A PPLICATION OF A SPATIAL EQUILIBRIUM MODEL FOR ETHANOL MULTIMODALITY IN B RAZIL Jamile de Campos Coleti Ph. D. candidate Institute of Economics University of Campinas Profa. Dra. Andréa Leda R. Oliveira Faculty of Agricultural Engineering University of Campinas University of Campinas Institute of Economics Ravello, Italy June 26-29, 2016 Faculty of Agricultural Engineering

The purpose is to analyze transportation alternatives for different ethanol routes in the face of current logistics conditions in Brazil, assessing the implications of transportation infrastructure restraints for enhancing ethanol competitiveness in the domestic and international markets. Objective Challenges Methodology Results Conclusions Questions Objective Scenarios

How to reduce the costs of Brazilian ethanol transportation making it more competitive? The use of intermodal in ethanol transport is more competitive? Questions Challenges Methodology Results Conclusions Questions Objective

Transportation in Brazil Source: adapted Oliveira (2015)

Agricultural Areas: frontier regions booming Challenges Ethanol production is concentrated in the South Central region: Brazil is the world's second largest ethanol producer Prod: 23 bi/lExport: 3 bi/l Ethanol transport is made mostly by road; lack of transshipment point The road transport for long distances is inefficient (<expensive <delayed); Source: NIPE - CTC

Logistical Challenges in Brazil Challenges

The capacity to offer ethanol with greater efficiency and lower costs will be a significant competitive factor between ethanol producing countries. Brazilian Logistics System: attempts to arrange transportation intermodal New challenges: increasing the use of intermodal as an alternative to reduce transport costs Challenges

Scenario 1 it is a base scenario where road and rail routes with the rates currently applicable values are practiced. In Scenario 2 proposed a reduction of 15% of rail freight, thus changing the dynamics of transport routes. Scenario 3 represents a future situation which compares the use of road only, the intermodal road-rail and road and pipeline, assuming the works of Logum System are already operating. Scenarios

In partial equilibrium model, are analyzed the direct effects of any trade policy on a given market. Excess supply regions were defined based on the following criterion: if ethanol production exceeds the volume consumed, then this is an excess supply region, and the opposite is characterized as a excess demand region; To forecast the impacts and effects of adopting new transporting policy for Brazilian ethanol trade, this paper developed a partial equilibrium model formulated as a Mixed Complementarity Problem (MCP) for ethanol transportation. Methodology

MCP Methodology

Road Routes Methodology LEGEND ROADWAY ORIGIN DESTINITY MACROREGIONS OF SÃO PAULO

Rail Routes Methodology LEGEND ROADWAY ORIGIN DESTINITY RAILROAD TRANSHIPMENT MACROREGIONS OF SÃO PAULO

Pipeline Routes Methodology LEGEND ROADWAY ORIGIN DESTINITY MACROREGIONS OF SÃO PAULO PIPELINE ESTORAGE

The use o intermodality shows more competitive than roadway because: Scenario 1: 64% of routes is more competitive using the intermodal, 46% using roadway only; Scenario 2: 87% of routes is more competitive using the intermodal, 13% using roadway only; Therefore, to routes destined for the international market, 100% of routes the model has found the best transporting option is intermodality. Scenario 3*: 71% of routes is more competitive using the intermodal, 29% using roadway only; *the best volumes on model. Results

In Scenario 3 it can be seen an increase of 2%, so, when it increases by 50% the supply price, both buyers as sellers responded positively to the positive variation of the price elasticity of supply. This behavior was also observed when reducing the price elasticity of demand by 50%, so, when it reduces the price elasticity of demand in 50% there an 8% increase in the volume of domestic demand, so the market responded positively to this change and there is a reduction of almost 11% in the volume of international demand, then in that case, the market responded negatively to this change.

Conclusions Using the MCP model proposed for the transfer of Brazilian ethanol, it was possible to verify the effects of the using of the intermodal transportation. When a 15% discount is applied to railroad freight (Scenario 2), multimodality becomes more competitive than the use of direct road mode; Multimodality is more competitive, because as reducing the cost of railroad transportation and implementing a new pipeline system the transportation, flows increase (0,20%).

Conclusions The major difference observed in the three Scenarios between adopting multimodality or using only the road mode can be seen in the transportation destined for Santos Port. Regarding the domestic market, when the three scenarios are compared, we identify that 40% of routes are more competitive using direct road mode, whereas 60% are more competitive using multimodality >>>NEWS PROJECTS PIL – Logistics investment program – 10/06/ Investiment: 66 bi U$S works planned in rail and ports, and some highways and airports.

I NTERMODAL AND MARKETING OF BRAZILIAN ETHANOL : AN APPLICATION OF A PARTIAL EQUILIBRIUM MODEL Jamile de Campos Coleti Ph. D. candidate Institute of Economics University of Campinas Profa. Dra. Andréa Leda R. Oliveira Faculty of Agricultural Engineering University of Campinas University of Campinas Institute of Economics Ravello, Italy June 16-19, 2015 Faculty of Agricultural Engineering THANK YOU!