I tried caldo de cana (fresh sugarcane juice) on the side of a desolate country road in Sertãozinho, Brazil, in August 2007, and loved it. Today, I have it every Saturday morning at our local street market.

To read my 14-story series on sugar cane and ethanol (álcool) in Brazil, choose the “Louisiana/Brazil” category. These stories were published in a thoughtful order over a series of four days. To read them in that order, scroll below, where the “Day 1″ story appears, and work your way down. All of the stories from “Day 3″ focus on Brazil, specifically in São Paulo state.

If you’d like digital copies (pdf) of the actual news pages from the Louisiana/Brazil series or any story, you should be able to download one for yourself from the Scribd-hosted pdfs I have within this blog. Any problems, please contact me at: bobmoser333 [at] gmail [dot] com .

By Bob Moser, Americas correspondent
Dec. 14, 2011

Relationships between contractors and operators in the Gulf of Mexico may undergo fundamental changes in 2012, and could even make some think twice about work in the region, now that US regulators will hold contractors liable for accidents in a way not accounted for in common contracts known as Master Service Agreements (MSAs).

Twenty Incidents of Noncompliance (INC) notices have been issued since October to the “Macondo trio” of contractors involved with the 2010 well blowout. The Macondo response was the first time the Department of Interior had issued INCs directly to a contractor that wasn’t the well’s operator.

The move was long overdue, officials now say. The Bureau of Safety and Environmental Enforcement (BSEE) will regulate contractors along with operators from now on, said Michael R. Bromwich, former BSEE director who was replaced by James Watson on Dec. 1.

Contractors held accountable

“I believe in a system of legal and regulatory accountability, and the issuance of those INCs (to BP, TransOcean and Haliburton) reflects my view that such accountability is not limited to operators,” Bromwich told contractors during a speech to the International Association of Drilling Contractors in November.

“I know it is a new view for this industry, but I am convinced it is the right view”, he said.

Regulators in other industries in the US and offshore regulators from other countries found it strange the BSEE or past agencies would limit its authority to just operators, Bromwich said. The BSEE can preserve its standard of holding operators fully responsible for accidents, and in most cases solely responsible.

But there was no sound legal or logical basis for contractors to keep receiving de-facto immunity, as they have for decades, when the agency is authorized to regulate all entities involved in developing offshore leases, Bromwich added.

The ripple effect this may have on how contractors do business in the Gulf has yet to be seen, but the top priority for contractors may soon become rewrites or amendments to MSAs they have with operators.

MSAs between operators and contractors usually contain indemnities that protect the contractor from issues like pollution and third-party liability, said Rick Kuebel III, attorney with Locke Lord that specializes in deepwater operators and decommissioning.

The BSEE’s newly increased scope for which parties it will issue INCs to wasn’t foreseen in current MSA contracts, and could lead contractors to disfavor work in the Gulf of Mexico if they can’t amend MSAs with their operator partners, Kuebel said.

“If INCs are issued to a contractor with an MSA already in place, are contractors going to want to pass the cost of that fine on to the operator; or accept the penalty as a cost of doing business?” he said. “This becomes a risk allocation issue about how you do business. It will be a good discussion to have for major P&A contractors.”

Contractors can expect better inspection and regulatory effort to come from the BSEE, because for the first time the agency is actually training its offshore inspectors in environmental enforcement – something that, surprisingly, didn’t exist in a formal manner under the former MMS mantel.

The MMS never had a training program for its offshore inspectors, even though that was a key part of the agency’s responsibilities for oversight. “It was bad enough that the agency was asked to inspect more than 3,000 facilities with fewer than 60 inspectors; the problem was compounded because the agency had never developed its own training program,” said Bromwich, during his IADC speech in November.

Increased oversight

BSEE has since created a National Offshore Training and Learning Center, hired its first-ever training director, and has established for the first time, an Environmental Enforcement Division. That division will provide regular oversight of operators to ensure they’re meeting established regulations, and are in line with requirements on their leases and permits.

Greater oversight shouldn’t concern P&A contractors that already hold themselves to the highest standards and run safe operations, said Tom Rosegrant, Superior Energy’s president of well service and P&A in the Gulf of Mexico and US inland waters.

The biggest challenge companies like his have had with the BSEE is getting permits approved in a timely manner, something Rosegrant attributes to the government struggling to hire engineers in a competitive labor market. The BSEE claims it will have hired more than 40 new inspectors by Jan. 1.

