Between Brazil's largest city Sao Paulo and the state of Mato Grosso do Sul, there stretches some 2,000 kilometers of hinterland, covered as far as the eye can see by vast grasslands dotted with grazing cattle, and unending expanses of sugarcane.

In the town of Nova, Valdir Jose Zorzo, the stocky president of food concern Dallas Group, greets his visitors in the company of his third wife. Despite his German descent, Zorzo displays nothing of the stereotypical Teutonic reserve. Indeed, he is effusively eager to show off his wealth – his huge enterprise, three airplanes, and a villa at the center of a lake. He says he spends one or two days a week inspecting his 12 farms by airplane.

Farmland Bigger than Taipei City

When arriving at his sugarcane plantations, Zorzo fetches a small knife from his pocket to deftly peel off the hard woody rind of the sugarcane. Like a mischievous kid, he makes fun of others who can't figure out how to properly chew the pith inside the stalks.

In Mato Grosso do Sul, Zorzo is a household name. He is known as a mega landowner with 33,000 hectares of farmland, roughly 1.2 times the surface area of Taipei City. In terms of both landholdings and political clout, the Coelho clan is unchallenged in Mato Grosso do Sul. But as an individual, Zorzo owns the largest amount of farmland and is the biggest supplier for the region's ethanol plants.

Since it is quite lucrative to lease land in Brazil, many landowners lease their land to distilleries which grow sugarcane. Depending on the land's proximity to the ethanol plants, usually within a perimeter of 30 kilometers one hectare can yield an annual rent that equals the price of 60 to 75 tons of sugarcane.

But Zorzo carefully calculated that with his own machinery, equipment, means of transportation, and a machine parts maintenance department, he could make an even higher profit by cultivating, harvesting, and shipping the sugarcane himself.

If Zorzo rented the 6,000 hectares of sugarcane plantations to the distilleries, he would earn a rent of around 13 million reais (some US$6.7 million) per year. But by producing his own sugarcane, Zorzo made 36 million reais last year, for a net profit of around 15 million reais (US$7.7 million) – and that was achieved under unfavorable circumstances, with his sugarcane crop at the low point of its eight-year harvesting cycle, and the selling price plummeting in the second half of the year. "I made only two thirds of what I made two years ago," Zorzo reveals with a hint of dissatisfaction.

In the seemingly endless expanse of sugarcane fields, three chopper harvesters are working in a row. The giant machines cut the cane at the base, separate it from its leaves, cut it into many sections that are deposited into an accompanying truck, while the cut leaves are blown back onto the fields.

Zorzo explains that a crop of sugarcane can be harvested for six to eight years, but the plants' sugar content diminishes over time. On top of that, it is crucial to harvest sugarcane at the right time when its sugar content is highest and the sugar-containing pith inside the stalks is still soft and juicy. If the canes are overly mature, they become woody and hollow inside. The ideal harvesting time is around 300 days after the cane sprouts.

Zorzo's three harvesters need to work nonstop for more than 40 days to harvest his 6,000 hectares of sugarcane fields. Harvesting such huge amounts of sugarcane within a limited period of time is an enormous logistical task, since ensuring that all sugarcane is harvested when it has roughly the same sugar content requires true expertise.

Producing alcohol from sugarcane is much more efficient than distilling it from other sugary feedstock such as corn. Faced with high oil prices and concerns over the drying up of the world's oil reserves, many industrial nations have begun to invest in sugarcane-based biofuel production in Brazil.

Dozens of Biofuel Plants under Construction

A glitzy information brochure by the government of Mato Grosso do Sul proudly touts the state's biofuel industry. Forty-three red stars on the state's map represent ethanol factories that are under construction, in addition to eleven existing ones. Last year the state's ethanol output doubled to 3 billion liters. When five years down the road all 43 new plants have started operation, annual output will increase fivefold to 15 billion liters.

Zorzo notes that aside from Brazilian enterprises, companies from Japan, the U.S. and China are behind the new biofuel plant projects. Jerry Huang, an investor from Taiwan, names three major Japanese corporations – Mitsui, Mitsubishi and Marubeni – that are known to have invested in biofuel plants in Brazil, with production aimed at the Japanese market. George Soros's flagship Quantum Fund has also invested in three large ethanol plants in Brazil.

Gate security at the ethanol plants is tight. But when one plant allows us entry, we immediately encounter an overwhelming smell of fermenting sugarcane. Steam fills the air, and rumbling machines make so much noise that we must shout to be heard. The factory manager Paulo Antonio Cesar Medeiro explains that when sugarcane arrives at the plant, it is first tested for its sugar content before the factory buys the shipment. Last year top quality sugarcane fetched up to 50 reais per ton (about US$25.9), but since oil prices have since declined, the current price has dropped to 37 reais (about US$19) per ton.

Medeiro notes that it takes only a three-hour process – from extracting the sugary juice to fermenting and distilling – to turn the harvest from one hectare of sugarcane into 100 tons of ethanol. Aside from using sugarcane juice for ethanol production, the pith that remains after juice extraction can be used as fuel. Medeiro's factory is entirely fired with sugarcane pith. Excess pith that is not needed for firing the plant is fermented and sold as fertilizer for seven reais per ton.

An In for Taiwan?

The plant belongs to the Itamarati Group, a conglomerate of dozens of companies, from banks to railroads. With a paid-in capital of US$80 million (about NT$2.6 billion) and an annual output of 6.8 million tons of ethanol, the plant counts among the smaller distilleries in Brazil. But the Itamarati Group has already decided to expand the plant to boost its output tenfold.

Taiwan has a lot of idle capital and entirely depends on imports to cover its energy needs. In order to guarantee a stable energy supply, such enterprises as Taiwan Sugar could follow in the footsteps of the United States and Japan and secure resources in overseas producer countries like Brazil.

Translated from the Chinese by Susanne Ganz

Valdir Jose Zorzo

Went to Mato Grosso do Sul 13 years ago to develop his enterprise: 4 foodstuff factories, 12 farms, and 6,000 hectares of sugarcane plantations.

Personal assets: more than US$10 billion.

Recipe for success: specializes in running businesses that enjoy low tax rates. The group's foodstuff companies are exempt from state business tax, which allows Zorzo to sell at retail prices that are 30 percent cheaper than those of his competitors.