Exploring the policy and social factors fueling the expansion and shift of sugarcane production in the Brazilian Cerrado

Abstract

Within the past decade, the sugarcane ethanol industry in Brazil has increased its production capacity to meet rising domestic demand for ethanol. However, to achieve this growth the industry has had to expand into new frontiers in the Brazilian Cerrado, specifically in the states of Goias and Mato Grosso do Sul, which is now the second largest producing area of ethanol in Brazil. We argue that the expansion into the Brazilian Cerrado is a result of the interactions between the increase in demand, governmental policies, infrastructure, and factors that have prevented traditional sugarcane producing regions from meeting the increasing demand for ethanol. This paper analyzes the policies that have shaped the sugarcane industry in Brazil and the expansion of the industry across the country. The policies and issues examined include those that led to the concentration and consolidation of the sugarcane industry in the state of Sao Paulo and the consequences of this consolidation; the influence of governmental policies on the decision-making process of producers and industry; the state-level policies designed to expand the industry into Goias and Mato Grosso do Sul states; infrastructure development; and the Sugarcane Agroecological Zoning policies. Through this study we conclude that the ethanol industry identified the Cerrado states as an opportunity for investment, given the good agricultural conditions for producing sugarcane, affordable land prices and favorable state-level fiscal incentive policies. In addition, there is a need for further regional development policies as the interaction between the sugarcane sector and regional government is likely to continue into the future.