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Expected growth of sugarcane industry and impact on the Brazilian economy: 2015 and 2020

Costa, Cinthia Cabral da and Guilhoto, Joaquim José Martins (2011): Expected growth of sugarcane industry and impact on the Brazilian economy: 2015 and 2020.

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The sugarcane sector in Brazil has been achieving large increases in production since the beginning of the 2000s, owing to the deregulation of its two main products: sugar and ethanol. This growth has been driven more by the ethanol production, which grew at a rate of 13% per annum (between 2000 and 2009), than by sugar, which grew at an annual rate of 8% over the same period. Nevertheless, instability in the supply of ethanol is still a problem in the industry. Structural changes, such as the mechanization of sugarcane harvesting, are also in progress. Taking into account the future demands for sugar and ethanol and structural changes in projections, made by industry representatives for the years 2015 and 2020, this article employs inuput-output analysis to estimate the impact of these projections on the Brazilian economy. The results show that in 2010, with a production of R$ 66.6 billion for sugar and R$ 36.2 billion for ethanol (at 2010 prices), the total impact on the economy was about R$ 374.6 billion in Total Output (TO), R$ 210 billion in the Gross Domestic Product (GDP), R$ 62.4 billion in remuneration to employees, and a gain of 5.1 million jobs, per annum. For 2015, the estimated economic impact on TO, GDP and employee earnings was 56% higher than the values for 2010. As for 2020, the projections showed that the increases were in the range from 109 to 117% in scenario 1, or 91 to 98% in scenario 2. For job numbers, the impact in 2015 was 48% higher than that reported for 2010, while in 2020 it was between 82 to 99% higher. It was also observed that the income effect of the shocks in the ethanol and sugar sectors was the most significant part of the predicted impact on the number of jobs created in the economy. The results showed, therefore, the importance of the sugarcane industry in the economy, emphasizing the need for government policies to foster the growth of this sector.

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