BRAZILIAN ETHANOL ON THE RISE

Is Brazil on the verge of a green gold rush? After a short period of decline, Brazil's ethanol production has grown at no less than 8 percent per year over the past 5 years, and its production costs are the lowest in the world. Its penetration in the transportation industry has already reached 40 percent of light car demand. And Brazil is currently the world's largest ethanol exporter. But what is Brazilian ethanol's potential for growth beyond current levels, and what opportunities and hurdles underlie these growth prospects?

* Brazil's ethanol price competitiveness compared with gasoline, continued government support, and the attractiveness of flexible fuel vehicles have helped ethanol consumption rise well beyond government mandates.
* Although international growth is expected to increase in the years to come, thanks to the implementation of government mandates worldwide, the expansion of global ethanol trade still faces significant obstacles, including importers' protectionism, the limited number of alternative suppliers, insufficient transport infrastructure, and an insufficient economic advantage over gasoline.
* With no lack of land, Brazilian ethanol production is expected to grow at least an average 7 percent per year in the coming ten years, with the potential to rise to 19 percent in the second half of this period, under pro-ethanol market conditions.

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