Brazil's public sector investments in the sugar-ethanol complex fell 13% in the first half of 2011 compared with the same period a year ago to Real 2.9 billion ($1.85 billion), data from Brazil's development bank BNDES shows. In 2010, total governmental investments in the sector in the first half of the year amounted to Real 3.36 billion.
With higher interest rates and fewer projects in its portfolio, BNDES forecast investments in 2011 to reach between Real 6 billion and Real 6.5 billion against an all-time high of Real 7.6 billion last year.
As of April 1, BNDES has raised the cost of borrowing to 8.7% versus rates that hovered between 5.5% and 6.5% in 2010.
Despite a year-on-year decline in overall investments, the share of funds given to projects related to coogeneration of energy rose markedly to Real 435 million from Real 154 million in 2010.
In Brazil, most advanced mills can produce electricity from burning the sugarcane bagasse that comes out of the ethanol production process. They then sell it back to the grid to help offset variable costs.
Ethanol experts have pointed out that coogeneration of electricity has become a key element for profitability in the sector after the global economic downturn of 2008-2009 when Brazilian mills struggled to stay open. All other categories of investments also fell compared to 2010.
While Real 440 million were invested in the expansion of sugarcane fields compared to Real 465 million in 2010, funds for the industrial production of sugar and ethanol fell to Real 2 billion from Real 2.7 billion a year ago.
