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Escola Superior de Agricultura “Luiz de Queiroz” – ESALQ/USP Third Lemann Dialogue Agricultural and Environmental Issues in Brazil November 7-8, 2013 University.

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Presentation on theme: "Escola Superior de Agricultura “Luiz de Queiroz” – ESALQ/USP Third Lemann Dialogue Agricultural and Environmental Issues in Brazil November 7-8, 2013 University."— Presentation transcript:

1 Escola Superior de Agricultura “Luiz de Queiroz” – ESALQ/USP Third Lemann Dialogue Agricultural and Environmental Issues in Brazil November 7-8, 2013 University of Illinois Márcia Azanha Ferraz Dias de Moraes Professor at the Department of Economics, Business and Sociology ESALQ - University of Sao Paulo

2 1. Social indicators in sugarcane, sugar and ethanol production 2. Brazilian Ethanol Program: main drivers 3. Can it be replicated in other countries? 4. Sustainability issues 5. Final considerations Sugarcane-bioethanol workforce in Brazil: employment, education, social inclusion

3 1. Social indicators in sugarcane, sugar and ethanol production  Job creation  large number of people  inclusion of low schooling workers  Official employment ( formal contracts)  Job penetration: production spread all over the country Sugarcane-bioethanol workforce in Brazil: employment, education, social inclusion

4 Production Growth  Ethanol Production: has risen from 4 to 28 billions liters Sugarcane Production: moved up from 100 million tons to 620 million tons Positive impact on jobs → creation of jobs for thousands of workers →Agriculture (sugarcane): poorly educated workers 520% 600%

5 Number of formal workers by producing regions and sector 2011 Source: Prepared based on data provided by RAIS, 2011

6 Sugarcane Production Chain: Main Agents Industrial Sugar and Ethanol Production Sugar Cane Fields 70,000 sugarcane growers 440 Sugar Mills/Ethanol Distilleries Source: MAPA – MME – MDIC – 2005 PNAD (2008), GEMT (2010) 439,922 employees 600,000 employees Sugar cane field The sector comprises 70k independent producers, accounting for 25% of national sugarcane production 75% of sugarcane comes from self supply of vertically integrated mills ( mills have sugarcane fields plus processing plants) 50% harvest manually and 50% mechanically Sugarcane processing plants in Brazil can produce sugar and/or ethanol By products: -Vinasse: used as biofertilizer - Bagasse: eletrical power generation -all plants are self sufficient in eletric power - most efficient sell the energy surplus to the market

7 Production and Job Position in 2011 Operating Sugarcane Mills Sugarcane Mills under construction Jobs in Sugarcane (2011): 439,922 NNECS Industrial Units 78 (20.7%)298 (79%) Ethanol Production 7%93% Sugar Production 13%87% Job Positions 36.6%63.4% Source: Prepared based on data provided by PNAD ,809 employees 36.6% 279,113 employees 63.4% CS produces about 90% of main products, with 63.4% of the workforce This is explained by higher agricultural productivity in this region: better soil and climate conditions use of mechanized harvesting and planting

8 2,258,276 agricultural workers in Brazil Agricultural workers in Brazil, 2011 Sugarcane employees accounts for almost 20% followed by corn (15.5%) and coffee (12%) Sugarcane: very impressive number inclusion of many low schooling people Source: Prepared based on data provided by PNAD 2011

9 Agriculture 4.4 Average Schooling of Crop Workers Brazil, 2011 The average schooling of agriculture workers is 4.4 years of study Sugarcane: The workers of sugarcane sector have about 4.8 years of study 20% (about 100k workers ) are illiterate Source: Prepared based on data provided by PNAD 2011

10 Sugarcane: Average Schooling 2011 Source: Prepared based on data provided by PNAD years of study is the average, considering both regions under survey NNE region has lower education level The state of São Paulo has the highest level: 6.3 years of school, which still is very low

11  Rules and Norms Norms: federal, state and municipal - Federal Decree # 2.661, July/ SP state - State Decree # , State Decree # , State Decree # , 2000: - State Law # , 2002 – Deadlines for the end of Sugarcane Burning - Mechanized areas (flat): Non mechanized areas: 2031 Environmental Protocol - June, 2007: SP state and UNICA signed a cooperation Protocol - Although non mandatory, producers’ adhesion was close to 100% New deadlines for sugarcane burn halt are: Flat areas: 2014 Non flat areas: 2017 T HE BANNING OF S UGARCANE B URNING

