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Submitted by Alex Koberle on
I believe some lessons can be drawn from the biodiesel program of the Brazilian government established in 2005 and currently undergoing implementation. The programme mandates a 5% addition of biodiesel to fossil diesel sold to final consumers. It offers tax incentives and exclusive access to auctions to those refiners that purchase some or all of their raw feedstocks from family farms. The amount they must purchase varies by region in Brazil from 10% in the North and Central-West regions to 50% in the semi-arid and impoverished Northeast. The Social Fuel Certification program is administered by the Ministry of Agrarian Development (MDA in Portuguese) and the goal of this provision is to provide social inclusion by ensuring a buyer for the crops, access to lines of credit and technical training provided by the refiners in what would otherwise be an industry dominated by industrial farms.
These provisions are laudable indeed but the scope of this inclusion has been criticized as not going far enough. One study quotes Professor Celio Berman, from the University of Sao Paulo (USP) who concluded that "small family farmers have been invited to participate in the Programme as mere producers of grains [...] the inclusion of family agriculture was idealized in such a way as to favour large biodiesel producers. The use of labour through family farming allows the large biodiesel producer to operate with a larger margin of profit." The paper continues: "A legislative consultant in the Brazilian Chamber of Deputies, P.C.R. Lima, identified this weakness, stating that ‘‘the current legislation does not establish any incentive for the installation of small units of biofuel production nor for the aggregation of value to the production of raw materials, which will, as always, leave the farmers dependent on the industrial producer." [Garcez and Vianna. Brazilian Biodiesel Policy: Social and environmental considerations of sustainability. Energy 34 (2009) 645–6540]
This is an important point because for one, small farmers too often lack the negotiating skills and conditions needed to procure favorable contracts for their goods and, in the worst cases may even be blatantly taken advantage of. In the Northeast region for example, one refiner is so dominant it produces 90.5% of the biodiesel. This is approaching a monopsony and the farmers stand to lose from competition for their crops [ibid].
I am not claiming that foul play is happening but in a region notorious for its injustices and corruption, these conditions are worrisome. Ideally, any programme that encourages farmers to grow a particular crop should also make provisions for the existence of a market that will absorb those crops at a fair price. Or go even further and provide conditions for the creation of cooperatives to process the crops into finished products, thereby keeping the added value in the hands of the farmers.