Development in Southern Brazil

Mario Osava

RIBEIRÃO PRETO, Brazil, Mar 22 2011 (IPS) - The roads are exceptionally good and numerous here, in contrast with other parts of Brazil, but the monotony of the landscape is not inviting to tourists. Sugar cane fields stretch to the horizon along a 400-km stretch of highway to the north of São Paulo.

In the heart of this area, which has a high level of economic and social development as the country’s largest producer of sugar and ethanol, is Ribeirão Preto, one of the richest cities in Brazil, with a population of 605,000 and per capita income more than twice the national average.

The sugar cane boom has driven local development because, since cane dries quickly after harvest, it must be processed immediately after cutting. This means that unlike other major cash crops, like coffee and soybeans, it has to be processed locally and cannot be exported as a raw material to be transformed elsewhere.

In this short local production chain there are no intermediaries, which keeps prices down, benefiting consumers, said engineer Cícero Junqueira Franco, one of the leaders of the ethanol industry in Brazil, who at the age of 79 is still an influential partner in a number of companies.

But it was the National Alcohol Programme (Proalcool), launched in 1975 to partially replace gasoline consumption and reduce oil imports, that fuelled today’s prosperity in the region of Ribeirão Preto, which has basically become one big plantation of sugar cane, for the production of ethanol, known simply as “alcohol” in Brazil.

Large-scale production of ethanol “changed the structure of the industry and changed Brazil,” Junqueira, one of the “fathers” of Proalcool, told IPS. He and other business leaders suggested that the government adopt the policy in 1974, when the price of oil rose fourfold in the space of a few months during the 1970s fuel crisis.

At the time, Brazil was importing 85 percent of the oil it consumed, and the soaring of fuel prices curbed the nation’s economic growth. Ethanol helped the country weather the energy crisis, at a time when there was a surplus of sugar cane on the domestic market, due to government incentives for production.

So Proalcool emerged to solve two problems, said Roberto Rodrigues, former agriculture minister from 2003 to 2006 and now a university professor and chairman of the Agribusiness Council of the Federation of Industries of the state of São Paulo (FIESP).

In the 35 years since the programme was created, Brazil’s ethanol production has skyrocketed from 611 million litres to 27.7 billion litres in 2010, while sugar output has risen more than five-fold, to 38.7 million tons.

To meet demand, the land under sugar cane production has quadrupled, which led to a seven-fold increase in the harvest. In 2010, 8.1 million hectares were planted and 625 million tons of cane were produced.

That was only possible because average productivity rose three percent a year, an “extraordinary” increase when it comes to agriculture, Junqueira explained in his rural residence, an oasis of trees watered by a stream and hemmed in on all sides by sugar cane fields, in the municipality of Orlandia, 55 km north of Ribeirão Preto.

The accelerated growth broke down the government’s control over the sugar cane industry, which was maintained by means of production quotas and a monopoly on exports, and transformed the rural areas and small towns of the state of São Paulo, especially in the northeast of the state, where sugar cane cultivation is concentrated.

In the past, few sugar cane processing plants employed an engineer, but today “they are unlikely to have fewer than three,” Junqueira noted. And in plants that produce both sugar and ethanol, “31 different kinds of professionals” are employed, he added.

Proalcool “breathed oxygen into a sclerotic system,” modernised it and attracted a new type of entrepreneur, “opening minds,” said Maurilio Biagi Filho, another ethanol tycoon, who as a child spent hours “studying and playing football” with the children of employees at a plant founded by his father.

Electricity, plastics and other chemical products, fertilisers and enzymes have been incorporated into the plans of the sugar cane industry. Scientific and technological research has received a strong boost in the area, which has driven the opening of universities and research centres run by the sugar and ethanol industry.

The growth has favoured the development of a diversified machinery industry for the production of sugar cane and its processing into sugar, ethanol and energy. In Sertãozinho, 20 km from Ribeirão Preto, there are 550 companies, most of which also provide equipment for other industries, like the oil and hydroelectric sectors, both within and outside Brazil.

The harvest is 70 percent mechanised, and is set to be totally mechanised by 2014. This has expanded the industrial market, by increasing demand for harvesters and other farm machinery, and has come hand in hand with environmental requirements set to prohibit the traditional practice of setting fire to sugar cane fields to clear them of waste in order to facilitate harvesting by hand.

Hotels filled to capacity in every city in the region reflect the economic boom driven by the sugar cane and ethanol production chain.

But “a clearer policy is needed,” Biagi told IPS. Ethanol production follows the sugar cane cycle. Without a harvest in the first quarter and without stocks accumulated and controlled by the government to regulate and stabilise the market, there is a shortage of ethanol because a greater share of the harvest went towards producing sugar, due to the rise in prices in 2010.

Flex-fuel vehicles which run on gasoline, ethanol or any blend of the two, have been produced in Brazil since 2003, which has made it possible for customers to use the least expensive fuel. But this time, demand for ethanol did not drop as much as expected.

The apparent progress driven by the sugar cane economy has its critics, however.

The mechanisation process began in the late 1980s, to thwart the sugar cane cutters’ movement for their rights, “not because of environmental reasons,” Helio Neves, president of the Federation of Rural Workers of the State of São Paulo, told IPS.

Mechanisation will also leave thousands of workers without jobs, and there are not enough training opportunities to help all of the labourers find new work, he said.

Sugar cane “is a wonderful plant,” but monoculture concentrates the power in corporations “at the expense of democracy,” imposing “a dictatorship of economic interests over social concerns,” lamented Neves, a highly respected trade unionist who was involved in the historic strike of sugar cane cutters in Guariba, 65 km from Ribeirão Preto, in 1984.

Furthermore, the prosperity brought by the industry is unequally distributed. Ribeirão Preto, where the best-paid services are concentrated, and Sertãozinho, are the wealthiest parts of the region.

Meanwhile, relative poverty and lack of jobs have forced thousands of women from Guariba, Barrinha and other municipalities with vast sugar cane production but virtually no industry to seek jobs as domestic workers in Ribeirão Preto.

That is the case of Maria Alcántara Silva, a local woman “over 30.” For the past six years she has commuted 35 km from her town, Pradópolis, to Ribeirão Preto and back every day. She says the better pay in the larger city compensates for the cost of the bus tickets. She at least earns enough to support her son, who is studying chemistry at the university, she said.

In Guariba there are 620 women registered as working as domestics in Ribeirão Preto, and the city government covers 40 percent of the cost of their transportation, said José Roberto de Abreu, municipal secretary of employment and labour relations.