Biofuel industry, a blockbuster industry till few months back, has lost its shine temporarily as global financial crisis dried up the investors’ pocket.
Associated Press reported that biofuel industry is knocked down by the global financial crisis in Brazil, which was the largest revenue earner for the country few months back.
Current financial turmoil has shaken the investors’ confidence, forcing them to shelve their investment plans for the time being in Brazilian biofuel projects. In fact, Marcus Jank, president of Brazilian Sugar Cane Producers Association, indicated that previously set future investment target of $30-40 Billion in the industry till 2012 will be slashed.
Biofuel industry was a super success for Brazil as oil prices increased abnormally to US$ 150 per barrel in 2008. It thus became an eye catching industry for the renewable energy investors and attracted billions in fresh investments for new biofuel plants and distilleries. Apart from that, being the cheapest source of ethanol production, Brazil became a center point for the new investments before September 2008.
But the slowdown of global financial market slashed the crude oil prices; as a result, investors are not able to reap profits out of biofuel business. This has halted investments in biofuel considerably. Even Robert Rodrigues, the Brazilian Agriculture Minister, also agreed that under the current financial crunch, government support is just not enough to keep the investment growth rolling in Brazil.
Tightened domestic credit is also irritating the industry players. For instance, lack of financial support forced a big ethanol producer to file for bankruptcy in November this year.
While evaluating the current scenario, an analyst at RNCOS agreed that the current crisis would affect severely the investment and expansion plans in the Brazilian biofuel industry in the coming years. But the trend could be reversed if crude oil prices again start showing upward movement in the international market.
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