Brazil ethanol growth rides on local demand

05 March 2008 22:03  [Source: ICIS news]

SAO PAULO (ICIS news)--Opportunities to export Brazilian ethanol exist, but the sector's expansion remains driven by domestic demand, a large producer said on Wednesday.

The domestic market remains untapped due to a discrepancy in sales taxes charged by different Brazilian states, however, according to Eduardo Farias, president of Grupo Farias, which owns 10 ethanol mills in five Brazilian states.

“If every state charged the same tax as Sao Paulo, there would be demand for another 7bn litres/year of ethanol,” he told delegates at an industry event in Sao Paulo.

Sao Paulo, Brazil’s ethanol heavyweight, applies a 12% sales tax on hydrous ethanol, or half the levy charged by some other states. The state taxes on ethanol discourage expansion by offering little or no cost advantage compared with gasoline.

“All that could change with a simple stroke of a pen by four or five governors,” he said.

Farias estimated global ethanol import demand will be at 6bn litres in 2015, with the US and the EU ranking as the top buyers.

Japan, he said, was “a promise, a promise, and a promise”, drawing laughter from delegates, as he referred to an alleged, long-standing reluctance by the Japanese to import large quantities of Brazilian ethanol.

The producer also accused the EU of protectionism by using, he claimed, environmental and technical specifications as a “desguise” to restrict ethanol imports.

He said nothing about the 54 cent/gal tariff the US levies on Brazilian ethanol.

Farias spoke at F. O. Licht’s Sugar and Ethanol Brazil 2008. The event was organized in partnership with IBC Brasil.

For more on ethanol visit ICIS chemical intelligence

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By: William Lemos
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