CAUCA VALLEY, Colombia -- Laborers swing sickles and machetes under a punishing equatorial sun to harvest sugar cane in the narrow flatlands along the Cauca River.
Though 85 percent of Colombia's cane crop is harvested this old-fashioned way, industry leaders say they have no intention of mechanizing the harvest, for fear of mass unemployment in a rural area where people suffered during Colombia's five-decade-long civil war.
Instead, sugar cane growers say they are modernizing in a different way, becoming generators of renewable energy.
During a tour of an ethanol refinery and power plant surrounded by limitless cane fields, managers at Mayagüez SA, one of the country's biggest sugar manufacturers, explained how government energy incentives are making sugar farming more profitable than ever.
"We used to be a sugar cane grower; now we are energy producers," said Carlos Eduardo Quintero Arizala, the company's sales director. "Our vision is to be globally competitive, transforming sugar cane into healthy energy."
Home to some 2,700 family farms and 13 sugar mills, the Valle del Cauca is endowed with rich soils and a climate that frees growers from seasonal farming cycles. Laborers who made the sugar cane business possible here -- Colombia has been growing cane since the 16th century -- are now the backbone of what is shaping up to be the next Latin American ethanol success story.
Envious of Brazil's accomplishments with sugar-cane ethanol, Colombia's then-president, Alvaro Uribe, championed a 2007 law that ordered all gasoline retailers in his nation to sell a mixture of 90 percent hydrocarbon fuels and 10 percent ethanol.
That mandate was later scaled back to an 8 percent mandatory blend after an industry push back, but nevertheless, the bill had the intended effect. Of the more than 740,000 acres of sugar cane plantations in the valley, at least 116,000 acres are devoted to growing feedstock for ethanol.
Colombia's ethanol industry is still tiny. At about 300,000 gallons of daily production, the country is still far behind the world's largest ethanol-producing nations, the United States and Brazil. Experts estimate that in the previous year, Brazil alone added more new sugar-cane ethanol refining capacity than Colombia has built over the past five years.
But Colombian government officials and industry leaders are eager to rapidly expand their biofuels effort, seeing it as an effective means of improving security and growing prosperity in struggling rural areas. They are doing so through laws and incentives encouraging the production of large quantities of biodiesel from palm plants and ethanol from sugar cane.
With palm-based biodiesel, the government sees a potent weapon against narco-traffickers and the coca crops they encourage (Greenwire, May 2). But with sugar-cane ethanol, the aim is purely economic.
Colombian officials see the potential for a lucrative export market in the United States. Unlike Brazil, whose ethanol faces a heavy U.S. tariff, Colombia has a pending free trade agreement with the United States that exempts Colombian ethanol from tariffs.
"Colombia has big potential, but first we have to increase the production for the local market," said Luis Fernando Londoño Capurro, president of the Association of Sugarcane Growers of Colombia, or Asocaña.
Speaking at his office in Cali, Londoño acknowledged that his members are facing some government pressure to seek future export markets for Colombia's ethanol. Producers are looking not only to the United States but also to Europe and even Brazil, but the struggle to expand just the domestic market and meet scheduled increases in the blending standard means talk of selling abroad is far too premature, he said.
"We are being competitive, but we have a long way to go before we are dedicating our production for exports," Londoño said.
The sugar industry has undergone a dramatic transformation in just a short time.
Just five years ago, Mayagüez's focus was entirely on sugar, white and brown, marketed to households or businesses under various brand names. But since Uribe's ethanol bill passed in 2006, the company began selling sugar-cane ethanol to gasoline distributors.
Mayagüez still sells tons of sugar, much of it for export. But today, the company also generates about 40,000 gallons of ethanol from its distillery outside the small town of Candelaria. The company says it will soon expand that capacity to about 66,000 gallons a day.
With those profits, the company has already gone further. Last year, Mayagüez completed a 37-megawatt-hour-per-day biomass cogeneration plant next door, a first for the industry.
The power plant fuels the sugar mill and ethanol distillery by burning the discarded waste from the sugar cane plant. But Mayagüez officials say the mill and distillery only consume about 11 to 12 megawatt-hours of juice per day, and the company sells the rest to the national utility.
Mayagüez is not only a sugar and ethanol manufacturer, but also an independent power producer.
"This is a new business started last year," Quintero explained. Though preference is given to sugar production to meet contractual obligations, Quintero now considers his company to have been forever transformed into a liquid fuels and energy generator. He is confident this new business model will cushion his 2,600 employees and the nearby school that Mayagüez supports from the frequent commodity-price shocks.
"For us, it's very important, the welfare of the employees and the welfare of the community," Quintero said.
Jorge Bendeck Olivella, president of Colombia's National Biofuels Federation, or Fedebiocombustibles, said the Mayagüez story is repeating itself throughout the sugar industry and is quickly becoming the industry norm. He and other industry officials say that in the next few years, almost all sugar producers in the Cauca Valley will have both an ethanol and biomass cogeneration plant next to their existing mills.
