Course:CONS200/2020/The Socioeconomic Impacts of Sugarcane Production in Brazil

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Introduction

Example of sugarcane harvest in Piracicaba, a city in southern Brazil.

Sugarcane derived ethanol produced in Brazil is one of the most competitive and leading biofuels in the world [1]. The sugarcane ethanol sector contributes significantly to the national economy which impacts GDP, employment and trade; these impacts are not equally distributed throughout the country, nor between income classes[2] . The Brazilian sugarcane production contributes not only to the financial growth of the country but also improves the quality of life. The most developed state, São Paulo, is responsible for 54% of the sugarcane production and has the second highest HDI [3]. Alternatively, Alagoas contributes to only 5% of the country’s production and has the third lowest HDI [3]. Due to Brazil’s variable economic structure & socioeconomic conditions throughout its geographic regions, it is important to have proper knowledge of the effects of the sugarcane industry on all its different regions[4].  In Brazil, ethanol production accounts for more than 700,000 direct and 200,000 indirect jobs[1]. Sugarcane production employs around 630,000 people and equipment needed for sugarcane production is fabricated and developed by Brazilian companies along with constructions of the mills by Brazilian firms[1]. Sugarcane is also a source of bio-electricity and is a source of renewable energy in Brazil[5]. Apart from economic benefits of sugar production, the added benefit of power generation adds to the Brazilian economy and improves security of electricity supply[5]. It has greatly impacted the energy security and is a relatively easy solution to the energy crisis because it uses waste and by-products of sugarcane production[6].

Economic Impacts

Costa Pinto sugar/ethanol production plant. Shown the ethanol distillery facility. Location, Piracicaba, Sao Paulo, Brazil. Production uses sugarcane as feedstock.

Brazil is the largest producer of sugarcane ethanol worldwide and its production is expected to increase substantially in the upcoming years[2]. Studies have shown that expansion of sugarcane ethanol production in Brazil in 2030 could increase the national GDP by 2.6 billion USD and employment by 53,000 fte[2]. This increase in GDP would evidently cause a significant increase in the national economy.

Importance of regions in the production of sugarcane

Regions represent a really important factor in determining the impact of sugarcane production on the country’s economy due to the fact that different regions have different varying potentials when it comes to mass production of sugarcane ethanol. The sectors that were projected to contribute the most to the GDP expansion due to the increase of sugarcane ethanol in 2030 are sugarcane, ethanol and sugar production[2] .The majority of sugarcane and ethanol production in Brazil, is located in the Centre-South (CS) of Brazil [1]. In the Northeast (NE) of Brazil, on the other hand, mostly sugar is produced and only 7% of the total national ethanol production [1]. Some regions throughout the country have a greater potential for sugarcane production than others. According to some findings, sugarcane expansion led to a growth in  GDP per capita in three regions: in Brazil as a whole, in the North-Northeast and in the Center-South excluding São Paulo, As a matter of fact, the North East region of Brazil was found to have the biggest potential for sugarcane production.

The positive socio-economic impacts that occur while developing and expanding the production sector in the North East region are very large for the region and for the economy of the rest of Brazil[2]. The amount of total sugar, ethanol and electricity production depends on sugarcane composition, configuration of the industrial plant and global industrial losses which can vary according to the region [7]. The NE region stands out as the poorest region of the country with a high number of people living under the poverty line and a high rate of illiteracy[1]. There is a need to develop the NE region to promote economic growth and to create job opportunities which highlights the importance of sugarcane production expansion in regions especially in the North[1]. Therefore, this places location of regions as a very important factor in determining the production of sugarcane in Brazil and its impact on its economy.

Social Impacts

The Brazilian sugarcane production contributes not only to the financial growth of the country but also improves the quality of life. The most developed state, São Paulo, is responsible for 54% of the sugarcane production and has the second highest HDI [3]. Alternatively, Alagoas contributes to only 5% of the country’s production and has the third lowest HDI [3].

From the period 1990 until 2018 brazil saw a huge expansion in their HDI statistics. There was an increase of 9.3 years in life expectancy at birth and an increase of 39.5% in Brazil’s GNI per capita [8]. However, the most recent data tells us that brazil is still positioned at 79 out of 189 countries on the HDI scale [8]. This indicates that while brazil is in the high human development category, it still has a long way to go.

This figure shows the improvement of each component index to Brazil’s HDI since 1990.
This table shows Brazil’s HDI trends based on consistent time series data.

The emerging agribusiness, processing, logistics and production, contributes to the rising infrastructure and employment in rural Brazil, with direct effects on local standards of life[9]. However, some case studies show that agricultural expansion has been income and land concentrated and led to rural conflicts and loss of environmental services important for supporting local air, water and soil conditions [9].

