Analysis: Chavez, Brazil end ethanol row

By Carmen J. Gentile
UPI Energy Correspondent

MIAMI April 18 (UPI) — Venezuela is not at odds with Brazil over Brazil’s plans to increase ethanol production throughout the region, Venezuelan President Hugo Chavez has said.

Reports of Chavez’s disdain for Brazil’s long-term ethanol ambitions in the region coupled with his public remarks questioning the merit of the recently signed U.S.-Brazil ethanol accord dominated talks Monday during the Latin American energy summit and sparked rumors Chavez was at odds with his Brazilian counterpart, President Luiz Inacio Lula da Silva.
Chavez, however, sought to quash rumors of a rift and clarified his concerns about increasing ethanol production, saying it would cut into food production.

“The media says there is an ethanol war,” Chavez said Tuesday. “Ethanol is a valid strategy as long as it doesn’t affect food production.”
As a concession to the region’s decision to move forward with plans to boost ethanol production, Chavez said the 13 new oil refineries he proposed to reduce Latin America’s dependence on the United States should be accompanied by ethanol plants next door to promote the increased use of fossil and biofuel blends commonly used in Brazil.

At least in public, it appeared Chavez was willing Tuesday to soften his stance on the accord Brazil signed last month with the United States to boost ethanol production in Latin America, a deal he once referred to as “craziness.”

Lula rejected Chavez’s comments, saying food production would not be affected by the effort to produce alternatives to petroleum, of which Venezuela is the largest producer in the region and counts the United States as its best customer.

“All South American countries and Africa can easily produce oil seeds for biodiesel, sugarcane for ethanol and food at the same time,” he said earlier this week, referring to Brazil’s ambition to work with European nations to increase sugar production in Africa to promote ethanol production on that continent as well.

In March, Washington and Brasilia inked a deal expanding Brazil’s proven track record in the sugarcane-based ethanol business to expand ethanol production in Central and South America.

“The United States and Brazil are the world’s two largest biofuels producers, so cooperation is natural,” Eric Watnik, a U.S. State Department spokesman on Latin American affairs, said earlier this year. “Our goal is to advance global energy security by helping countries diversify their supply.”

Brazil and the United States are world leaders in ethanol production, though Brazil produces sugar-based ethanol while the United States backs the corn-based variety. In terms of fuel efficiency and emissions cleanliness, sugar ethanol is considered superior.

Brazil has been a world leader in alternative fuels since the mid-1970s, when Brazil’s Pro-Ethanol Program subsidized sugar mills to produce extra product specifically for the production of the biofuel in the wake of the oil price spike experienced worldwide.

Now, Brazil is producing enough ethanol to meet its growing domestic needs and with the help of some foreign investment could one day make the leap to becoming a major international vendor of alternative fuels, a bandwagon the Bush administration would like to join considering the president’s recent pledge to reduce U.S. dependence on foreign oil.

Brazil’s ethanol industry and success with combining biofuels and fossil fuel for vehicles has already caught the attention of European nations, which in 2006 expressed interest in promoting the production of ethanol in Africa using Brazilian technology.

So far, Britain and the Netherlands are among the countries looking to partner with Brazil to grow sugarcane for ethanol in South Africa and Mozambique.

While the prospect for partnership resonates well in both Brasilia and Washington, the greater integration of their respective ethanol industries will not be without its share of hiccups.

On the environmental front, activists warn that increasing sugar production in Brazil will mean more deforestation of the Amazon.
Brazilian officials, however, maintain the country was capable of tripling its production in the coming years “without knocking down a single tree,” Brazilian Minister of Agriculture Luis Carlos Guedes Pinto said in December.

Protection of the country’s rainforest against logging and expanding agricultural interests has become a hot-button issue in Brazil over the last two decades. Last year Brazilian authorities pledged to protect some 37 million acres from loggers in the northern Amazon.

Analysts also warn of the potential political fallout from the U.S.-Brazil energy alliance.

Cuba is interested in reviving its own sugar sector, once a world leader with the help of Soviet subsidies.

Coupled with the growing role oil-rich Venezuela plays in world energy, forging an alliance could prove politically troublesome for both President Bush and da Silva.

“Lula (da Silva) is walking a very tricky road here because his reputation comes from being a populist leader who distinctively distrusts multinational corporations, at least before he became president,” Larry Birns, director of the Council on Hemispheric Affairs, told United Press International. “There can be constraints with becoming too chummy with the United States.”
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