Fedebiocombustibles is eager to lure investors to further expand Colombia's booming biofuels industry, but Bendeck cautions the nature of the opportunities here are different from what one would find in Brazil.
Namely, he and other industry insiders say investors in Colombia's new biofuels push will have to contend with stricter environmental rules, lingering security issues and new crop varieties that are better suited for this climate.
"Brazil is a model, but we don't receive help from anyone around the world," Bendeck said. "In Brazil, the structure is completely different."
Squeezing out more sugar
Since the ethanol blend rule passed, five other sugar mills in the Cauca Valley have established their own ethanol distilleries.
The two largest, run by the companies Incauca and Ingenio Providencia, together pump out almost 160,000 gallons of sugar-cane ethanol each day. Together, all the producers make roughly 300,000 gallons of ethanol a day, enough to meet the national 8 percent blend rule -- but just barely.
Both Fedebiocombustibles' Bendeck and Londoño at Asocaña believe their nation can be much better than that.
Colombia's government is poised to increase the blend rule to 10 soon, they say, but both associations have a goal of achieving a 30 percent ethanol blending mandate over the coming years.
"We must fulfill our commitment with the government to cover the whole country with a mix of 8 percent ethanol, 92 percent gasoline," Londoño said. "As time goes on, that mix will go up. We will go up to 15 percent, then 20 percent, with the new plants and the expansion of some existing plants."
After that, the only way Mayagüez officials say they and their competitors can boost ethanol generation is by curbing sugar exports. The reason, they say, is that there is no more room to expand cultivation in the Cauca Valley.
"This is an issue that the Colombian sugar cane industry is very well aware of, and we are searching in other parts of the country," said Alvaro Amaya Estevez, director of the Colombian Sugarcane Research Center, or Cenicaña.
Amaya's lab, which is almost entirely funded by the sugar cane growers surrounding Cali, has been working for decades to boost the productivity of the fields and to find new ways to organically improve the soil and keep pests and diseases under control.
On that front, Amaya claims success. The fields in this 200-mile-long valley generate more than 350 pounds of sugar for every metric ton of cane crop, making the Colombian cane growers No. 1 in the world in terms of tons of sugar per hectare, he said.
But since the biofuels law came into effect, Amaya's staff has nearly doubled as the industry tries to get still more sugar out of the fields.
Though Amaya and his team are optimistic that Cenicaña can make further production gains and boost sucrose content through experiments with new crop varieties and genetically modified (GM) crops, he admits they are close to hitting a wall.
Turning 'greenfields' into cane fields
Getting new ethanol refining capacity is not the problem, industry insiders say. Rather, new regions will have to be opened up for the domestic cane growers to have a chance of meeting a growing demand for ethanol.
"If you want to expand the production of ethanol you have to think in greenfields," said Asocaña's economic director, Johan Martinez Ruiz.
"The ethanol plant is the easiest part of the journey. The hard thing is to have the sugar cane."
Fedebiocombustibles and Asocaña are hoping to attract growers to Colombia's east and north, some parts of which have only recently been calmed from the violence perpetrated for decades by armed insurgent groups.
Ecopetrol, Colombia's largest oil and gas company, is said to be developing a major biofuels project in the eastern part of the country. Currently, the only foreign investor in the sector is an Israeli company developing sugar cane fields in the north to pave the way for a 100,000-gallon-a-day ethanol plant in the Magdalena province, expected to be fully online in 2014.
Londoño at Asocaña believes those projects together, coupled with the expansions under way in the Cauca Valley, could in total produce enough ethanol to satisfy a national blending standard of up to 14 percent.
The trade associations say they have been seeing interest from others. Brazilian producers are eyeing opportunities in the region where Ecopetrol is investing. And officials say a U.S. company was also looking to invest in sugar-cane ethanol in the north before the global financial crisis forced it to abandon those plans in 2009.
Expanding from an 8 percent blend today to the industry goal of 30 percent will require almost tripling the area under cultivation. But Colombian biofuels enthusiasts insist this immense feat can be achieved without destroying sensitive natural resources or competing with food crops.
All involved in boosting ethanol production say the sugar cane industry should consider expanding into cattle ranches in the east.
With about 22 million head of cattle occupying 106 million acres -- almost 5 acres per cow -- the country's Ministry of Agriculture says cattle ranching in Colombia is grossly inefficient and has room to consolidate land and introduce feedlots and other standard practices that would improve it.
Meanwhile Cenicaña is fully anticipating expansion in the east and is laying the groundwork to support the industry's efforts there. Amaya and his team are busy developing new sugar cane varieties that would do well in the drier east. One promising specimen he mentions has the ability to grow in poorer-quality soil while consuming 50 percent less water.
The opportunities are immense, industry experts say, but it will take a lot of work and patience to see them through.
"At this moment, around 4 million hectares are available for agriculture, and we could reach around 10 million hectares that are available to grow crops," Amaya said. "There's a big area here that can be planted with sugar cane with no conflict with other food crops."
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