Brazilian ethanol industry expansion hurt by falling US dollar
The declining US dollar has created problems for the Brazilian ethanol industry. “Of the roughly 80 ethanol mills that were announced to be built in the 2007-08 market year, 11 of them have already stepped away from their plans,” Marcelo Coelho, an ethanol consultant, told CNN Money. The problem is the rising cost of ethanol investment in US dollars, creating lower returns on investment for foreign capital sources.
Brazil’s President, Lusa Inacio Lula da Silva, concluded a four-nation Scandinavian tour last month aimed at increasing European interest in Brazilian trade and investment.
Recently, Petrobras, the state oil company and Cosan, the largest ethanol group, have been at odds over a Petrobras plan to build a state-owned pipeline to transport ethanol. “If Petrobras has the logistics, it will have control of the sector and this we don’t want,” said Rubens Ometto Silveira Mello, Cosan’s controlling shareholder and chief executive officer, told Agencia Estado. The proposed ethanol pipeline will run from Goias state to Sao Paulo. Private industry has been studying construction of its own pipeline, which is expect to cost $1.6 billion.
The state pipeline will be financed by the Japan Bank of International Cooperation, and the Inter-American Development Bank. Petrobras’ has planned a second pipeline from Goias to Paranagua, a major commodities port, and the copany recently established an export base at Suape, near Recife on the northeast coast.
