Brazil, US to Collaborate on Biofuels

2 October 2008

A bill designed to improve Western Hemisphere cooperation on energy was approved by the US Senate Foreign Relations Committee on 23 September. Notably, the bill aims to promote collaboration on biofuels between the world's two top ethanol producers - Brazil and the US.

President of the Brazilian Sugarcane Industry Association (UNICA), Marcus Jank, said in an interview with Reuters that the bill would allow the two countries to move beyond past trade disputes and that the bill would help the US and Brazil to work "as partners in the creation of a global market for biofuels." The Brazilian sugarcane industry also disclosed that US$ 58 million has been earmarked for the bill.

Sponsored by Senator Richard Lugar of Indiana, Senate Bill 1007 expands on an existing Memorandum of Understanding inked in March 2007 by President George W. Bush and his Brazilian counterpart, Luiz Inacio Lula da Silva. A change in the title of the new legislation - from "United States-Brazil Latin America Energy Cooperation Pact" to "The Western Hemisphere Energy Compact" - reveals the growing US interest in developing regional cooperation on energy issues.

Although Brazil exports approximately 50 percent of its ethanol to the US, Brasilia has been at odds with Washington over certain agricultural subsidies and tariffs, particularly in the areas of cotton and ethanol. After the breakdown of world trade talks at the WTO in July, a Brazilian trade official had indicated that Brasilia was likely to initiate dispute proceedings at the WTO with the US over its ethanol import tariffs.

Brazil and the US together account for 75 percent of world ethanol production and over 50 percent of biodiesel output. According to UNICA, US ethanol production has risen to almost 11 billion gallons annually and Brazil, whose output reportedly may triple by 2020, produced approximately 5.8 billion gallons in 2007.

ICTSD reporting; "Interview - Brazil, U.S. to cooperate on biofuels - official," REUTERS, 24 September, 2008; "New bill to expand promotion of biofuels is a welcome boost for U.S.-Brazil relations according to Brazilian Sugarcane Industry," PRN NEWSWIRE, 23 September, 2008.

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