January 26, 2009 Diverse Alternatives

Volume 12 | Issue 1

Paulo Adalberto Zanetti, the chief executive officer of Vale Do Ivaí, tells Lee Weingast how the company makes the most out of sugarcane, pr

The search for alternatives to petroleum-based fuels is often in the headlines and on our minds these days. And while there are so many uses for petroleum, there is also a variety of valuable things that come from sugarcane. The Brazilian company Vale do Ivaí is taking full advantage of the fibrous stalk to produce not just the obvious, sugar, but also ethanol, yeast and even electricity.
Located in Vale do São Pedro do Ivaí in the southern Brazil state of Paraná, Vale do Ivaí was founded in 1981. Spurred by the Brazilian government’s pro-alcohol program, which provided incentives for large-scale sugarcane growers to produce ethanol alcohol as an alternative fuel, the company has seen a steady increase in production over the years.

ETHANOL MAKING SENSE NOW AND IN THE FUTURE
Besides the obvious reason of reducing dependence on fossil fuels, ethanol makes sense in terms of efficiency. Vale do Ivaí’s Chief Executive Officer, Paulo Adalberto Zanetti, explains that “alcohol is better for the health of the car’s engine. And, at 75 percent of the price of gas, alcohol is competitive.” Indeed, ethanol can promote better performance, especially for cars, like 40 percent of newer Brazilian models, with modified engines that run well on any combination of gasoline and ethanol.

During the company’s infancy, its sole product was hydrated ethanol, a ready-to-use fuel for cars composed of 93 percent alcohol and 7 percent water. Until the end of the 1980s, all the sugarcane used by Ivaí was grown by local farmers and purchased by Ivaí. Now, since the establishment of Ivaicana Agropecuária Ltd. in 1989, the branch of Ivaí created to produce sugarcane in conjunction with other regional producers in order to regulate the supply, the company has grown 83 percent of the cane used in its plants. The remainder of the raw material is cultivated by outsourced partner farmers to whom Vale do Ivaí provides technical and agricultural assistance.

What makes Vale do Ivaí such a strong, healthy company? A high yield in its agricultural production, among the best in the country, is due to the superb climate and soil of the region assisted by the company’s expert technology. The company’s clear three-pronged strategy has proven extremely successful. Focus and investments in shipping and storage logistics, a process of diversification along with steps to increase volume, has allowed the company to improve and grow steadily. In a state in which 90 percent of sugar produced is exported, Vale do Ivaí is very competitive and exports 100 percent of the sugar it produces.

LOGISTICS IN BRAZIL AND OVERSEAS
The company’s storage facilities are conveniently located near major highways and railways. A modern shipping terminal with a capacity for 54,000 tons of sugar, and a planned alcohol pipeline give Vale do Ivaí an edge in the sector. All the sugar produced by Vale do Ivaí is exported. It is sold through traders to Russia, the Middle East and Africa with contracts made for future delivery and prices fixed by the New York Stock Exchange. Currently, 30 percent of its alcohol is sold to clients abroad and the company expects that number to climb to 90 percent in the near future. Vale do Ivaí’s own company, CPA Trading, is responsible for sales and shipping on both the domestic and export fronts. CPA deals with negotiations between the plant and fuel distributors such as Petrobrás, Shell and Esso. Ethanol, also sold through traders, goes to Europe, Japan, Korea and Mexico while yeast is sold to 76 countries in Europe, the United States, Latin America, China and Japan.

Always striving for growth and improvement, in 2002 Vale do Ivaí formed a partnership with the American company Alltech to produce yeast. The yeast is made from fermentation of sugarcane and is destined as a natural protein additive in animal feed. Vale do Ivaí is the sole supplier of molasses, the raw material for yeast production. In 1991, in response to the growing demand for anhydrous ethanol alcohol, used as an additive in gasoline, Vale do Ivaí added this product to its roster. In 1993, in another move toward diversification, Vale do Ivaí began to put its sugarcane to use in the production of sugar. That first harvest yielded 13,226 tons of the sweet, white powder.

Vale do Ivaí’s headquarters is in the town of São Pedro do Ivaí, in the north of Paraná state. Its other two locations are the Fronteira plant in the Triángulo Mineira area of the state of Minas Gerais and the Cambuí plant in Paraná. In 2002, Vale do Ivaí’s São Pedro plant processed 1,150,000 tons of sugarcane. That number soared to 3,500,000 tons in 2008, with a total of 80 percent of that cane from the company’s own cultivation. The company’s annual production of ethanol is 207 million liters. It produces 116,000 tons of sugar, 23,000 tons of molasses and 25,000 tons of yeast each year.

COMMUNITY OUTREACH
Vale do Ivaí has a significant presence in Paraná as a member of important associations and partnerships. It is one of nine business partners in PASA, a group that works with storage and loading in the city of Paranaguá. Vale do Ivaí plays an active role as one of 30 businesses in the state of Paraná, and one of 10 who account for 70 percent of alcohol produced in the state.

The company won awards for its socially and environmentally responsible practices. Zanetti says that Vale do Ivaí, “recognizes that its workforce is its most important resource and believes in supporting its employees and improving their quality of living in many ways.” While the company provides medical assistance and health insurance, it believes prevention is the best medicine and to this end, in-house nutritionists provide advice on healthy eating, while physical education instructors and physical therapists run exercise sessions and orient workers on ergonomics in the sugarcane fields. Affordable, nutritious food is available at the company restaurant and foods are distributed to teams of workers in the fields. The company also supports education for its workforce by offering scholarships and specifically supports pregnant women and mothers through workshops and a toy library with an educator on staff.

Even the seemingly inevitable and positive move toward mechanization is viewed carefully in terms of how it would affect employees. Zanetti explains that sugarcane plays an important role in the local economy, providing employment for much of the population. While the company would like to mechanize some of the cultivation practices, especially burning the sugarcane which causes pollution, management realizes that mechanization results in unemployment, which causes social problems in the area. Vale do Ivaí is in the process of moving away from the practice of cutting and burning the fields by hand, but it is doing so carefully and keeping its valuable human resources in mind.

The environment too is a priority for Vale do Ivaí, which runs a significant reforestation program. Universities and EMBRAPA, the Brazilian agricultural research department, study reforestation at Vale do Ivaí’s sizeable natural reserve in Barabacena, Minas Gerais. The company also reaches out to young learners and opens the reserve for environmental education programs. Vale do Ivaí protects the area, which is owned by the founding family, against hunters and deforestation and maintains interpretive trails. It also collaborates with city and state government in a native plant nursery which provides local farmers, whether or not they cultivate sugarcane, with seedlings.

The future for Vale do Ivaí holds big things. The company’s goal is to process five million tons of sugarcane by 2011. And it is seeking partners to combine forces to expand to processing nine million tons of cane. At this point, Zanetti explains, “There is a lot of condensation in Brazil so scale is important.” The company also plans growth in the area of generation of electricity through biomass, where Zanetti sees that Vale do Ivaí has “enormous potential.”

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