Sugar energy sector demands measures to avoid producer bankruptcy

To minimize the difficulties of the ethanol sector in Brazil, especially rural producers, due to the new coronavirus (Covid-19) pandemic, the Parliamentary Front for Agriculture (FPA), in joint action with the Parliamentary Front for the Valorization of the Sugar-Energy Sector, prepared a letter, sent to Minister Tereza Cristina of Agriculture, to demand emergency measures and avoid the collapse of the sugar-energy sector.

Faced with the collapse of companies' revenue flow, to avoid the bankruptcy of rural producers, in addition to shortages among the population, the president of the FPA, deputy Alceu Moreira (MDB-RS), defends a credit line of R$9 billion. “The biofuel sector in Brazil is encouraged to produce clean and renewable fuel. It is a right policy that needs to have its minimum prices paid to the sector,” he said.

According to Moreira, the impasse between Saudi Arabia and Russia, over cuts in daily oil production, brought down the prices of the commodity, which competes with ethanol. “The minimum price of R$1,70 for a liter of alcohol is being sold for less than R$1, which completely makes the sector unviable and causes enormous losses. We need a quick and immediate solution,” he explains.

Deputy Arnaldo Jardim (Cidadania-SP) highlights that the restriction measures imposed by States, necessary to combat the pandemic, caused a total retraction in domestic fuel demand, which directly reflected in the price of the product. “In the second week of March, ethanol had already closed with a 13% reduction in its price. If that wasn't enough, the reduction in demand for sugar, in the domestic and international market, is causing a drop in revenue for Brazilian producers,” said Jardim.

“Fuel is a revenue base for public entities across the country. Having a sector like this destroyed is a problem for the future of Brazil, therefore, any effort that can be made to find a solution to this crossing is highly meritorious and welcome,” highlighted the parliamentarian, who is president of the Parliamentary Front for Valorization of the Sugar Energy Sector.

Another pressure factor on ethanol, according to Jardim, is the international price of oil. “The drop of more than 50% in the price of oil had a devastating effect on the sector, with a drop of practically 40% in the price of ethanol, placing it well below its cost,” he said.

The ethanol sector represents 2% of the Brazilian Gross Domestic Product (GDP) and brings together sugarcane producers, workers in the chemical and food sectors, cooperatives and agro-industries responsible for the production of sugar, ethanol and bioelectricity in the Center-South and North East of the country. A production chain that includes 360 plants and distilleries, including 70 thousand rural producers, 750 thousand direct jobs and 1,5 million indirect jobs, in more than 1200 Brazilian cities.

See below the emergency measures for the sugar-energy sector:

– Institution of a warrantage program to allow the storage and financing of at least 6 billion liters of anhydrous and/or hydrated ethanol;

– Temporary reduction in the federal tax burden applied to hydrated ethanol (PIS/Cofins on biofuel totals around R$0,24/liter); It is

– Increase in the Contribution for Intervention in the Economic Domain (CIDE) on gasoline by R$ 0,40 per liter of the derivative at the refinery.