METHODOLOGY
Ethanol Based Products Contribution To Brazil’s Economic Growth
Fuel is one of the main factors that contribute either positively or negatively to the economy of a country. Brazil has come up with the invention of fuel from ethanol. This research seeks to find out whether the development and implementation of ethanol based products and technologies have been a contributing factor to Brazil’s rapid economic growth in the past 10 years. It also seeks to establish if it has contributed, will it continue to provide economic growth in the future?
Justification
It is obvious that the world encounters an energy crisis. Ethanol, produced mainly from sugar cane or maize, constitutes 90 percent of biofuels produced in the world (the rest is biodiesel). According to Otaviano Canuto, the head of the World Bank Brazil, ethanol pollutes 60 percent less compared to oil (Foreign Policy No.118, July/August 2007). Sustainable bioenergy: a framework for decision makers, published by the United Nations in April 2007, argues that biofuels are the only short-term alternative to replace oil in transportation which is the main source of the emission of greenhouse gases.
Brazil is one of the countries that risked replacing oil with ethanol. The awareness of renewable energies is a recent issue with few countries investing in research and development of more clean fuels. Brazil is one of the striking examples. Even though it is a third world country, it is trying hard in achieving its development through implementation of various elements in their economic development strategies. In the next 10 years, Brazil plans to triple the ethanol production area by increasing the arable land from three to nine million hectares. The Brazilian government has already signed an internal agreement with farmers and entrepreneurs for the expansion. This is because the plan does not intend to degrade the environment through the cutting down of forests, but rather make use of appropriate grassland and grow soybean crop.
The aim of this research is to understand how the recent trade of renewable fuel will be viable and profitable in less than10 years. In addition, it is meant to help understand the mechanism and ways through which Brazil can survive in this oligopoly ethanol market. Besides regional change, this research will allow us to take a broad view and understanding of the effect of ethanol energy on the automotives whose change is in favor of biofuel, which in turn is jeopardizing the traditional automotive market.
Objectives
1) To determine how ethanol became an alternative fuel in Brazil.
2 To determine the relationship between investment in research and development and economic growth in Brazil.
3) To find out the contributions of ethanol production economically.
4) To determine the importance of biofuel market and Brazilian estimated contribution to automotive construction.
Problem
Sometimes this year, Brazil was ranked number 8 in terms of large and growing economies in the international market. The nation’s economic growth rate is rising faster than that of some European countries like France and England. Brazil is excelling in the economy even though it is difficult to tell how a country with a poverty rate and low literacy as Brazil can be able to maintain such encouraging rates of growth. Besides, ethanol is considered a short term alternative to replace fossil fuels like oil. However, it remains the best option for Brazil to facilitate their growth and maintain the oligopoly.
The questions many beg to ask is whether ethanol production has benefits to Brazil’s development. Again, does the technology promote sustainable growth? Something else worth finding out is whether the renewable energy sector makes changes in the Brazilian economy in the long run. Another question would be whether biofuels have the potential to take the economy to a higher level.
Hypothesis
Hypothesis # 1
Some of the factors that might have influenced or triggered the financial growth of Brazil are the production of new fuel and related technologies. The implementation and development of the energy generation innovations began at the same period with the growth and improvement of the economic structures of Brazil.
Hypothesis # 2
The change in the government from Luiz Inacio Lula da Silva’s to Dilma Rousseff‘s between 2003 and 2011 could also be a factor that influenced Brazils economic structure and growth rate. This is because it created diversified economy reformation laws and agreements.
Hypothesis # 3
The development of ethanol as an alternative can be a short term boost to the economy.
Theoretical Framework
To determine the relationship between ethanol and the economic development of Brazil, this research will make use of several sources. Even though the ethanol energy case is recent, there have been several scholars and researchers who have studied the issue before. Ethanol is a chemical compound derived from the fermentation of sugars that can be used as fuel, either on its own or as a mixture with gasoline in varying quantities. Their use has spread mainly to replace petroleum consumption.
The end result of the ethanol and gasoline, or gasohol mixture is known as gasohol. Two mixtures E10 and E85 are commonly used with an ethanol content of 10% and 85%, respectively. Ethanol is also highly used as an additive for standard gasoline oxygenate, replacing methyl terta – butyl ether (MTBE ). The latter is responsible for contamination of soil and groundwater. It can also be used as fuel in fuel cells.
Due to the energy crisis and unstable oil prices, several countries have tried to find alternative solutions which are biofuel. Some of these countries include: United States, Mexico, Colombia, Venezuela, Europe and Brazil. These countries control the ethanol market. Brazil is one of the main beneficiaries of the biofuels. Even though it is a third world country, it has reported great improvement and economic growth in less than 7 years.
Professor Schumpeter’s theory of innovation states that innovation is one of the factors that bring change in an economy. This is because innovation allows one to be able to come up with new products. He argues that technological inventions create a temporary monopoly market that allows a firm to make profit before competition starts. Schumpeter in the growth theory based on destructive creativity states that it is not possible to have economic growth without the use of technology. The theory goes ahead to state that human capital and creativity are also key factors to introducing innovative production methods. The case of Brazil is one influenced by technology and creativity.
