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Biodiesel to the rescue

Can the Brazilian National Biodiesel Program encourage rural development and ease poverty in the northern regions of the country?

Seminararbeit 2008 16 Seiten

BWL - Wirtschaftspolitik


Table of Contents

List of Abbreviations

1. Introduction - Rural Poverty in Northern Brazil and Perspectives for Biodiesel Production

2. How to Reduce Poverty in Rural Areas - Some Theoretical Thoughts

3. The National Biodiesel Program and its Approaches Towards Rural Development and Poverty Reduction

4. Potential Achievements and Limitations of the Program

5. Conclusion - A less Prosperous and More Pessimistic Scenario



The Brazilian Biodiesel Program (PNBP) is set out to reduce poverty in the underdeveloped Northern regions of the country. It encourages family agriculture from plants such as castor and palm which are not suitable for plantation farming through government subsidies and low interest credits. The PNBP would have the potentials to reach its goals, if its design and its administration were not half-hearted and the program prone to be sacrificed to the interests of the over-powering soy lobby. Without a more genuine dedication to its social focus, the PNBP is set out to end as a reprint of the highly subsidized ethanol program benefiting car-owners instead of the rural poor.

List of Abbreviations

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1. Introduction - Rural Poverty in Northern Brazil and Perspectives for Biodiesel Production

In 2003, President Lula da Silva announced the initiation of the National Program for the Production and Use of Biodiesel (PNBP) aiming at rural development and poverty reduction in the underdeveloped Northern parts of the country. His statement must have been a déjà-vu experience for some Brazilians. In 1975, the military dictatorship launched Proálcool1 to produce bioethanol which was equally advertised as a development program in exactly the same regions.2 More than 30 years of a mostly booming ethanol industry later not much has changed in Northern Brazil where 54% of country’s poor live but only 34% of the population.

Brazil is one of the most unequal

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Figure 1

Taken from Bento de Souza (2006), 370.

countries in the world with a Gini coefficient of 0.58.3 30% of the inhabitants live in poverty. In other countries with similar per capita GDP the number is only 10%.4 While the Southern parts of Brazil come close to that figure (see graphic), in some provinces in the North-East nearly 60% of the population live below the poverty line. Northern Brazil is mostly rural and the majority of farm activities are carried out on small, family-owned farms.5

PNBP is a second try to treat these development disparities. It aims at creating employment opportunities through tax incentives for companies that produce in the undeveloped regions and low-interest credits to farmers promoting the inclusion of family agriculture and the use of non-plantation plants such as castor6, palm and jatropha.

There are valid reasons why the Brazilian government decided for new type of biofuel instead of promoting a refocus in the social orientation of the bioethanol program. Biodiesel is considered better suited for pro-poor growth mainly because production processes are not so elaborated, oil-plants are sturdier, fuel transportation is easier and yields per hectare are high. The cultivation of many biodiesel plants is work-intensive and workload is not as seasonally centred as with sugarcane.7 Moreover, plants such as castor and jatropha are no competition to food crops and are suitable for cultivation in the dry areas of the North-East. African palm can be grown in the tropical climate of the North-West. It has low production costs, a high oil content and flourishes 40 years without replanting.8

The Brazilian government put more efforts in designing the PNBP as a development program than was hitherto done with Proálcool. PNBP neatly fits Fome Zero, the welfare initiative of the President.9 It stays questionable nonetheless whether the program can substantially lower poverty and encourages rural development in the North. PNBP seems to be taken out of a textbook for sustainable development leaving out every second chapter. Without land titles and agricultural cooperatives family farmers will be prone to exploitation by big companies and oppressive contracts. Moreover, the overpowering soy-lobby is pushing for more soy-based biodiesel although soy is economically and environmentally inferior to other oilseed plants. If the PNBP is not administered with more rigour, a Proálcool déjà-vu in all its negative developmental and environmental effects will be the outcome to expect.

2. How to Reduce Poverty in Rural Areas - Some Theoretical Thoughts

After a generation of urban focused development theories worshiping industrialization as a development tool, in the late 1990s the focus shifted towards agricultural development and what has been termed pro-poor growth. Industrial growth can raise the mean income but it generally skews it towards the urban areas neglecting the rural poor which are mostly engaged in subsistence agriculture. Hence growth within the agricultural sector benefits those most which are most likely poor. Rural growth has a positive impact on the overall distribution of wealth and is three times more successful in lowering overall poverty than urban growth.10 Higher income from agriculture is mainly spent on non-tradable goods and services such as domestic transportation and basic health and education which gives underemployed nonfarmers earning possibilities that urban growth or foreign demand cannot create. Mellor points out that the data he compared “make a powerful case that it is agricultural growth and essentially only agricultural growth that brings about poverty decline in low income countries11 with a substantial agricultural sector.”12 In a second step of development the agriculture sector will shrink again through technological innovations and higher levels of education and new employment opportunities will evolve.13

While biofuel production was initially seen as a tool to increase energy security, lately the focus has shifted somewhat putting biofuel production in this context of agriculturally led rural development. Moreover, biofuels are highly valuable as a rural energy sources - an additional bonus of a biofuel centred development strategy. Energy access can lower daily workload, increase health conditions and create new commercial opportunities.14

