(Photo: Energy Secretary Gustavo Lopetegui doesn’t believe in the role of the State regulating the biofuels)

Buenos Aires, June 19th. Both corn-based and sugarcane-based ethanol industry are living hard times due to the erratic biofuels Government policy.

In 2006, the Argentine Congress passed the Biofuels Act, establishing a mandatory blend between gasoline and ethanol, and between biodiesel and diesel. Furthermore, the law established a quota system and a price fixed by the Government to impulse this strategic value chain.

Ethanol industries grew thanks to the law until to reach 1.11 million cubic meters in 2018, from initial 125K cubic meters in 2010. Currently, ethanol output is divided into equal parts between corn and sugarcane industries.
But after the coming of the Cambiemos coalition to the government in December 2015, this young industry began to walk a sinuous way, full of advances and setbacks.

The Government, particularly with the arriving of Gustavo Lopetegui to the Energy Secretariat, has shown itself permeable to the petrol industry interests, that argues that biofuels policy forces them to raise the gasoline and diesel prices.

For the sugarcane value chain, the moment is very harmful. Since May 2017 to the present, sugarcane-based ethanol went up 47%, while the inflation rate reached 67%, gasoline rose 92% and the exchange rate (dollar), 115%.
According to the RIA Consultores’ weekly report, ethanol price rounds US$ 0.50 per liter versus US$0.80 during 2015 and versus one dollar before 2014.

The sugar industry is based in the northwest of the country, basically in Tucumán, Salta and Jujuy provinces. Tucumán and Salta are ruled by Peronism party, but Jujuy is run by Gerardo Morales, a loyal ally of President Macri. Mr. Morales tried to influence over Mr. Lopetegui, but this last one is part of the hawk wing of the Government and rejects the state role regulating private business.

In fact, Lopetegui has said that Macri’s administration will not raise the mandatory blend (industry asked for a 15% blend), adding that he does not agree with the state intervention fixing prices and establishing quotas for the industry and that he believes in the free competence between fossils and renewable fuels.

Meanwhile, sources of eFarmNewsAr told this media that the sugarcane industry is close to the collapse. Ethanol blend was designed to create a new demand that offset the sugar-dependence of the industry. But Energy Secretary decided to use an average sugar price to calculate the ethanol one, but in a tricky way that consists into using the 2018 low prices cycle and not the highest 2019 prices.

The reality is that in the first quarter, ethanol output dropped 7% to 215,552 cubic meters, and no new investment is seriously considered under this uncertainty scenario.