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Escola Superior de Agricultura “Luiz de Queiroz” – ESALQ/USP

Escola Superior de Agricultura “Luiz de Queiroz” – ESALQ/USP. Third Lemann Dialogue Agricultural and Environmental Issues in Brazil November 7-8, 2013 University of Illinois. Márcia Azanha Ferraz Dias de Moraes Professor at the Department of Economics, Business and Sociology

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Escola Superior de Agricultura “Luiz de Queiroz” – ESALQ/USP

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  1. Escola Superior de Agricultura “Luiz de Queiroz” – ESALQ/USP Third Lemann Dialogue Agricultural and Environmental Issues in Brazil November 7-8, 2013 University of Illinois MárciaAzanhaFerraz Dias de Moraes Professor at the Department of Economics, Business and Sociology ESALQ - University of Sao Paulo

  2. Sugarcane-bioethanol workforce in Brazil: employment, education, social inclusion 1. Social indicators insugarcane, sugar and ethanol production 2. Brazilian Ethanol Program: main drivers 3. Can it be replicated in other countries? 4. Sustainability issues 5. Final considerations

  3. Sugarcane-bioethanol workforce in Brazil: employment, education, social inclusion 1. Social indicators insugarcane, sugar and ethanol production Job creation large number of people inclusionoflowschoolingworkers Official employment (formal contracts) Jobpenetration: production spread all over the country

  4. ProductionGrowth Sugarcane Production: moved up from 100 million tons to 620 million tons • Ethanol Production: hasrisenfrom 4 to 28 billions liters 520% 600% • Positive impact on jobs • creation of jobs for thousands of workers • Agriculture (sugarcane): poorly educated workers

  5. Number of formal workers by producing regions and sector 2011 Source: Preparedbasedon data providedbyRAIS, 2011

  6. SugarcaneProductionChain: MainAgents 439,922employees Sugar CaneFields Industrial Sugar and EthanolProduction 70,000 sugarcanegrowers 440 Sugar Mills/Ethanol Distilleries 50% harvestmanually and 50% mechanically 600,000employees • Sugarcane processing plants in Brazil can produce sugar and/or ethanol • By products: • Vinasse: used as biofertilizer • Bagasse: eletrical power generation • all plants are self sufficient in eletric power • most efficient sell the energy surplus to the market • Sugar canefield • The sector comprises 70k independentproducers , accounting for 25% of nationalsugarcaneproduction • 75% of sugarcane comes fromselfsupply of verticallyintegratedmills • (millshavesugarcanefieldsplusprocessingplants) Source: MAPA – MME – MDIC – 2005 PNAD (2008) , GEMT (2010)

  7. Operating Sugarcane Mills Sugarcane Mills under construction Production and Job Position in 2011 Jobs in Sugarcane (2011): 439,922 160,809 employees 36.6% • CS producesabout 90% ofmainproducts, with 63.4% oftheworkforce • Thisisexplainedbyhigheragriculturalproductivity in thisregion: • bettersoilandclimateconditions • use ofmechanizedharvestingandplanting 279,113 employees 63.4% Source: Prepared based on data provided by PNAD 2011

  8. Agriculturalworkers in Brazil, 2011 • Sugarcaneemployeesaccounts for almost20% • followedbycorn (15.5%) • andcoffee (12%) • Sugarcane: • veryimpressivenumber • inclusionofmanylowschoolingpeople Source: Preparedbasedon data providedby PNAD 2011

  9. AverageSchoolingofCropWorkers Brazil, 2011 • The average schooling of agriculture workers is 4.4 years of study • Sugarcane: • The workers of sugarcane sector have about 4.8 years of study • 20% (about 100k workers ) are illiterate Source: Preparedbasedon data providedby PNAD 2011

  10. Sugarcane: AverageSchooling 2011 • 4.8 yearsofstudyistheaverage, consideringbothregionsundersurvey • NNE regionhaslowereducationlevel • The stateof São Paulo hasthehighestlevel: 6.3 yearsofschool, which still isverylow Source: Prepared based on data provided by PNAD 2011

  11. The banning of Sugarcane Burning • Rules and Norms • Norms: federal, state and municipal • - Federal Decree # 2.661, July/1998 • - SP state • - State Decree # 42.056, 1997 • - State Decree # 28.848, 1988 • - State Decree # 10.547, 2000: • - State Law # 11.241, 2002 – Deadlines for the end of Sugarcane Burning • - Mechanized areas (flat): 2021 • - Non mechanized areas: 2031 • Environmental Protocol • - June, 2007: SP state and UNICA signed a cooperation Protocol • - Although non mandatory, producers’ adhesion was close to 100% • New deadlines for sugarcane burn halt are: • Flat areas: 2014 • Non flat areas: 2017

