issue 195 - May 1989
Photo: Peter Stalker
Tanked up on sugar
Brazil launched an ambitious experiment to substitute alcohol
for oil. How has it worked out? Moyra Ashford reports.
When international oil prices ballooned in the early 1970s the Brazilian economy was knocked sideways. Fuel bills jumped from a tenth of the country's total imports in 1970, to more than a half, a decade later. In an effort to stem the hemorrhage of foreign exchange the Government decided in 1975 to launch a project to replace gasoline with locally-produced ethanol - alcohol distilled from sugar-cane. Since then the 'Proalcool' programme has become the world's biggest and most expensive experiment in alternative automotive fuels. Technically, the programme has been a stunning success. Production skyrocketed according to schedule - from 500 litres in 1976 to 12.4 billion litres in 1988. The technology has been improved and sugar-cane yields have also shot up. Brazil's universities have built up valuable research on ethanol, alternative uses for it and its by-products. And car makers proved that car engines could be successfully converted to burn the new fuel. In addition, sugar-cane alcohol proved to be far less polluting than gasoline. Cars burning alcohol produce 57 per cent less carbon monoxide, 74 per cent fewer hydrocarbons and 13 per cent less nitrogen oxides than engines fired by fossil fuels. At first the country's car industry, led by the multinationals Volkswagen, Ford and General Motors, resisted the cane-based fuel. But once convinced that the Government was serious, their engineers quickly designed engines that could run on ethanol.
By 1988, 90 per cent of the cars produced in Brazil came with alcohol-burning engines. Of the 14 million cars currently on the road (about one for every ten Brazilians) some four million have alcohol engines. Since these cars consume 30 to 40 per cent more fuel than gasoline-burning engines, their sale was encouraged by tax incentives. The Government promised to peg the price of alcohol at 60-65 per cent of the price of imported gasoline. Slowly Brazilian car drivers were convinced - by 1986 ethanol provided around half the country's automotive fuel.
Then, late last year the Government decided to pull the plug. The State-backed industry which was scheduled to produce 20 billion litres of ethanol by 1992 was in trouble. Low world oil prices meant that ethanol was becoming less competitive all the time. Alcohol can only compete with gasoline when international oil prices are $30 a barrel or more - not a problem during the last oil scare in 1979. To make matters worse, the alcohol industry continued to soak up huge State subsidies. From 1975 to 1987 the Proalcool programme shaved $10.4 billion off Brazil 'soil import bill. But the industry absorbed nine billion dollars in Government subsidies during the same period. From 1985 to 1986 alone, State support for ethanol jumped from $650 million to nearly two million dollars.
When the Government jacked up the price for ethanol last October, the alcohol car suddenly became far less attractive. Drivers with alcohol-burning cars feel cheated by the Government's backtracking on its pledge to keep the price of alcohol fuel low. Sensing a shift in the market, car makers have reacted swiftly. This year the number of cars produced with alcohol engines is expected to plummet from 90 per cent to around half of total production.
But even if the Proalcool programme goes belly-up in the next few years, there is one group of Brazilians who will have done very nicely out of it. The sugar-cane barons are one of the oldest and most powerful oligarchies in the country. As a result of the guaranteed market for their cane, the barons not only survived the dramatic fall in international sugar prices in the mid-1970s, they actually thrived. The ethanol experiment thus helped to shore up one of the country's most archaic sectors.
Land ownership in Brazil is highly concentrated. Less than one per cent of all farms own 46 per cent of the total arable land. An estimated 12 million peasants are landless. In 1985 in Sao Paulo State, where most of the country's alcohol is produced, 10 per cent of arable land was planted with sugar cane.
Under a Government more attuned to the needs of the poor majority, the ethanol programme might have been used to help redirect money to landless peasants and small farmers. The gap between rich and poor in Brazil is one of the largest in the Third World. According to World Bank figures, the poorest 50 per cent of Brazilians earn less than 14 per cent of the national income while the top five per cent get nearly a third of the total.
Small farmers might have been encouraged to grow cane at a guaranteed price; the landless might have been given loans to get in on the deal. The Government might have plumped for mini-distilleries rather than huge factories.
But none of this happened. Instead, Government incentives in the form of low-cost loans found their way into the pockets of the big sugar growers. And the same thing happened with the distilleries. Forty per cent of total investment in the alcohol-fuel distilleries came from public funds.
'The Proalcool programme forced the big sugar growers to think of themselves as industrialists,' says Reinaldo Ramos of the Sao Paulo-based sugar co-operative, Copersucar. And they have become more efficient. Groups like Copersucar have invested part of their profits in the Technology Research Centre in Piracicaba. This has succeeded in boosting sugar-cane production by 18 per cent by breeding a superior cane plant. One problem they faced was vinhoto - the highly-polluting waste liquid which was regularly flushed into rivers killing both fish and other kinds of aquatic life. Eventually, vinhoto turned out to be both an excellent fertilizer for sugar-cane and an effective biological pesticide.
