Escola Superior de Agricultura “Luiz de Queiroz” – ESALQ/USP

Third Lemann Dialogue Agricultural and Environmental Issues in Brazil November 7-8, 2013 University of Illinois Márcia Azanha Ferraz Dias de Moraes Professor at the Department of Economics, Business and Sociology ESALQ - University of Sao Paulo

Sugarcane-bioethanol workforce in Brazil: employment, education, social inclusion

1. Social indicators in sugarcane, sugar and ethanol production 2. Brazilian Ethanol Program: main drivers 3. Can it be replicated in other countries?

4. Sustainability issues 5. Final considerations

Sugarcane-bioethanol workforce in Brazil: employment, education, social inclusion

1. Social indicators in sugarcane, sugar and ethanol production

 Job creation  large number of people  inclusion of

low schooling

workers  Official employment ( formal contracts)  Job penetration: production spread all over the country

Production Growth

Sugarcane Production: moved up from 100 million tons to 620 million tons 520%  Ethanol Production: has risen from 4 to 28 billions liters 600% Positive impact on jobs → creation of jobs for thousands of workers →Agriculture (sugarcane): poorly educated workers

Number of formal workers by producing regions and sector 2011

Sugarcane Sugar Ethanol Region NNE CS Total for Brazil NNE CS Total for Brazil NNE CS Total for Brazil Total for Brazil 3 sectors Source: Prepared based on data provided by RAIS, 2011 2011 87,025 278,216 365,241 238,657 336,650 575,307 48,171 165,241 213,412 1,153,960

Sugarcane Production Chain: Main Agents

Sugar Cane Fields 70,000 sugarcane growers

50% harvest manually and 50% mechanically

439,922 employees Industrial Sugar and Ethanol Production 440 Sugar Mills/Ethanol Distilleries 600,000 employees Sugar cane field

 The sector comprises 70k independent producers , accounting for 25% of national sugarcane production  75% of sugarcane comes from self supply of vertically integrated mills ( mills have sugarcane fields plus processing plants) Sugarcane processing plants in Brazil can produce sugar and/or ethanol By products: -Vinasse: used as biofertilizer - Bagasse: eletrical power generation -all plants are self sufficient in eletric power - most efficient sell the energy surplus to the market

Source: MAPA – MME – MDIC – 2005 PNAD (2008) , GEMT (2010)

Production and Job Position in 2011

Jobs in Sugarcane (2011): 439,922

Industrial Units

NNE

78 (20.7%)

CS

298 (79%) 160,809 employees 36.6% Ethanol Production Sugar Production 7% 13% 93% 87% Job Positions 36.6% 63.4%  CS produces about 90% of main products, with 63.4% of the workforce  This is explained by higher agricultural productivity in this region: 279,113 employees 63.4% Operating Sugarcane Mills Sugarcane Mills under construction  better soil and climate conditions  use of mechanized harvesting and planting

Source: Prepared based on data provided by PNAD 2011

Agricultural workers in Brazil, 2011

2,258,276 agricultural workers in Brazil 500 450 439,9 400 350 300 250 200 150 100 50 0 349,5 269,9

(thousand people)

153,2 129,1 116,3 82,6 56,3 49,0

 Sugarcane employees accounts for almost 20% followed by corn (15.5%) and coffee (12%)  Sugarcane:  very impressive number  inclusion of many low schooling people

Source: Prepared based on data provided by PNAD 2011

1 0 3 2 5 4 7 6 6.2

5.8

5.3

Average Schooling of Crop Workers Brazil, 2011

Agriculture 4.4

5.0

4.8

 The average schooling of agriculture workers is 4.4 years of study

4,1 3.9

3.2

3.1

 Sugarcane:  The workers of sugarcane sector have about 4.8 years of study  20% (about 100k workers ) are illiterate

Source: Prepared based on data provided by PNAD 2011

Sugarcane: Average Schooling 2011

2 1 0 7 6 5 4 3 4.8

3.1

5.9

Brazil NNE CS Source: Prepared based on data provided by PNAD 2011 6.3

SP

 4.8 years of study is the average, considering both regions under survey  NNE region has lower education level  The state of São Paulo has the highest level: 6.3 years of school, which still is very low

T HE BANNING OF S UGARCANE B URNING



Rules and Norms

Norms: federal, state and municipal

- Federal Decree # 2.661, July/1998 SP state - State Decree # 42.056, 1997 - State Decree # 28.848, 1988 - State Decree # 10.547, 2000: - State Law # 11.241, 2002 – Deadlines for the end of Sugarcane Burning - Mechanized areas (flat): 2021 - Non mechanized areas: 2031

Environmental Protocol

- June, 2007: SP state and UNICA signed a cooperation Protocol Although non mandatory, producers’ adhesion was close to 100% New deadlines for sugarcane burn halt are: Flat areas: 2014 Non flat areas: 2017

Mechanical versus Manual Harvesting  Burnt sugarcane (manual harvesting) or green cane (mechanical) ?

