The ethanol supply challenges in Brazil

Oil is currently the target of criticism and concerns on the issues of greenhouse gases emissions, escalating prices and decreasing availability. Brazil, since 1975, has been encouraging ethanol use as a bio alternative, either as a substitute or as an additive to gasoline. The launching, in 2003, of vehicles that can run on any proportion of ethanol and gasoline, reinforced this process. These flex fuel light vehicles are already 33% of the national 25 million fleet and flex fuel car sales are about 91% of new vehicles. These cars have created a self regulated market. Whenever ethanol prices rises too high the consumer switches to gasoline, forcing it down again. Sugarcane, the source of Brazilian ethanol, is a long standing feature of the economy, almost since Portuguese discovery. There is no land shortage in view, since sugarcane uses only 3% of the country´s 340 million hectares of arable land. Still, are there challenges to meet the 18% yearly increase rate of domestic consumption? Today the only limits seem to be lack of capital and much reduced oil prices, both not seen in the foreseeable horizon.