February 22, 2007

 

US, Brazil seek partnership on ethanol

 

 

The US and Brazil, the world's top producers of ethanol are seeking ways to create a global market for the biofuel by promoting common standards, a US state department specialist on energy said.

 

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

 

The subject will be on the table when US President George W Bush meets his Brazilian counterpart, Luiz Inacio Lula da Silva, during a trip to Latin America set for March.

 

The two countries, collectively possess more than 70 percent of market share, said Gregory Manuel, the state department special advisor on energy, during a seminar at the Brazil Institute of the Woodrow Wilson Centre in Washington.

 

Incidentally, President Bush recently declared ethanol a cornerstone in reducing US dependence on oil.

 

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

 

The US currently places a 54-cent-a-gallon tariff on most imported ethanol. Brazil wants the same to be lowered though it seems unlikely  in the current talks.

 

Manuel pointed out the discussion is not yet about cutting tariffs but about creating a broader market in third countries.

 

In December, the US Congress renewed tariffs on ethanol imports until 2009, even though ethanol is far less expensive to produce from Brazilian sugarcane than from US corn.

 

If an agreement between the two countries is signed, both will likely share some of the technological advances each has been pursuing independently.

 

Part of the deal would be to improve and develop production of ethanol in the Caribbean and Central America, Manuel added.

 

This could eventually diminish the regional influence of oil-rich Venezuela. Venezuelan President Hugo Chavez has exploited regional frustrations with the market-driven economic prescriptions that the US has promoted throughout the region for years, and has used oil revenue to promote several regional economic alliances.

 

Some Caribbean countries, helped by a trade agreement with the US signed last year, could become key exporters since they do not pay tariffs to export to the US, noted Marcos Jank, president of Brazilian think-tank Icone.