Brazil exports ethanol

flex-fuel vehicles in Brazil

Brazil has four different types of cars; diesel, gasoline, alcohol, and flex-fuel. Till 1978 all Brazil sold were gasoline cars. When the oil crisis started, Brazil was 90 percent dependent on imported gasoline. Brazil’s military dictatorship created a value-chain program called Pro-alcohol, giving subsidies to sugar cane farmers to produce more sugar cane that would go into the production of E100, a 100 percent ethanol-based fuel to energize the alcohol vehicles they produced.

Since 2003 Brazil has produced flex-fuel vehicles that will take alcohol or gasoline. According to Rogelio Golfarb, President of Association Nacional dos Fabricantes de Veículos Automotores (ANFAVEA – the National Association of Automobile Manufacturers of Brazil) and director of corporate affairs and communications at Ford Motor Companys subsidiary in Brazil, in 2004, 1.7 million vehicles were sold in Brazil.

For the same reason that Brazil, with 185,000,000 people, only sold 1.7 million vehicles it is the same reason they were able to export 650,000 cars in 2004 from Brazil. Brazil has cheap labor. According to Golfarb, some of the major obstacles to domestic sales are high-interest rates and high taxes on the cars themselves, “There are 185,000,000 people in Brazil, but we don’t have the economy the United States has. The per capita income is not the same. Flex-fuel sales have helped increase sales from 1.58 million vehicles in 2003. In January 2005 flex-fuels constituted 73 percent of vehicle sales.”

Because of poor sales in Brazil, Brazil has taken to exporting their vehicles as well. The Real has strengthened in the last year, however, causing the price of the car to increase, making the Brazilian export not so desirable financially. In 2006 the agreement for free trade for cars between Argentina and Brazil goes into effect and this could help exports.

From 1959 to 1981 diesel was used only in light commercial vehicles, not cars. Today, because of the price of diesel and government mandates diesel is used mainly in commercial vehicles. Because of government-held mandates, it is reported that within two years Brazil will be completely independent of foreign oil.

Brazil has also taken to exporting their productions; ethanol and cars. Brazil exports ethanol to Sweden. They can export ethanol to the United States, but there is a large tariff (2.5 percent ad valorem tariff and the second duty of 54 cents per gallon) on each gallon of ethanol. There are companies looking at a loophole in the law that would allow them to import Brazilian ethanol without the tariff by dehydrating it in El Salvador (a Caribbean country) and bringing in no more than 7 percent of the total production of U.S. produced ethanol.

In the United States, ethanol was a grassroots program by the corn states until California banned Methyl Tertiary Butyl ether (MTBE). According to the American Coalition for Ethanol (ACE), 24 states have banned MTBE since lawsuit’s that say MTBE polluted the water supplies. Some states repealed the reformulated gas (RFG) oxygen requirement, but Senators came in and offered ethanol as an oxygenate instead. On August 8, 2005, President Bush signed HR 6, the Energy Security Act of 2005 doubling the amount of Renewable Fuels Standard (RFS) by 2012.

In the United States, some gasoline contains 5.7% ethanol by volume while other gasoline contains 10% ethanol by volume, and some gasoline contains no ethanol at all. To simplify, I will assume that the average ethanol percent is 8.5% for the gasoline that contains ethanol. According to the DOE, 3.9 billion gallons of ethanol per year go into 45.9 billion gallons of gasoline/ethanol blend. 45.9 billion gallons out of 140.4 billion gallons is 32%. This is just a rough approximation, but 140.4 billion gallons of gas minus 45.9 gallons of ethanol blend means that there are 94.5 billion gallons of gasoline that contain no ethanol.

According to Jan Ake Jonsson, Saab Abs Managing Director, “Garan Persson, the prime minister of Sweden declared that he will personally be responsible for the task force that will break Swedens dependency on oil by 2020. It was mandated that gas stations over a certain size have to have alternative fuels. There are now over 300 gas stations that carry ethanol. The first month we sold 5,000 bio-power 9-5s.”

Bio-power cars are flex-fuel vehicles (FFV) that take ethanol or gasoline. There are heavy incentives in Sweden to purchase FFVs; a 20 percent reduction on taxation if you buy an alternative fuel vehicle, free parking, no congestion charge. In Sweden 1 liter of gasoline costs around $1.30, while ethanol costs $1.00 a liter, a full 30 percent decrease in price to match the decrease you see in energy.

Sweden gets its ethanol from two sources; they import it from Brazil and they produce cellulose ethanol from wood in Northern Sweden. In Sweden, total car sales total around 270,000. In January, 12 percent of total sales were alternative fuels, 80 percent of those vehicles were ethanol. Saab is part of the BioAlcohol Fuel Foundation (BAFF).

The United States, Sweden, and Brazil are not the only countries to use ethanol for fuel. According to Xinhuanet, China has gained a yearly output of bio-ethanol gasoline of 10.2 million tons, accounting for 20 percent of its overall gasoline consumption, Thursdays Shanghai Securities News reported, quoting the State Development and Reform Commission. China has created a trial use of bio-ethanol gasoline, a mixture of ten percent ethanol and ninety percent gasoline, in five provinces and 27 cities. Bio-ethanol usually means cellulose ethanol, made from the non-food part of the plant, therefore having no impact on the food chain.

Golfarb says that there is a more efficient value chain production of sugar cane in Brazil than of corn in the United States, ” We have more land and more sun, so we can produce more than the United States. Since the production of sugar cane has increased Brazil has started using the waste of the sugar cane in farm and distillery which generates energy for heating and electricity.

Because of ethanol Brazil is able to pay off its debt to the International Monetary Fund (IMF) earlier than thought. After that Brazil will have the money to afford more development in their own country and to keep more of their money in their own country. All of this was done with the four components needed; the automakers to make flex-fuel vehicles, the ethanol producers to produce mass quantities of ethanol (it takes 1.5 gallons of ethanol to equal a gallon of gas), retailers to sell ethanol alongside and blended into gasoline (the Brazilian government ordered Petroleo Brasileiro SA, or Petrobras to distribute fuel) and the consumers that have been willing to use alcohol/ethanol and to buy flex-fuel vehicles.

The irony of this is that this was mandated by a military dictatorship. Our democratic U.S. politicians have squirmed at the idea of raising gas taxes, instead of spending billions to make automakers raise their mpg levels which haven’t done squat to get us off the dependence of foreign oil. Instead, we have warlords at 1600 Pennsylvania Ave that have successfully lobbied that no tax tariffs be placed on Saudi Arabia oil, while 54 cents a gallon be placed on imported ethanol.

If we spend upwards of $250 billion a year on vehicle transportation what is wrong with E85 allowing $212,500,000 of that money to stay in the United States? I wouldn’t mind going to Minot, ND and see gold bathroom sinks in some farmer’s house. At least the farmer won’t try to kill me for conspicuously consuming the product he is selling me.

The Emperor is driving around with no clothes on.