Saturday, June 6, 2009

Dow Jones has a lengthy piece of the U.S.-Brazil Memorandum of Understanding (MOU), saying it is much ado about nothing.










Brazil, US Biofuels Cooperation More Dream Than Reality

SAO PAULO (Dow Jones)–Greater cooperation on biofuels development is needed between Brazil and the U.S. or else ambitious goals set out in a 2007 accord will turn into a dream deferred. The two countries signed a memorandum of understanding in March 2007 during President George W. Bush’s second visit to Brazil. The main objective was to foster cooperation on biofuels and to develop reliable, clean and sustainable energy sources. But the agreement includes few details, especially related to the development of advanced biofuels, private sector investment, expansion of the global market and bilateral trade.

“The biofuels agreement is short on details but big on ideas,” admitted U.S. Ambassador to Brazil Clifford Sobel at a biofuels conference in Sao Paulo this week.

But Sobel highlighted a Wednesday meeting of executives as an example of U.S.-Brazil cooperation. Ten of the largest Brazilian sugarcane growers and 10 of the largest U.S. technology companies met to discuss the future of biofuels.

Sobel said several innovative ideas came out of the meeting. “Why not look at having the Brazilian National Development Bank funding projects in the U.S.?” he gave as an example.

But others feel cooperation needs to be ramped up to another level.

Andre Amado, undersecretary of energy and technology at the Brazilian Foreign Ministry, called for more joint investment on advanced biofuels.

“Brazil currently has the leading position in first-generation biofuel technology, but Brazil needs to be involved in developing second-generation biofuels so we don’t become leaders of a medieval technology,” he said.

Amado said that the U.S. has invested $40 billion in advanced biofuel research, far more than Brazil.

“Without a strong partnership in technology research we won’t be able to advance in the development of new generations of biofuels,” he said. “It’s in Brazil’s strategic interest for the partnership with the U.S. to advance.”

In Brazil, around 85% of research is government-sponsored, while in the U.S. over 50% is conducted by the private sector. Amado said the U.S. private sector has the resources to fund research and technology that the Brazilian government and private sector don’t.

Amado, who was Brazil’s ambassador to Japan until last year, said, “While I was promoting ethanol use in Japan, a Toyota executive said to me that greater use of ethanol would simply shift their reliance on foreign fuel from the Middle East to Brazil. I realized then that we need to have more producers if ethanol is to be embraced by the world.”

But when it comes to the U.S., the 54-cent per gallon tariff on imported ethanol remains a controversial issue.

Jose Sergio Gabrielli, president of Brazilian government-controlled energy giant Petrobras (PBR), said that, while it now protects U.S. corn farmers, the tariff is not sustainable in the long run.

The U.S. plans to consume 36 billion gallons of ethanol annually by 2022. Currently, U.S. production is only 9 billion gallons, which means room for imports, said Sobel.

“There is also room for more bilateral cooperation,” he added.

Brazil and the U.S. produce a combined 75% of the world’s ethanol.

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