The market forces made it simple to owners of big distilleries to buy small properties in their neighborhoods. And they were the only ones in a position to have access to credit lines and to cut big deals with Petrobras – the state-owned oil company in charge of blending ethanol and gasoline. In addition, with prices guaranteed by the government, in many case the agricultural frontier was displaced, creating additional transportation costs for perishables – the so called externalities, as international financial agencies like to name it, instead of using social costs, a more appropriate expression. Trucking increased fuel consumption increasing the price of food. Food security then lost its first battle against energy security.

It is worth highlighting the whole program was conceived to supply fuel to cars, not to buses – the sole way of mass transportation in Brazil at the time; nor to trucks, by far and large the main --if not the sole, in many regions – way of transportation of goods in the country, were railroads are almost non-existent (except for the export of pig iron).

The ethanol program was not at all conceived under the concept of “renewable energy”, but only to protect the trade balance from the first oil crisis. No one ever dared to put figures on the social costs of such initiative, which include heavy subsidies for the very wealthy – the price of an equivalent barrel of ethanol was then three times higher than the price of oil.

Now it is time for biodiesel. As usual, the administration claims that it will benefit the very poor, mainly due to tax breaks for biodiesel from castor bean oil. However, these tax breaks are available for companies who produce biodiesel from castor bean oil, and not to the small farmers who actually supply those companies with their raw material, and in spite of the fact that almost all biodiesel in Brazil will be produced from soy.

Castor bean represents a very small fraction of the production of small farmers in the arid regions of the Northeast, the single largest concentration of very poor in Latin America. In these areas, small farmers are barely able to produce beans and manioc for their own subsistence, while castor bean is a marginal product, which brings them very little – if any – additional income.

Brazil had once been the largest world producer of castor bean, a position that was lost to China and India due to lack of public policies for the sector and technical assistance. The international price of castor bean oil in the international market is at least twice the price of diesel. Therefore, it does not make any sense to use it for the production of biodiesel. But still, the administration insists that small producers of castor bean will make additional income by producing castor bean for the production of biodiesel.

But who will really be the ones who cash the additional value? The small farmers who produce raw material or the big guys who produce the biodiesel to sell it to Petrobras and other fuel distribution companies?

These small farmers in the arid Northeast live in areas with no access to electricity, communications, and not even reasonably acceptable dirty roads!

About 4 years ago, a multi-disciplinary study sponsored by LaGuardia suggested that the government should intensely work on the formation of cooperatives and small farmers associations so they could actually see the added value to their products and cash it. Also, this would be the only way for them not to end up selling their lands. Now, there are local and foreign groups looking for the acquisition of large areas in these lands – 10,000 hectares and above - which are still worth almost nothing due to the scarce rain and sources of water in the region. With the administration focusing on the real wealthy – in addition to providing food stamps and very little – if any – technical assistance to the very poor in the arid Northeast, one can expect exodus from rural areas to start taking place very soon.