# Presentation: 098128

## Bioenergy value chain construction methodology.

*USDA Global Conference on Agricultural Biofuels:*
- February 2007

## Argentine Context

- Oil & Fuel Business:
- From 1940:  state control:
- Subsidized vs. taxed fuels
- 1990’s: Privatization of YPF, etc. No state control. Exports
- CNG remains subsidized. Free market for the rest. 4U$S/Gallon
- 2001: 300% devaluation. Inflation & price control
- 2007: 2.4 U$S/Gallon. Imports
-  Gasohol fails (1970’s) and  CNG succeeds (1990’s)
- 2007: New Biofuels Law & provincial and city investment promotion acts.
- MAIZAR presents Argentine Ethanol Goals
- Argentina is facing an energy crisis?

## Understanding Argentina 

- 1880-1930: economic growth thru ag exports: beef, wheat, corn, flax.
- 1940’s:
- nationalistic feeling
- all utilities confiscated
- urban vs. rural development struggle.
- Low wages=> cheap food and energy
- Cheap food=> price controls

## Understanding Argentina

- 1950- today¿? Pendular economy:
- fiscal deficit vs. inflation control
- Promote exports vs. tax exports
- High exchange rate vs. low exchange rate
- Promote investments vs. stop investments
- High wages vs. low wages.
- Cheap food vs. international market prices.
- Promote agriculture vs. export taxes

## Fuel business in Argentina

- Since 1940 strong public intervention:
- Subsidized fuels:
- LPG
- CNG
- Kerosene
- Diesel
- Alconafta (Gasohol) in Northern provinces 1960-1987
- Taxed fuels:
- Gasoline
- Jet fuel
- Diesel oil
- Fuel oil

## Fuel business in Argentina

- 1990: Privatization and liberation
- YPF fires 45.000 employees. (90% of total)
- GNC: the only subsidized fuel left.
- No state control.
- Strong competition amongst players
- Large up and down stream investments.
- Fuel taxes go up:
- Gasoline price in 2000: 4U$S/gallon.

## Argentine Biofuels Law 26.093February 2007

- Domestic market regulation
- Exports receive no benefits
- 5% biofuels in gasoline and diesel after 2010.
- Tax deductions apply only to companies that hold **farmer or government ownership **majority
- Fuels Tax (ITC) exemption
- Investments can be deducted from Profit Tax.
- Domestic price to be set by Government Authority depending on profit.
- Market quotas set by the Government Authority.

## Argentine Ethanol Market in 20105% ethanol mix in gasoline

- Fuente: Ministerio de Economía - Secretaría de Energía - Dirección Nacional de Economía de los Hidrocarburos

- 185.000 m3 Ethanol per year (49 million gallons per year)
- 80.000 hectares planted for ethanol
- 5 ethanol plants built (40 mill liters or 10 mill galls /year each)
- 800.000 tons of corn produced.
- Biodiesel: 600 mil m3/año

- Regular gas

- Premium gas

- Diesel

## Construction of a new chain Structure

**Research **
**     ****&**
**Development**

**Input**
**Supply**

**Agricultural**
**Production**

**Industry**
**    ****&**
**Consumption**

**Trade**
**    ****&**
**Export**

- Institutions

- Community/Public Opinion/ Press

- G  o  v e r m e n t

## Strategy

- Competitive advantages of each link
- Coordination and cooperation between links= competitive value chain

## Habits &  skills for a new culture

- Sense of belonging
- I belong
- Equality
- Dedication and commitment
- Common goals
- Benchmarking
- Conversations and information
- Work is built on speech
- Speaking the same language is no barrier to misunderstandings and un-coordination.

## Habits &  skills for a new culture

- Negotiation and consensus
- Trust
- ↑ coordination & ↑ value
- Continuous improvement
- Guilt
- Entrepreneurial and innovative initiative
- Search of opportunities
- Anticipation

## Conclusion: building the chain

- A competitive bioenergy chain can be built.
- Each link must develop its competitive advantages.
- Plans and goals should include all actors and stakeholders.
- Social and economic development
- Public-private cooperation is critical.

## 

MAIZAR: Lavalle 548 3o B. Capital
                Tel: (011) 5031-2676   

Martín Fraguío 
mfraguio@maizar.org.ar 

- MAIZAR: Lavalle 548 3o B. Capital
-                 Tel: (011) 5031-2676
- Martín Fraguío
- mfraguio@maizar.org.ar