Brazil-ethanol-slows

Brazil is struggling to make enough ethanol to satisfy domestic demand just as the U.S. scraps restrictions on imports for the first time since 1980.

The U.S., the world’s largest market for the biofuel, on Jan. 1 cut a 45 cent-a-gallon tax credit and a 54 cent-a-gallon tariff that protected local companies from foreign competition. Brazil, the world’s No. 2 producer, is unlikely to be able to take advantage after output dropped 19 percent this season.

Investment in new sugar-cane assets and plantations in Brazil plummeted to $700 million last year, from $7.84 billion in 2008, according to Salim Morsy, an analyst at Bloomberg New Energy Finance in New York. Biofuel investors in Brazil are suffering from bad weather, poor infrastructure and government bureaucracy, said Gerson Carneiro Leao, head of the National Sugar Cane Commission at the CNA agricultural confederation.

“The government is to blame for the shortage of ethanol,” Leao said by telephone from Recife. ”Producers are indebted, taxes are exorbitant, and the red tape is stifling.”

Brazil may become a net importer of ethanol this year, with purchases of 1.66 billion liters during the 2011-2012 season exceeding exports for the first time in at least 10 years, according to Sao Paulo-based consultancy Datagro. Last year, Brazil exported 1.97 billion liters of ethanol, compared with the 5.1 billion liters shipped overseas in 2008.


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