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Case Title:

Brazil’s Success with Bio-fuels: The Road to Economic Independence

Publication Year : 2007

Authors: Saravanan I B

Industry: Oil and Natural Gas

Region:Brazil

Case Code: GBE0062C

Teaching Note: Available

Structured Assignment: Not Available

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Abstract:

In 2006, Brazil's energy company Petrobras signed an agreement to carry out a feasibility study for a new $225 million pipeline to carry ethanol from the center-west state of Goia to the coastal state of Sao Paulo. The pipeline would have a capacity to transport about 1 billion gallons of the ethanol fuel annually to the Petrobras' refinery at Sao Paulo where it would be mixed with gasoline. It would also create new opportunities for ethanol export through the state's ports. Efforts like these made Brazil produce a record 819 million gallons of ethanol for export from 2006-2007 harvest, making it the world's leader in renewable energy resources, with roughly 60 % of its sugar production invested in ethanol conversion, exceeding 4.2 billion gallons during the season.

Brazil was the biggest economy in South America with an annual GDP growth of 2.9%. Brazil's extensive bio-fuel program made its 19 million drivers, fill ethanol in their cars in the country's 34,000 gas stations, relieving the country from the burden of importing fossil fuels. More than half of Brazil's flex-fuel automobiles ran on gasoline, ethanol or a mixture of both. By 2010, Brazil hoped to double its production from the 2006 level. The National Alcohol Program (ProAlcool) was launched in 1975 and since then, Brazil had produced over 90 billion liters of ethanol from sugarcane. The installed capacity in 1988 was over 16 billion liters annually, distributed over 661 projects. In 1989, over 12 billion liters of ethanol replaced about 200,000 barrels of imported oil a day. From 1976 to 1987 the total investment in ProAlcool reached US $6,970,000 million and the total saving equivalent to imported gasoline was US $12,480,000 million. An analysis of Brazil’s economic indicators showed an improving trend. Stronger exports and diminishing imports in lieu of decreasing fossil fuel import was evident from the fact that Brazil had trade balance of US$ 0.7 billion in 2000 which rose to US$ 77.7 billion in 2006. External debt and unemployment rates were decreasing, but forex reserves in hand were steadily increasing.With its potential contribution to a sustainable and renewable energy supply, biofuel’s socio-economic impact on the rural population was immense. In the years to come, Brazil would be leading the biofuel aspirants and continue to develop technologies benefiting millions of people. In the process, it would help free the world from Green House Gas emissions and make it a safer place to live. Brazil would be hailed as the beacon of light, showing the way for the rest of the world to follow.

Pedagogical Objectives:

    The case anticipates familiarising the students on
  • The diminishing production of fossil fuels
  • Growing importance for bio fuels such as Biodiesel and Bioethanol
  • Brazil’s growth to dominance in biofuel production
  • Methodology of Bioethanol production
  • Brazil Government’s support and measures to use of bio fuels
  • Biofuel’s socio-economic impact on developing countries.

Keywords : Government and Business Environment Case Study,Bio fuels, Brazil’,s success in Biofuels, Bio ethanol Bio diesel, Flex fuel vehicles, Sao Paulo Ethanol factory, Petrobras, Proalcool Reduction in GHG emissions from biofuel, Bioethanol from sugarcane and corn, Economic impact of biofuels on economy, H-Bio diesel E-85, E-100, E-20, Fuel blending, Fermentation process for ethanol

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