Bromwich said an overhaul of how civil penalties are imposed is also long overdue, and the BSEE will pursue legislative change for this.

Currently, it can take more than a year to decide if civil penalties should be imposed after INC notices are handed out. It’s far too long to wait, Bromwich said, and the penalty, which now tops out at US$40,000 per day, per incident, is too low in an industry where operators can pay between US$500,000 and US$1 million per day for a rig.

Government aid will end soon, and CSP will have to prove its technology and profitability to risk-averse banks and private financiers.

By Bob Moser, Americas correspondent
Nov. 18, 2011

With key government aid programs likely to expire at year’s end, concentrated solar power (CSP) developers will have to turn to a private investment market that may be too risk-averse to back the relatively unproven technology over renewables like PV and windpower, which are also aggressively competing for lender attention.

Of 103 CSP plant locations on CSP Today’s 2011 US CSP projects map, 17 are currently operational, eight are under construction, and around 78 in various stages of planning. But across the industry, a recent rash of bankruptcies and major shifts in tech-commitment may be overshadowing the positive groundwork many firms are laying.

Bankruptcies, foreign competition

California-based Solyndra Inc. closed shop and filed for bankruptcy in August, as did Evergreen Solar and SpectraWatt. Those three manufacturers made up roughly 20% of US panel manufacturing capacity.

Solar thermal company Stirling Energy Systems filed for bankruptcy in September. The company had planned to compete in the utility-scale CSP market. California regulators had approved two Stirling projects last year totaling 1,372.5 MW, but its sister company, developer Tessera Solar, sold those projects when it couldn’t line up construction financing. Frustrated by the process, utility Southern California Edison canceled its contract for one of the projects.

More project developers are turning to PV as a cheaper and faster option for utility-scale projects. In August, Solar Trust of America announced it will use PV instead of CSP for the first 500 MW of its 1 GW Blythe Solar Power Project. On October 6, PV-plant builder solarhybrid AG announced it was buying up to 2.25 GWP in US solar projects from CSP developer Solar Millennium AG.

“It does send a signal, no question about it, and throws down a gauntlet for the CSP industry to work through cost issues and technology risks,” said Audrey Louison, partner and renewables specialist at  Boston-based law firm Mintz Levin. “The loan guarantee program has done what it was supposed to do with CSP. It catalyzed some big projects, and if they are successful there may still be a role for CSP in the market. Utilities themselves may be interested in some self-built large-scale projects.”

The Section 1603 cash grant program has helped 2,410 renewable energy projects in the last year monetize the 30% ITC without needing a tax equity partner. The vast majority of those – 2,095 to be exact – were solar energy projects.

When that program expires at year’s end the solar sector will suffer more than any renewables industry, concludes researchers at Mintz Levin in a renewables finance greenpaper published in September. If the cash grant program were extended long-term, solar power would win big, with CSP projects benefiting more than any.

Silver lining?

About 85% of the CSP projects Mintz Levin expects to seek financing through 2013 are 100 MW or larger, and that type of capital-intensive project is much easier to finance if 30% of its capital costs can be recovered as a direct cash grant. But prospects for the program’s extension are dim, Louison says.

There’s private money eager to back renewables in the US. About 10,000 MW of windpower (or US$20 billion at US$2 per watt) were installed in the US in 2009, and commercial banks financed roughly half that.

Some of these same banks – Santander, Bank of Tokyo, Union Bank NA and more – will have loans for solar developers, but their concern with unproven technology and commercial scales may limit CSP, says Brett Prior, senior analyst with Greentech Media/GTM Research.

Developers of new CSP tower projects could struggle to convince lenders or have to pay a premium, Prior says, since Brightsource’s Ivanpah will be the technology’s first full-scale deployment. Brightsource has funding set for its Hidden Hills projects nos. 1 and 2, but may face premiums from lenders for planned expansions.

“It may be an uphill battle. Debt holders are first in line, so if anything goes wrong it’s actually equity investors whose return gets hurt,” Prior said. “But if operations and maintenance costs more the equity investor gets hit, but the lenders are still covered.”

The cost of PV panels has dropped 37% within the past year thanks to Chinese producers slashing prices. Asian competition was the main factor that pushed American PV panel producer Solyndra into bankruptcy last quarter, and forced Solar Millennium AG to abandon a US$2.1 billion loan guarantee last month to drop thermal technology for cheaper PV.

