The government plans to triple funds for companies including Bunge Ltd and Petrobras that are developing processes to turn sugar cane into high-margin chemicals and boost ethanol output, said Alexandre Tanaka, an official with Brazil’s research-financing agency Finep.

Brazil’s ambition is to lead development of the next generation of bio-fuels after a decade of hyperinflation stymied research budgets. The country is seeking to become a supplier of fuel-production technology and processes rather than purchasing them from other countries, Tanaka said. Its position as the world’s top producer of sugar cane may help it succeed with an approach some U.S. companies have abandoned.

“Brazil has traditionally had a policy of substituting imported technology and prioritizing commodities in its trade balance,” Tanaka said. When the country’s economic policies were shaped by hyperinflation “it was unthinkable to invest in projects that yield returns over long periods. Technology innovation is a long-term investment.”

Finep, or Financiadora de Estudos e Projetos, as the innovation agency is officially known, and the state-development bank BNDES will provide 5.2 billion Reais of loans under its PAISS program and another government effort announced in April called Inova Energia, Tanaka said. The loans will have interest rates as low as 3.5%, less than half the benchmark interest rate.

MercoPress