Sugarcane production in Brazil has had negative impacts on labour conditions. The side effects to working in labour of sugarcane production are diseases such as back pain, neck pain, bursitis and tendinitis arthrosis [9]. These diseases are associated with movements forcing bad posture and being exposed to detrimental environmental conditions. Research shows that harvesters are at higher risk of cancer due to use of pesticides and exposure to sugarcane soot [9]. Some case studies report that respiratory and allergic diseases are not accounted for because of the lack of financial resources [9]. In the sugar sector one of the major concerns is forced labour and unfavorable labour conditions, this issue has been addressed by some organizations like Reporter Brasil [9]. Irregularities concerning the labour law are seen as slavery like conditions. In Sao Paulo in 2009 there was no evidence of forced labour but some cases of labour irregularities were discovered the same year [9]. Many cases show lack of rest after six consecutive hours of manual work, and overtime hours without authorization, and irregularities in Personal Protective Equipment (PPE) along with lack of hygiene in toilets [9].

Studies were conducted to assess the impacts of ethanol, sugarcane and sugar production in the socioeconomic indicators of a region [9]. In approaching the matter, the HDI-M (Human Development Index of Municipalities) was used as an indicator to assess the quality of life [9]. The main focus was to identify how the HDI is influenced by the sugarcane sector in the municipalities in the state of São Paulo [9]. For explanatory variables, researchers investigated indicators that could potentially affect human development as taxes collected, costs with health, relative significance of each sector, and the sugarcane sector involvement in the municipality [9]. The presence of industrial plants in the city is estimated by a binary variable and the same to label municipalities where the growing of sugarcane is the main agricultural activity [9]. In concluding the study, it was found that if the cross effects are not accounted for, the sector’s existence improves HDI-M for municipalities that have sugarcane as the principal agricultural activity [9]. However, when examining the cross effects of binary variables on other variables like tax collection, the business has negative impacts [9].

Employment in Sugarcane Production

Sugarcane plantation owners relied on African slaves to perform manual labor at the end of the 16th century. [10] Before slavery was legally abolished nationwide in 1888, more than 3.5 million slaves were shipped had been shipped to Brazil. [10] After slavery was abolished, sugarcane plantation owners had plenty of ex-slaves to choose from to hire for cheap labor purposes. [10] These workers received housing usually on the edge of the plantation and little or no pay for working part of the week. [10] They were not able to work on any other plantations, the plantation owners could at any time force the residents to work on the plantation, and workers constantly faced the threat of eviction. [10] In 2009, A National Agreement was signed that enforced various labor standards and criminalized informal recruitment. [10] In 2018, sugar production was found with the highest formalization rate within Brazil’s agriculture with roughly 1 million formal workers. [10] Workers are payed for their output during the harvest period and in the offseason their wages often do not surpass the official minimum wage. [10] Official minimum wage was $294 USD as of May 2017. [10] Formally employed workers receive entitlements such as paid holidays, year-round contributions to pension, and severance pays in case of dismissal. [10] Wage work became regulated by Consolidação das Leis do Trabalho (Consolidation of Labor Laws, CLT), and their regulations entail three different types of employment contracts. [10] A permanent contract ensures secure employment and is standard. [10] A seasonal contract follows the harvest period and is fixed in duration meaning it is finished at the end of the harvest. [10] The fixed-term contract lasts up to 90 days and is usually for inexperienced workers. [10]

In 2013, Brazil produced 28 billion litres of sugarcane ethanol making them the largest producer worldwide. [11] During that year, approximately 10 million hectares of planted sugarcane yielded 768 million tons of sugarcane. [2] From 2000 to 2013, the number of mills in Brazil increased by a rate of 171% allowing for 3.6 million metric tons of sugarcane to be processed daily. [2] The total amount of sugarcane crushed by mills in Brazil grew from 170 million tons to 560 million tons between 1980 and 2012. [2] Total annual amount of sugarcane ethanol is generally at a constant increase. More than 700 000 direct jobs and 200 000 indirect jobs were reported in 2011 as a result of Brazil’s ethanol production. [1] Sugarcane production employs roughly 630 000 people in agriculture. Within the industry, mechanization is phasing out most manual cane cutting. [1] Experts believe that the shift to mechanization will eliminate 50 000 to 200 000 jobs in agricultural sugarcane cultivation. [1] São Paulo leads Brazil in producing sugarcane and formally employed 175 021 workers in 2009. [4] A vast number of indirect jobs are required for producing sugarcane. Brazilian firms construct and install mills and Brazilian companies supply the large bulk of equipment used. [1] Brazilian industries such as metalworking and equipment manufacturing have been tightly connected to sugarcane regions such as São Paulo for some time. [1]

