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Brazil is the world's second largest producer of ethanol and the world's largest exporter, and it is considered to have the world's first sustainable biofuels economy and the biofuel industry leader. Together, Brazil and the United States lead the industrial world in global ethanol production, accounting together for 70% of the world's production and nearly 90% of ethanol used for fuel.  In 2006 Brazil produced 16.3 billion liters (4.3 billion U.S. liquid gallons), which represents 33.3% of the world's total ethanol production and 42% of the world's ethanol used as fuel. Total production is predicted to reach at least 26.4 billion litres (6.97 billion U.S. liquid gallons) for 2008. Brazil’s 30-year-old ethanol fuel program uses modern equipment and cheap sugar cane as feedstock, the residual cane-waste (bagasse) is used for process heat and power, which results in a very competitive price and also in a high energy balance (output energy/input energy), which varies from 8.3 for average conditions to 10.2 for best practice production.The Brazilian ethanol program provided nearly 700,000 jobs in 2003, and cut 1975–2002 oil imports by a cumulative undiscounted total of US$50 billion. The production of ethanol is concentrated in the Center and Southeast regions of the country, which includes the main producer, São Paulo State. These two regions were responsible for almost 90% of Brazil's ethanol production in 2004.
There are no longer light vehicles in Brazil running on pure gasoline. Since 1977 the government made mandatory to blend 20% of ethanol (E20) with gasoline (gasohol), requiring just a minor adjustment on regular gasoline motors. Today the mandatory blend is allowed to vary nationwide between 20% to 25% ethanol (E25) and it is used by all regular gasoline vehicles, plus three million cars running on 100% anhydrous ethanol, and five million dual or flexible-fuel vehicles. The Brazilian car manufacturing industry developed flexible-fuel vehicles that can run on any proportion of gasoline and ethanol. Introduced in the market in 2003, these vehicles became a commercial success, and by March 2008, the fleet of "flex" cars and light commercial vehicles had reached 5 million new vehicles sold, which represents around 10% of Brazil's motor vehicle fleet and 15.6% of all light vehicles. The success of "flex" vehicles, as they are popularly known, together with the mandatory use of E25 blend of gasoline throughout the country, allowed Brazil in 2006 to achieve more than 40% of fuel consumption from sugar cane-based ethanol for the light vehicle fleet, and represents almost 20% of total fuel consumption in the road transport sector when trucks and other diesel-powered vehicles are considered.
Since the second half of the 70's, and as a result of the 1973 oil crisis, the Brazil government has been promoting ethanol as a fuel. By 1978 the first gasohol automobile was developed. The Brazilian government provided three important initial drivers for the ethanol industry: guaranteed purchases by the state-owned oil company Petrobras, low-interest loans for agro-industrial ethanol firms, and fixed gasoline and ethanol prices where hydrous ethanol sold for 59% of the government-set gasoline price at the pump. These pump-primers have made ethanol production competitive yet unsubsidized. In recent years, the Brazilian untaxed retail price of hydrous ethanol has been lower than that of gasoline per gallon. Approximately US$50 million has recently been allocated for research and projects focused on advancing the obtention of ethanol from sugarcane in São Paulo.
The Pró-Álcool or Programa Nacional do Álcool (National Alcohol Program) was a nation-wide program financed by the government to phase out all automobile fuels derived from fossil fuels (such as gasoline) in favour of ethanol. It began with the anhydrous alcohol to blend with the gasoline. This mixture has been used since then and is now done with 24% of alcohol and 76% gasoline (commonly known as gasohol). The program successfully reduced by 10 million the number of cars running on gasoline in Brazil, thereby reducing the country's dependence on oil imports. The decision to produce ethanol from fermented sugarcane was based on the low cost of sugar at the time. Other sources of fermentable carbohydrates were tested such as the manioc. Sales of alcohol-only cars tumbled after an alcohol shortage coupled with low gas prices in the late 1980s to early 1990s. 
In May 2003 Volkswagen built for the first time a production flexible fuel car, the Gol 1.6 Total Flex. Chevrolet followed two months later with the Corsa 1.8 Flexpower, using an engine developed by a joint-venture with Fiat called PowerTrain. That year production of full flex-fuel reached 39.853 automobiles and 9.411 light commercial vehicles. By 2005, popular manufacturers that build flexible fuel vehicles are Chevrolet, Fiat, Ford, Peugeot, Renault ,Volkswagen, Honda, Mitsubishi, Toyota and Citröen. Flexible fuel cars were 15,2% of the car sales in 2004, 38,6% in 2005, 59,7% for 2006 and 71.9% for 2007. By March 2008, the fleet of dual-fuel vehicles, including autos and light commercial vehicles, had reached 5 million.
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