Showing posts with label competitive advantage. Show all posts
Showing posts with label competitive advantage. Show all posts

Thursday, February 24, 2011

The Independence of Brazilian Culture

Oil is the basis of development for the entire world. Even though it must imported and supplies are limited, nearly all energy is produced from fossil fuels. The oil crisis of the 1970s brought these facts to the everyday lives of citizens around the world. While other nations forgot these lessons within a decade, Brazil drove the movement to rely on their own means of production, in this case sugar-cane derived Ethanol. Over the following decades, Brazil turned this specialized knowledge and local commodity into an engineering and economic boon. It is now the world's most efficient producer of ethanol and produces much of its electricity through sugarcane biomass generation. Why did Brazil choose to embrace this technology at a time when no other nation did? What circumstances were unique to Brazil to make the ethanol industry successful where others failed? The answer lies in Brazil's history of colonization and slave labor, its abundance of fertile land to grow sugar cane, and government commitment to the success of the nation's ethanol program.

When the Portuguese arrived in Brazil in 1500, the population of indigenous peoples was approximately three million; more than Portugal itself. Accounts tell of indigenous tribes being curious and open to trade with the new arrivals. Initially, the Portuguese bartered with the natives to bring brazilwood and other forest items to the coast. However, when the natives had accumulated all the tools and pots that they needed, they showed a lack of interest in continuing the arrangement. Consequently, the Portuguese turned to violent persuasion. The enslavement of the natives shaped much of the history of Brazil that would follow.

How did the country of Portugal, with a population of around one million, conquer a country with over 3 million? There were many tribes, nearly all with different languages and some with histories of war and distrust. The Europeans took advantage of the cultural differences among the Indian peoples to pit one against the other. They used historical vendettas to keep the Indians from uniting against them and subsequently to obtain slaves. The conquest of Brazil was not a simple toppling of an organized empire, but a drawn out process that spread slowly over huge distances, different peoples, and centuries.

Since the arrival of the Portuguese, sugar has been the most important commodity of Brazil.
They realized that some of the most moist and fertile soil in the world is located on the seaboard of what is now the State of Pernambuco. It's climate is very suitable for growing sugar and it is also conveniently located as a port of call for sailing ships traveling from Portugal to West Africa and the Orient. A triangular trade soon flourished, in which slave labor was imported from West Africa to work on sugar plantations. The sugar was exported to markets in Europe where rising demand was beginning to outrun supplies.

While a desire to stay independent of the need to import oil and the abundance of sugar cane make for a great start to ethanol production, the government's commitment to the program is what advanced it to a global powerhouse. First, the government offered credit guarantees and low-interest loans for construction of new refineries. Second, a state trading enterprise began purchasing ethanol at favorable prices. Third, gasoline prices were set to give ethanol a competitive advantage. Fourth, a marketing program was launched, with the slogan “Let’s unite, make alcohol.” Finally, the state-owned oil company, Petrobras, began making investments for distribution of ethanol throughout the country. Without these measures the oil industry might have been able to muscle ethanol out of the market.

Brazil is leading the world in efficient ethanol production because of their history of oppression, their subsequent desire for independence, their bounty of sugar cane, and the support of the government. Lessons can be learned from analyzing how Brazil became successful. While it might not be able to be translated to every country, some might have the opportunity to become more energy independent thanks to the pioneering steps taken by Brazil.


References: 1. Sandalow, David. (2006) ETHANOL: LESSONS FROM BRAZIL
2. Country Studies. Brazil. The Indigenous Population. http://countrystudies.us/brazil/4.htm