12 Mechanical versus Manual Harvesting  Burnt sugarcane (manual harvesting) or green cane (mechanical) ?  green cane: it is more efficient the usage of mechanized harvesting  Prohibition of sugarcane burning: constitutes an advance in environmental terms  it demands fewer workers (one harvester substitutes about 80 workers)  it changes the worker’s profile  it requires training and qualifying programs

13 Agriculture 39.0% Labour Rights - Brazil, 2011 The proportion of workers who are formally employed in the Brazilian agriculture is very low: 40% Sugarcane shows the best indicator: about 81% of the employees are formally hired These employees have all labor rights established in the legislation: enjoy the right to receive unemployment insurance; remunerated annual vacations Extra month of salary per year …. Source: Prepared based on data provided by PNAD 2011

14 Sugarcane: contrasting number of formal and informal workers. Brazil, NNE, CS and São Paulo, 2011 Source: Prepared based on data provided by PNAD 2011 The state of SP has a very impressive proportion of formally hired workers: 92% The proportion of formally hired workers in NNE region is lower

15 Sugarcane: Number of employees by Age Bracket Source: Prepared based on data provided by PNAD 20 Sugarcane sector successfully reduced the proportion of child labor from 15.3% in 1981 to less than 0.5% in 2011 This is a the results of multiple efforts: Better law observance Requirements of the market itself Government social programs: Bolsa Familia, Bolsa Escola Increased the proportion of adult workers

16  There is an extensive legal and regulatory apparatus governing the Brazilian labor market, covering all sectors of the economic activity, including workers in the sugarcane, sugar and ethanol sectors  The main regulations for the labor market in Brazil are: (i) The Federal Constitution; (ii) Consolidation of Labor Laws (CLT), (iii) Rural Workers’ Law (5889/73; (iv) Law No /2001 that establishes the wage policy.  The organization of workers’ unions is covered in article 5 of the Federal Constitution. –There are annual negotiations (Collective Agreements) between workers’ unions and the sector’s syndicate (in compliance with the legislation) Labor Market Regulations

17 Wages: sugarcane and other crops The wages of soya sector are the higest ones Earning Equation estimated showed that: After the control of other variables that influence wages: Schooling Age region, color, gender, etc The average montly wage of other crops workers in comparisson with sugarcane wages are: Coffee: 9,9% lower; Cassava: 23,2% lower; Corn: 30,1,% lower; Rice: 30,1% lower; Soya: 0,2% lower

18  Brazilian soil and climatic conditions are also found in many underdeveloped and developing countries with a large poorly-educated population excluded from the labor market  With appropriate public policies that aim both:  to reduce greenhouse gases emissions  also to include thousands of workers to the labor market Brazilian experience could be replicated, generating jobs, income, and contributing to mitigate CO 2 emissions in the world Brazilian Experience: Could it be replicated in other countries?

19 Biofuels production: which are the drivers? Brazil (1975): macroeconomics problems due the oil shocks 1973 and 1979 oil shocks: bad impacts on national inflation and on balance of payments Proalcool: to stimulate the production of anhydrous ethanol Second oil crisis had a devastating impact on Brazil’s trade balance, inflation -Brazilian MILITARY government sought to reformulate Proálcool: production of hydrous ethanol Nowadays: international marketing is emerging - Oil importers: reduction of oil dependence - Environmental issues: to develop strategies towards a low carbon economy - There are regulatory policies encouraging the use of biofuels in at least 46 countries at the national level and 26 states and provinces by early 2012(REN, 2012). (production subsidies, transport fuel-tax exemptions, share in total transport fuel obligations, blending mandates) There is a global demand for biofuels

20 Biofuels production: where to produce? África - Natural conditions for developing sugarcane based industry as good as or even better than Brazil - There is available land Host countries perspective: what are the positive aspects? - To improve economic and social development - To reduce dependency on fossil energy (many countries will suffer with increased oil prices and climate change) - To modernize its agricultural sector through sugarcane industry - the investments in rural infrastructure (water, electricity, roads, school, training programs), distribution channels, housing, banking, health programs), can have a positive impact in the agricultural sector as a whole - To avoid ecological destruction - Sugarcane (bagass) and ethanol: there are sinergies with other energy needs (fuel for cooking) must be produced in a sustainable way