  12. Mechanical versus Manual Harvesting • Burnt sugarcane (manual harvesting) or green cane (mechanical) ? • green cane: it is more efficient the usage of mechanized harvesting • Prohibition of sugarcane burning: constitutes an advance in environmental terms • it demands fewer workers (oneharvestersubstitutesabout 80 workers) • it changes the worker’s profile • it requires training and qualifyingprograms

  13. LabourRights - Brazil, 2011 • Theproportionofworkerswho are formallyemployed in theBrazilianagriculture is verylow: 40% • Sugarcane shows thebestindicator: • about 81% oftheemployees are formallyhired • Theseemployeeshaveall labor rightsestablished in thelegislation: • enjoy the right to receive unemployment insurance; • remuneratedannualvacations • Extra month of salary per year • …. Source: Preparedbasedon data providedby PNAD 2011

  14. Sugarcane: contrastingnumberof formal and informal workers. Brazil, NNE, CS and São Paulo, 2011 • The proportionofformallyhiredworkers in NNE region is lower • The stateof SP has a veryimpressiveproportionofformallyhiredworkers: 92% Source: Prepared based on data provided by PNAD 2011

  15. Sugarcane: Number of employees by Age Bracket • Sugarcanesector successfullyreducedtheproportionofchild labor • from 15.3% in 1981 to lessthan0.5% in 2011 • Thisis a theresultsofmultipleefforts: • Betterlawobservance • Requirementsofthemarketitself • Government social programs: Bolsa Familia, Bolsa Escola • Increasedtheproportionofadultworkers Source: Prepared based on data provided by PNAD 20

  16. Labor Market Regulations • There is an extensive legal and regulatory apparatus governing the Brazilian labor market, covering all sectors of the economic activity, including workers in the sugarcane, sugar and ethanol sectors • The main regulations for the labor market in Brazil are: (i) The Federal Constitution; (ii) Consolidation of Labor Laws (CLT), (iii) Rural Workers’ Law (5889/73; (iv) Law No. 10.192/2001 that establishes the wage policy. • The organization of workers’ unions is covered in article 5 of the Federal Constitution. • There are annual negotiations (Collective Agreements) between workers’ unions and the sector’s syndicate (in compliance with the legislation)

  17. Wages: sugarcane and other crops • The wagesofsoya sector are thehigestones • EarningEquationestimatedshowedthat: • Afterthecontrolofothervariablesthatinfluencewages: • Schooling • Age • region, • color, • gender, etc • The averagemontlywageofothercropsworkers in comparissonwithsugarcanewages are: • Coffee: 9,9% lower; • Cassava: 23,2% lower; • Corn: 30,1,% lower; • Rice: 30,1% lower; • Soya: 0,2% lower

  18. Brazilian Experience: Could it be replicated in other countries? • Brazilian soil and climatic conditions are also found in many underdeveloped and developing countries with a large poorly-educated population excluded from the labor market • With appropriate public policies that aim both: • to reduce greenhouse gases emissions • also to include thousands of workers to the labor market Brazilian experience could be replicated, generating jobs, income, and contributing to mitigate CO2 emissions in the world

  19. Biofuels production: which are the drivers? • Brazil (1975):macroeconomicsproblemsduetheoilshocks • 1973 and 1979 oil shocks: bad impacts on national inflation and on balance of payments • 1975 - Proalcool: to stimulate the production of anhydrous ethanol • Second oil crisis had a devastating impact on Brazil’s trade balance, inflation • Brazilian MILITARY government sought to reformulate Proálcool: production of hydrous ethanol • Nowadays: international marketing is emerging • Oil importers: reduction of oil dependence • Environmental issues: to develop strategies towards a low carbon economy • - There are regulatory policies encouraging the use of biofuels in at least 46 countries at the national level and 26 states and provinces by early 2012(REN, 2012). • (production subsidies, transport fuel-tax exemptions, share in total transport fuel obligations, blending mandates) There is a global demand for biofuels

  20. Biofuels production: where to produce? • África • Natural conditions for developing sugarcane based industry as good as or even better than Brazil • There is available land • Host countries perspective: what are the positive aspects? • To improve economic and social development • To reduce dependency on fossil energy (many countries will suffer with increased oil prices and climate change) • To modernize its agricultural sector through sugarcane industry • the investments in rural infrastructure (water, electricity, roads, school, training programs), distribution channels, housing, banking, health programs), can have a positive impact in the agricultural sector as a whole • To avoid ecological destruction • Sugarcane (bagass) and ethanol: there are sinergies with other energy needs (fuel for cooking) • must be produced in a sustainable way