Effects of Sugarcane Production in Different Regions

Sugarcane regions in Brazil

Brazil’s economic structure and socioeconomic conditions vary throughout its geographic regions. Therefore, the structure of local economies and local potentials for sugarcane expansion result in considerable differences in the impacts of sugarcane production across different regions[11]. Approximately 87 000 km2 of land is designated for farming sugarcane, where about 91% of this land is situated in the south central region of Brazil, mainly in São Paulo[12][13]. In São Paulo, the presence of sugarcane processing facilities raised the real municipal GDP per capita by an average of $76 from 2000-2008[13]. During this time, there was also a positive spillover effect in which the sugarcane industry in Sao Paulo raised the real GDP per capita by an average of $31 in each of the 15 closest neighbouring municipalities[13]. In general, municipalities with sugarcane production industries have relatively higher per capita GDPs and also score higher on the Human Development Index (HDI) than those without[11].

The effects of sugarcane production can also vary even within the different local communities of São Paulo. For example, Ortolan Fernandes de Oliveira Cervone, et al., ‘s (2018) study focused on local perceptions of the impacts of sugarcane farming in Capivari and Agissê, two municipalities in São Paulo with significant sugarcane production. Sugarcane farming in Capivari is often traditionally performed, while in Agissê, it is more large-scale and intensive[12]. Due to the harsher environmental impacts of large-scale intensive farming, locals in Agissê were more critical of sugarcane farming than those in Capivari[12].

Effects of sugarcane farming are not only unequally distributed geographically, but also over various income classes. Brinkman, et al., ‘s (2018), study found that over 60% of employment impacts from sugarcane production have larger effects on those in income classes lower than the minimum wage. Overall, the impacts and the ability for a community to benefit socio-economically from sugarcane production expansion depends on characteristics of the economy of the region itself[11].

Potential of Electricity Production through Sugarcane Biomass

Sugarcane is an important source of renewable energy in several countries around the world[6]. Sugarcane and biomass sourced electricity are renewable sources of energy that are low-cost and make use of waste products to power the economy[6]. Bagasse, a former waste-product of the sugar-milling process, is now used to generate electricity to power sugar mills[5]. As the sugar mills are energy self-sufficient, the cost is lower and leads to more competitive prices for Brazilian sugarcane[14]. The surplus energy is sold to governments and adds to the electricity grid, improving security of electricity supply[5][15]. After the energy crisis in 2001, the Brazilian government prioritized the energy sector and encouraged investments to improve energy security[5].

Sugarcane mill roller used to process sugarcane crop

In Brazil, sugarcane has grown to be the main source of renewable energy since 2007 and accounts for 18.2% of the nation's total energy supply as of 2009[16]. As of 2018, the sugarcane sector accounted for more than 80% of all bio-electricity[14]. It is also reported that less than a quarter of sugarcane bio-electricity is harnessed and the true potential is at 142 thousand GWh, creating the possibility for a large shift in the energy sources used by the economy[14].

Another benefit of electricity produced from sugarcane, is that it reduces the climate change and weather related vulnerability caused by hydropower[5]. In 2018,11.4 Brazilian homes benefited from sugarcane bio-electricity and more than 80% of this electricity was added to the grid during 'dry period' which is when hydropower is least productive[14]. Hence, electricity production through sugarcane improves electricity surplus while reducing risks posed by other renewable energy sources like hydropower and solar energy. This will reduce uncertainty related risks caused by other renewable sources and protects local citizens from sudden economic losses[5].

However, with decrease in water availability due to erratic weather patterns, sugarcane production could potentially be affected as water levels and soil conditions may affect the crop’s growth[6]. Using current climate models and projections, the yield is projected to decrease by anywhere between 20-40% in the future [6]. This would heighten vulnerability of energy systems to climate change because of the increase in frequency of drought and flooding, along with altering current water and crop cycles[6].

Sugarcane production has many advantages, because of low cost and less vulnerability to water availability as in hydropower. However, dependence on one crop may prove to be disastrous with upcoming changes in climate and weather patterns[6]. The unpredictability of the extent to which sugarcane production may be affected by changing climate causes potential risks to the energy sector and all the citizens dependent on this energy source[6]. Particularly in developing countries like Brazil, because of less technologically advanced methods to respond to climate change[6].

