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Brazil eyes ethanol as fast track to power

Brazil aims to double its production of ethanol in 10 years as the high price of oil and growing concerns over climate change spark a demand for biofuels.

By Staff writer of The Christian Science Monitor / June 6, 2007

SÃo Paulo, Brazil

Flying over the heart of Brazil, a vast savannah known as the cerrado here, one could be forgiven for mistaking the setting for Iowa, Kansas, or virtually anywhere along the US farm belt.

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Neat acres of cotton, corn, and soybean extend into the horizon, and even American farmers have arrived to join a boom that over the past few years has positioned Brazil to overtake the US as the world's agricultural superpower.

Last year, Brazil surpassed the US as the largest exporter of soybeans. That followed its scoring the No. 1 spot in beef exports in 2004. And now, as the high price of oil and concerns over climate change spark global demand for alternative fuels, Brazil is aiming to double its production of sugarcane for ethanol in the next decade. As investors flock to this colossal country with its ideal growing climate, Brazil is hoping ethanol will help speed its sluggish rise as an economic power.

"Brazil has already consolidated its position as the agriculture supplier of the world," says Andre Nassar, general manager of the Institute for International Trade Negotiations (ICONE) in São Paulo, Brazil. "Now I think the Brazilian government sees ethanol as an instrument to make other countries pay attention to us, as a supplier of both food and energy."

Brazil's clout has been on display this week during President Luiz Inacio Lula da Silva's three-day trip to India, where the two countries announced plans to quadruple trade to $10 billion by 2010 and boost India's use of biofuels. The two rising economic powers also aimed to enhance cooperation as a strong voice of the developing world before heading into talks at the Group of Eight (G-8) summit in Germany this week.

Brazil's clout in trade talks

The European Union has invited Brazil, India, and the US to meet in Germany later this month to attempt to hash out a deal on World Trade Organisation (WTO) negotiations. Launched in 2001, the WTO's Doha round of talks aims to break down trade barriers that hinder the economic progress of poor countries.

As Brazil's agribusiness has boomed, it has won important trade cases against the US, including the scrapping of cotton subsidies, and has led a coalition of developing nations against US subsidies in general and European tariffs within the Doha round. "Their cohesiveness arguably may be the one thing that can turn this round of negotiations into something favorable for developing countries," says Sandra Polaski, a senior associate at the Carnegie Endowment for International Peace.

The country's rise as the world's "breadbasket" – a transformation made possible by an abundance of land and sun, decades of money pumped into research, and growing demand from developing countries such as India and China – has implications for the face of world agriculture. Today Brazil is the world's largest exporter of sugar, beef, poultry meat, coffee, orange juice, and tobacco.

In March, Lula signed a proposal with President Bush to promote the ethanol industry in the region.

The prospect for an international ethanol market is still uncertain, but if it does transpire Brazil would most certainly be a central global supplier – even as domestic demand goes up. Its ethanol production is far more efficient than that of the US, which makes ethanol with corn.