Brazil, the United States, Globalization and Ethanol

Three stories circulating in the back pages of the international press nicely summarize the complexities of energy and environmental relationships between the United States and Brazil. This relationship is a window, generally, on the differences in outlook and approach between developed and developing states. Better put, perhaps, its suggests the fundamental conflicts of interests between states, like the United States, with mature economies, and states, like Brazil, with aggressive economic policies and growing economies.



On February 7, 2007, the BBC reported that Brazilian President Luis Inacio Lula da Silva has accused developed countries of failing to do enough to fight against global warming. In a speech delivered in Rio de Janeiro, “President Lula said developed nations applied a double standard in their approach to global warming.” (Emilio San Pedro, Brazil scolds rich on environment, BBC News, Feb. 7, 2007). He suggested that developed states spent more time developing the elegant language of treaties—like the Kyoto treaty—then on actually acting to reduce contributions to global warming. “Developed countries, he said, had nothing to teach Brazil on the subject, adding that his country had reduced the deforestation of the Amazon rainforest by more than 50% in the last three years.” Id. The developed states, on the other hand, had already substantially deforested all of their territories in their aggressive push to develop their economies in the last century. Id.

A day later, the Washington Post reported on plans for meetings between the United States and Brazil “the two largest biofuel producers in the world . . . to discuss a new energy partnership that they hope will encourage ethanol use throughout Latin America and that U.S. officials hope will diminish the regional influence of oil-rich Venezuela.” (Monte Reel, US seeks partnership with Brazil on ethanol: Countering Oil-Rich Venezuela May is Part of Aim, The Washington Post, February 8, 2007). The Americans are pushing the program for the most innocuous of reasons: “"It's clearly in our interests -- Brazil's and the United States's -- that we expand the global market for biofuels, particularly ethanol, and that it become a global commodity of sorts," said R. Nicholas Burns, the U.S. undersecretary of state, who led discussions with Brazilian government officials on Wednesday.” Id. And, indeed, ethanol is poised to become as important an economic commodity to the United States as it has been to Brazil. “U.S. production is expected to sharply increase as new production facilities are finished this year, but demand is expected to surge as well. Bush has called for a 20 percent reduction in gasoline consumption by 2017, which would require an estimated 35 billion gallons of alternative fuels to bridge the gap.” Id. Though the common knowledge suggests that American interests are driven by a need to appear to counter the influence of Venezuela’s Hugo Chavez. “According to Carvalho, the Brazilians are aware that such concerns -- particularly about Venezuela's oil influence -- have spurred talks of the ethanol partnership.” Id. On the other hand, Brazil is touting the talks as a means of encouraging the use of renewable energy. Yet it is also common knowledge that Brazil is seeking to use the agreement to reform the basis of its trade relationships with the United States. “The United States currently places a 54-cent-a-gallon tariff on most imported ethanol. Brazilian producers have long labeled the tariff hypocritical, saying that it is exactly the kind of trade barrier that U.S. officials oppose in other countries.” Id. Moreover, Brazil would not resist finding a way to counter the threat to its own petrochemical connections, especially after the then newly installed government of Bolivia nationalized Brazil’s holdings.

Brazil is clearly speaking out of both sides of its mouth. It scolds states with mature economies for failing to act aggressively to combat global warming while simultaneously negotiating for rights to contribute to global warming through an aggressive exploitation of its rainforest regions to be purchased by supplying developed states with the means to curb their own contributions to global warming. The policy is clever. Lula is essentially attempting to buy the right to contribute to global warming by facilitating an equivalent reduction in contributions to global warming by developed states. This purchase would help leverage Brazilian economic development that, in turn, requires environmental degradation that would contribute to global warming. But with reductions from developing states (and perhaps even neighboring states to which Brazil could sell its own ethanol), in part produced by contributions form Brazil, there would be no net increase in global warming contributions in the aggregate.

Understanding these relationships, and the way in which common ground can be found, will serve as a useful experience for discussions with that other great developing economy—the People’s Republic of China. It is to be hoped that the United States can learn to listen, and develop sufficient flexibility to creatively find common ground with Brazil. Success with Brazil may portend a mutually beneficial accommodation with China on environmental and fuel issues.

And this is not just wishful thinking. Whether or not the Americans are thinking in those terms, the Brazilians certainly are. In a report about a little noticed presentation in Washington at the Woodrow Wilson Center, Roberto Abdenur, the Brazilian Ambassador to the United States, suggested the creation of an ethanol forum between the United States, Brazil, China, India, the E.U., and South Africa. (Bruno Garcez, Brasil fará fórum sobre etanol com EUA, China e UE, BBC Brasil.com, Jan. 25, 2007). The idea is to create a powerful consortium of consumers and producers to set up a network within which ethanol could serve as a substitute for petroleum (“''A idéia é criar este núcleo (de países) e lentamente incorporar outros países que sejam produtores ou potenciais produtores e/ou consumidores, para que o etanol um dia se torne globalizado e possa até substituir até certo ponto o petróleo'', comentou o embaixador.”) Id. This idea, the Brazilian Ambassador suggested, coincided with statements of President Bush, who would be visiting Brasil in March 2007. Id. The connection with the United States would be quite useful—between them, Brazil and the U.S. control 70% of the production of ethanol and both would benefit handsomely from the creation of an international commodity consumption market for ethanol (“Segundo Abdenur, as duas nações compartilham de um mesmo objetivo estratégico - o de ''transformar o etanol em uma commodity comercial energética internacional''.”). Id. In this context, China, India and the E.U. could serve initially as a consumption market for ethanol products, and in China’s case, a potential producer as well.

Thus, petroleum, ethanol, free trade, and energy policies conflate in interesting ways. Creating and facilitating transborder collectives in ethanol production between the United States and Brazil ought not to be understood in its most narrow context—as a method of being mean to Hugo Chavez. It can impact energy and environmental policy in significant ways. It can serve as a platform through which trade relations between the United States and Brazil can be augmented, and through them unblock the long stalled negotiations on the Free Trade Area of the Americas, a regional trade association long sought by the United States and opposed by Brazil for fear of trade inequity. But it can also serve as a means of equalizing U.S. China relations by providing the United States a commodity it could sell to China (other than its technological expertise). And it can help diversify the operations of energy companies in a way that might free them from a slavish devotion to the whims of petroleum producing states.