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BRAZIL: Sugar Cane Fields Turned into Industry in Sertãozinho

Mario Osava

SERTÃOZINHO, Brazil, Apr 11 2011 (IPS) - “A disappointment” was his first impression of his new city. It was small, half the size of his hometown of Barretos, and had “weak lights,” says Marcelo Pelegrini, remembering his family’s move to this southern Brazilian city when he was nine years old, after his father got a job transfer.

São Francisco sugar processing plant in Sertãozinho.  Credit: Mario Osava/IPS

São Francisco sugar processing plant in Sertãozinho. Credit: Mario Osava/IPS

It was 1975 and the National Alcohol Programme (PROALCOOL) had just been launched to find gasoline substitutes and reduce imports of oil, which were strangling the Brazilian economy during the 1970s energy crisis.

The subsequent sugar cane boom turned Sertãozinho into the industrial centre of Brazil’s main sugar-producing region, in the northeastern part of the southern state of São Paulo.

Prosperity, based mainly on the city’s 550 factories and seven sugar and ethanol-producing plants, has brought a threefold rise in population since then, to more than 110,000 today – the same size as nearby Barretos, but with the advantage of offering more jobs for skilled workers.

Pelegrini today laughs at his first impression of Sertãozinho. He went on to become a central player in the city’s fast-growing economy, as the city government’s secretary of industry, trade, supplies, agriculture and labour relations since 2002.

But he has not only taken part in administering boom periods. The local economy was hit hard by the global financial crisis that began in the United States in 2008, as reflected by the loss of some 2,400 jobs in the city in 2009, after a four-year period of growth that generated nearly 11,000 new jobs, Pelegrini said.

“It was the worst crisis in our history,” says Cristiane Cámara Braz, marketing manager in Sermatec, one of the leading manufacturers of heavy equipment for the sugar cane industry, like boilers or entire processing plants. “Without credit, clients lost their capacity to pay,” many projects were stalled or cancelled, and “our turnover was cut in half.”

As the result of a fever of investment in the industry from 2005 to 2007, 55 new sugar and ethanol plants opened in Brazil in 2007 and 2008. But the crisis cut short many projects in the following years, with companies staggering under the weight of unpayable debts.

The effects of the crisis, which affected industry in Sertãozinho, include the current shortage of ethanol, which has forced Brazil to import the fuel from the United States to supply the domestic market until this year’s harvest begins this month. (In Brazil, all cars run on a mix of gasoline and ethanol, or alcohol fuel.)

In addition, many Brazilian companies in difficulties were forced to sell their ethanol plants to foreign firms.

Sermatec is recovering after a change in management. It is developing new technologies and seeking out new markets, such as the oil, steel and mining industries. In the past, 90 percent of orders came from the sugar cane industry. But today, “diversification is the watchword,” Braz said.

The company currently has 1,200 employees, after reinstating a portion of the workers laid off in 2008 and 2009. It has a corner on 40 percent of the national market for biomass boilers, needed by new plants as well as older plants in the process of upgrading. It also exports equipment, including complete units to Africa and to other countries in Latin America.

The industrial machinery industry in the sugar cane sector basically emerged from the shops that carried out repairs and maintenance on imported cane processing equipment, which later began to manufacture parts, and in some cases, like Sermatec, accumulated the know-how for the design and assembly of entire plants.

The history of the industry in Sertãozinho began in Zanini, a workshop founded in 1950 that grew into a leading industrial machinery maker in the 1970s and began to develop technological innovations. In the 1990s, it succumbed to the ethanol crisis, but it spawned a number of companies that inherited the business and learned to work together.

Some, like Sermatec, began as subsidiaries, while others were established by former employees of Zanini, whose former chief executive Maurilio Biagi is “a visionary who encouraged the entrepreneurial spirit and formed new business leaders,” said Adalberto Marchiori, communications and marketing officer for TGM Turbinas.

TGM, whose “owners and skilled workers came from Zanini,” started out by offering technical assistance and maintenance. In 1994, the company began to produce steam turbines, of which it became “the biggest manufacturer in Latin America,” exporting them to 30 countries, including Germany and the United States. It now has 1,100 employees.

The large scale of production reached by the sugar cane industry in the northeastern portion of the state of São Paulo created exceptional conditions for the birth and expansion of the industrial machinery industry, which employs 18,000 people in Sertãozinho, according to Pelegrini – in other words, one-third of all employed workers in the city.

The technology has been developed in close interaction with sugar mills and distilleries, responding to their needs. The boilers “vary from project to project,” depending on the conditions and objectives of each, Braz explained. The increasing generation of electricity, taking advantage of sugar cane bagasse or waste, has led to an expansion of the plants.

As a result of the steady demand for skilled workers, which has grown again after the impact of the international crisis, Sertãozinho has drawn labour power from other cities, and is providing training for local workers.

Several institutions have expanded their installations and offer courses in the city. The Brazilian Centre of Sugar, Alcohol and Energy Industries (CEISE) founded a Corporate University in December, along with a distance learning institute.

The aim is to raise knowledge in the industry, through courses on bioenergy, higher management and other subjects for company executives, said Janaina Calor, the Centre’s executive manager.

Ceise was born in 1980 in Sertãozinho as an association of local companies. But last year it decided to go national, adding “br” to its name and taking on the mission of fomenting development of the industry.

To orient future growth, it set up a “competitive intelligence unit” with 10 committees of specialists evaluating aspects of the production chain, like innovations, logistics and international trade, and new products from sugar cane, like biochemicals and electricity.

“It will be a revolution,” says the president of Ceise-Br, Adezio Marques.

The industry “was not at all united, and ignored the concept of a production chain,” with sugar cane industrialists, cane growers and the capital goods industry negotiating separately with the national government, until Ceise-Br began to “search for unity,” he said.

The mechanisation of the sugar cane harvest in the state of São Paulo, set to be completed by 2014, has expanded the market for agricultural machinery, whose manufacturing – according to Marques’ estimates – will employ some two million people along the entire production chain in Brazil, including 4,000 companies, plus logistics services, suppliers of inputs and other related activities.

One of the pioneers in the sugar cane equipment manufacturing industry was Luiz Antonio Pinto, an inventor popularly known as “Professor Pardal”, who founded the Santal Equipamentos company in the city of Ribeirão Preto, 20 km from Sertãozinho.

Pinto built harvesters, adapting Australian models, starting in the 1960s, but “they cost more than the labour power,” which was abundant and came at that time from the northeast, Brazil’s poorest region, Marques noted.

But harvesters are now viable, as they “became more efficient and costs went down,” while the cost of labour power went up, he explained.

In the state of São Paulo, which produces 60 percent of Brazil’s sugar and ethanol, a ban on the burning of cane fields – a practice that facilitates manual harvesting – will go into effect in 2014. As a result, the last remaining cane cutters will be replaced by harvester machines.

Santal is now preparing to produce crawler harvesters, to compete with multinationals like the U.S.-based John Deere and Case.

Of the nearly 1,000 harvesters sold annually in Brazil, 95 percent are crawlers, which are more stable and do not compact the soil as much as a wheeled vehicle. Santal, which up to now has only produced four-wheel-rear drive harvesters, currently sells just 30 or 40 units a year.

But the company is a pioneer is the manufacturing of the vehicles that transport the sugar cane from the harvester to the trucks that carry it to the processing plant. It also makes planters.

However, the invention by Pinto that probably made the biggest contribution to the success of ethanol as a gasoline substitute was an easy-to-read hydrometer that gas stations install on their pumps to indicate the percentage of water mixed in the ethanol, indicating its quality as a motor fuel.

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