Another important theory is the model of growth through creative destruction by Philippe Aghion and Peter Hewitt. This theory talks about the economic growth through vertical innovation. This is through the combination of methods ideal for the management of businesses.
In the influence of development theory in economic policies in the 1950s and 1960s, there are the cases concerning Argentina and Brazil. These cases talk about more economic development theories that state that the key aspects of the leading theory on economic development are: modernization, dependency, and infrastructure and globalization system. These are the justifications of the theory that help in understanding the efforts countries make to improve the economy. This is particularly in reference to countries facing high poverty rates. This aspect of the theory helps to explain the model as well to give the necessary recommendations to various countries.
A part of the four key aspects of the leading theory on economic development, other theories that illustrate the reasons behind Brazil’s has rapid growth is Dependency. The theory emerged in the year 1950 as a result of a research by the Economic Commission for Latin America and the Caribbean (ECLAC ). One of the researchers Raul Prebish, known for his contributions to the Singer-Prebisch model explains that to create favorable economic conditions, one must apply the following responsibilities: check the currency exchange rates, promote government efficiency, national development issues, creating investment platform, and allowing capital inflow to strengthen industrialization particularly in developing countries among others.
The theory of economic innovation is a principle of financial growth and change that alters the traditional view. Modern economic theories, and the center of these theories are fundamentally built with knowledge, technology, entrepreneurship and innovation. Compared to traditional theories that are partly analyzed as independent elements, modern theories include and count the items as a group responsible for the economic impact of the rules applied. Joseph Schumpeter was the first and most significant economist analyzing economic innovations.
A part of the theories of thinkers will include references as Flex-fuel vehicle adoption and dynamics of ethanol prices: lessons from Brazil.
Miguel tries to focus on the dynamics of the prices of substitute fuels in particular ethanol and gasoline, and how they impact the production growth of a flex-fuel car. Through partially modifying the model used, the results provide an argument strong for the following scenarios: when given the choice between different fuels, the price of ethanol stays more stable. The dynamics of fuel prices are determined by the changes of supply and demand including the price of sugarcane, ethanol, and export demand for flex-fuel vehicles.
The other theoretical work is, Governing biofuels in Brazil: A comparison of ethanol and biodiesel policies. Arthur explains that during the past decade Brazil implemented an innovative program, the National program of Production and Use of Biodiesel (PNPB). The government wanted to avoid any kind of geographical concentration and domineering agriculture. This excluded families who own their own farms. The agreements of bioethanol and biodiesel in Brazil were compared through analyzing the contents of these agreements. However, this was difficult for some politicians and institutions to accept. There were disagreements between the government system and the rules governing energy and agriculture because the two agreements could not match.
Even though the ethanol energy innovation in Brazil has great benefits, the 2008 crisis has been complex. Several factors have been blamed as the cause of this sugarcane-ethanol crisis. Some of the factors mentioned as the causes of the crisis include policies, increase in fuel taxes, lower mandate, the act of holding gasoline prices below the internationally recognized prices among other factors. This is an economic model that tries to explain the crisis. Brazil’s policies governing ethanol and sugarcane are each different and they have a different and unique impact on the market and the prices. Some of the policies affect the prices of gasoline. These policies are low taxes and high levels of tax exemptions. These policies lower the prices of gasoline in Brazil which may not be all that healthy for the economy.
Methodology
The purpose of this research project is to better understand why Brazil is the only third world country that is increasing its wealth and power at such a rapid and firm rate. To expose this phenomenon, this project will combine and employ both a quantitative and qualitative data collection method, but is rooted in a qualitative position that recognizes the importance of locating the research within a particular economic, cultural, and chronological context.
The research methodology involves analyzing significant and relevant data from available documents, professionally published observations, government and private economic reports, as well as other related publications. I will need to get data on the GDP of the country before the establishment of the biofuel industry, and the changes up to date. I will pay key attention to all segments of the economy that use biofuels directly or indirectly and show how they have benefitted from biofuel. I will also get data on the investment made by the government and private players towards the industry. This will be followed by compiling the statistical data in order to analyze the material and arrive at a more complete and clear understanding of historical reconstruction of Brazil’s economic structure and rapid growth. I will also use three distinct theories to guide my analysis of the data. The Schumpeter’s theory of innovation, Aghion and Hewitt destructive creativity, and influence of development theory in economic policies. These theories will allow me to focus on the aspects of my research data and allow me to acquire a definite conclusion.
Analysis of the factor played by research and development towards the giant biofuel industry is necessary. To understand this i need to come up with a timeframe of the development and growth of the industry and the key players. The level of scholar’s research in the field must hold the key to the stable industry. I will visit key government institutions to get the inputs of research. I will also make use of published scholarly reports that were done on the first years of the industry. More information can be acquired from the universities and laboratories that had key roles in the development of the industry.
