Abstract
To better understand the form and relevance of state intervention in the agribusiness of sugarcane production in Brazil, we sought to create a chronology of the major government policies adopted and of their effects on the industry. The sugarcane ethanol industry has seen alternating cycles of overproduction and oversupply. Therefore, intervention in the industry has been based primarily on maintaining the balance between production and consumption using two basic instruments: crop plans and policies designed to regulate prices and credit.
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- 1.
For example, in less than 10 years (between the harvests of 1989–1990 and 1998–1999), the sector suffered two serious and asymmetric crises: first a shortage of fuel ethanol, and then a surplus of ethanol and sugar.
- 2.
Loosely speaking, there are similarities between this process and the current model of remuneration for sugarcane (CONSECANA-SP, 1999).
- 3.
Government price guarantees had created the financial stability that allowed the expansion of credit available to the refineries.
- 4.
According to Gomes (1979, p. 138), “There are reports that the Getúlio Vargas Foundation conducted only two cost surveys for the IAA: one in the 1965–1966 harvest season and another ten years later. In the interim, the cost information supplied by the Institute represented, at best, calculated values adjusted on the basis of price indicators.”
- 5.
Although the term subsidy is often used, strictly speaking, it does not apply. Neither the Brazilian government nor the World Trade Organization consider such payments to constitute subsidization, because they do not directly involve budgetary funds or tax breaks.
- 6.
This schedule was not adhered to, and northeastern producers continue to receive this allowance today.
- 7.
The northeastern region currently includes the states of Alagoas, Bahia, Ceará, Maranhão, Pará, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, Sergipe, and Tocantins.
- 8.
The south-central region currently includes the states of Espírito Santo, Goiás, Mato Grosso, Mato Grosso do Sul, Minas Gerais, Paraná, Rio de Janeiro, Rio Grande do Sul, Santa Catarina, and São Paulo.
- 9.
According to Ramos (1991, p. 198): “For the northeastern region, 10 % annual interest; a 3-year grace period; and 10 years to repay; for the south-central region, 12 % annual interest; a 3-year grace period; and 10 years to repay.” There was no indexation.
- 10.
Originally designated the Ministério do Trabalho, Indústria e Comércio (Ministry of Labor, Industry, and Trade), the name was changed to the Ministério da Indústria e do Comércio (Ministry of Industry and Commerce) in 1960 and to the Ministério do Desenvolvimento Industrial, Ciência e Tecnologia (Ministry of Industrial Development, Science, and Technology) in 1989. In 1990, the Ministry was dismantled, only to be resurrected in 1992 as the Ministério da Indústria, do Comércio e do Turismo (Ministry of Industry, Trade, and Tourism), which was renamed the Ministério do Desenvolvimento, Indústria e Comércio (Ministry of Development, Industry, and Trade) in 1999, only to be renamed the Ministério do Desenvolvimento, Indústria e Comércio Exterior (Ministry of Development, Industry, and Foreign Trade) later in that same year. Therefore, we will refer to the Ministry by various names, depending on the time period being discussed.
- 11.
Those revenues were generated by fees levied on each bag of sugar and each liter of fuel ethanol produced, and by taking a share of the net income from exports. For exports, sugar producers received a price similar to the domestic market price, the difference between the two prices going to the Special Export Fund. This arrangement caused considerable dissatisfaction among sugar refinery owners in the south-central region.
- 12.
The difference between the price paid to producers for ethanol (parity with sugar) and the price received for its sale to gasoline distributors (parity with gasoline).
- 13.
After the removal of the state intervention, in 1999, the decision of the production mix between ethanol or sugar, is a choice of producers, based on expectations of prices of the two products.
- 14.
According to Santos (1993), the application process was as follows: the interested party submitted a proposal to the CNAL, which, together with the IAA, assessed the location of the project, its appropriateness to the objectives of Proálcool, and its technical aspects; once the proposal had been approved by the CNAL, the party had 90 days to submit a final draft to the financial agent (usually the Bank of Brazil), which evaluated the financial and economic aspects in order to assess the ability of the applicant to provide a return on the investment; after the proposal had been approved by the financial agent, a summary of the proposed operation was sent to the Central Bank for its approval; if the Central Bank approved the project, it would make the funds available to the financial agent, which then extended the financing to the applicant.
- 15.
Gazeta Mercantil Latino Americano, May 4–10, 1998, p. 14.
- 16.
The explanation of the account deficit ethanol can be found in Santos (1993), p. 236–237.
- 17.
The so-called “Plano Cruzado”, an anti-inflation program that, among other things, froze the prices of goods and services, was introduced in 1986, during the administration of then-President José Sarney.
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Ferraz Dias de Moraes, M., Zilberman, D. (2014). State Intervention in the Chain of Production of Ethanol from Sugarcane in Brazil: Its Forms and Effects on the Development of the Sector Between the 1930s and 1980s. In: Production of Ethanol from Sugarcane in Brazil. Natural Resource Management and Policy, vol 43. Springer, Cham. https://doi.org/10.1007/978-3-319-03140-8_2
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DOI: https://doi.org/10.1007/978-3-319-03140-8_2
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