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Brazil and US sign memo on ethanol
AFP
SAO PAULO
Petroleumworld.com 03 12 07
Brazil and the United States, the world's largest ethanol producers, on Friday inked a strategic alliance to promote biofuels, declaring the step important for the environment and global security.
US Secretary of State Condoleezza Rice and Brazilian Foreign Minister Celso Amorim signed the memorandum of understanding to cooperate in promoting ethanol on the sidelines of US President George W. Bush's five-nation Latin American tour.
Bush and Brazilian President Luiz Inacio Lula da Silva described the pact as significant for both the environment and global security.
"If you're dependent upon oil from overseas, you have a national security issue. In other words, dependency upon energy from somewhere else means that you are dependant upon the decision from somewhere else," Bush said after touring a biofuels depot in Sao Paulo, Brazil's biggest industrial hub.
Washington wants to reduce US dependence on the Middle East and other external suppliers of oil and natural gas.
The danger of US energy dependence is personified in Latin America by Venezuelan President Hugo Chavez, who has wielded his country's massive oil reserves to try to weaken US influence in the region. Chavez, visiting Argentina, led protests against Bush's trip.
The memo maps out bilateral cooperation to promote ethanol on global markets and addresses rules on the transfer of technology to other countries wanting to produce the fuel.
Brazil and the United States want to standardize the definition of ethanol so it can be traded on global markets, the same way oil is traded.
Brazil produces ethanol from sugarcane, while the United States uses corn, and
together, they account for 70 percent of the fuel's production.
"This memorandum is our response to the greatest challenge of the 21st century," Lula said.
Bush's visit "may well mean a strategic alliance that will allow us to convince the world that we can change the energy plan," he said.
Regionally, the United States and Brazil also intend to help other countries, starting in Central America and the Caribbean, to stimulate private investment for local production and consumption of biofuels.
But no agreement was reached eliminating a 0.54 dollar-per-gallon (3.8 liters) US duty on Brazil's ethanol.
"It's not going to happen," Bush told reporters at a joint press conference, indicating that the US Congress would only review the legislation when it expires in 2009.
Last year, Brazil exported 3.5 billion liters (925 million gallons) of ethanol, more than half going to the United States, which subsidizes ethanol made from corn.
The Brazilian sugarcane industry had asked Lula to press Bush to lower the US duty on Brazil's ethanol, hoping to boost its exports.
"Brazil hopes that the ethanol market will be benefited by free trade, free of protectionisms" Lula said, but added "a lot of talking" was still needed to bring down trade barriers.
"The day will come when that conversation will mature, and then we can find a common denominator that will allow us to come to an agreement," he said.
More than four out five new cars in Brazil can run on ethanol, either mixed with gasoline or pure.
Builders say the market for flex-fuel cars is exploding, and should number 15 million in 2013, slurping some 28.7 billion liters (7.6 billion gallons) of bio-alcohol.
Brazil's state oil giant Petrobras said ethanol production can be expanded 15 times over five years, without further destruction of the Amazon or harming food production.
Investment in biofuels production meanwhile is soaring, with Brazil's sugarcane industry plowing money into distilleries.
French commodity group Louis Dreyfus also recently bought five plants, while US and Japanese investors are looking for business opportunities to establish stable energy supplies.
But opponents fear an industry expansion could result in the exploitation of peasants farming sugarcane and destroy the environment.
Wednesday, 900 protesters occupied a Sao Paulo state Cevasa plant, a sugar and ethanol-processing business recently sold to US agro-industry giant Cargill.
In Rio de Janeiro, hundreds of people also occupied the offices of the Brazilian Development Bank to protest US-Brazil cooperation on biofuels.
Bush countered: "The American people care deeply about social justice."
"We believe in supporting programs that help lift people out of their current conditions and we want to help," he said.
Chavez, who was in Buenos Aires to address an anti-Bush rally on Friday, lashed out at the ethanol agreement.
"So we are going to produce food to run the vehicles of the gentlemen of the North? What a crazy thing this Bush plan is," the firebrand leftist leader told journalists.
AFP 10 0037 GMT 03 07
Copyright© 2007 AFP. All Rights Reserved.
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