SAO PAULO, Brazil—Brazil’s biofuel industry just months ago was being flooded with billions in new investments for vast new sugarcane plantations and gleaming distilleries that churn out the cheapest ethanol on earth.

But the global financial crisis has put the brakes on that boom, drying up foreign investment and domestic credit, stalling new projects and prompting cash-strapped ethanol producers to indefinitely postpone expansions.

“I’m still ready to play ball, but the ball disappeared,” said former Brazilian Agriculture Minister Robert Rodrigues, whose plans for an ethanol startup were recently put on hold as foreign investors withdrew cash amid fears that a global recession would slow demand for fuel.

Heavily leveraged small and mid-sized ethanol operations are likely to be bought out by their larger counterparts, if emergency credit lines from state-owned banks aren’t enough to stave off crushing debt obligations, participants at a biofuels conference in Sao Paulo this week said.

One large ethanol maker filed for bankruptcy last week to restructure $100 million in debt it could not pay. Analysts and sugarcane growers predict others will follow, and a leading industry association says 50 percent of new equipment orders have been canceled or postponed.

Some $30 billion to $40 billion in investment that was expected in the industry over the next four years will be slashed, Marcus Jank, president of Brazil’s powerful Sugar Cane Producers Association, said without giving details.

Brazil’s biofuel industry, born in the 1970s and concentrated in sugarcane-rich Sao Paulo state, has long been considered a global model, and its method of producing ethanol from sugarcane is cheaper and more efficient than rivals, including the U.S., who use corn.

John Melo, chief executive of U.S.-based Amyris Biotechnologies, said Brazil’s ethanol industry will survive because of strong domestic demand and because international demand for cheap renewable fuels will rebound with oil prices.

Amyris has teamed with Brazilian producers in a joint venture that could produce 1 billion gallons of sugarcane-diesel a year by 2015.

The Brazilian and U.S. governments are meanwhile funding research and development projects to spur ethanol startups throughout Latin America, but the financial crisis will inevitably delay private sector investment, U.S. Agriculture Secretary Edward Shafer told The Associated Press.