21 Biofuels production: where to produce? Africa Host countries perspective: what are the priorities? - Food security (physical and economic access) - Modernize the agricultural sector - Improve (create) infrastructure - Creation of employment and income - Improve rural and urban development Could biofuels contribute? Challenges - Food versus fuel debate: must be overcome - Land tenure: land for foreigners is a very controversy issue - Large versus small scale: inclusion of small producers - Coordination and rent distribution along the supply chains - To ensure equitable distribution of income along the production chain (sugarcane suppliers, workers) - To accomplish with the existing sustainability criteria

22 Sustainable Business models Labor Market (i)Workers’ profile (manual or mechanical agricultural activities); (ii)Workers’ availability; (iii) Institutional framework (existence of workers’ unions and of legislation and rules regulating the labor market, minimum wage policies) (iv)Local habits Production modes: (i)Size, structure, and distribution of land and property (patriarchal and matriarchal systems of inheritance, community organization); (ii)Small versus large scale; (iii)Transaction costs and coordination issues (agricultural producers’ cooperatives)

23 There are several patterns o Bonsucro (Better Sugarcane Initiative) o ISCC (International Sustainability & Carbon Certification) o 2009/28/CE European Union Diretive o Roundtable On Sustainable Biofuels (RSB) o Greenergy o Protocolo Agroambiental (Brasil) o GBEP Do all the requirements make sense? How will the new producers deal with them? Several social and environmental principles Sustainability Criteria

24 Economic Viability of Hydrous Ethanol  Viability of the hydrous ethanol is dependent on the federal fuel pricing policy, which currently aims to control inflation by maintaining prices of gasoline at the refinery, regardless of fluctuations in production costs and oil prices on the international market  this police reduces hydrous ethanol competitiveness with gasoline, in terms of the relative pump prices  The government must set a nationwide energy policy and establish an energy matrix, making it clear to society what is the role of each fuel from a long-term perspective.  the energy mix would allow planning ethanol production, which becomes particularly important when one considers that ethanol is made from agricultural raw materials, making its production subject to adverse weather conditions as well as to the seasonal nature of sugarcane cultivation  The lesson to be learned from the Brazilian experience is that, in a free market environment, without clear rules, the sugarcane ethanol industry cannot garner the level of investment needed in order to meet the potential demand for biofuels

25 Socioeconomic aspects of the Brazilian production  Solid institutional apparatus that regulates the labor market  Large number of jobs created in the three sectors (sugarcane crops, sugar and ethanol): surpass one million formal jobs  Positive impacts on development of rural areas, spillover effects  There have been an improvement of the indicators of the sugarcane:  Better observance to labor and environmental legislation  Better working conditions  Greater number of formal jobs in sugarcane sector  Reduction in underaged workers  Investment in training and qualification  Social and environmental certification programs adopted by companies  Lessons from the Brazilian experience can be useful for new producers FINAL CONSIDERATIONS

26 Production of Ethanol from Sugarcane in Brazil: from State Intervention to a Free Market Book co-authored with Prof David Zlberman (UC Berkeley) -Origin of Proalcool, the role of the military government, and the deep state intervention existing on the sugarcane, sugar and ethanol sectors at that time -The process of deregulation occurred from the late 90s, and the challenges and changes faced by the stakeholders in a free market environment - The new rules and changes since 2000, the international interest in alternatives to oil, the new environmental and social agendas, the financial constraints, and ultimately how we see the future of biofuels in Brazil. Marcia Moraes and David Zilberman

27 LABOR MARKET RESEARCH AND EXTENSION GROUP Thanks for your attention Feel free to contact

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29 Food versus Fuel Several authors (Adami et al. 2012, CGEE 2012, Goldemberg 2008, Goldemberg et al. 2008, Nassar and Moreira 2013, Neves et al, 2011) have presented evidence that the food versus fuel debate in Brazil is not an issue, given the large availability of raw materials and agricultural land in the country; The expansion of biofuel production in Brazil is regulated by several standards These include the Agro-ecological Zoning standard, which considers maps of soil, climate and rainfall, topography, environmental regulation, and the desire to respect areas that should be preserved. It also aims to reduce competition in areas dedicated to food production (MAPA 2009). According to Rosillo-Calle (2012), biofuel production and food security needs to be complementary. It is important to assess food security impacts from biofuel production, and it is equally important to assess the benefits that these alternative fuels generate if they meet their most important objective, which is the reduction of GHG emissions. Under appropriate conditions, biofuels can even be an important factor for improving the food security in some African countries (Lynd and Woods 2011).


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