U.S. Seeks Partnership With Brazil on Ethanol

Sugar cane arrives at a plant belonging to Cosan SA Industria e Comercio, the largest sugar and ethanol producer in Brazil. Most of Brazil's ethanol comes from sugar cane.
Sugar cane arrives at a plant belonging to Cosan SA Industria e Comercio, the largest sugar and ethanol producer in Brazil. Most of Brazil's ethanol comes from sugar cane. (JC Franca -- Bloomberg News)

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By Monte Reel
Washington Post Foreign Service
Thursday, February 8, 2007

SAO PAULO, Brazil, Feb. 7 -- The United States and Brazil, the two largest biofuel producers in the world, are meeting this week to discuss a new energy partnership that they hope will encourage ethanol use throughout Latin America and that U.S. officials hope will diminish the regional influence of oil-rich Venezuela.

U.S. officials said they expect to sign accords within a year that would promote technology-sharing with Brazil and encourage more Latin American neighbors to become biofuel producers and consumers.

The United States and Brazil together produce about 70 percent of the world's ethanol, a fuel that President Bush has called a cornerstone in reducing U.S. dependence on oil.

"It's clearly in our interests -- Brazil's and the United States's -- that we expand the global market for biofuels, particularly ethanol, and that it become a global commodity of sorts," said R. Nicholas Burns, the U.S. undersecretary of state, who led discussions with Brazilian government officials on Wednesday.

For the United States, the initiative is more than purely economic. Venezuelan President Hugo Chávez has exploited regional frustrations with the market-driven economic prescriptions that the United States has promoted throughout the region for years, and he has used oil revenue to promote several regional economic alliances.

Burns declared that biofuel is now the "symbolic centerpiece" of U.S. relations with Brazil, a country that U.S. officials have long hoped could counteract Venezuela's regional anti-American influence.

"Energy has tended to distort the power of some of the states we find to be negative in the world -- Venezuela, Iran -- and so the more we can diversify our energy sources and depend less on oil, the better off we will be," Burns said at a news conference in Sao Paulo.

Brazil, the world's largest exporter of ethanol, has been a leader in biofuel technology after its government invested heavily in the ethanol industry in the 1970s. Its sugar cane-based ethanol is more efficient to produce than the corn-based fuel made in the United States. To date, ethanol has replaced about 40 percent of Brazil's non-diesel gasoline consumption. More than 70 percent of the vehicles now sold in Brazil are flex-fuel models that run on either ethanol or gas, and the number continues to increase.

Although the United States has surpassed Brazil in the total amount of ethanol produced, its producers cannot keep up with surging demand. Last year, the United States produced about 4.9 billion gallons and imported an additional 1.7 billion gallons, mostly from Brazil.

U.S. production is expected to sharply increase as new production facilities are finished this year, but demand is expected to surge as well. Bush has called for a 20 percent reduction in gasoline consumption by 2017, which would require an estimated 35 billion gallons of alternative fuels to bridge the gap.

The United States currently places a 54-cent-a-gallon tariff on most imported ethanol. Brazilian producers have long labeled the tariff hypocritical, saying that it is exactly the kind of trade barrier that U.S. officials oppose in other countries.

"It's not about free trade, but fair trade," said Matt Hartwig, spokesman for the Renewable Fuels Association, a Washington-based lobbying group that says lifting the tariff would amount to the United States supporting Brazilian producers. "The tariff has never served as a barrier to entry. More than 400 million gallons of ethanol came in from Brazil alone last year -- straight from Sao Paulo to New York Harbor."


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