In principle, therefore the problem of increasing ethanol production was solved. The remaining problem was to make sure that the ethanol produced was consumed.

The Government solved the problem using two instruments [1]:

• Adopting mandates for mixing ethanol to gasoline. Up to 1979, the mixture of ethanol in the gasoline increased gradually to approximately 10% which required small changes in the existing motors. In 1981, ethanol consumption reached 2.5 billion liters.

• Setting the price of ethanol paid to producers at 59% of the selling price of gasoline (which was more than twice the cost of imported gasoline). The high price of gasoline has been used for a long time by the Government as a method of collecting resources to subsidize diesel oil. Parts of such resources were then used to subsidize ethanol.

Subsidies of approximately one billion dollars per year on the average over the 30 years were needed to sustain the program. These subsidies were removed gradu­ally and in 2004 the price paid to ethanol producers was similar to the cost of gaso­line in the international market as seen in Fig. 3.