Result shows that the availability of this energy source is especially relevant for the location of industries from the chemical, ceramic, steel, and textile industries

Is the availability of natural gas relevant to the process of industrial concentration? How much does it weigh? Questions like these moved economist Edgar Perlotti to analyze the “The Spatial Concentration of Industry: evidences of the role played by the availability of natural gas,” published at the beginning of this year in the form of an article in the Magazine of Advanced Studies (Revista de Estudos Avançados) of the Institute of Advanced Studies of the University of São Paulo (IEA/USP). Last Monday, November 27, Perlotti spoke on the subject at USP’s Energy and Environment Institute (IEE), at the invitation of Professor Hirdan Katarina de Medeiros Costa, as part of the activities developed by Project 21 of the FAPESP-Shell Research Centre for Gas Innovation (RCGI).

The economist, who holds a Master’s degree from the IEE, worked with four natural-gas-intensive sectors in Brazil: chemical, ceramic, steel, and textile. And compared the importance of the availability of natural gas to both the intensive and non-intensive use sectors.

“This analysis attempts to identify the importance of the availability of natural gas to the spatial concentration process of industry. I worked from the hypothesis that we would have a concentration of natural-gas-intensive industries around Gasbol. In order to check on this, I used different methods. The most robust was an econometric model, which made it possible for me to conclude that the availability of natural gas is, in fact, very relevant for industries in the sectors that are natural-gas-intensive, but the same is not true for the others.

According to Perlotti, within this model, such variables as the weight of the infrastructure and the quality of the labor force at the location of the industries. But there are exceptions that have to do with variables that the econometric model cannot control, but also affect the decision to locate a plant.

“In this study, I analyzed Brazil as a whole. I attempted to place several controls in the model, so as to have the cleanest possible result. But it is impossible to control everything. For example: fiscal battles are a variable that influences the location of an industry. And, in this analysis, I was unable to control that factor.”

São Paulo – Now, Perlotti wants to reproduce the methodology, in order to evaluate the State of São Paulo, and to include pricing in the model. “There are three natural gas distributors in the State o São Paulo, and each one holds a concession in different regions. Now, I want to know if the pricing policy of a concession area makes the industry migrate or flow in that direction. This helps understand the competition between them, if that competition truly exists. The big question is: do they compete with their prices?”

According to him, special attention will be given to the “border” between the Paraíba Valley and Greater São Paulo. “I want to investigate whether or not there is migration of industries from one place to another. Because the conditions related to infrastructure and the labor force are very similar. Under those conditions, does the price of one distributor attract a company to its concession area? That’s what I want to find out. I work with the hypothesis that the price is relevant and that there is competition between them, via prices.”

The economist will also evaluate both the migration of industries within the State and the installation of new industries. “The effect that I see as being most important is the migration, because it is what shows me the weight that the availability of the energy source has on an enterprise. The other effect is important, because it provides a measure of the economic development, but the industry, when born, is more flexible in its choice of location. An already established industry is less flexible: and if, even at that, it decides to relocate, it is because the variable of ‘energy availability’ is very significant.”