São Paulo: Day 3 - Full Day Business Visits

Trip Start Jun 01, 2013
1
6
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Trip End Jun 12, 2013


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Flag of Brazil  , State of Sao Paulo,
Wednesday, June 5, 2013

Itinerary

6:00AM Breakfast at hotel, Restaurant Amaranto
9:00AM Depart Hotel

10:00A-11:30A: UNICA - Brazilian Sugarcane Industry Association http://english.unica.com.br/
Speaker: Luana Maia - Institutional Relations Coordinator
Topic: Overview of Ethanol and Sugarcane in Brazil

12:00-1:45PM Lunch at Tree Gourmet buffet

2:30P-4:30P: Apontador
http://www.apontador.com.br/institucional/en/index.php
Speaker: Moacir Kang - Co-Founder
Topic: History and Founding of Apontador - leading geolocations site in Brazil

5:00PM After visits, return transfer to hotel
Dinner on own

Today started off with a visit to UNICA, The Brazilian Sugarcane Industry Association, where our speaker Luana Maia Oliveira gave us some very interesting background to the sugarcane industry. At first I was not sure what I would get out of this visit, but it turned out to be one of the most interesting, eye-opening and one of my favorite visits of the trip.

UNICA is the largest organization in Brazil representing sugar, ethanol and bio-electricity producers. It was created in 1997, following a consolidation process involving regional organizations in the State of São Paulo after government deregulation of the sugar and ethanol sectors. UNICA members answer for more than 50% of all ethanol produced in Brazil and 60% of overall sugar production. The organization is run by a Board of Directors composed of representatives of its member companies, and a full-time group of experienced executives, specialists and technical consultants whose expertise covers relevant areas such as the environment, technology, energy, international trade, corporate social responsibility, legislation, economics and communications. UNICA's mission is to play a leading role in the consolidation of the Brazilian sugarcane industry as a modern agroindustrial complex equipped to compete sustainably, in Brazil and around the world, as suppliers of ethanol, sugar and bio-electricity.

Five centuries ago, sugar was worth almost as much as gold throughout Europe, because its production was limited to quantities that couldn't meet the demand. That made growing sugarcane a very profitable enterprise, which couldn’t be pursued in Europe primarily because of inadequate climate conditions. Thanks to their seafaring prowess, the Portuguese were among the few who ventured out in search of new lands to explore. One of their objectives was to plant sugarcane in newly discovered areas in order to produce sugar. Examples of this include sugarcane plantations in Cape Verde, the Azores and Madeira islands, all of which were settled by the Portuguese. In Brazil, cultivation began in 1532 after the first expedition by famed navigator and explorer Martim Afonso de Souza. At the outset, sugarcane was planted in regions rich in massapê-type soil, under hot and humid tropical conditions, with slave laborers brought from Africa. Thus began Brazil’s first Economic Cycle, known as the "Sugarcane Cycle".

By the 1800s, Brazil, once the world’s biggest sugar producer, fell to fifth spot with only 8% of world production. With the end of the "Coffee Cycle" in the 20th Century, there was a resumption of sugarcane cultivation to produce sugar for the internal market. The states of São Paulo and Rio de Janeiro became main suppliers for Southern Brazil, bringing about a decline for the sector in the Northeast. To get around the crisis caused by the growing number of sugar production and refining facilities, the Sugar and Alcohol Institute, known as the IAA, was created in 1933 by the federal government. Its main objective was to control production and keep prices steady, which meant that each mill could only produce within a pre-established quota. As sugar production began to spread around the world, and attempts to ensure the competitiveness of Brazilian sugar proved ineffective, the first oil crisis in 1973 became a new and vital ingredient. It provided a unique alternative for Brazil’s sugar producers to regain competitiveness: the production of fuel alcohol, or ethanol.


In 1975, the Brazilian government launched its National Alcohol Program, known as Proálcool, which diversified the output of the sugar industry. Significant investments were made, with support from the World Bank, to allow for the expansion of areas cultivated with sugarcane and the introduction of ethanol distilleries. Amid the worldwide petroleum crisis, the experience helped reduce Brazil’s vulnerability and increase energy security. Engineering advances following the second global oil crisis, in 1979, led to the development of engines powered strictly with hydrated ethanol. By 1984, automobiles equipped with “alcohol engines” accounted for 94.4% of overall production by major automakers established in Brazil. After 1986, the lessened effects of the oil crisis combined with government economic plans designed to fight high inflation to cause a downward slide in the production of strictly ethanol-powered automobiles. This led to an ethanol supply crisis in 1989, and a plunge in the production of ethanol-powered vehicles, which fell to about 1% of all vehicles on the road by 2001.

