Files
Abstract
In order to enhance energy security and independence, Brazil has supported the production and use of ethanol. Brazilís leadership in this market reveals complex inter-linkages between ethanol, sugarcane, sugar and fossil fuels. These sectors have been growing an average of 14% per year, while the countryís growth rates have been very modest. This paper presents a theoretical framework for understanding the interaction between Brazilís economic growth and the evolution of these sectors as the economy transitions toward long-run equilibrium. Then, the sensitivity of these results is analyzed under two simulations; Örst, a reduction of the cost of Önancial intermediation (which the literature identiÖes as one of the factors a§ecting Brazilís growth), and second, an increase in ethanol prices by 2.6%, based on the expectation that biofuelsíworld demand is increasing.