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30 th International Sweetener Symposium August 2 - 7, 2013

30 th International Sweetener Symposium. BRAZIL’s HIDDEN SUGAR SUBSIDIES Patrick H. Chatenay ProSunergy (UK) Ltd. 30 th International Sweetener Symposium August 2 - 7, 2013. Brazil’s Hidden Sugar Subsidies. D efine: “Brazil” “Hidde n ” “Sugar” “Subsidies”.

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30 th International Sweetener Symposium August 2 - 7, 2013

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  1. 30th International Sweetener Symposium BRAZIL’s HIDDEN SUGAR SUBSIDIES Patrick H. Chatenay ProSunergy (UK) Ltd. 30th International Sweetener Symposium August 2 - 7, 2013

  2. Brazil’s Hidden Sugar Subsidies • Define: • “Brazil” • “Hidden” • “Sugar” • “Subsidies” 30th International Sweetener Symposium August 2 - 7, 2013

  3. Brazil’s Hidden Sugar Subsidies • Assets: • Sugarcane: 24 Mln acres, producing 640 Mmt • Mills: circa 400 • Outputs: • Sugar: 40 Mmt(28 exported / 12 sold domestically) • Ethanol: 6.9 B gal. (4.2 for flex-fuel / 2.7 for gasohol & export) • 50% of international trade in sugar: price maker • 20% of world sugar production • 30% of world ethanol supply 30th International Sweetener Symposium August 2 - 7, 2013

  4. Brazil’s Hidden Sugar Subsidies • Excellent, focussed and constant propaganda: • “Brazilian sugar policy is quite simple: free market for sugar and ethanol” • 4thFAO International Sugar Conference, August 2012 • (A. Rand Barros & C. Magnos Lopes, UFPE & Datamétrica) • Most policy-makers think sugar has nothing to do with ethanol. • Acapital-intensive industry: subsidies play a role long after they have disappeared. • WTO rules: • Do not cover all support systems; • Depend upon member submissions and reactions. 30th International Sweetener Symposium August 2 - 7, 2013

  5. Brazil’s Hidden Sugar Subsidies Sugarcane, Mill, Sugar House & Distillery 30th International Sweetener Symposium August 2 - 7, 2013

  6. Sugar is Ethanol In Brazil, sugar is ethanol and ethanol is sugar: 85% of the fixed assets involved in the production of sugar & ethanol are shared. If you subsidize the one, you subsidize the other and there is cross-subsidization. 30th International Sweetener Symposium August 2 - 7, 2013

  7. Brazil’s Hidden Sugar Subsidies: A Little History • The first (1973) and second (1979) oil shocks saw the Brazilian government embark upon an ambitious program to substitute imported gasoline with sugarcane-based ethanol, “ProÁlcool”. • Between 1975 and 1990, • Government subsidies for field and mill expansion, and for distillery construction, amounted to US$17.4 B. • To create demand, ethanol prices were subsidized by some US$ 12 B. • … the sugarcane supply more than trebled. • In the sugar industry, assets last: if fields, mills and distilleries were built with subsidies, the effects of those subsidies last too. 30th International Sweetener Symposium August 2 - 7, 2013

  8. Brazil’s Hidden Sugar Subsidies: How Much? 30th International Sweetener Symposium August 2 - 7, 2013

  9. The Brazilian Sugar Subsidies: Acceleration • April 2013 Additional Support Measures: • Compulsory ethanol blend in gasoline increased from 20 to 25%. • US$ 450 million per year in new tax rebates. • US$ 3 billion in National Development Bank soft loans for 2013. 30th International Sweetener Symposium August 2 - 7, 2013

  10. Brazil’s Hidden Sugar Subsidies • The facts show: • Brazil’s dominance in world sugar is built on over three decades of massive government support. • That support still is material, amounting to 15% of Brazilian sugar sales in value at least. • Brazil advocates trade liberalization: the massive government support it gives its sugar industry should be accounted for. 30th International Sweetener Symposium August 2 - 7, 2013

  11. 30th International Sweetener Symposium BRAZIL’s HIDDEN SUGAR SUBSIDIES Thank you 30th International Sweetener Symposium August 2 - 7, 2013

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