  21. Biofuels production: where to produce? • Africa • Host countries perspective: what are the priorities? • Food security (physical and economic access) • Modernize the agricultural sector • Improve (create) infrastructure • Creation of employment and income • Improve rural and urban development Could biofuels contribute? • Challenges • Food versus fuel debate: must be overcome • Land tenure: land for foreigners is a very controversy issue • Large versus small scale: inclusion of small producers • Coordination and rent distribution along the supply chains • To ensure equitable distribution of income along the production chain (sugarcane suppliers, workers) • To accomplish with the existing sustainability criteria

  22. Sustainable Business models Labor Market Workers’ profile (manual or mechanical agricultural activities); Workers’ availability; Institutional framework (existence of workers’ unions and of legislation and rules regulating the labor market, minimum wage policies) Local habits Production modes: Size, structure, and distribution of land and property (patriarchal and matriarchal systems of inheritance, community organization); Small versus large scale; Transaction costs and coordination issues (agricultural producers’ cooperatives)

  23. Sustainability Criteria There are several patterns • Bonsucro (BetterSugarcaneInitiative) • ISCC (International Sustainability & Carbon Certification) • 2009/28/CE EuropeanUnionDiretive • Roundtable On Sustainable Biofuels (RSB) • Greenergy • Protocolo Agroambiental (Brasil) • GBEP Do all the requirements make sense? How will the new producers deal with them? Several social and environmental principles

  24. EconomicViabilityofHydrousEthanol • Viability of the hydrous ethanol is dependent on the federal fuel pricing policy, which currently aims to control inflation by maintaining prices of gasoline at the refinery, regardless of fluctuations in production costs and oil prices on the international market • this police reduces hydrous ethanol competitiveness with gasoline, in terms of the relative pump prices • The government must set a nationwide energy policy and establish an energy matrix, making it clear to society what is the role of each fuel from a long-term perspective. • the energy mix would allow planning ethanol production, which becomes particularly important when one considers that ethanol is made from agricultural raw materials, making its production subject to adverse weather conditions as well as to the seasonal nature of sugarcane cultivation • The lesson to be learned from the Brazilian experience is that, in a free market environment, without clear rules, the sugarcane ethanol industry cannot garner the level of investment needed in order to meet the potential demand for biofuels

  25. FINAL CONSIDERATIONS • Socioeconomic aspects of the Brazilian production • Solid institutional apparatus that regulates the labor market • Large number of jobs created in the three sectors (sugarcane crops, sugar and ethanol): surpass one million formal jobs • Positive impacts on development of rural areas , spillover effects • There have been an improvement of the indicators of the sugarcane: • Betterobservance to labor and environmentallegislation • Better working conditions • Greaternumber of formal jobs in sugarcane sector • Reduction in underagedworkers • Investment in training and qualification • Social and environmental certification programs adopted by companies • Lessons from the Brazilian experience can be useful for new producers

  26. Production of Ethanol from Sugarcane in Brazil: from State Intervention to a Free Market • Book co-authored with Prof David Zlberman (UC Berkeley) • Origin of Proalcool, the role of the military government, and the deep state intervention existing on the sugarcane, sugar and ethanol sectors at that time • The process of deregulation occurred from the late 90s, and the challenges and changes faced by the stakeholders in a free market environment • The new rules and changes since 2000, the international interest in alternatives to oil, the new environmental and social agendas, the financial constraints, and ultimately how we see the future of biofuels in Brazil. Marcia Moraes and David Zilberman

  27. LABOR MARKET RESEARCH AND EXTENSION GROUP http:www.esalq.usp.br/gemt Thanks for yourattention Feelfree to contact madfmora@usp.br

  28. Food versus Fuel Several authors (Adami et al. 2012, CGEE 2012, Goldemberg 2008, Goldemberg et al. 2008, Nassar and Moreira 2013, Neves et al, 2011) have presented evidence that the food versus fuel debate in Brazil is not an issue, given the large availability of raw materials and agricultural land in the country; The expansion of biofuel production in Brazil is regulated by several standards These include the Agro-ecological Zoning standard, which considers maps of soil, climate and rainfall, topography, environmental regulation, and the desire to respect areas that should be preserved. It also aims to reduce competition in areas dedicated to food production (MAPA 2009). According to Rosillo-Calle (2012), biofuel production and food security needs to be complementary. It is important to assess food security impacts from biofuel production, and it is equally important to assess the benefits that these alternative fuels generate if they meet their most important objective, which is the reduction of GHG emissions. Under appropriate conditions, biofuels can even be an important factor for improving the food security in some African countries (Lynd and Woods 2011).

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