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Maurílio Biagi Filho

Member of the Board of Bioenergética Aroeira


Past, present and future of ethanol

At the inauguration of Usina São José, Minister Lobão, talking about the “Proálcool” (the Brazilian National Alcohol Program), described the wonders that ethanol, as a program, had  accomplished for the country (and still does), now being in a position to cater to all countries of the world.

On that occasion, I remembered a study that was handed over to then President Geisel, called “Photosynthesis as a Source of Energy”. Contrary to common belief, “Proálcool” was a program launched by the oil guys rather than the sugarcane folks.
It began as a movement in 1973, through Associgás – the Association of Liquefied Petroleum Gas Distributors that, at the time, had Dr. Lamartine Navarro as vice-president.

In detail, this is what happened: Concerned about achieving the main objectives of the 2nd National Development Plan, controlling inflation, upholding accelerated growth and keeping the balance of payments in check, General Ernesto Geisel, at the time still the future president of Brazil, asked the then commercial director of Petrobras and future minister of Mines and Energy, to confer with the private sector on the issue.

Shigeaki Ueki contacted Dr. Lamartine, asking him to study the use of unconventional energy sources, to provide the new government with subsidies. “Associgás” became a discussion forum for the oil crisis, under the coordination of Dr. Lamartine, who was assisted by engineer Cícero Junqueira Franco, a renowned expert in ethanol production technology, by some people of academy, and the entrepreneurs Maurílio Biagi – my father –, Orlando Ometto, and Renato Barbosa, from Usina da Barra, Nova América, Santa Elisa and Zanini.

The conclusion reached by the group resulted in the document called “Photosynthesis as a Source of Energy”, which was delivered to the National Oil Council in March 1974 and became the starting point of “Proálcool”. Brazil was colonized with sugarcane, we have a history in sugarcane, with all the ingredients such as the mishaps, the plantation owners, the sugarcane mill owners, then came the “age of IPOs” (initial public offerings of stock), and now what is important is to know what the present and the future of sugarcane entail.

Sugarcane’s present is a transition phase, it is a model worn out in 2008. We are now experiencing the third period, the entry on stage of new players, for instance, construction company Odebrecht. At this Forum, sitting right here in this discussion round, are players representing 300 million tons of sugarcane, more than half the Brazilian sugarcane output. See the importance this Forum, as an event, has achieved.

However, President Dilma Rousseff is not sitting here. This is so because until now we have not been able to establish a good relationship with the federal government. We must think about this. Politics means relationships, politics is something slightly different from what we producers know how to do.

We know how to produce, and well at that. We don’t know how to do politics. This is proven here. With the State of São Paulo, things have developed differently. A few days ago, I was at the governor’s palace when the governor walked by and called me, asking how things were. I said: “Governor, what’s happening is this, this and that”. He immediately took the phone and called Marcos Jank, president of UNICA and settled the matter then and there. As simple as that.

President Lula did a great job. Obviously, sugarcane was a theme of interest to him. He had a program that we might be able to implement now, which is the integration of the Americas, starting in Mexico, via sugarcane. This was his dream. Except for Chile, all the other countries have sugarcane. He really tried hard to accomplish this. Every government must work its priorities. I don’t think the time is right to launch the highspeed train. More appropriate would be to launch 100 new ethanol distilleries, or to set the stage for us to do that. We are beginning to see a movement rejecting corruption.

Brazilian society no longer tolerates this. Things were swept under the carpet, but not anymore. We have to be closer, to be able to make suggestions. To help. We need to know what the federal government thinks of us. We only know this from reading the newspapers. We need to occupy this space.

The future is the era of the oil companies. We are seeing an excellent phase in the industry. There is no crisis. Prices are excellent, everybody is making money, so what is holding us back from progressing even more?

Why isn’t everybody investing? Because we cannot see ahead. Regardless of whether the oil price is at US$ 30/barrel or at US$ 150, the gasoline price will be the same. If one would annualize Petrobras’ profit in this semester, it would suffice to purchase some 50 plants.

With the profit of Exxon of four years ago, one could buy the entire Brazilian industrial park. We are talking about a poor business called ethanol, compared to a rich business called oil. It’s a different world. We must think about this. Cosan bought Esso, and now they are seeing that there are two weights for one measure, because profitability is very different. The Odebrecht Group is now seeing what the profitability in the ethanol business is and what it is in all other segments of the Group that operates in this industry.

So, we need to do a study to assess whether I am right or exaggerating. I think we need a dose of realism in order to take this step.

What is this dose of reality? The other day, I was joking with William, publisher of  Revista Opiniões, about my opinion in this matter. I wrote an article for the magazine stating what I think about all this. It’s there. Read this article in the magazine (or in the site

I took part, since the beginning, in building the Proálcool program as a source of energy, I travelled across the whole country together with my brother, Luiz Biagi, who, like Lamartine Navarro, was a pioneer of this program. I went to meetings to talk to cattle breeders and tell them “guys, this here is fantastic, guys, this here is wonderful for Brazil, guys, this is green and yellow fuel”.

Petrobras produced very little oil, so the first major revolution that resulted from the program was to make Petrobras increase oil production, and increase it a lot. This was the first positive outcome of the National Alcohol Program, but very few people know this. One mistake we always made was to say we competed with oil. We produced an additive for one of the sub-products of oil, called gasoline. We are very important.

We can represent 10% of all the gasoline additive in the world. The only country that can have and sustain this model is called Brazil. That is why we must go slowly, present ourselves slowly and make Brasília understand.

I have always joked, saying that Washington is more important for us than Brasília. Today, we have a 10 billion liter shortfall of ethanol. Consumption increases by 3 billion liters per year. We can work a lot, we need a lot of capital, we need 200 new greenfield plants to again achieve the needed production volume. On the other hand, we have to think a little about how this program was financed by sugar. Without sugar we wouldn’t be here today.

When we installed the 170 distilleries under the “Proálcool” program, they were only distilleries. A few years later, they were all producing sugar. Independent distilleries could not have survived had it not been for the guarantee represented by sugar. This is more or less true to this day.

The current minister of agriculture admitted he knows absolutely nothing about agriculture. So then stop political appointments. Our govenor handles this differently.

His appointments are technical. He goes looking for somebody from the industry, who understands the subject. Well, these are the reflections I wanted to make here today, so that we all may think a little about why President Lula used sugarcane to showcase Brazil, as something important we had. He travelled to many countries, and used to say he was proud to talk about sugarcane. But he wasn’t a plant owner. This was a business of his country; it was a business that was a major reference for Brazil.