AUTHORS' SUMMARYBrazil's First Ethanol Program (ProAlcool), launched in 1975, was a direct response to the dramatic rise in imported petroleum prices in 1973. The military government of the time saw this as a challenge to Brazil's financial stability and energy security, since the country imported 80% of the fuel used by its transport sector. Moreover, Brazil had extensive sugar plantations that were facing increased challenges to their exports from European Union trading preferences with African, Caribbean, and Pacific countries and the emergence of corn syrup and other close substitutes for sugar.ProAlcool was initially a classic import substitution policy. Subsidies were used to expand ethanol production, then in its infancy, and to induce vehicle users to shift to dedicated engines for ethanol that could handle a gasoline blend with more than 5-10% ethanol. When gasoline prices fell a few years later, those who had shifted were left paying the higher costs of ethanol, while the original problem of oil imports remained.
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