S. America plows biodiesel, ethanol crops

Brasilia Arabia
It's easy to imagine Eduardo Pereira de Carvalho as a loud-talking channeler of Henry Ford, whose 1920s enthusiasm for crop-based ethanol was eventually drowned by cheap oil. As head of the Sao Paulo Sugarcane Agroindustry Union, Carvalho speaks with a revolutionary's flare, ticking off reasons why his country is the Saudi Arabia of ethanol.

Brazil produced 4 billion gallons of ethanol in 2004, some 37 percent of the world total, while the U.S. churned out 3.4 billion gallons, 31 percent of the world's share. The country also exported 634 million gallons -- 112 million of that to the U.S. -- and its government is pushing to clear more land for production. Its vast size and tropical climate are perfect for the production of sugar cane, which is said to have better energy conversion rates than corn, the primary source for ethanol in the U.S. What's more, Brazilian producers burn cellulosic stalk of sugar cane to make energy that fuels the entire industrial process. "That is why our production costs are half that of corn," Carvalho says.

While Brazil builds its ethanol empire -- eyeing customers from Venezuela to China -- other South American nations are also getting on board. Most are embracing mandatory fuel mixes for cost, security, and environmental reasons, but some hope to become bio-fountains spilling into a global fuel revolution.

In September, Venezuela -- which now mandates ethanol blending in some parts of the country and may require a 10 percent mix nationwide in the future -- said it will spend $900 million over five years to bring 15 new plants online. Colombia passed a law requiring a 10 percent ethanol mix in cities with populations over 500,000, but geography restricts its sugar cane production, meaning it will likely have no exportable surplus. Peru is pushing ethanol, with California as a potential market, while Argentina is putting its ethanol empanada in the mix too. It has become the world's 17th-biggest ethanol maker, producing 42 million gallons last year, according to F.O. Licht (though its output goes mainly to agrochemicals, drinks, and cosmetics). And tiny Paraguay and Uruguay are also seeking to get involved.

That said, nobody holds a caipirinha to Brazil, whose confluence of geography, economics, and politics has spawned an industry that, unlike the U.S.-based ethanol sector, is now capable of standing without the crutch of tax subsidies. And its fortunes rose three years ago when Brazilian automakers began churning out "flex-fuel cars" that run on a combination of power sources, including ethanol. Carvalho says the country's car industry is heading to 100 percent flex fuel, and predicts that "within a year or so there will be no more new gas cars made in Brazil." In early November, automakers rolled out a flex-fuel car that will be sold in the U.S. next year. While all that makes some U.S. ethanol makers nervous, Carvalho and others say there's room for collaboration. In April, Brazil's minister of development, industry, and foreign trade, Luiz Fernando Furlan, traveled to California on an ethanol cheerleading tour. While there, he suggested that U.S. and Brazilian companies could jointly market their products to China, widely considered to be the globe's emerging mega-consumer of energy.