Losing Forests to Fuel Cars

In addition, as use of corn-based ethanol grows in the United States, rising prices are influencing American soybean farmers to switch to corn. And as the United States, the world's largest soybean producer, cuts soybean plantings, buyers are looking to Brazil, the No. 2 soy producer, to expand its production. Brazilian soybean production is already at record levels and is predicted to increase another 4.5 percent this year, according to Abiove, an industry association.

"There is a dual pressure in Brazil," Buchanan said. "The direct pressure to expand production of sugarcane and the indirect pressure to expand Brazilian soy, if U.S. soy is reduced."

The agriculture business and the Brazilian government say that there are nearly 350,000 square miles of already-cleared land available for agricultural expansion in the Cerrado. The government says more than 115,000 square miles of cattle pastures could be used -- that's enough land to more than double soybean production and increase sugarcane production five times and ethanol by at least 10.

"Brazil is the only country with a vast amount of land available for immediate expansion of sustainable agriculture. If the U.S. races after ethanol, soybean prices tend to climb and demand will be supplied by Brazil," said Carlo Lovatelli, corporate affairs director for Bunge, one of the largest soy traders in Brazil, headquartered in White Plains, N.Y.

Lovatelli, who also represents companies responsible for 93 percent of all soy traded in Brazil, said that if demand escalates, Brazilian production could double in as little as three to four years.

And the target region has already been chosen: "Cerrado is perfect for agriculture and will be used -- there is no question about it," Lovatelli said.

But Frank Guggenheim, executive director of Greenpeace Brazil, said Brazil's advantage could easily become a disadvantage. "Brazil is in a special situation because of the vast amount of land available, if it uses it in a prudent way," Guggenheim said. "But if it just pushes the agriculture frontier and causes devastation, it will be a disaster."

Brazil is already the scene of the most extensive deforestation in the world, accounting for 42 percent of the world's net forest losses from 2000 to 2005, according to a report by the Food and Agriculture Organization, an arm of the United Nations. Nongovernmental organizations say 7 million hectares of the Amazon were cleared in the past five years by soybean farmers with the help of multinational companies such as Cargill.

Faced with pressure from its clients, Cargill brought other traders together with advocacy groups and established a moratorium under which no soybeans would be bought from devastated areas of the Amazon for two years, beginning July 24, 2006. Although the moratorium ends next year, not even the advocacy groups say the situation will return to what it was before.

The Cerrado, however, has not had the spotlight that the Amazon has, and so the environmental impact of expansion of the sugarcane business into the savanna is under less international scrutiny.

This month, Brazilian Agriculture Minister Reinhold Stephanes announced new measures to avoid devastation from sugarcane plantations. But some groups say enforcement would be effective only with large investments in mapping tools and ground supervision, which the Brazilian government could not afford.

And ethanol investments keep growing. The sugar industry estimates that $17 billion will be invested through 2012 in 86 new sugarcane processing plants, adding to the 330 plants in Brazil today.

So far, the impact of the U.S. thirst for Brazilian ethanol has been blunted by the 51-cent-per-gallon subsidy paid to American corn ethanol producers and by the 54-cent-per-gallon tariff on imported ethanol. The Senate extended the tariff until 2009, even though Bush signed an accord to jointly promote biofuel production with Brazil.

Nevertheless, of the 680 million gallons of ethanol the United States imported last year, about 500 million gallons came from Brazil, the world's leading ethanol exporter.

"The tariff was not an eliminating factor when we, last year, had $78-a-barrel oil on a sustained basis," says Roger K. Conway, director for the Agriculture Department's Office of Energy Policy and New Uses. "There certainly could be more imports from Brazil. It depends on energy prices."

Soros's company in Brazil is betting that the United States will have to increase ethanol imports and that a calendar for gradual reduction of the tariff could be established from 2010.

"If the U.S. entirely lifts the tariff, demand for ethanol will go through the roof and the pressure on the environment would be enormous," said a former Brazilian secretary of state for science and technology, José Goldemberg, speaking at a seminar on Brazilian ethanol in Washington last month.