South America Calling

Brazilian sugar and ethanol plants with a combined crushing capacity of 60 million metric tons of sugarcane are close to bankruptcy, according to local business daily Valor Economico, citing industry-commissioned research.

Some 30 plants are multiple months late on payments and have stopped operating, said a report issued by Ricardo Pinto Associados and seen by the newspaper.

The blame is put firmly at the door of the government, which caps gasoline prices in an effort to control inflation. Since most Brazilian cars are flex fuel, gasoline fuel gets a big competitive bump compared with ethanol fuel.

Of the 30 plants near default, some 22 are in the top-producing state of Sao Paulo, which has a total of 190 plants.

According to the Brazilian Sugarcane Industry Association (UNICA), plants with the capacity to mill 40 mmt of cane were closed or had operations suspended between 2012 and 2014.

(AG)

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