Agricultural growth cannot be equalized with sustainable development which can only be achieved if growth is encouraged in conjunction with other income generating activities. The essential step to creating a modern economy is exiting the rural market which can only be reached if transaction costs are low and the necessary infrastructure exists. Moreover, education is crucial to enter the second stage of development and it has to be guaranteed that the whole community benefits from development e.g. also women and ethnic minorities. Farmers must have access to credits to set up businesses and to finance the high initial costs of crop cultivation and they must be able to reach fair terms of trade something which in the beginning has to be publicly controlled due to the weak negotiation position of poor farmers.15 Cooperative systems of ownership give farmers more negotiation power vis-à-vis big companies, allow small cultivators access to the supply chain and make large investments possible. Landownership creates more responsible cultivators which engage in sustainable land use rather than seeking harmful short-term profits. Unfortunately, the extension of valuable biofuel production often puts even more pressure on land tenures. Capacity building at the rural community level is essential for farmers to realize the potentials of biofuel production, for example concerning a possible combination with other food crops.16 As will be shown in the following, in some of these preconditions for sustainable development, PNBP has limitations.

3. The National Biodiesel Program and its Approaches Towards Rural Development and Poverty Reduction

The idea behind the biodiesel program as a development tool is simple. The major part of the population in Northern Brazil engages in some kind of subsistence agriculture and biofuel production offers a growing market. The potentials of extensive unused land for oilseed cultivation and the massive underemployed labour force should be brought together to produce biodiesel. Thereby domestic plants with high oil contents can be cultivated for which production is difficult to mechanize and where family farmers have an advantage over plantations. Moreover, in the tropical north in an ideal scenario already deforested areas could be reused for palm production providing employment opportunities and lowering deforestation pressure on the Amazon rainforest.17 Government intervention shall guarantee market access to small farmers and protect them from the downward price pressure triggered by economies of scale through creating a comparative advantage for Northern biodiesel on the basis of governmental subsidies.

In 2003, the National Biodiesel Program was launched and in January 2005, the law 11.097 authorized a mandatory blend of 2% to normal diesel by 2008 (B2) and of 5% by 2013 (B5). The program aims to fulfil four main goals:

1.) decrease biodiesel imports,
2.) encourage biodiesel production across different states,
3.) reach competitive prices and
4.) promote social inclusion and environmental sustainability.18


1 It was initially planned to produce bioethanol from manioc to promote development in the North but the project was not continued. In the same year also the first biodiesel program Pró-óleo was launched which was a failure due to lack of technology. Compare: Munir Y. Soares, “The Brazilian Biodiesel Program” (Postgraduate Paper, University of São Paulo, 2007), 1.

2 Jens Giersdorf and Manfred Nitsch, “Biodiesel in Brasilien: Ein neues PROÁLCOOL oder Chance für den Nordosten?,“Focus Brasilien 1 (2006): 6.

3 The higher the Gini coefficient on a scale from 0 to 1, the more unequal is a country.

4 Joaquin Bento de Souza, “Economic Integration, Poverty and Regional Inequality in Brazil,” RBE Rio de Janeiro 60 (2006): 364 and 368.

5 Franz J. Kaltner et. al., Liquid Biofuels for Transportation in Brazil: Potential and Implications for Sustainable Agriculture and Energy in the 21st Century (FDBS, 2005), 54.

6 Some literature talks of mamona which is the Brazilian word for the castor plant.

7 Leo Peskett, Biofuels, Agriculture and Poverty Reduction (UK Department for International Development, 2007), 12-13.

8 Edmar Fagundes de Almeida et. al., “The Performance of Brazilian Biofuels: An Economic, Environmental and Social Analysis,” In Biofuels: Linking Support to Performance (OECD/ITF, 2008), 174.

9 Zero Hunger was inaugurated in 2003 to eliminate extreme poverty and hunger in Brazil. It includes among other programs Bolsa Fam í lia which provides poor families with financial aid on the condition that children attend school and receive vaccinations. Compare:

10 John W. Mellor, Pro-Poor Growth: The Relationship Between Growth in Agriculture and Poverty Reduction (USAID, 1999), 9-13.

11 Brazil is technically not a low-income country but its Northern and North-Eastern provinces are low-income.

12 Mellor (1999), 21.

13 Mellor (1999), 23.

14 Sivan Kartha, and Gerald Leach, Using Modern Bioenergy to Reduce Rural Poverty (Stockholm: Stockholm Environment Institute, 2001), 2.

15 Mellor (1999), 23 and 40-43.

16 Kartha / Leach (2001), 22-28.

17 Ademar Ribeiro Romeiro, Biofuels in Brazil: A Prospective Option Against Deforestation; Income Concentration and Regional Disparities (Netherlands Environmental Assessment Agency, 2006), 34-35. It would be environmentally more sustainable to reforest these lands with tropical plants. Nevertheless without employment opportunities, regional farmers have an incentive to deforest even more land for farming and it would therefore be better to reuse land where the biggest damage has already been made instead of encouraging more possible deforestation of primary forest. Since 2004 a “Roundtable on Sustainable Palm Oil” exists in Brazil. Compare: Fagundes de Almeida et. al. (2008), 180.

18 Soares (2007), 1-3.


ISBN (eBook)
ISBN (Buch)
503 KB
Institution / Hochschule
Hertie School of Governance – Master of Public Policy
Biodiesel Ethanol Ländliche Entwicklung Brasilien




Titel: Biodiesel to the rescue