CNN Money - Long-Term Investors In Brazil Ethanol Unfazed By Dollar Crash

An interesting piece about how the fall of the dollar against the Brazilian Real has barely made an impact on the Brazilian ethanol investment boom. The long-term ethanol story for Brazil is almost entirely positive. The feedstock - sugarcane - is the cheapest and you can go long on the demand curve too. According to the chief executive of state-run oil firm Petroleo Brasileiro SA ( PBR), " . . . Brazilians will consume more ethanol than gasoline by 2020 when flex-fuel cars will dominate the country's car fleet."

We hear a lot about ethanol in Brazil but need to be reminded that although flex-fuel cars now represent 85% of Brazilian new car sales, they are still only 12.8% of the entire light-vehicle fleet. Brazilians love to see themselves as exceptional and they're not wrong. Arguably this is the first country in the history of the world to attempt an agricultural-based industrial revolution. So looking out over the next decade, Brazilian ethanol and crucially, the Brazilian Real, look like a good place to be.

But can anything stop Brazil's ethanol juggernaut?

I think there are two technological and one regulatory threat;

i) The emergence of low cost celluloscic biofuels

ii) The arrival of high mileage plug-in hybrid vehicles

iii) The Brazilian government decides at some point to no longer mandate the ethanol content in gasoline

I don't see i) happening in the next 5 years and certainly not scaleably so in the next 10. ii) is a real possibility, the technology is already available, but mass production of these vehicles will be still at least 5 years off. iii) doesn't look likely at all in the next 10 years.