However, few of these improvements have filtered through to the country's second major cane-producing region, the impoverished north-eastern State of Recife. Here production costs are higher and cane workers' salaries lower.
A detailed study of the ethanol programme last year by two highly-respected academics points out the difference in pricing strategy between petroleum and alcohol. Government pricing of gasoline - the 'elitist fuel' - is designed to make the rich subsidize the poor. The wealthy pay over the odds for gasoline for their big cars, while the poor on the other hand get 'social fuels' like diesel-oil and cooking gas at subsidized rates.
With the ethanol industry it's a different story altogether. The price is high, and it's largely rich car drivers who pay it. But all the money goes directly to the major producers, the sugar barons. 'There is no social passing on to other fuels,' says the report.
The study's authors, Dr Jose Goldemberg and Professor J R Moreira, believe that competition from low-priced oil may torpedo the experiment. 'The difficulties the National Alcohol Programme are going through are almost insuperable with the present international prices. All the past success of the programme, as well as the investment made, much of it with public funds, runs the risk of being lost.'
Moyra Ashford is a São Paulo-based writer.
Wednesday is an odd day in Lagos
Try not to schedule business appointments in Lagos on a Wednesday - particularly if they entail travelling across the city's befuddling twine of bridges, into the commercial nerve-centre, 'the Island. It is not that Wednesdays are work-free days in Lagos. Just the opposite; midweek is now the day Lagos roads are busiest.
Twelve years ago when the city's population was about four million, no fewer than two million people hit Lagos roads at the same time, generally going to the same place - the Island. Two million people tilled the 350 square kilometres of roads in every conceivable kind of vehicle: buses, mini-buses, taxis, mini-taxis and of course cars, cars and more cars.
Car ownership shot up in the oil-boom of the mid-1970s. People scrimped and saved and poured their earnings into cars. Before anybody realized what was happening, virtually all middle-income workers in business and in the civil service, even teachers and clerks, had joined the well-to-do in the car owner's club. More than 150,000 cars swarmed the streets every day with several thousand more vehicles from outlying areas contributing to the traffic headache.
The State Government took action in 1976. It enacted an ingenious traffic control law which divided the cars on Lagos streets into two groups - based on whether they had registration numbers starting with odd or even numbers. On Mondays, Wednesdays and Fridays, only the odd-numbered cars can use the roads. On Tuesdays and Thursdays cars with licence plates beginning with 2, 4, 6 or 8 are permitted.
The first problem is that there will always be more cars on the roads on the 'odd-number' days, because there are more odd than even digits - no registration numbers in Nigeria start with zero.
But on Mondays, things are not too bad. The week is still young and business activities are at an ebb. As a result many people whose cars have the right to the roads are not too keen on going to the Island. Then on Friday, Jumat prayers by Moslems mean that the day virtually ends at noon. So Friday is quiet as well. Wednesday is therefore the choice day when as many people and invariably as many odd-numbered vehicles as possible are on the move. Traffic is a nightmare.
This law had many interesting effects. Some former car-owners, for example, became hitchhikers. And neighbours with odd and even-numbered cars suddenly became more friendly, giving each other rides to work on the alternate days when their cars had the right to the roads.
But soon the wealthier Lagosians found another solution. They began to buy second cars - arranging' to have them registered so they had a car each for the odd and even number days and could therefore drive into the city when they liked.
By 1980, in the midst of a buoyant oil economy, second cars had become so common the traffic control law became virtually useless. Since then the traffic chaos has gone from bad to worse. Today 200,000 cars compete daily for the 50,000 available parking spaces on the Island. Thousands of people have moved to Lagos from the countryside and overall birth rates have remained among Africa's highest. The population of Lagos - a tiny stretch of coastal land 35 kilometres wide and ten kilometres long - has ballooned to eight million.
The increase in private car use coincided with the collapse of the State-owned public transport system when oil, the mainstay of the Nigerian economy, crashed on the world market. Now nearly six million Lagosians commute daily with no mass transit. And the few State-owned buses are registered to carry two standing passengers for every one seated. A $100 million national public transit programme was shelved last year. Similar economic problems in 1984 forced the State Government to suspend further deliberations on a two-billion-dollar mono-rail scheme.
Government ministries, private companies, banks and manufacturing firms in the city all have to provide their staffers with buses. Even 'tipper trucks' owned by construction firms are now used as means of transport.
In search of a more permanent solution, the Lagos State Government began reviewing its traffic law last December. In January this year the Government introduced a differential pricing system for fuel. Commercial vehicles now pay only two-thirds of what private vehicle owners pay. The new pricing system has not yet curbed the use of private cars, however, probably because there are no alternatives. Instead, many car owners now cut costs by carrying fare-paying passengers, without being registered as commercial vehicles.
Lagos struggles on in the stranglehold of the motor car.
O'seun Ogunseitan is a Nigerian journalist.