Falling demand for hydrated ethanol (E100) was compensated by an increase in the use of anhydrous ethanol mixed with gasoline, thanks to the expansion of Brazil’s light vehicle fleet. By then, in 25 years of large scale use of ethanol, Brazil had developed engine technologies and
distribution logistics that were unprecedented in the world. The network of fueling stations in which pure ethanol could be purchased reached 28 thousand. In March of 2003, Flex-Fuel vehicles were introduced. These could run on ethanol, gasoline or any mixture of the two, thanks to technology that could identify the precise fuel mixture in the tank at any given time, and adjust engine performance to match. The novelty led to a new wave of growth in the sugarcane industry, which was helped along by concerns surrounding the availability and cost of fossil fuels and growing fears about the environment and global warming. All of these combined to make ethanol an increasingly viable and important renewable fuel alternative, for Brazil and the
world.

As of late 2007, sugarcane fields occupied about 7.8 million hectares in Brazil, or about 2% of all arable lands available in the country. This makes Brazil the number one producer of
sugarcane in the world, followed by India, Thailand and Australia. Main production regions are South-Central Brazil, where close to 90% of overall production is concentrated, and the Northeast, which accounts for the remainder. There are two harvests per year, which allows Brazil to produce sugar and ethanol year round for both the internal market and for export. With the end of government involvement in the sector in the late 1990s, free market rules became the norm, without subsidies. Sugar and ethanol prices have since been set according to
supply and demand variations, while sugarcane prices became hinged on quality and percentage share in the finished products. To properly manage and balance both production and demands from within the sector, the industry has sought to create market instruments, such as futures trading, while developing new opportunities for both sugar and ethanol through the removal of protectionist barriers. The industry is also heavily involved in efforts to develop standards for ethanol, as a first step to make it a globally tradeable environmental commodity.

Brazil’s 37-year-old ethanol fuel program is based on the most efficient agricultural technology for sugarcane cultivation in the world, uses modern equipment and cheap sugar cane as feedstock, the residual cane-waste (bagasse) is used to produce heat and power, which results in a very competitive price and also in a high energy balance (output energy/input energy). The U.S. EPA designated Brazilian sugarcane ethanol as an advanced bio-fuel due to its 61% reduction of total life cycle greenhouse gas emissions, including direct indirect land use change emissions.

There are no longer any light vehicles in Brazil running on pure gasoline. Since 1976 the government made it mandatory to blend anhydrous ethanol with gasoline, fluctuating between 10% to 22%, and requiring just a minor adjustment on regular gasoline engines. In 1993 the mandatory blend was fixed by law at 22% anhydrous ethanol (E22) by volume in the entire country, but with leeway to the Executive to set different percentages of ethanol within pre-established boundaries. In 2003 these limits were set at a minimum of 20% and a maximum of 25%. Since July 1, 2007 the mandatory blend is 25% of anhydrous ethanol and 75% gasoline or E25 blend. The lower limit was reduced to 18% in April 2011 due to recurring ethanol supply shortages and high prices that take place between harvest seasons. The Brazilian car manufacturing industry developed flexible-fuel vehicles that can run on any proportion of gasoline (E20-E25 blend) and hydrous ethanol (E100). Introduced in the market in 2003, flex vehicles became a commercial success, and together with the mandatory E25 blend throughout the country, allowed ethanol fuel consumption in the country to achieve a large market share of the gasoline-powered fleet. Today, there are 15 Automakers in Brazil with over 90 models of cars an motorcycles that have flex fuel engines.

Brazil's sugar cane-based industry is more efficient than the U.S. corn-based industry. Sugar cane ethanol has an energy balance seven times greater than ethanol produced from corn. Brazilian distillers are able to produce ethanol for 22 cents per liter, compared with the 30 cents per liter for corn-based ethanol. U.S. corn-derived ethanol costs 30% more because the corn starch must first be converted to sugar before being distilled into alcohol. Despite this cost differential in production, the U.S. did not import more Brazilian ethanol because of U.S. trade barriers and import tariffs. Sugarcane cultivation requires a tropical or subtropical climate, with a minimum of 24 inches of annual rainfall. Sugarcane is one of the most efficient photo-synthesizers in the plant kingdom, able to convert up to 2% of incident solar energy into biomass. Sugarcane production in the United States occurs on a limited basis compared to Brazil in Florida, Louisiana, Hawaii, and Texas.

Ethanol produced from sugarcane provides energy that is renewable and less carbon intensive than oil. Bio-ethanol reduces air pollution thanks to its cleaner emissions, and also contributes to mitigate global warming by reducing greenhouse gas emissions. Brazil is currently also working on 2nd and 3rd Generation technologies that will expand the uses of ethanol from simply a fuel source to use in the manufacture of detergents and solvents, cosmetics, lubricants, bio-plastics and polymers, plastic bottles, tires and packaging. I had no idea that so many products can be made from sugarcane, and with the rest of the world wanting to reduce their dependence on foreign oil, I think Brazil is poised to become a major player, if not the world leader in the supply and export of ethanol as a viable fuel source to many countries around the world. They are ready for the challenge, however do not want to invest in new mills and expansion of their crops until the world wide demand for ethanol increases, which is understandable. The bottom line is, if the world decides to explore the increased use of ethanol, Brazil is in the perfect position to step in and supply the demand.