Low-cost Chinese PV panels have also driven proven equipment makers from Germany and Japan into financial trouble. Solar thermal simply doesn’t seem to be able to adapt as quickly to the competitive marketplace as PV has done.

Thermal developers typically offer custom-designed plants built on a utility-scale and need years to design and construct. They cost more to build and maintain than plants using PV panels today.

But the United States’ trade balance in solar products is still very much positive. The country was a net exporter in 2010 by US$1.9 billion, and had a positive trade balance with China.

The US exports a lot of poly-silicon and manufacturing equipment, Prior says, but is a net importer of modules. “I wouldn’t say that more modules from Asia being installed in the US means eroding support for our industry,” Prior said.

By Bob Moser
Published June 7, 2011

Brazil’s recycling rate hasn’t risen in step with its plastics consumption, and while municipal collection expands each year, the market is ripe for private collection companies to invest, according to analysts at Chemical Market Associates Inc.’s one-day Latin America Petrochemicals and Polymers Conference, held in conjunction with Brasilplast in São Paulo.

Selective collection in Brazil’s cities has grown slowly but steadily during the last 15 years, from 81 municipalities in 1994 to 443 in 2010. But informal collection by Brazil’s poor and homeless still accounts for more than 60 percent of all plastic collected. It’s roughly the opposite in the U.S., where 66 percent of PET recyclate comes from curbside or other voluntary collection.

Ease of collection has proven to be the key for recycling participation in the U.S., and remains the main challenge for Brazilian recycling agencies to implement in local infrastructure. The fact that few consumers want to do more than the absolute minimum in recycling is a universal concept, said Andrew Sampson, CMAI global relations manager.

Brazilians consumed more than 5.9 million tons of plastic products in 2010, a 13 percent increase from the year prior. Of those plastics, 62 percent were from single-use categories like food, drink and packaging. Consumption of plastics in Brazil reached 70.4 pounds per person, continuing its steady annual rise of about 1.1 pound per person annually during the past six years.

More than 780 businesses are now registered in Brazil as recyclable-plastics collectors. As of 2007 the country’s plastics recycling rate had topped 21 percent.

But while economic prosperity has lifted millions of Brazilians out of poverty and into the consumer middle class over the last three years, experts don’t believe recycling awareness has been adopted at the same rate. The country’s plastics recycling rate is now estimated at around 20 percent or less.

The market is right for private recycling companies to invest in educating the population about recycling and providing the infrastructure to make it easy, said Solange Stumpf, an executive partner with MaxiQuim Chemical Business & Intelligence of Porto Alegre, Brazil.

A national regulation passed August 2010 is starting to require factories, importers, distributors and sales companies to take responsibility for the collection and separation of their recyclable waste. These businesses and others will be required to work with local governments for proper recycling, and companies that work with hazardous liquids must have plans in place to oversee safe collection and removal of their chemical waste.

Brasilplast was held May 9-13.

By Bob Moser
Published June 7, 2011

Brazilians’ consumption of plastics jumped by more than a million tons in 2010 and domestic production followed, prompting more than 50 percent growth in sales for plastics machinery manufacturers in Brazil compared with the year prior.

But Brazil’s manufacturing sector for blow molding machines has become increasingly competitive in recent years, with more foreign players establishing sales or production subsidiaries in the country. A rapidly growing economy is boosting consumer purchasing power, but market leaders at Brasilpast 2011, held May 9-13 in São Paulo, said they’re facing short-term saturation in domestic sales, and an overvalued currency that’s limiting their export potential.

Growth may slow
Americana, Brazil-based Pavan Zanetti Indústria Metalúrgica Ltda., one of the market’s top producers of blow molding machines, enjoyed a sales record in 2010 with 67 million Brazilian reais ($41.2 million). But through the first five months of this year, signs point to the domestic market being satiated for machinery expansion.

Sales manager Newton Zanetti said he expects machinery sales to drop across the industry to pre-2008 financial-crisis levels, though he’s optimistic that sales of supplies and post-warranty service will help companies like his minimize any loss in revenue.

“Brazil isn’t a linear growth market like others around the world; we grow in leaps and bounds here,” Zanetti said. “If the government continues with incentives we expect maybe 4 percent growth this year at most, compared to 7 percent in 2010.”

