Brazilian Sugarcane Industry

The Brazilian Sugarcane Industry Association (UNICA), represents the top producers of sugar and ethanol in the country's South-Central region, especially the state of Sao Paulo, which accounts for 60% of the country's total production. Along with its 101 member companies, UNICA develops position papers, statistics and specific research in support of Brazil's sugar, ethanol and bioelectricity sectors. Its membership accounts for about 50% of Brazil's sugarcane harvest. In 2007, Brazil produced 425 million metric tons of sugarcane, which yielded 29.8 million tons of sugar and 17.7 billion liters of ethanol.

Yahoo Finance

A report called "Deadly Brew," aired on Thursday, Jan. 24 by Bloomberg Television, is a dangerously misleading and out-of-context representation of Brazil's sugar and ethanol industry, according to the Brazilian Sugarcane Industry Association (UNICA).

"The report relies on isolated incidents, flawed data and unsubstantiated allegations. Not surprisingly, it arrives at unbalanced and inappropriate conclusions that bear no resemblance to the industry as it is today," says UNICA President and CEO Marcos Jank.

The report is seriously out-of-date according to Jank, as it not only omits wide-ranging advances in labor conditions and relations between workers and employers, but also chooses to portray industry efforts to introduce mechanization and end the manual harvest in a gradual and orderly manner as a problem and not a solution. At the same time, the report strives to criticize the manual harvest itself.

"Bloomberg appears more interested in showing impressive footage of a fire burning in the night than explaining that this is how straw is cleared virtually wherever sugarcane is harvested in the world," says Jank. The fact that close to 40% of the Brazilian harvest is already mechanized is not even mentioned, while signed agreements between the industry and labor unions that have brought significant improvements to worker transportation, transparency in payment methods and protective equipment standards were equally ignored.

And while nobody in the industry will argue that problems still exist, they must be put in the right context, something the Bloomberg report fails to do as it focuses on examples far removed from the accepted norm in the Brazilian sugar and ethanol industry, in a clear attempt to imply that exceptions reflect the entire industry.

A partial list of misrepresentations in the report includes:

-- The completely unsubstantiated statement that conditions have
deteriorated while ethanol has expanded. For example, close to 95% of
all field workers involved with UNICA member companies are documented
workers, with labor and social security benefits, which puts the
sector ahead of nearly all others in the Brazilian economy in that
respect. On average, workers are paid about double the current
Brazilian minimum wage, which places them among the best paid in
Brazilian agriculture;

-- The report portrays all cane cutters as migrant workers from lower
income regions in the country, which is not the case anywhere in
Brazil. Most cane cutters are from the area where they work;

-- There are close to one million workers in the industry throughout
Brazil, not 500,000 as the report says. About 400,000 are cane
cutters. In the state of Sao Paulo, the heart of the industry and
base of UNICA's membership, there are 189,000 cane cutters,
of whom 40% are migrant workers from other states;

-- There is no minimum amount a cane cutter must produce per day.
Cutters are guaranteed a minimum daily fee regardless of how much
they cut, and the final amount paid to each cutter is based on a
pre-negotiated amount per ton;

-- Numbers without context may sound impressive in political campaigns
but don't amount to credible journalism, and are often used to
distort viewers' impressions. The report mentions accident numbers
that appear high but are outdated, and doesn't refer to the latest
Labour Ministry statistics showing accidents in the sugar and ethanol
industry falling from 11,000 in 1999 to 8,000 in 2005,
even as the number of workers has grown;

-- The report also mentions an outdated death total, ignoring the latest
available Labour Ministry figures, which show that in 2005,
17 workers died on the job or while being transported to their work
locations. That represents 0.004% of 414,000 cane cutters
throughout Brazil;

-- It should be noted that contrary to what the Bloomberg report implies
on several occasions, there is not a single case where the death of a
field worker from the sugar and ethanol sector in Brazil has been
officially linked to the type of work done;

-- There is no provision in the Brazil-U.S. Ethanol agreement signed in
2007 that "ensures Brazil will be a major beneficiary" of ethanol
exports to the United States. Not only is there no such clause or
guarantee in that document, as stated in the Bloomberg report, but
current import tariffs in the U.S. strongly discourage importing
ethanol from Brazil;

-- There is no such thing as a "razor-sharp stalk" as mentioned in the
report -- what's razor-sharp is the straw that's burned so cutters
can begin the harvest. In fact, burning the straw is called for in
collective agreements between workers and employers. If the straw
isn't cleared, the cutter cannot do the job.

