Brazil, US sign unprecedented biofuels agreement

09 March 2007 14:24 [Source: ICIS news]

US and Brazil sign unprecedented biofuels agreement By William Lemos

LONDON (ICIS news)--Brazil said on Friday that it had signed a biofuels agreement with the US to share technology as well as develop a technical standard for ethanol so the product could be globally traded as a commodity.

The agreement was announced as President George Bush prepared to visit a fuel distribution centre outside of Sao Paulo.

Bush arrived in Brazil late Thursday to start his week-long tour of five Latin American countries. He was scheduled to leave for Uruguay late on Friday.

The US and Brazil also agreed to share technology with other Latin American countries interested in developing large-scale production of ethanol, local press reported.

Brazil is the world’s second-largest ethanol producer after the US, but the leading exporter of the biofuel. The two countries account for 70% of the world’s ethanol production.

The biofuels pact with the US has sparked protests across Brazil, as anti-Bush sentiment runs high in the country due to the US policy on Iraq. In addition, many Brazilians believe Bush’s visit is a new effort by the US to meddle in Latin American affairs.

Brazil’s Landless Workers Movement (MST), a left-leaning association of 1.5m members, said the biofuels partnership was just a strategy by the US to use ethanol as a tool to weaken the growing influence of Venezuela in the region.

Brazilian officials also resent Washington’s steadfast refusal to drop or reduce a 54-cent/gal (€0.41/gal) tariff the US levies on ethanol imports.

Brazil will again ask the US to remove the tariff, but the request was expected to fall on deaf ears, as US officials have already warned the tariff is not up for discussions.

US Energy Secretary Samuel Bodman said on 14 February that the US would not end government support and protections for the ethanol industry before the end of 2008.

The US grants fuel refiners a 51 cent/gal subsidy for ethanol blended in gasoline regardless of where the biofuel is produced. Without the tariff, foreign producers would also benefit from the incentive.

Brazil claims the tariff hurts free trade, but a top government official was quoted by the Brazilian press on 2 March saying its removal was not a condition for negotiations with the US.

By: William Lemos
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