Brazil's ethanol push could eat away at Amazon

Brazil is the world's top exporter, though U.S. ethanol production still surpasses Brazil. But Brazil has an edge over the United States for future production because ethanol can be produced more cheaply with sugar cane than the corn used by U.S. farmers to make ethanol.

And increased use of corn for ethanol is prompting international corn price increases, prompting Silva to tell reporters last week he would tell Bush, "Why make ethanol out of corn? Why don't we feed the corn to the chickens."

Bush has set a goal of 35 billion gallons a year of ethanol and other alternative fuels, such as soybean-based biodiesel, by 2017 — a fivefold increase over current requirements.

But production of ethanol from U.S. corn is expected to fall far short of meeting such an increase, and experts doubt even land-rich Brazil would be able to fill the gap along with help from Central America and the Caribbean. So Bush envisions a major speedup of research into production of "cellulosic" ethanol made from wood chips, switchgrass and other feedstocks.

Tariff obstacle
Political and energy analysts warn that any agreements reached between Brazil and the United States are unlikely to have short-term effects. And the deal itself could end up largely symbolic because of reluctance by Washington to address a key point of friction: A 53 cent-per-gallon U.S. tariff on Brazilian ethanol imports.

"For the Brazilians, the tariff has utmost priority," said Cristoph Berg, an ethanol analyst with Germany's F.O. Licht, a commodities research firm. "They will agree with developing biofuel economies around the world, but the first thing they will say is 'We want to do away with that tariff.'"

No one is expecting Bush to give ground on the tariff. The politically sensitive issue essentially subsidizes American corn growers who are rapidly ramping up ethanol production amid Washington's encouragement of renewable biofuels to ease U.S. dependence on imported petroleum.

But the visit will help Bush and Silva join forces to promote the politically popular issue of renewable energy simply by gathering in a place where ethanol is king.

Ethanol proponents hope Bush and Silva will come up with a framework to sharply boost ethanol production in the nations between Brazil and the United States, encouraging more foreign investment.

And coming up with technical standards to define quality levels for ethanol is key to turn it into a commodity that could be traded like oil.

"I think its Brazilian know how and American know how, there's a lot of cross fertilization that can take place," said Brian Dean, executive director of the Interamerican Ethanol Commission.

The commission counts among its directors Florida Gov. Jeb Bush, the president's brother, as well as former Brazilian agriculture minister Roberto Rodrigues and Luiz Moreno, president of the Inter-American Development Bank.

Increasing ethanol production in the region is also expected to be a major topic in Guatemala later this month when the bank holds its annual meeting, Latin America's top yearly economic gathering.

"We see a marketplace in ethanol that can create an enormous amount of economic growth and prosperity in the United States and the rest of the world," Dean said.

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