Brazilian Industry Part 1

In this article there will be purely facts, I'll do the analysis another time.

A Brief History Lesson

Brazil’s industrial development has been brisk during the last two decades. Between 1947 and 1960, when the import substitution industrialization strategy was at its apex, an outstanding rate of expansion was achieved. After 1960, however, the pace of industrial expansion slowed down, largely because the existing economic infrastructure could no longer sustain the same high rate of growth.

From 1964 onwards, the federal authorities undertook a comprehensive program to overcome these obstacles and to provide an economic environment conducive to renewed expansion of the industrial sector, both public and private. In the last 25 years, Brazil has succeeded in diversifying and expanding the production of manufactured goods and consumer durables. Furthermore, it has established technologically sophisticated industries especially in the fields of telecommunications, electronic data processing, aircraft production, biotechnology, and new materials. Four key sectors – steel, auto, petrochemicals, and utilities – have played a decisive role not only in the development of the industrial sector, but in the expansion of the economy as a whole.

Petroleum and Petrochemicals

Until 1953, the production of crude oil in Brazil was only about 2,000 barrels a day, and the domestic refining capacity was just over twice that figure, forcing the country to be heavily ependent on imports. In that year, after long and sometimes difficult debates, Congress enacted legislation establishing the state-owned oil company Petrobrás. Having been granted exclusive rights for oil exploration and production, Petrobrás quickly set about identifying commercially viable oil deposits to become a self-sustaining, large-scale enterprise. Private actors were only allowed to participate in the refining and distribution stages. In 1993, the Petroleum Intelligence Weekly classified Petrobrás among the 20 largest companies in the world. In 1994 the Brazilian oil company produced 8.4 billion barrels, becoming the 10th company with the Largest oil reserves in the world. Petrobrás has developed some of the most advanced deepwater drilling technology. In 1995, Congress passed a constitutional amendment removing protectionist barriers that had given Petrobrás a monopoly. And in 1997, the new Petroleum Act further dismantled Petrobrás’ monopoly by allowing private companies to partner with Petrobrás or work independently. In the early 1990s, and considering only proven reserves, Brazil became self-sufficient, being able to guarantee its supply for a minimum of 17.3 years. In 2002, Brazil held the 15th position in the world ranking for largest proven oil reserves (9.8 billion of barrels per year), the 16th position for biggest production, and the 12th in refining capacity.

Brazil’s petrochemical industry has experienced rapid expansion. In 1972, Brazil became the largest petrochemical-producing nation in Latin America. Brazil has three petrochemical complexes located in the states of Bahia, Rio Grande do Sul and São Paulo, and two more are projected: a second one in the state of São Paulo, and on in the state of Mato Grosso, associated with the Bolivian natural gas pipeline. The main products are plastics, fertilizers and synthetic textiles. In 2002, Brazil produced around 3 million tons per year, which corresponded to 3 percent of the world’s production.

Ethanol

To better balance Brazil’s petroleum consumption with its crude production, intensive research was conduced from the late 1960s through the early 1970s to identify an economically viable alternative to oil as a fuel source. The National Alcohol Program, set up in 1975, began with the production from sugar cane of anhydrous fuel ethanol, which was blended with gasoline at about 11 percent. By 1979, the program was extended to include the production of hydrated alcohol, which was used pure to power new and converted vehicles. The high point was reached in 1986, when 95 percent of the new passenger cars sold was powered by alcohol, and the fleet of alcohol-fueled vehicles totaled 4.5 million. In 2002, the production of ethanol, both anhydrous and hydrated, reached 12.6 million m3, having increased 9.8 percent in relation to 2001. The government increased the proportion of anhydrous alcohol blended with gasoline to 25 percent by then of 2002.