S. America plows biodiesel, ethanol crops

By Kelly Hearn

updated 1:23 p.m. ET Jan. 5, 2006

In his drab office in the fashion-obsessed chaos of downtown Buenos Aires, Argentina, Edmundo Defferrari cuts a farmhand's figure in a corporate man's world.

The 28-year-old industrial engineer, in cap, jeans, and scruffy beard, taps through a PowerPoint presentation choked with graphs, statistics, and cartoon renderings of how his prototype biodiesel plant can help farmers become self-sufficient. Then he opens a dark brown bottle filled with soybean diesel. "When it burns," he says, "it smells like there's a McDonald's in the field."

Backed by Don Mario, an Argentine seed company, Defferrari has developed what he hopes is a bit of methadone for global oil addiction: a localized way for soybean farmers to turn part of their harvest into homespun fuel. And this entrepreneur is far from alone. Kick-started by high oil prices and talk of peak oil, South America is making an incipient push to reshape the future of fuel.

It's not an easy task. "International financial institutions, from the International Monetary Fund to the Inter-American Development Bank, have loaned with a favorable bias upon extractive industries, and little effort on renewables," says Mark Langevin, a politics professor at Chapman University in Santa Maria, Calif., whose work focuses on Brazil. Observers also say that politics and economies of scale currently mean more noise than payoffs for the South American biofuel industry.

But that's not stopping engineers in the continent's agricultural powerhouses, particularly Brazil and Argentina, from exploring how to make and export cleaner fuels. And as the U.S. prepares to take its own biofuel production to another level, some are wondering if the global market will end up smelling more like salsa or apple pie.

Border Petrols
Defferrari hopes his $152,000 prototype plant in Chacabuco, about 145 miles west of Buenos Aires, will herald a trend that will become as common as cow dung. The plant can churn out about 360 gallons of biodiesel and 10 tons of animal feed from 12 tons of soybeans per day. Not only does it produce fuel that's about half diesel's market price, it's automated, requiring humans only to load the contraption and turn it on and off.

"This is about farmer protection, about making them self-sufficient," Defferrari says. "This is the kind of plant that three or four farmers could invest in together." He's got interest -- and not just from farmers. His work has landed him in local magazines, in wire stories, and on CNN. And though he won't give details, the budding entrepreneur says he is planning a trip to Chicago for meetings with a big energy firm.

In Argentina, which reaps high volumes of soybean and sunflower seeds, biodiesel is often pitched by industry watchers as the alternative fuel with the most national potential. But production in the country is currently at an "artisan level, of little volume," says Claudio Molina, head of the Argentine Association of Biofuels. According to AgroDiario, an Argentina-based agriculture magazine, an estimated 20 plants are operating in the country, but they are not legally registered.

Some hope tighter regulation and legal subsidies will help cultivate the fledgling industry here. Argentine lawmakers are mulling a bill that would mandate a 5 percent mix of biodiesel with regular diesel, creating an annual demand of 660,000 tons by 2009. But the bill is stuck -- unlike in Brazil, whose young biodiesel industry is helped by a mandated 2 percent mix by 2008, and 5 percent by 2013. Brazil opened its first commercial biodiesel refinery in March.

And South America's biggest country is a leader in another important fuel. Last year, the global production of ethanol displaced about 3 percent of the 317 billion gallons of gasoline consumed on the planet, according to a report from the Renewable Energy Policy Network for the 21st Century. Nearly 40 percent of that global supply came from Brazil, the largest ethanol market and maker in the world.