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The deregulation of the sugarcane industry in Brazil

Grant number: 11/21508-7
Support type:Regular Research Grants - Publications - Books published abroad
Duration: March 01, 2012 - February 28, 2014
Field of knowledge:Applied Social Sciences - Economics
Principal Investigator:Márcia Azanha Ferraz Dias de Moraes
Grantee:Márcia Azanha Ferraz Dias de Moraes
Home Institution: Escola Superior de Agricultura Luiz de Queiroz (ESALQ). Universidade de São Paulo (USP). Piracicaba , SP, Brazil


The central question of the book is to consider the extent to which the state can move away from the sugar-alcohol sector, and what are the forms of state action required in the new deregulated environment. From the second half of the 80's began in the Brazilian economy a generalized process of deregulation, intensified in the middle of the 90's, covering several productive agricultural sectors (including, coffee, wheat, milk and sugar), which underwent important institutional changes, since were extinguished important set of rules, many of which existed for more than 50 years. The sugarcane agro-industrial chain was certainly one of the most administratively controlled by the Brazilian State. Since the 30s the government established the production (including setting production quotas for sugar and alcohol for each plant), was responsible for marketing the products (dictating the price per ton of sugarcane, sugar and fuel, and also determining the buyers and sellers for the alcohol fuel), and was responsible for all exports of sugar and alcohol. Thus, deregulation of this sector affected the relations of agents throughout the production chain: producers of sugarcane, sugar mills and distilleries and fuel distributors, as well as consumers of alcohol and sugar, as new price levels are likely to prevail in the new deregulated environment. In the background of deregulation, we have the change of political regime with strong bureaucratic and authoritarian traits, for a system with more democratic features. This change, from authoritarianism, which favored the centralized decisions, to democracy, which strengthens the role of Congress (since they require clearer rules and the establishment of legal standards for government action), showed a major change of roles of each of the actors involved with the establishment of public policy, in order to deal with the new institutional environment established. In the first part of the book there is a characterization of the sugar and ethanol sectors in Brazil, in order to highlight their relative importance within the national economy and also in foreign markets. In the second part is exposed on the state intervention in some countries and in Brazil. With regard to state intervention in Brazilian sugarcane agribusiness, there is a review of its main forms and their effects on the development of the sector in the period 1930 to 1980, in order to have a better understanding of the magnitude of the interference of the state and its effects on the supply chain. With this we intend to emphasize the intensity of the effects of deregulation on an industry that since the 30's lived under the aegis of the State, and that needs to learn to deal with the rules imposed by the market economy. The creation of the Alcohol Program is analyzed in detail. In the sequence there is a description of the process of the state withdrawal, including major government decisions and actions of the agents involved. We present the relevant legislation, changes in public and private organizational environment, changes in the price support to fuel ethanol and sugar cane, and changes in markets for sugar cane, sugar and alcohol resulting from deregulation .In part four the theory used for the analysis of survey data, and also the methods used are presented, followed by results, discussion and conclusions. The results include the definition of the new role of the state, considering the institutional environment and the characteristics of the markets for sugar cane, sugar and alcohol, and the most efficient ways to market the products of the production chain, and also the determinants of political decision-making processes. In addition, we compare the current decision-making structure with the existent in the Proalcool. (AU)