The Proálcool ( National Alcohol Program ) was created on November 14, 1975 by decree nº 76.596 and idealized by the physicist José Walter Bautista Vidal and by the urban engineer Ernesto Stumpf . The objective was to reduce external dependence on oil products and to stimulate large-scale domestic production of alcohol.
Emergence of Proalcool
The program, which still exists today, resulted from an alternative to the Oil Crisis in the early 1970s, when Saudi Arabia, Iran, Iraq and Kuwait began to regulate exports. Thus, there was the “Oil Shock” in 1973, the year in which the United States, Holland and Denmark declared support for Israel against Egypt and Syria in the so-called Yom Kippur War.
In response, OPEC (Organization of Petroleum Exporting Countries) embargoed sales to North Americans and Europeans, a situation that inflated the oil market. An estimate by Ipea (Institute of Applied Economic Research) points to an inflation of 400% in the price of a barrel, which went from US $ 2.90 in October 1973 to US $ 11.65 in January 1974.
Faced with high oil prices worldwide, the Brazilian government started to invest in projects to stimulate the production of alcohol as an alternative to gasoline. In this way, Proálcool was developed in five phases. The initial phase lasted from 1975 to 1979 and the government is now in the fifth phase, which started in 2003.
Proalcool Initial Phase
The first phase of the program is marked by encouraging the production of sugarcane, strengthening and creating distilleries and assembling automobiles powered by alcohol. In this phase, alcohol production evolved from 600 million liters per year – data for the 1975/76 biennium – to 3.4 billion liters per year – the amount achieved in the 1979/80 biennium). The automakers started delivering the first alcohol-powered cars in 1978.
Second level
Proálcool’s so-called affirmation phase lasted from 1980 to 1986 and culminated in the “Second Oil Shock”, which once again inflated the oil market. As a way of trying to alleviate the crisis in the supply of fuels, the Brazilian government created bodies for the administration of Proálcool, research and development of more alternatives to oil.
The National Alcohol Council and the National Alcohol Executive Committee were created. There was also an increase in automotive production. The fleet of cars powered by alcohol, which in 1979 represented only 0.46%, increased to 26.8% in 1980 and, in 1986, 76.1% of the cars produced in Brazil offered engines powered by biofuel .
Third Phase
The third phase of Proálcool lasted from 1986 to 1995, being called the stagnation phase. In this period, unlike what occurred in the sum of political manipulation in the oil market, the price of a barrel dropped from US $ 40 to US $ 10. The situation generated questions regarding Brazilian energy policy.
There was a reduction in investments for the production of alternative fuels and the growing demand for alcohol-powered cars was not met. The fleet acquired (sale) of cars powered by alcohol already surpassed 95% of the total deliveries at the end of 1995, without, however, having enough fuel to supply it.
Despite the increase in sales of automobiles powered by alcohol, there was a sharp drop in oil prices and, as a consequence, of its main derivative, gasoline. Fossil fuel thus became competitive again and alcohol production was discouraged, with a fall in sugarcane plantations and a reduction in government subsidies to agriculture and industry.
Among the consequences of the scenario, the fall in the reduction in the production of cars with engines adapted to alcohol was inevitable. The automakers also had to adapt to the new economic profile of the country, which is more open to the international market, which allowed the import of cars powered by gasoline and diesel.
Still as a policy of maintaining an alternative not only political, but economic and environmental, the federal government determined the addition of alcohol to gasoline to try to solve the shortage of biofuel. Methanol was also added, which started to be imported because production was falling sharply.
Fourth Phase
The period defined as the Proálcool Redefinition Phase occurs between 1995 and 2000. In this phase, the production of sugarcane was practically focused on the transformation into alcohol. Sugar exports stood at 10 million tons, when it was no more than 1 million tons in the early 1990s. In this period, automakers reduced the supply of alcohol-powered cars to 1% of total production. In order to avoid a collapse in the market, in May 1998, the federal government issued Provisional Measure No. 1,662, which increases the addition of alcohol to gasoline from 22% to 24%.
Fifth Phase
This is the current phase of Proalcool and started in 2000. Unlike the decision that marked the beginning of the program by the federal government, the private sector also sees alternative energy as a certain source of profit. If producer countries previously regulated supply, research now shows that it is necessary to anticipate a supply crisis due to the depletion of oil reserves.
In the automotive market, in addition to engines adapted to receive the mixture of fossil fuels and biofuels, flex cars also appear – also called biofuels and which represent in the middle of the decade, 49.5% of the fleet of light commercial vehicles sold annually in the country by the estimate Anfavea (National Association of Vehicle Manufacturers).