The world's most important sugar region is poised for more growth following a WTO ruling last week against European sugar subsidies. Farm workers in the region currently earn less than $5 a day, among them Cicero de Moraes, 22, above, at a farm about 100 miles northwest of Sao Paulo, Brazil.

WTO ruling ensures
sweet future for Brazil

SAO PAULO, Brazil >> Just an hour's drive from this teeming city of 18 million, lush sugarcane fields stretch for hundreds of miles, towering more than twice the height of farm workers toiling under the relentless sun.

Born in the 1970s as Brazil turned to alcohol-fueled cars, the sugar industry in Sao Paulo state started as a brash but backwater operation dedicated to producing ethanol for domestic consumption. But over the last decade, it has eclipsed all competitors, taking advantage of advanced technology and the planet's lowest costs for making refined sugar.

Now the world's most important sugar region is poised for more growth and a wave of foreign investment -- thanks to a World Trade Organization ruling last week that European sugar subsidies unfairly reduce the profits of Sao Paulo's large, self-contained sugar growing and processing plantations.

"Today is D-Day for the liberalization of the world's protected sugar market," said Eduardo Carvalho, president of the association representing Sao Paulo state's sugar farmers. "This decision represents a victory of developing countries, like Brazil, in search of the way to make globalization a two-way street."

No. 1 sugar producer and exporter Brazil accused the European Union, the world's second-largest exporter, of shipping abroad more subsidized sugar than permitted by international trade rules.

The WTO preliminary ruling, if upheld, could eventually allow the producer of nearly 17 percent of the world's sugar to more than double its current sugar farmland of 12.4 million acres, Carvalho said. That would translate into cane fields across an area the size of Cuba.

Sugar's farming in Brazil is as old as the country's colonial history, dating back more than four centuries when Portuguese settlers planted it to feed huge European demand. But farmers traditionally grew cane in the Brazil's northeastern region.

Southern Sao Paulo state got its big start during the energy crisis of the 1970s, when Brazil's military dictatorship launched a massive government-backed program to promote alcohol-fueled cars and wean the country from dependance on expensive imported gasoline. No one knew then that Brazil would later find massive reserves of petroleum offshore from Rio de Janeiro.

Critics of Brazil's sugar industry say it's ironic that Brazil challenged European subsidies after building up its sugar industry for decades with government loans, fixed prices for ethanol, taxes on gas to encourage consumers to use alcohol-fueled cars and other incentives.

Brazilian sugar producers acknowledge that they probably wouldn't be in business if it weren't for past government help, but say South America's largest country had no choice when its economy collapsed during the 1970s oil crisis.

From the 1970s through the 1980s, Sao Paulo's sugar industry grew rapidly as farmers bought up cheap land and hired low-cost labor to work the fields, using virtually all production to make ethanol. Acreage once dedicated to coffee and corn was replaced by cane.

But crisis hit in 1989 when bad weather decimated production in Sao Paulo state, leading to shortages of ethanol at the pumps that enraged millions of drivers who had purchased alcohol-powered cars.

Sugar plantation owners decided to shift gears, experimenting with new strains of cane and investing in high technology milling operations to produce refined table sugar for export. Brazil surpassed India as the world's top sugar producer in the mid-1990s, and exports more than doubled from 1996 to 13.4 million metric tons in 2002.

Brazilian sugar industry players are so savvy that they probably don't need the trade victory to keep profiting, said Steven Kyle, economist and professor at Cornell University.

"This is modern agriculture with the best soil and climate around and the potential for world domination of the market," said Kyle, who has visited Sao Paulo's sugar region.

Brazilian farmers also have something else to smile about. Automakers last year introduced "flex-fuel" cars in Brazil that run on either gasoline or alcohol. Kyle said the flex-fuel cars could give Sao Paulo's sugar cane growers a guaranteed domestic market. Most flex-fuel car buyers are currently filling up with alcohol because costs half as much as gas, hit again by another worldwide oil crisis.



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