Brazil’s government revealed new financing and other incentives for sugar cane ethanol production, declaring that it will work closely with the private sector to improve production in an industry that has struggled of late despite its enormous promise.
Recently the government of Brazil announced that it would offer to the private sector funds in the range of 30 billion to 35 billion Real to finance expansion in the sugar cane sector through 2014, a major bet equivalent to almost two-thirds of the industry’s annual output.
Haroldo Lima, who is the head of Brazil’s ANP energy regulatory agency, told a major investor conference the best way for the government to thwart regular shortages in the sugar cane-based bio-fuel was to make available the thriving conditions so that investment could get a boost “not in the medium term, but in the short term.”
The enthusiastic, business-friendly communication from Lima and other officials as well as Energy Minister Edison Lobao came as a surprise, given that Brazil’s government was understood to behind the regulatory control of ethanol earlier this year. Some investors in the sector dread a stronger government intervention, such as the setting of production targets.
Mr. Lobao believes that is imperative to consider that the sector is going through a new phase of challenges; hence, according to him these challenges are faced with everyone (government, business men) so this will have to be “overcome together”
Lobao said the government is putting in efforts with private-sector representatives to devise a regular 10-year investment plan — a period that is anticipated to see demand for ethanol roughly double in tandem with Brazil’s flourishing economy.
Meanwhile, the producers at the conference said some kind of incentive was badly needed. Despite high prices for the bio-fuel and a huge expansion in the domestic fleet of cars that use it, Brazil’s approximately 30bn a year sugar cane industry has struggled with sluggish investment and inadequate supply.
Earlier, officials from President Dilma Rousseff’s government have criticized ethanol producers for what they explain as a disappointing and failed investment and planning from private players that failed to thwart cyclical ethanol shortages that provoked a near-revolt among consumers at the pump earlier this year.
Producers, on the other hand say that their efficiency is restricted by the regulatory uncertainty, patchy tax laws and huge financial wreckage from the 2008-09 global crises. After rising at an annual average rate of 10% since 2000, cane production in Brazil rose by no more than average 4%.