Insight Focus
- Guatemala will adopt a 10% ethanol blend.
- Guatemala is already self-sufficient in ethanol production.
- The EU and USA may need to import from other sources.
The government of Guatemala announced that starting January 1st, 2024, all gasoline must contain 10% ethanol.
Effects of the New Law
Guatemala currently produces 245 million litres of ethanol a year. 90% of this is exported, while the remaining 10% is used in the domestic beverage and pharmaceutical industry. Of these exports, 40% go to the European Union with a further 20% going to the USA. Once the blend is applied, these countries may need to source new ethanol supply.
We are interested to see what happens to Guatemalan sugar prices once the ethanol blend is applied. When the United States began to blend ethanol into gasoline, farm acreage where corn is grown grew by about 9%. It’s possible something similar happens to Guatemalan sugar cane.
Why is Guatemala Shifting Towards Ethanol?
There are several reasons why Guatemala is shifting towards ethanol. The is the positive environmental impact it will have. Reports have shown that by turning to a 10% ethanol blend, Guatemala will save 7 million tonnes of CO2 from reaching the atmosphere. This move will help Guatemala reach its Paris Agreement goal of reducing CO2 emissions by 11% by 2030.
There are financial reasons as well. Guatemala will save around USD 75m per year in combustibles imports after implementing the blend. This move will also help Guatemala reduce its dependency on oil and will help alleviate high domestic gasoline prices.
Lastly, Guatemala is implementing the blend for logistical reasons. Guatemala is one of the largest sugar producers in the world. We estimate Guatemala will produce around 3 million tonnes of sugar in 2022/23
Since Guatemala already produces a high sugar volume, it won’t have to import ethanol from other countries. Studies claim that for Guatemala to implement its 10% blend, it will need around 238 million liters of ethanol. With its five current distilleries, Guatemala can produce 245 million liters of ethanol.