Conclusion

Brazil, out of most countries in the world, has the greatest potential for sugarcane production which makes its production of ethanol, one of the most competitive and leading biofuels in the world. In terms of contributions to the national economy, the production of ethanol has the greatest potential in increasing GDP, trade and employment rate. Production of ethanol though sugarcane production varies from region to region in Brazil and allows for the creation of jobs, thus contributing to the national economy. Brazil's transition from slavery to informal employment, and finally formal employment [10] is important for the well-being of workers. Although many workers are directly hired, indirect employment is an essential role that sugarcane production plays in Brazil's economy. [1]

Although sugarcane production in Brazil has many negative social impacts, we must not forget the positive effect it has on the country’s HDI. Research has confirmed that municipalities in Brazil with sugarcane production have better socioeconomic indicators compared to similar municipalities without sugarcane [3]. Additionally, sugarcane use in bio-electricity production has improved energy security in Brazil which has benefited the country socially and economically[5]. Potential mitigation strategies to combat climate change related sugarcane yield reduction may reduce the possible disadvantages of relying on sugarcane bio-electricity[6].

References

  1. 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 "Analysis of socio-economic impacts of sustainable sugarcane–ethanol production by means of inter-regional Input–Output analysis: Demonstrated for Northeast Brazil". https://www-sciencedirect-com.ezproxy.library.ubc.ca/science/article/pii/S1364032113004954?via%3Dihub.  External link in |journal= (help) Cite error: Invalid <ref> tag; name ":2" defined multiple times with different content
  2. 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 "Interregional assessment of socio-economic effects of sugarcane ethanol production in Brazil". https://www.sciencedirect.com/science/article/pii/S1364032118300340.  External link in |journal= (help) Cite error: Invalid <ref> tag; name ":1" defined multiple times with different content
  3. 3.0 3.1 3.2 3.3 3.4 "The use of socioeconomic indicators to assess the impacts of sugarcane production in Brazil. Renewable and Sustainable Energy Reviews". ScienceDirect. 
  4. 4.0 4.1 Moraes, Márcia Azanha Ferraz Dias de (2014). Production of ethanol from sugarcane in brazil: From state intervention to a free market. Switzerland: Springer. p. 190. ISBN 3319031392. 
  5. 5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7 Khatiwada, Dilip; Seabra, Joaquim (2012). "Power generation from sugarcane biomass - A complementary option to hydroelectricity in Nepal and Brazil". Energy. 48: 241–254. 
  6. 6.0 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 Zhao, Duli (2015). "Climate Change and Sugarcane Production: Potential Impact and Mitigation Strategies". International Journal of Agronomy. 
  7. "Economic, environmental, and social impacts of different sugarcane production systems". https://onlinelibrary.wiley.com/doi/abs/10.1002/bbb.1829.  External link in |journal= (help)
  8. 8.0 8.1 "Inequalities in Human Development in the 21st Century" (PDF). United Nations Development Programme. 
  9. 9.00 9.01 9.02 9.03 9.04 9.05 9.06 9.07 9.08 9.09 9.10 9.11 9.12 9.13 9.14 "Potential impacts on local quality of life due to sugarcane expansion: a case study based on panel data analysis". SpringerLink. 
  10. 10.00 10.01 10.02 10.03 10.04 10.05 10.06 10.07 10.08 10.09 10.10 10.11 10.12 10.13 10.14 Queiroz, Allan S (2018). "Unintended consequences of job formalisation: Precarious work in Brazil's sugarcane plantations". International Sociology. 33: pp. 128–146. 
  11. 11.0 11.1 11.2 11.3 Brinkman, Marnix (2018). "Interregional assessment of socio-economic effects of sugarcane ethanol production in brazil". Renewable and Sustainable Energy Reviews. 88: pp. 347–362. 
  12. 12.0 12.1 12.2 Cervones, Camila Ortolan Fernandez de Oliveira (July 2018). "Resident perceptions of the impacts of large-scale sugarcane production on ecosystem services in two regions of Brazil". Biomass and Bioenergy. 114: 63–72. 
  13. 13.0 13.1 13.2 Moraes, Marcia Azanha Ferraz Dias de (August 2016). "Accelerated growth of the sugarcane, sugar, and ethanol sectors in Brazil (2000-2008): Effects on municipal gross domestic product per capita in the south-central region". Biomass and Bioenergy. 91: 116–125. 
  14. 14.0 14.1 14.2 14.3 "Chapter 13 - Bioelectricity of sugarcane: a case study from Brazil and perspectives". Sugarcane Biorefinery, Technology and Perspectives: 255–279. 2020. 
  15. "Environmental and economic assessment of sugarcane first generation biorefineries in Brazil". Clean Technologies and Environmental Policy. 14: 399–410. 2012. 
  16. "Life cycle assessment of Brazilian sugarcane products: GHG emissions and energy use". Biofpr. 5: 519–532. 2011. 


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