The Brazilian Sugarcane Industry finds it unacceptable that a global organization like Bloomberg, established in Brazil for several years with a large team of journalists, chose to produce such a distorted view of a highly successful sector of the Brazilian economy, which Bloomberg professionals cover and do business with on a daily basis.

"There is no reasonable explanation for phrases like 'cars run on human blood' or 'Brazil entering its industrial revolution' finding their way into a report produced by Bloomberg, leaving the impression that its professionals are not aware of what goes on in Brazil, including its current stage of industrialization. In fact, Bloomberg professionals cover Brazil every day, and routinely file stories that clash directly and quite blatantly with much of what's in the 'Deadly Brew' report," Jank concludes.

US Ethanol policy
Adam Dean

Brazilian President Luiz Inácio Lula da Silva and U.S. President Bush met last week at Camp David to discuss the future of ethanol. As the world's largest producer of sugar and a pioneer in the production of ethanol, Brazil is a key ally in Bush's plan to reduce America's foreign oil dependence and environmental footprint.

Imports of Brazilian ethanol could be a major step toward achieving Bush's goal of reducing American gasoline consumption by 20 percent over the next ten years. As ethanol can be produced from sugar, increased consumption of the fuel in the United States could also lead to a higher commodity price for sugar producers in Brazil, with the potential to lift thousands out of poverty.

Despite these potential benefits, there is disagreement on whether producing fuel from food crops such as sugar or corn is truly a panacea. Breaking nearly a year of silence due to ill health, Cuban leader Fidel Castro recently lambasted the U.S. plan. According to Castro, the diversion of food crops to fuel production devastates the poor of Latin America, who can no longer afford basic food staples. For instance, due to its use in the production of ethanol, corn prices have risen more than 80 percent since last summer, from $2.17 to nearly $4 a bushel. This increase has caused tortilla prices in Mexico to rise by nearly 50 percent over the same period.

But the effects of rising corn and sugar prices are not all bad. The use of sugar in ethanol production has the potential to benefit thousands of rural farmers in Latin America who depend on the commodity's price. If the United States were to increase imports of Brazilian ethanol, the additional demand could lift the price paid to Brazilian sugar producers from a recent low of only nine cents per pound. In this way, Castro's complaints over the rising prices of food commodities fail to consider the benefits for producers in developing countries.

Despite the above criticisms of biofuel consumption and free trade, the key to higher living standards for the poor of Latin America does not lie in protectionist trade measures or abandoning ethanol production. Rather, an American commitment to free trade would allow all to benefit from the advances in biofuel technology.


At the heart of the issue is U.S. ethanol policy. Despite the Bush Administration's explicit support for increased U.S. ethanol consumption, the United States maintains a tariff of 54 cents per gallon for imported ethanol. This tariff limits U.S. ethanol imports and creates a higher domestic price than would otherwise result from a more open market.

By limiting market access for Brazilian ethanol producers, who would benefit from increased exports, the U.S. tariff also limits the subsequent benefits that would accrue to Brazilian sugar producers. Furthermore, since ethanol production in the United States is based on corn, the tariff also leads to a higher price of corn in the United States. This artificially inflated price is then passed on to Mexican consumers in the form of higher food prices.

The ramifications of the U.S. ethanol tariff display the ethical consequences of American trade policy. In order for Brazilian ethanol and sugar producers to benefit from global trade, they must be granted tariff-free market access to the United States.

If the United States is to share the benefits of globalization with developing countries, it must maintain a commitment to open markets for foreign imports and carefully consider the global impact of its trade policy.