Sweet deal: Brazilian companies send ethanol technology abroad to make money, and to improve life in poorer countries.
As famous names such as U.K. billionaire Richard Branson, Sun Microsystems Founder Vinod Khosla and Microsoft's Bill Gates write checks into the hundreds of millions of dollars in the race for green fuels, Brazilian companies are already there, doing deals. "Brazil is doing everything it can do to help other countries," says Patti Wrobel, commercial advisor on sugar and ethanol issues at the Brazilian embassy in London. "It is an intent of Brazil to make the Brazilian experience well known all over the world and make ethanol an international commodity. Brazil cannot be the only world supplier if demand picks up."
Many of the world's poorest countries, including those in the Caribbean and sub-Saharan Africa, already are sugar cane producers. They just need help to improve their production and diversify into ethanol. In Jamaica, for instance, Brazilian sugar and ethanol company Grupo Coimex has retrofitted a 151-million liter ethanol distilling plant for renewable-fuels company Petrojam Ethanol. Coimex also provided the company with hydrous ethanol, a key ingredient to the fuel, which is shipped to the United States, says Karl James, chairman of Petrojam in Kingston.
For years, Petrojam used alcohol made from wine imported from the European Union (EU) to make ethanol. The Europeans suddenly cut off supply to the Caribbean island to use the wine for its own ethanol production, James says. Brazil came to the rescue.
Hurricane Ivan in 2004 set back the project, but Coimex finished refitting the plant in 2005 to withstand high winds. The plant is now up and running, and all of its exports go to the United States under favorable trade terms. James says he has had some inquiries for exports to Canada and Europe. "We were the first project the Brazilians did overseas. We became the guinea pigs to see how our industries can be improved and what can be done in the future," he says. "The results so far are satisfactory to both of us, and it's a good base from which to move forward."
Massive domestic expansion in Brazil has cut availability of ethanol--and sugar-related machinery, which could make it difficult for the Brazilians to export technology for the next couple of years. Seventy-nine Brazilian projects have gotten under way or are under development in the past two years; it now takes two years for new hardware to reach some mills inside the country.
Yet Brazil remains in a good position to not only export its technology but also to help industry suppliers, such as distillery manufacturers. For sugar cane production to increase in Africa and the Caribbean, farmers will also need better cane varieties, which Brazilian companies can provide. Along with technology transfer comes many new business opportunities, including a chance to build plants overseas.
Next could be government-owned Jamaican Sugar Company, which has five mills and nearby cane fields up for privatization. One of the potential bidders is the Jamaican sugar cane farmers association, in association with Brazil's Grupo Aracatu. According to Daniel Vilhena, Aracatu's finance director, the company has been trading ethanol outside Brazil for years, but taking control of mills in Jamaica with the workers' association will be its first direct foreign investment.
"We will make a bid for some or all of the Jamaican Sugar Company. The government isn't sure if it will sell it all together or in individual parts or if it will sell the land or rent the land. We can bring to Jamaica our know-how, efficiency, and improve their costs," Vilhena says. "People say Jamaica is the worst place for sugar in the world but it has the same climate as northeast Brazil." Jamaican production costs are at US$0.30 per pound but can be cut to $0.10 per pound or lower with better technology and new varieties of sugar cane, Vilhena says.
Africa, a perennial loser in world agriculture trade deals, could be shaping up to be the world's ethanol source, and Brazil its supplier of technology and know-how. Brazil and the United Kingdom have drafted a study outlining how sugar production in southern Africa could double to 1.5 million hectares from 700,000 hectares over the next 10 to 15 years. Should that happen, African sugar producers could end up responsible for 7.30 billion liters of ethanol a year, creating hundreds of thousands of jobs while sidestepping $1.60 billion in gasoline imports. Ethanol exports would pump $2.90 billion in fresh revenue into the region. Zambia, Madagascar, Mozambique, Tanzania, Angola, and the Democratic Republic of Congo are set to take in the lion's share.
For decades, most African sugar producers sold their crop to Europe at high prices through special trade deals. But changes made to European agriculture policy in late 2005 will cut African sugar prices by more than a third. Now those countries are looking for something else to do with loads of cheap sugar cane. They have compensation money from Europe to do it--up to $205 million a year for the next seven years--so serving the world's growing hunger for ethanol looks like a good bet.
"One of the options for diversification after the reform of the EU sugar regime will be ethanol production," says Sergio Mate, second secretary at the Embassy of Mozambique in Brussels. "That means that envisaged expansion of plantations in the four biggest mills in the center and south of the country will now serve energy production purposes." Mozambique last year posted its highest sugar production on record since it gained independence from Portugal in the 1970s. After suffering from years of domestic conflict, the sugar industry there has recovered, in part thanks to special, high prices from Europe and the United States.
Overhaul. Mozambique now wants to wean itself off of raw sugar exports and focus on other products, like ethanol. It will cost Mozambique $300 million to overhaul its sugar industry over the next five years, says Mate. That's a lot of money, but Brazil and the World Bank are ready to help, developing a program that combines Brazilian expertise with World Bank funding, although the bank at press time had yet to budget a specific amount.
Part of the challenge for Africa and Brazil is seeking a balance between raw production and turning sugar into value-added ethanol. There is little opportunity for sugar cane expansion in industrialized South Africa, for instance, although there is a lot of opportunity for expansion in other parts of southern Africa and the rest of the continent.
"The sugar industry in South Africa has learned a lot of lessons over the years about sustainable development and social sustainability in regards to sugar, and what roles it needs to play in any further development for ethanol," says Adam Chase, director of E4Tech, a company commissioned by the U.K. to study the potential for Brazilian ethanol projects in Africa. "It isn't just a black-and-white issue of saying we want massive farms, because it's also good to have small farms from an economic standpoint."
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|Comment:||Sweet deal: Brazilian companies send ethanol technology abroad to make money, and to improve life in poorer countries.(ENERGY)|
|Date:||Jun 1, 2006|
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