The UNICA offices are in a very nice part of town right across the street from a very high-end mall called Iguatemi. We had a few minutes to take a walk through the mall and see all the high-end designer brands that we are used to seeing in the USA, albeit at a much higher price point. Brazilians love their American culture and brands, and it was very interesting to see the difference in the people that frequent this mall compared to the mall that we visited a few days ago. The street that we were on was also littered with high-end car dealerships, and Porsche's, Mercedes, BMW's and Ferrari's were everywhere, stark contrast to some of the other areas we had been in. The contrast between rich and poor is evident every day as you move around the city of São Paulo.

We moved onto a little restaurant called Tree Gourmet for our lunch. It was another buffet style restaurant, with very tasty food and Caipirinha shots (yes, they serve them for lunch - loved it). From there we took a little walk to our next business visit through an neighborhood called Vila Olimpia. It was a mixed residential and commercial neighborhood with a vibrant crowd of young professionals. As we walked what struck me was the amount of new high-rise construction that was going on in the city. There was definitely a growth spurt in the city of São Paulo.

We arrived at our next visit, Apontador, and were met by the co-founder and CEO, Moacir Kang (He told us to call him Mo). Apontador is an Internet technology company consists of two sub-companies, Apontador Search (the Bing of Brazil) and MapLink (the Google Maps of Brazil). It was interesting for me to find out that companies such as Bing and Google actually utilize the Apontador databases for their search capabilities, and that if you use any of those services in Brazil, you are actually actually accessing Apontador data. Apontador is the number one local search engine in Brazil with 17 million visitors, and MapLink is the number 1 traffic info site in Brazil covering 23 cities with 7.5 million points of interest and 2 million user contributions (e.g. likes, reviews, etc.) They also provide software as a service for tracking services through a partnership with one of the major mobile phone carriers in Brazil, Telefonica Vivo. When comparing Apontador to other technology companies, they are the only privately held company in the top 20 list of technology companies worldwide. In the top 20 list, Google is number 1, followed by Facebook in the 2nd spot, and Microsoft in 3rd place. Yahoo is placed 7th, and Apontador is in 18th just ahead of Twitter in 19th position, and LinkedIn in the 20th spot.

The MapLink side of the business covers 930,000 km of roads, and tracks cars for traffic conditions by monitoring over 800,000 cars sending 80 million positions daily to the map link servers. Due to the high crime rates in Brazil, most insurance companies will not ensure a vehicle without a tracking device, and Mo's company uses these tracking devices to track vehicles and monitor traffic patterns, as well as send re-route information and real-time traffic data back to mobile GPS units.

One of my biggest frustrations while being in Brazil was the quality and usability of the Internet infrastructure. While Brazilians are used to it and think it is better than what they have had to date, it is nowhere near as dependable and fast as the services offered in the USA. While Mo believes that the technological infrastructure needs increasing, he feels that physical infrastructure (roads, railways, etc) is in greater need of improvement. However, he is also able to use his data to drive improvements in fleet management, insurance, and many other infrastructure areas. His companies are definitely growing, and they are currently in the process of looking for new premises, as they do not have anymore room for people to sit. With the accelerated growth of the company, he is constantly trying to find ways to motivate his employees, as the technology talent pool is very expensive and scarce in Brazil.

When asked about sustainability, he replied that his companies practice sustainability due to making traffic patterns better, reducing pollution due to less people having to sit in traffic, as well as providing ride share apps for people to reduce their daily usage of motor vehicles.

Basically, Mo's companies gathers electronic data, and then resells it to anyone who is willing to pay for it. It was very interesting that we had this visit the day before the news reports came out about the uproar regarding electronic tracking by the Government in the USA, as this is something that has been going on for years. It's called big data, and many companies use it. Have you ever wondered how Amazon suddenly knows what you been searching for and shows you pop-up ads in your Internet browser? Just remember every time you use Facebook to login to a site because you are too lazy to create a new account, you have just given your entire Facebook page to a company to sell your profile to anyone willing to pay for it. Apontador is just one of the companies that constantly gives away "free" apps to people who want to use them, and in return people just blindly enter all their details into these apps, which then becomes their data to use and sell. Before you say that they can't do that, just remember you probably accepted the long list of terms and conditions before accessing these apps, probably without reading it too. They have full right to your data. There is no privacy on the Internet, and anything you send out there is public domain, just like this blog that you are reading... Scary thought.

As this was our last night in São Paulo, we decided to end this part of the trip with a stylish night out on the town. We went to a bar called the Skye Bar which is perched on top of the Unique Hotel (http://www.youtube.com/watch?feature=player_embedded&v=oRL0WLPB37E). The Hotel was shaped like a ocean liner of sorts, with very modern furnishings and finishes - quite spectacular. My photo's just don't do the view any justice, as it was one of the most incredible city views I think I have ever seen. We proceeded to have some cocktails, soak up the view, and reflect on the last few days of visits we have had in São Paulo. We then settled in for a delicious dinner in the Skye Restaurant followed by a quick tour of the lobby area of the hotel thanks to our guide Fernando, who seemed to know everybody there. What an exquisite ending to a wonderful visit to São Paulo - I would definitely return for another visit if I were to get the opportunity to.
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