Plastics producers have been able to buy Brazilian production machinery in record numbers in recent years due in large part to widely accessible, low-interest financing available from Brazil’s economic development bank, BNDES. Government loans, plus Brazil’s practice of 12- to 24-month-long installment payment plans, have played a big role in machinery sales.

But that success is no longer enough to mask the issues of currency inflation and an increasingly crowded market for machine companies. Market leaders said they’d like the industry to push government for reform on cumbersome tax, labor and import policies that drive up the cost of business.

“It’s been a very tough market here over the last two years, mainly because of the strengthening of the currency,” said Hermes Alberto Lago Jr., commercial machinery director for Indústrias Romi SA of Santa Bárbara d’Oeste, Brazil, an 80-year-old firm where injection and blow molding machinery account for 25 percent of annual revenue.

“More foreign competitors are selling here at low prices, and export sales are tougher because currency is overvalued,” he said. “So we’re having to develop new products.”

Cost of business
Even with 10 years as an established injection molds brand in the Brazilian market, Diessenhofen, Switzerland-based Schöttli AG still only sells around three molds per year in Brazil. The country’s high import tariffs, which add up to a 56 percent tax for a Schöttli mold, minimize the foreign brand’s opportunity to compete with locally made molds.

Schöttli is just one of many foreign machinery producers that hope to see Brazil’s import tax barriers reduced or removed in the future, said Alexander Anders, head of technical sales. Brazil remains one of the most attractive growth markets in the world for Schöttli, with promising domestic-market growth potential specifically in health-care expenditures for Brazil’s emerging middle class.

A great deal of Brazilian business development has been delayed in recent years by the country’s slow action to improve transportation infrastructure, reform public education and reduce labor-related taxes and costs that rank among the world’s highest.

For every 100 Brazilian reais paid in salary to an employee, companies must pay 8 percent into a government-mandated fund that employees receive if they’re fired. Brazilian companies have extra fixed costs that foreign competitors don’t, like 30 days paid vacation per worker, and a mandated “Christmas bonus” each year in the form of an extra month’s salary. There also are mandated lunch stipends for workers, and companies of certain sizes must give workers a certain value per month for grocery expenses.

“We call it the ‘Brazil cost,’ ” said Ricardo Prado Santos, vice president of Piovan SpA’s local unit, Piovan do Brasil Indústria e Comercio Ltda. in Osasco. The local firm produces periphery equipment like dryers, refrigeration systems, vacuum conveyer systems and more.

“Brazil has a lot of taxes, and a lot more cost that goes into each employee. In the end, it can cost 60-100 percent more for a Brazilian employee, above their regular salary,” he said.

The challenges that multinational firms like Berlin-based Bekum Maschinenfabriken GmbH face in Brazil only seem to be increasing as of late. More competition in a still-relatively small market has prompted most Brazilian buyers to focus on price, where Bekum often can’t compete with “less-high-quality” brands, said Uwe Margraf, president of São Paulo-based subsidiary Bekum do Brasil Indústria e Comercio Ltda. A lack of raw material within the country also requires the pricey import of foreign-born materials.

Cranberry Township, Pa.-based Conair Group didn’t come to Brasilplast to debut new auxiliary equipment, but to kick off the company’s focused effort to expand sales and service throughout Latin America. Conair will focus on Brazil in particular, despite the costs.

“Brazil is still a very protected country compared to the rest of Latin America,” said Jan-Olof Nilsson, managing director of Conair Mexicana SA de CV in Guadalupe, Mexico, which oversees Latin American trade. “There’s up to a 50 percent import tax on our auxiliary equipment. This is something that could motivate Conair to produce in Brazil.”

Conair knows it must boost its brand recognition in Brazil to overcome price differences, and will expand its local hires from the handful of sales representatives and one technician who have been here for 25 years.

Brazil’s future
Wilmington, N.C.-based Wilmington Machinery Inc. has a unique relationship with the Brazilian plastics market that it hopes will grow into a full-fledged marriage for small bottle makers in the next few years.

As a manufacturer of high-speed rotary blow molding machines geared toward multilayer food bottles, Wilmington sold its first MSB-40DP machine in Brazil, of all places. The machine was introduced in 2009 as a 40-station, dual-parison model that produces 80 small bottles at 10 rpm. At least six more SB machines were quoted for new Brazilian clients during Brasilplast, said Jeff Newman, vice president of sales and marketing.

