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Brazil to invest $2.85bn to fund biofuel and renewable chemical tech research

BRIC country plans to triple funds for biofuel companies developing processes to turn sugar cane into chemicals and boost ethanol output, reports claim

GranBio says Brazil has the best conditions to lead a biotechnology revolution in second-generation ethanol, Bloomberg reports

Brazil will invest BRL 6.1bn ($2.85 billion) to fund biofuel and renewable chemical technology research, according to reports. The development will accelerate its efforts to modernise its energy industry and shift away from a commodity-export based economy, Bloomberg has said.

The BRIC country plans to triple funds for companies including Bunge Ltd. (BG) and Petroleo Brasileiro SA that are developing processes to turn sugar cane into high-margin chemicals and boost ethanol output, said Alexandre Tanaka, an official with Brazil's research-financing agency Finep, Bloomberg reports.

Brazil's ambition is to lead development of the next generation of biofuels after a decade of "hyperinflation stymied research budgets". The country is seeking to become a supplier of fuel-production technology and processes rather than purchasing them from other countries, Tanaka said.

Bloomberg reports "Brazil has traditionally had a policy of substituting imported technology and prioritising commodities in its trade balance," Tanaka said. When the country's economic policies were shaped by hyperinflation "it was unthinkable to invest in projects that yield returns over long periods. Technology innovation is a long-term investment."

Biotechnology revolution

Financiadora de Estudos e Projetos, as the innovation agency is officially known, and the state-development bank BNDES will provide BRL 5.2bn of loans under its PAISS program and another government effort announced in April called Inova Energia, Tanaka said.

Bloomberg said the PAISS program, announced in 2011 with a budget of BRL 1bn, was expanded to meet demand and BRL 3.1bn of loans have been approved to companies including Dow Chemical Co. and Petrobras. This is for research into projects such as converting cane waste into cellulosic ethanol. The agriculture companies are also starting to convert cane into specialty chemicals used in consumer products including skin lotion and industrial lubricants.

Agencia Nacional de Energia Eletrica, Brazil's power regulator, expects utilities to channel BRL 600m into projects in the Inova Energia program, Bloomberg said. The companies are required to invest 1 per cent of net operating revenue on research and development as well as energy-efficiency programs.

"Brazil has the best conditions to lead a biotechnology revolution in second-generation ethanol," according to Bernardo Gradin, chief executive officer of GranBio. The Sao Paulo-based company was approved in May for a BRL 300m BNDES loan to build Brazil's first commercial-scale cellulosic ethanol plant.

"We need companies to take a risk on innovation," said Ricardo Rivera, a manager at national development lender BNDES's department for information technology and communication, Bloomberg reports. "We had some macroeconomic problems in Brazil which sapped the spirit of innovation here."

"We're trying to boost investment in research in areas that we think Brazil can be competitive in," Comin added.

BRIC investment

Around 90 per cent of investment in Brazilian renewable energy research projects were made by governments last year, compared to 68 per cent in China. Government agencies and businesses in Brazil invested USD 112.6m last year in researching renewable-energy technologies, up 15 per cent since 2009. Meanwhile, China spent USD 2.53bn and India spent USD 145.2m million, according to data compiled by Bloomberg.