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This paper analyses the evolution of the Brazilian sugar cane processing industry from 1975 to 1995. For this purpose, it makes use of neo-Schumpeterian and neo-corporatist ideas. The analysed period was very infiuenced by Proálcool (National Alcohol Program). Results show that, under Proálcool, producers were subject to a series of State institutional arrangements which favoured a subventionist paradigm for survival. However, the program's crisis contributed to deepen the productivity differences, existent in this industry. The less prepared firms, in terms of technological capacity, went out of business or were absorbed by the most dynamic ones (the ones that adopted the technological paradigm) as a result of productivity differences.
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