• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Economics Development Commentary

Free essay example:

Economics Commentary Number: III

Title of Extract: Brazil Eyes Ethanol as Fast Track to Power

Source of Extract: The Christian Science Monitor

Date of Extract: June 6th, 2007

Word Count: 750 Words

Date the Commentary was written: October 11th, 2007

Section V: Development Economics

Candidate Name: Shay Sidelnik

Candidate Number: 000233-049

This article is about Brazil planning to develop into an economic power by using its alternative fuel known as ethanol. Brazil is the biggest producer of this alternative fuel and it plans on doubling the production of this fuel over the next decade as the worldwide demand for alternative energy rises greatly. Brazil by all means has the potential to be one of the greatest economic powers in the world, and the country hopes that ethanol will speed up the process of becoming one. Over the past few decades Brazil has invested billions of dollars in agriculture and in past few years Brazil has surpassed the United States as the world's agriculture superpower, and the next step is to become an economic superpower. Brazil seems to be planning an export oriented development plan where it is going to concentrate on exporting ethanol. An export oriented development plan is when a country chooses to concentrate on exports opening its industries to worldwide competition and eliminating most protectionism policies (polices taken to protect local industries).

In the case of Brazil the country is choosing one industry in particular to concentrate on its exports. As the price of oil rises and with increasing concerns over the world's climate, there is a constant search for alternative sources of energy. Brazil is the major producer of a great substitute (an alternative product) for oil known as ethanol. Among other things Brazil is the worlds largest exporter of sugar. Brazil produces its ethanol out of sugar, and it is the largest producer and exporter of ethanol worldwide. Because of rising demand of alternative fuels Brazil plans to double its ethanol production in the next decade. Brazil hopes that just as so many countries in the 20th centaury boosted of oil for development it would be able to do the same by exporting ethanol.

Another thing that has to be considered is the advantage of fuel production over agriculture production. Brazil's economy has enjoyed great growth as it climbed to the number one exporter of agriculture. However the economy has not developed that much and the average standard of living has remind very low, especially for such a big economy. So why has Brazil's enormous growth in exports not resulted in development? The reason is most likely that the growth was a result of increased exports of agricultural goods which are both price and income inelastic.

Price Elasticity of Demand

image00.png

Income elasticity of demand measures the change in quantity demanded in relation to the change in income of the consumers, while price elasticity of demand measures the change of quantity demanded in relation to the change in the price of the product. When a product is income and price inelastic (as shown in the graph above) it means that the change in income of the consumers and the change in the price of the product has almost no affect on the quantity demand of the product. Since this is the case of agricultural products it could be the reason why Brazil has not enjoyed development with its massive growth. The inelasticity of these products makes the profit margin very low, which basically means that it is very hard to make profit of agricultural products. While the Brazilian economy experienced great growth from the increased exports of agriculture the profit was very low, and without profit the country did not have any extra money to address common underdevelopment problems such as poverty and inequality, so while the economy did grow it did not develop into the great superpower economy it can and should be.

        Meanwhile the Brazilian government's decision to concentrate its future exports on ethanol can be the solution to its lack of development over the years. The key is that fuel unlike agriculture is income elastic meaning that it changes with close relation to the income of the consumers, and it is also price inelastic.These two facts make the profit margin of fuel much greater. If its income elastic than it means that the potential of the quantity demanded is much greater, and if Brazil is selling to the worldwide market than it will enjoy that potential because over the world there are many people with high incomes who consume a lot of fuel. Also since fuel is relatively price inelastic the price can be very high and people will still consume it. With the continuous rising of price and demand of energy sources ethanol can be very profitable, with that profit Brazil might finally have some money to invest in development and perhaps become the economic superpower it should be.

This student written piece of work is one of many that can be found in our AS and A Level Production - Location & Change section.

(?)
Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Related AS and A Level Geography Skills and Knowledge Essays

See our best essays

Related AS and A Level Production - Location & Change essays

  1. The Role and Importance of Agriculture In the Carribean. Organisations involved in its ...

    They aim to improve efficiency in all areas of sugar cane production. Their main functions are: * The development of new varieties of sugar cane which are high yielding, drought resistant, pest and disease resistant. * The development of machinery and equipment suitable for Jamaican conditions.

  2. Development Essay - BRAZIL

    From 1889 to 1930, the government was a constitutional democracy, with the presidency rotating between the states of Sao Paulo and Minas Gerais. This period ended with a coup d'etat that placed Get Lio Vargas in the presidency. Just as the change of power took place, in 1889, so did a change of power in 1930.

  1. Opportunities in the big emerging markets (BEMs) such as India, Brazil and China.

    In any type of CFJV, finding a right reliable partner is of utmost importance. In searching for an a Chinese partner, a foreign company can contact a law firm or a trade company in China, or the appropriate Ministry, such as the Chinese International Trust and Investment Corporation (CITIC).

  2. Arthur Lewis's dual-sector model of development.

    Rostow also briefly mentions the need of a flow foreign exchange into the modern industrial sector. He points out that increased access to foreign exchange is vital to permit the less advanced countries to increase the supply of the equipment and industrial raw materials it could not then itself supply.

  1. "Can the theories that Alfred D. Chandler developed in his book 'Scale and Scope: ...

    In 1950, Germany was only on 15th place in the world according to per capita GDP. Thus, the realignment of economic power after the two World Wars does not provide any evidence for or against Chandler's hypotheses because wars simply do not appear in his theory.

  2. Case Analysis: Longe Industries v. Archco, JNRP

    a trailing axle, within three months of signing the non-compete agreement with Longe. o The defendant must have the intent to deceive the plaintiff: Using the same argument that was used to establish misrepresentation, Longe could claim that Archco intended to deceive Longe from the get go.

  1. In what ways are banks in developing countries different from banks in financially developed ...

    Lenders might decide not to make any loans (Mishkin, 2001: p187). Moral hazard happens after the transaction and refers to the problem that people behave differently in case they are operating with someone else's money. They take more risks which is undesirable from a lender's point of view.

  2. The Indutries and Energy Resousces of Brazil.

    And Others There are other types of energy in Brazil except for the main ones (H.E.P and oil) like Nuclear, Wind, Solar and Geo-thermal even though this makes a very little contribution and in some of the more remote places wood is still used for the main fuel.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work