I will also make use of questionnaires to gather information and public opinion on the use of biofuels. The questionnaires will be aimed at getting specific answers to specific questions regarding energy production in Brazil. I will issue the questionnaires to the energy department, and to a target population in Brazil especially consumers. This will help in understanding what the consumers feel about the entire biofuel as opposed to biodiesel. The government energy department will also share some insights on the development and contribution of biofuel to the economy. Questionnaires are a simpler way of obtaining the desired data. [Sample of the questionnaire located on page: 11]
There will be an intensive study of the economic trades as far as ethanol based products are done. I will also look at the other alternatives and carry out a hypothesis to determine the more viable products. The sampling method will be systematic, where the sample will first be picked randomly. The researcher will select a representation sample of the target population and carry out interviews to get some questions especially the open ended ones. This will help to gather information that cannot easily be captured in a questionnaire. It will also help to get the emotions of the interviewees. Most of the interviews will be conducted on the policy makers in the energy industry. This is because policies were mentioned as one of the factors that influenced the 2008 ethanol sugarcane crisis.
There will also be a bit of observation, whereby the researcher will observe the trends of the customer’s consumption. There will also be observation of the trends in the supply and demand of the biofuels. This will be done by keeping tabs with the reports provided by different bodies associated with the energy industry. Observation will go hand in hand with monitoring of the market trends over some time and comparing to previous periods. This will help in understanding how the biofuels have been fairing over a good period of time. This comparison will help draw conclusions on the performance of the biofuels. It will also make it easier to determine or foresee the future of the fuels. This will help determine if Brazil can still depend on biofuels as a contributor to economic growth in the long run.
Sample Questionnaire questions:
1. Can you give an overview of the contribution of the biofuel industry to the Brazilian economy?
2. What factors informed Brazil to go the biofuel way?
3. Do you experience any drawbacks in the development of the industry?
4. What are the major problems that have been solved by the use of biofuel?
5. Do you feel that there are some aspects of the industry that can be improved to grow the economy further?
6. Do you think overreliance on biofuels might have future consequences?
7. What is the society’s general feeling about the use of biofuels?
Bibliography
Practical implementation of liquid biofuels: The transferability of the Brazilian experiences
Energy Policy. Sep. 2013, Vol. 60, p70-80. 11p.
Flex-fuel vehicle adoption and dynamics of ethanol prices: lessons from Brazil.
Energy Policy. Aug. 2013, Vol. 59, p507-512. 6p
The price for biofuels sustainability.
Energy Policy. Aug. 2013, Vol. 59, p898-903. 6p.
The impact of OECD biofuels policies on developing countries.
Agricultural Economics. Jul 2013, Vol. 44 Issue 4/5, p477-486. 10p.
Biofuel Subsidies and International Trade.
Economics & Politics. July 2013, Vol. 25 Issue 2, p181-199. 19p.
Beyond commonplace biofuels: Social aspects of ethanol.
Energy Policy. June 2013, Vol. 57, p355-362. 8p.
Sugar beet for bioethanol production: An approach based on environmental agricultural outputs.
Energy Policy. Apr. 2013, Vol. 55, p662-668. 7p.
Fuel demand in Brazil in a dynamic panel data approach.
EnergyEconomics. Mar. 2013, Vol. 36, p229-240. 12p.
Brazil’s development bank invests $293 million in cellulosic ethanol firm.
Chemical Week. 1/28/2013, Vol. 175 Issue 3, p13-13. 1/4p.
Brazil Considers a Shift in Transportation Fuels.
Stratfor Analysis. Jan. 2013, p12-12. 1p.
Governing biofuels in Brazil: A comparison of ethanol and biodiesel policies.
Energy Policy. Oct. 2013, Vol. 61, p22-30. 9p.
A game theory analysis of market incentives for US switchgrass ethanol.
Ecological Economics. Sep. 2013, Vol. 93, p42-56. 15p.
A Model of Growth Through Creative Destruction. (n.d.). Retrieved September 2013 from http://www.nber.org/papers/w3223
A Spectral Analysis of World GDP Dynamics: Kondratieff Waves, Kuznets Swings, Juglar and Kitchin Cycles in Global Economic Development, and the 2008?2009 Economic Crisis [eScholarship]. (n.d.). Retrieved September 2013 from http://www.escholarship.org/uc/item/9jv108xp
Joseph A. Schumpeter | Esben Sloth Andersen | Macmillan. (n.d.). Retrieved from http://us.macmillan.com/book.aspx?isbn=9781403996275
Retrieved September 2013, from www.lanacion.com.ar/1602477-se-consume-mas-etanol-en-brasil
Alternative Fuels Data Center: Ethanol Fuel Basics. (n.d.). Retrieved September 20, 2013, from http://www.afdc.energy.gov/fuels/ethanol_fuel_basics.html
BBC News – Brazil GDP beats expectations for second quarter. (n.d.). Retrieved September 23, 2013, from http://www.bbc.co.uk/news/business-23901453
Brazil Economy Profile 2013. (n.d.). Retrieved September 23, 2013, from http://www.indexmundi.com/brazil/economy_profile.html
Are you looking for a similar paper or any other quality academic essay? Then look no further. Our research paper writing service is what you require. Our team of experienced writers is on standby to deliver to you an original paper as per your specified instructions with zero plagiarism guaranteed. This is the perfect way you can prepare your own unique academic paper and score the grades you deserve.
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]