 green cane: it is more efficient the usage of mechanized harvesting  Prohibition of sugarcane burning: constitutes an advance in environmental terms  it demands fewer workers (one harvester substitutes about 80 workers)  it changes the worker’s profile  it requires training and qualifying programs

Labour Rights - Brazil, 2011

Agriculture 39.0%

 The proportion of workers who are formally employed in the Brazilian agriculture is very low: 40%

100 90 80 30 20 10 0 70 60 50 40 81.0

76.7

69.8

64.1

33.5

27.6

24.1

8.5

3.7

 Sugarcane shows the best indicator:  about 81% of the employees are formally hired  These employees have all labor rights established in the legislation:  enjoy the right to receive unemployment insurance;  remunerated annual vacations  Extra month of salary per year ….

Source: Prepared based on data provided by PNAD 2011

100,0 90,0 80,0 70,0 60,0 50,0 40,0 30,0 20,0 10,0 0,0

Sugarcane: contrasting number of formal

Total 439,922 81,0

and informal workers. Brazil, NNE, CS and São Paulo, 2011

Total 160,809 Total 279,113 88,5 Total 142,185 91,9

 The proportion of formally hired workers in NNE region is lower

67,9 19,1 Brazil 32,1 NNE 11,6 CS SP 8,1

 The state of SP has a very impressive proportion of formally hired workers: 92%

Formal Informal Source: Prepared based on data provided by PNAD 2011

Age Bracket 10-15 15-20 20-30 30-40 40-50 50-60 Number of Employees

95,576 128,578 134,033 106,516 84,041 51,886

Sugarcane: Number of employees by Age Bracket

1981 Total %

15.3

20.6

21.4

17.0

13.4

8.3

Number of Employees

2,095 27,306 134,962 111,345 97,693 58,287

2011 Total %

0.5

6.2

30.7

25.3

22.2

13.2

 Sugarcane sector successfully reduced the proportion of child labor  from 15.3% in 1981 to less than 0.5% in 2011     This is a the results of multiple efforts: Better law observance Requirements of the market itself Government social programs: Bolsa Familia, Bolsa Escola

> 60 Total

24,396

625,016

3.9

100.0

8,234

439,922

1.9

100.0

 Increased the proportion of adult workers

Source: Prepared based on data provided by PNAD 20

Labor Market Regulations

 There is an extensive legal and regulatory apparatus governing the Brazilian labor market, covering all sectors of the economic activity, including workers in the sugarcane, sugar and ethanol sectors  The main regulations for the labor market in Brazil are: (i) The Federal Constitution; (ii) Consolidation of Labor Laws (CLT), (iii) Rural Workers’ Law (5889/73; (iv) Law No. 10.192/2001 that establishes the wage policy.  The organization of workers’ unions is covered in article 5 of the Federal Constitution. – There are annual negotiations (Collective Agreements) between workers’ unions and the sector’s syndicate (in compliance with the legislation)

200 150 100 50 450 400 350 300 250 Rice Cassava

Wages: sugarcane and other crops

 The wages of soya sector are the higest ones  Earning Equation estimated showed that:  After the control of other variables that influence wages:  Schooling  Age  region,  color,  gender, etc The average montly wage of other crops workers in comparisson with sugarcane wages are: Coffee: 9,9% lower; Cassava: 23,2% lower; Corn: 30,1,% lower; Rice: 30,1% lower; Soya: 0,2% lower

Coffee Corn Sugarcane Soya

Brazilian Experience: Could it be replicated in other countries?

 Brazilian soil and climatic conditions are also found in many underdeveloped and developing countries with a large poorly-educated population excluded from the labor market  With appropriate public policies that aim both:  to reduce greenhouse gases emissions  also to include thousands of workers to the labor market Brazilian experience could be replicated, generating jobs, income, and contributing to mitigate CO world 2 emissions in the

Biofuels production: which are the drivers?

Brazil (1975): macroeconomics problems due the oil shocks 1973 and 1979 oil shocks: bad impacts on national inflation and on balance of payments 1975 - Proalcool: to stimulate the production of anhydrous ethanol Second oil crisis had a devastating impact on Brazil’s trade balance, inflation -Brazilian MILITARY government sought to reformulate Proálcool: production of hydrous ethanol Nowadays: international marketing is emerging - Oil importers: reduction of oil dependence - Environmental issues: to develop strategies towards a low carbon economy - There are regulatory policies encouraging the use of biofuels in at least 46 countries at the national level and 26 states and provinces by early 2012(REN, 2012).

(production subsidies, transport fuel-tax exemptions, share in total transport fuel obligations, blending mandates) There is a global demand for biofuels

Biofuels production: where to produce?

África - Natural conditions for developing sugarcane based industry as good as or even better than Brazil - There is available land Host countries perspective: what are the positive aspects?

