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United States, Brazil cooperate on biofuels

During a visit to Brazil, March 8, President Bush signed an agreement with his counterpart, President Luiz Inácio Lula da Silva, to strengthen their nations’ partnership in ethanol and biofuels development.

The treaty creates a new path for cooperation in this field, from which Americans will have access to advanced technologies already in use in Brazil. Brazil has used ethanol as a main energy source since the 1970s.

“It would be unthinkable some years ago that an American president would come to Brazil to discuss energy,” Bush said at a Petrobras’ ethanol plant in São Paulo.

Since his State of the Union address, when Bush said his administration would seek alternative energy sources as a priority, the already heated up ethanol market in the United States went boiling.

In Brazil, the world’s largest ethanol producer, spirits also rose. Presently, Brazilian ethanol is taxed in the United States to protect local U.S. farmers from the more-productive sugarcane ethanol produced in Brazil. The tax was one of the issues addressed by the two presidents during Bush’s visit.

Although nothing was settled — it will surely demand much more time than the less than 30 hours Bush spent in Brazil — there is hope in Brazil that with the increase in American demand, the tax could fall. Nowadays, to circumvent the taxation, Brazilian producers export ethanol to Caribbean countries which re-export it to the United States without tax penalties, but with costly surcharges on shipping.

The agreement signed by Bush and Silva deals with technical cooperation in ethanol and biofuel development and market building. After visiting an ethanol distribution plant in São Paulo, where Bush saw how Brazil conducts alcohol refining and how a flex fuel car engine (that runs on ethanol or on gas or on mixtures of both) works, Bush said both countries should not only work together to further develop ethanol technology, but also to create a world market for the product, which could insure supply and increase demand.

“Sugarcane ethanol is, by far, the most productive of biofuels and I compliment President Silva for keeping his country on the edge of biofuel technology,” said Bush in his speech before about 200 leading Brazilian business leaders after the visit to Petrobras’ unit.

Far before the American president’s visit, Brazilian farmers were already ramping up production and marketing of sugarcane ethanol. It’s about the only bright spot for Brazilian agriculture these days.

Brazilian agriculture is just now starting to recover from three years of economic distress, but the problems were largely missed by sugarcane producers. Recent rises in oil prices and, therefore, in fuel prices, had the effect of strengthening the ethanol demand in Brazil, which led to heavy investments in local production.

Parallel to that, the growing concern in the United States with finding alternative sources of fuel isn’t going unnoticed by Brazilian sugarcane growers.

Any agreement from Bush’s visit will be highly positive to local sugarcane producers. Even if the tax is sustained, the combination of spending on technology, the opening of new markets and the broadening of existing ones for ethanol would be a real advantage for Brazilians, who already have a solid infrastructure for production, distribution and use of the product.

For the United States, advantages include the import of a fairly well-tested biofuel technology, a partnership of the world’s largest biofuel producer and a possibility to learn from Brazilian mistakes and avoid them.

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