June 7, 2007

 

Ethanol could position Brazil as the world's top agricultural superpower

 

 

The vast acres of cotton, corn, and soybean extending in the horizon and the arrival of American farmers to join the boom over the past few years is gradually propelling Brazil to overtake the US as the world's agricultural superpower.

 

Brazil has overtaken the US as the largest exporter of soybeans in 2006, following its surpassing of the number 1 spot in beef exports in 2004. As the rising oil prices of oil sparked world demand for alternative fuels, Brazil is aiming to double its production of sugarcane for ethanol in the next decade. As investors flock to this colossal country with its ideal growing climate, industry players are hoping ethanol will help accelerate Brazil's sluggish rise as an economic power.

 

According to Andre Nassar, general manager of the Institute for International Trade Negotiations (ICONE) in Sao Paulo, Brazil has already consolidated its position as the agriculture supplier in the world and Brazilian government is tapping ethanol for the country to become both supplier of food and energy.

 

Brazilian President Luiz Inacio Lula da Silva's three-day trip to India has two countries announced plans to quadruple trade to US$10 billion by 2010 and boost India's use of biofuels.

 

The booming Brazilian agribusiness has won important trade cases against the US, including the scrapping of cotton subsidies, and has led a coalition of developing nations against US subsidies in general and European tariffs within the Doha round of World Trade Organization talks. Sandra Polaski, a senior associate at the Carnegie Endowment for International Peace said Brazil's cohesiveness may arguably be the turnaround of negotiations to favour developing countries.

 

Brazil's prominence as the world's "breadbasket" was made possible due to ideal growing climate, financially-supported research and growing demand from developing countries such as India and China. The country is the world's largest exporter of sugar, beef, poultry meat, coffee, orange juice, and tobacco.

 

In March, Lula signed a proposal with US President George Bush to promote the ethanol industry in the region which still has uncertain markets in the international front. However, experts believe along with the increasing demand, Brazil's local ethanol is far more efficient than of the US which primarily uses corn for ethanol. 

 

According to Pedro de Camargo Neto, a former official in the agriculture ministry in Brazil says the global commerce simply "cannot ignore us anymore and they can't make decisions without the world's largest producer.  He adds that the "byproduct is it makes us a political leader. Ethanol will help that."

 

Over the past couple of decades, Brazil - in a conscious decision to focus on agriculture instead of just a mere industry - has invested billions of dollars into a premier research institute called Embrapa. It has, among other technological advances, figured out how to grow soy varieties in tropical climates.

 

Agricultural exports to China grew by 22 percent between 2005 and 2006, according to Brazil's Agricultural Ministry as soybean exports to the Chinese market alone rose to 11 million tonnes in 2006 from 7 million tonnes a year earlier.

 

Brazil's success has American farming industry over its losing competitiveness as the country is gradually dominating market share on traditional American domains such as soybeans.

 

However, Brazil's ladder to success won't be an easy climb. A report from the Organization for Economic Cooperation and Development (OECD) showed that only 10 percent of the country's roads are paved which contributes to high transport costs for soybean exports, for example - double what they are in the US, according to the US Department of Agriculture.

 

Environmental front is also cropping up as a problem. Deforestation has been largely present in Mato Grosso, the heart of soybean production in Brazil. And as sugar production expands and moves to the cerrado (Brazil's vast savanna ecoregion), they worry that soy production will get pushed deeper into rainforest areas.

 

Randy Curtis, an expert in Latin America infrastructure at The Nature Conservancy, says Brazil needs to decide on how much it is willing to sacrifice of its natural resources to produce the world's energy and soybean needs.

 

Brazil's agribusiness sector accounted for 28 percent of the country's GDP (gross domestic product), and employs 37 percent of the labour force, according to the USDA. However, cynics wonder if the agricultural affluence has benefited Brazil or only the big multinationals that raked in after Brazil's economy opened in the 1990s as many small, subsistence farmers have been displaced.

 

Nasar said these problems notwithstanding, Brazil now has the money and the resources that could develop more regions and could generate more employment and more agribusiness ventures.