- To improve economic and social development - To reduce dependency on fossil energy (many countries will suffer with increased oil prices and climate change) - To modernize its agricultural sector

through

sugarcane industry the investments in rural infrastructure (water, electricity, roads, school, training programs), distribution channels, housing, banking, health programs), can have a positive impact in the agricultural sector as a whole To avoid ecological destruction - Sugarcane (bagass) and ethanol: there are sinergies with other energy needs (fuel for cooking) must be produced in a sustainable way

Biofuels production: where to produce?

Africa Host countries perspective: what are the priorities?

- Food security (physical and

economic

access) - Modernize the agricultural sector - Improve (create) infrastructure - Creation of employment and income - Improve rural and urban development Could biofuels contribute?

Challenges

Food versus fuel debate: must be overcome - Land tenure: land for foreigners is a very controversy issue - Large versus small scale: inclusion of small producers - Coordination and rent distribution along the supply chains - To ensure equitable distribution of income along the production chain (sugarcane suppliers, workers) - To accomplish with the existing sustainability criteria

Sustainable Business models

Labor Market

(i) Workers’ profile (manual or mechanical agricultural activities); (ii) (iii) Workers’ availability; Institutional framework (existence of workers’ unions and of legislation and rules regulating the labor market, minimum wage policies) (iv) Local habits

Production modes:

(i) Size, structure, and distribution of land and property (patriarchal and matriarchal systems of inheritance, community organization); (ii) Small versus large scale; (iii) Transaction costs and coordination issues (agricultural producers’ cooperatives)

Sustainability Criteria

There are several patterns o o o

Bonsucro (Better Sugarcane Initiative)

ISCC (International Sustainability & Carbon Certification) 2009/28/CE European Union Diretive o o o Roundtable On Sustainable Biofuels (RSB) Greenergy Protocolo Agroambiental (Brasil) o GBEP

Do all the requirements make sense?

How will the new producers deal with them?

Several social and environmental principles

Economic Viability of Hydrous Ethanol    Viability of the hydrous ethanol is dependent on the federal fuel pricing policy, which currently aims to control inflation by maintaining prices of gasoline at the refinery, regardless of fluctuations in production costs and oil prices on the international market  this police reduces hydrous ethanol competitiveness with gasoline, in terms of the relative pump prices The government must set a nationwide energy policy and establish an energy matrix, making it clear to society what is the role of each fuel from a long-term perspective.  the energy mix would allow planning ethanol production, which becomes particularly important when one considers that ethanol is made from agricultural raw materials, making its production subject to adverse weather conditions as well as to the seasonal nature of sugarcane cultivation The lesson to be learned from the Brazilian experience is that, in a free market environment, without clear rules, the sugarcane ethanol industry cannot garner the level of investment needed in order to meet the potential demand for biofuels

FINAL CONSIDERATIONS

Socioeconomic aspects of the Brazilian production  Solid institutional apparatus that regulates the labor market  Large number of jobs created in the three sectors (sugarcane crops, sugar and ethanol): surpass one million formal jobs  Positive impacts on development of rural areas , spillover effects  There have been an improvement of the indicators of the sugarcane:  Better observance to labor and environmental legislation   Better working conditions Greater number of formal jobs in sugarcane sector  Reduction in underaged workers   Investment in training and qualification Social and environmental certification programs adopted by companies  Lessons from the Brazilian experience can be useful for new producers

Production of Ethanol from Sugarcane in Brazil: from State Intervention to a Free Market Book co-authored with Prof David Zlberman (UC Berkeley) Origin of Proalcool, the role of the military government, and the deep state intervention existing on the sugarcane, sugar and ethanol sectors at that time The process of deregulation occurred from the late 90s, and the challenges and changes faced by the stakeholders in a free market environment The new rules and changes since 2000, the international interest in alternatives to oil, the new environmental and social agendas, the financial constraints, and ultimately how we see the future of biofuels in Brazil.

Marcia Moraes and David Zilberman

LABOR MARKET RESEARCH AND EXTENSION GROUP

http:www.esalq.usp.br/gemt

Thanks for your attention Feel free to contact [email protected]

Food versus Fuel

Several authors (Adami et al. 2012, CGEE 2012, Goldemberg 2008, Goldemberg et al. 2008, Nassar and Moreira 2013, Neves et al, 2011) have presented evidence that the food versus fuel debate in Brazil is not an issue, given the large availability of raw materials and agricultural land in the country; The expansion of biofuel production in Brazil is regulated by several standards These include the Agro-ecological Zoning standard, which considers maps of soil, climate and rainfall, topography, environmental regulation, and the desire to respect areas that should be preserved. It also aims to reduce competition in areas dedicated to food production (MAPA 2009).

According to Rosillo-Calle (2012), biofuel production and food security needs to be complementary. It is important to assess food security impacts from biofuel production, and it is equally important to assess the benefits that these alternative fuels generate if they meet their most important objective, which is the reduction of GHG emissions. Under appropriate conditions, biofuels can even be an important factor for improving the food security in some African countries (Lynd and Woods 2011).