Ethanol Blend Reduction in Brazil ‘Makes Sense’ Provided 90-Day Deadline is Respected, Says Brazilian Sugarcane Industry Association

SAO PAULO, Jan. 12 /PRNewswire/ — According to the Brazilian Sugarcane
Industry Association (UNICA), the federal government’s decision to reduce the
anhydrous ethanol content of gasoline from 25% to 20% must be limited to the
established 90-day period.

“The government’s reasons for the temporary reduction are understandable,
but the move must be limited to the 90-day period only. Because of high
prices, consumers who own flex-fuel vehicles are already shifting from hydrous
ethanol back to gasoline, so there is no risk of pumps going dry,” said
UNICA’s Technical Director, Antonio de Padua Rodrigues.

Hydrous ethanol is pure ethanol (E100) used in flex-fuel vehicles, which
run on any mix of ethanol and gasoline. The blend reduction involves anhydrous
ethanol, which is the type of ethanol that is mixed with gasoline. While
hydrous ethanol contains about 5% water content, anhydrous ethanol is
virtually water-free.

The decision to roll back the blend level was announced by the Brazilian
government on Monday (January 11) in Brasilia, following a meeting attended by
UNICA executives. The measure takes effect on February 1 for a period of 90
days. Blend reductions are not new in Brazil — the last reduction occurred in
March of 2006, when the percentage fell from 25% to 20%. The blend level was
raised to 23% in November of that year, and fully reinstated at 25% in July of
2007.

Padua noted that the government should be praised for its open dialogue
with the industry and for setting a timeframe for the measure, with
reinstatement of the 25% blend happening as the sugarcane industry launches
what will be the largest sugarcane harvest in Brazil’s history. “Dropping the
blend requirement is unlikely to change the dynamics of the cane industry,
which will continue to produce more ethanol and more sugar year after year.
All that changed this year was the pace of that increase because of
unseasonable rains that affected the harvest,” concluded the UNICA executive.

Under Brazilian federal law, the anhydrous ethanol content of all gasoline
sold in the country must be between 20% and 25%. The blend range is set by an
interagency board (Conselho Interministerial de Acucar e do Alcool, or CIMA).
The 5% reduction in the blend is expected to result in an additional 100
million liters (26.4 million gallons) of hydrous ethanol available per month,
or around 7 percent of the current monthly demand.

“UNICA has always advocated policies that give consumers options. Over the
last few years, Brazilian consumers have opted to buy flex-fuel cars so they
can chose at the pump which fuel they want to put in their car. Hydrous
ethanol, not gasoline — be it with 20 or 25% anhydrous ethanol — has been
the fuel of choice in Brazil because of its competitive prices and
environmental benefits. We expect that trend to continue, hopefully not just
in Brazil but around the world,” said UNICA’s Chief Representative for North
America, Joel Velasco.

ABOUT UNICA

The Brazilian Sugarcane Industry Association (UNICA) represents the top
producers of sugar and ethanol in the country’s South-Central region,
especially the state of Sao Paulo, which accounts for about 50% of the
country’s sugarcane harvest and 60% of total ethanol production. UNICA
develops position papers, statistics and specific research in support of
Brazil’s sugar, ethanol and bioelectricity sectors. In 2008, Brazil produced
an estimated 565 million metric tons of sugarcane, which yielded 31.3 million
tons of sugar and 25.7 billion liters (6.8 billion gallons) of ethanol.

    MORE INFORMATION:
    CDN Corporate Communications - Sao Paulo, Brazil

    Rosa Webster - (5511) 3643 2707 / rosa.webster@cdn.com.br
    Mariane dos Santos - (5511) 3643 2730 / mariane.santos@cdn.com.br

SOURCE The Brazilian Sugarcane Industry Association (UNICA)