Until five years ago, Wilmington Machinery had focused almost entirely on producing machines for makers of large detergent bottles in North America. But the new SB series was designed with South American and European markets in mind, in pursuit of booming economies in each region and their populations’ proclivity toward single-serve beverages.

“The North American market is very much about stop-and-go convenience. But in countries like Brazil it’s different. [Brazilians] like smaller quantities because of their [lesser] spending power, and Brazil already has the customer base in place for small containers, because it’s a huge market for small, drinkable dairy in particular,” Newman said. “Brazil is going to be the single-largest market for this SB-series machine.”

Newman also finds Brazilian buyers more sensitive to energy costs, something the SB series has improved on compared with older, similar lines. Its compact design also plays to Brazilians’ concerns about floor space, something valued more in Latin America than in China, he said.

Bekum do Brasil is eyeing Brazil’s automotive industry as another growth market, where advancements in fuel tanks have prompted auto-parts makers to transition to coextruded plastic fuel tanks. Auto parts made up 1.4 percent of Brazilian-made plastics in 2010, but with new records set for car sales last year, Margraf said Bekum is the only manufacturer that can offer this type of coextruder machine with personalized maintenance.

Seeking new markets
Like many Brazilian manufacturers, Rotoline Equipamentos e Industriais of Chapecó must now pursue new foreign markets due to growing competition at home and the limits of an inflated currency. Rotoline sales manager Kadidia Umar said the company is strongly considering development of a lower-cost machine for emerging markets.

“Our new goal is to get into African countries,” Umar said. “We can’t compete with the low price of Chinese or Indian machines there, but ours are higher-quality.”

Key customer markets in Brazil for the company include construction and agriculture, two sectors of Brazil’s economy that have grown rapidly with the economic boom that followed the crisis in 2008. “We think those customers may migrate from the fiberglass market — which is no longer ‘green’ — to rotomolding,” Umar said.

Others have kept their focus on Brazil, but are developing value-added products to help existing customers get more from their machines. Bekum do Brasil is focusing this year on fully automating its BA25 blow molding machine to achieve savings by eliminating risks of accident or human error. It also will shave 30 seconds to one minute off printing time, according to Margraf, and integrate cooling systems into the machine to reduce cycle times and boost productivity.

Romi debuted four all-electric machines that offer energy savings of up to 30 percent compared with older Romi models. The new EL300 injection molding machine features advances in high-precision modeling with one of the lowest energy-consumption levels of any Romi model. The EL300 features 300 tons of clamping force and 745 grams of injection capacity.

The new EN150 injection press offers more precision for the production of technical parts, though it’s adaptable enough to produce toys, packaging and domestic tools as well. The EN150 offers 170 tons of clamping force, with 380 grams of injection capacity.

The new PET425 blow molding machine features a fully automated process, from initial raw material feed-in to removal of bottles directly to the bottling and storage lines. The PET425, designed to work with four mold cavities and to blow bottles for beverages, food and cosmetics among others, can produce bottles up to 2½ liters in volume, and can produce up to 5,000 bottles of 15 ounces, per hour.

And the new Compacta5TS blow molding machine is being marketed for packaging. It is equipped with a hydraulic unit, pressure accumulator and proportional valves that manage the transfer and closing of the mold. The machine can produce up to 400 bottles per hour with automatic deburring.

With machinery sales possibly slowed for the next few years, Romi is promoting the concept of lease/rental agreements. It’s common practice to lease machinery in the U.S. and other developed markets, but Brazilians have a strong cultural inclination toward ownership, Lago said.

“It’s truly a new idea of rental agreements we have to develop here in Brazil,” he said. “All Brazilians have a very strong feeling deep inside of wanting to own their goods.” In the few instances where machinery is leased, interest rates are often 18-20 percent — common for Brazil’s cumbersome credit system, and a common dealbreaker for leasing before negotiations get past an initial stage.

And periphery equipment maker Piovan debuted a host of products at the trade fair, including a new dry cooler line that is specially tailored for tropical climates, a 73-ton refrigeration unit and a revamped line of MXP and TXP blenders that better control a product’s weight per meter on the extrusion line. The company also introduced a small fitting unit named Lybra G for masterbatches and additives that incorporate loss in weight, and a new version of its Easy software, Easy3, that manages conveyer systems.

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