Import demand for Brazilian ethanol: a cross-country analysis

This study presents an empirical analysis of the import demand for Brazilian ethanol by its six major foreign buyers. The primary objectives of this study were to identify the economic factors affecting the demand for ethanol imports and to derive long-run price and income elasticities of import demand. These elasticities could be used to analyze the impact of government policies such as mandatory gasoline/ethanol blends and import tariffs. Import demand models were estimated with ordinary least squares (OLS), using quarterly time series data for the 1997-2007 time period. The results suggest that the factors influencing the import demand for ethanol vary across countries. Markets adopting mandatory blends of renewable fuels tend to have less price elastic import demand schedules. Ethanol imports were found to be price elastic and statistically significant in the Caribbean region (-1.66), Mexico (-2.08), Japan (-1.44) and Nigeria (-1.38), while import demand was price inelastic and not statistically different from zero in the US (-0.76) and Europe (-0.21). The regression results could not determine the impacts of import tariffs for the United States, Mexico and Nigeria on the quantity of imports because tariffs did not vary during the time period studied. Results show that mandatory gasoline/ethanol blends have been an important determinant of ethanol imports. (C) 2009 Elsevier Ltd. All rights reserved.