Fueling Development: Sugarcane Expansion Impacts in Brazil

The study finds that the entry of sugarcane mills in Mato Grosso do Sul triggers significant local economic growth, including a 30% increase in municipal GDP and a 40% rise in employment three years after construction. While sugarcane expansion primarily displaces cattle pastureland, it creates positive productivity spillovers for soybean and corn crops. Additionally, the research indicates a decrease in deforestation in hosting municipalities, potentially due to increased environmental scrutiny and law enforcement associated with large-scale industrial investments.

• Three years after a sugarcane mill is built, a typical hosting municipality experiences a 30% increase in GDP, a 10% increase in population, a 40% increase in employment, a 49% increase in aggregate wages, and a 31% jump in tax revenues.
• Sugarcane expansion primarily causes a shift in land use from pastures to sugarcane, resulting in a reduction of the cattle herd by an average of 27.2 thousand heads in treated municipalities.
• The expansion of sugarcane creates positive productivity spillovers for other grains; while soybean harvested area decreases by 10.16 thousand hectares, its yield per hectare increases from 1.84 to 2.87 tons. Total corn yield per hectare increases from 2.71 to 5.92 tons.
• The entry of new mills is associated with a decrease in deforestation. In the long run (three years post-operation), treated municipalities have between 4.34 and 7.42 thousand hectares more tree cover than they would have without the mills.
• The industrial sector sees the most significant growth in jobs and wages, with the number of workers in industry increasing nearly fourfold and skilled worker contracts increasing by 1,778 in the long run.
• The presence of mills stimulates the local financial sector, with private deposits doubling from the baseline mean (increasing by 4.76 million reais) and rural credit increasing by 18.53 million reais in the long run.
• The mills attract a wide range of ancillary businesses, including 186 additional business openings, particularly in agricultural service activities, machinery maintenance, and road freight transportation.

APA

Assunão, J., Pietracci, B., & Souza, P. (2016). Fueling Development: Sugarcane Expansion Impacts in Brazil. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/07/Paper_Fueling_Development_Sugarcane_Expansion_Impacts_in_Brazil_Working_Paper_CPI.pdf.pdf

Chicago

Assunão, Juliano, Breno Pietracci, and Priscila Souza. Fueling Development: Sugarcane Expansion Impacts in Brazil. Climate Policy Initiative, 2016. https://www.climatepolicyinitiative.org/wp-content/uploads/2016/07/Paper_Fueling_Development_Sugarcane_Expansion_Impacts_in_Brazil_Working_Paper_CPI.pdf.pdf.

Wikipedia

{{cite report |last1=Assunão |first1=Juliano |last2=Pietracci |first2=Breno |last3=Souza |first3=Priscila |title=Fueling Development: Sugarcane Expansion Impacts in Brazil |publisher=Climate Policy Initiative |date=July 2016 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2016/07/Paper_Fueling_Development_Sugarcane_Expansion_Impacts_in_Brazil_Working_Paper_CPI.pdf.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{assuno2016fueling, author = {Assunão, Juliano and Pietracci, Breno and Souza, Priscila}, title = {{Fueling Development: Sugarcane Expansion Impacts in Brazil}}, institution = {Climate Policy Initiative}, year = {2016}, month = jul, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2016/07/Paper_Fueling_Development_Sugarcane_Expansion_Impacts_in_Brazil_Working_Paper_CPI.pdf.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }