Brazilian Ethanol May Enter American Market

Brazilian ethanol may enter the American market during Barack Obama’s administration, since he has already shown himself sympathetic to environmental causes. With that, the United States may become a sponsor of renewable energy sources.

Among his campaign promises were an 80% reduction in carbon emissions by 2050, reduction in the dependence on oil imports, development and implementation of clean energy and making the United States a leader on climate change matters.

The principal economy on the planet has a goal of consuming 136 billion liters of ethanol in 2022. The current consumption is 30 billion liters (compared to 25 billion in Brazil). “If Obama maintains these goals of ethanol consumption, he may consider it necessary to complement the American market with importation, and in this case, the expectation is that he would accept the reduction, for a certain volume of exportation, the tariff currently applied on Brazilian ethanol,” affirms director-general of the Icone Institute of Commerce Studies and International Negotiations, Andre Nassar.

Today the United States places a tariff of US $0.54 per gallon on Brazilian ethanol, which impedes the entry of the product to the country.

Nassar believes that Obama’s preoccupation with more energy efficiency could also translate to the participation of the United States in the Post-Kyoto Protocol and in a new mechanism of clean development of a carbon market, such as the adoption of emissions reduction goals of greenhouse gasses.

“The Americans have a very heavy energy matrix in terms of CO2 emissions. If they had to clean up this matrix, it would tend to open opportunities for Brazil, especially in ethanol, which is our principal source of renewable and exportable energy,” he continues.

Aside from selling more ethanol to the United States, Brazil could attract American investment in clean energy and also develop partnerships in transference, research and development of technology.

As for the myth of democratic protectionism and what this could mean for Brazilian agribusiness, Nassar thinks that the subsidies conceded to grains,which are questioned by Brazil, are defined in an American agriculture law called the Farm Bill, and vary according to market prices. The current law was approved in the middle of last year and will expire in 2013. “In terms of agriculture policy and grain subsidies, the arrival of Obama doesn’t change anything. It is what the law defines, and that’s it,” summarizes Nassar.

He alerts that during the administration of Democrat Bill Clinton, especially in ’98 and ’99, prices fell a lot, and the president was pressured by Congress to concede complementary subsidies to the agriculture sector. This, according to him, could happen again, although it is improbable.

“The American deficit has never been so large and the times when they super-subsidize agriculture coincide with smaller deficits. I think that, if producers hit up Obama, asking for more than what is stipulated in the Farm Bill, I think they will not get it.”

Doha

The third theme of interest in the Brazilian agriculture sector is the Doha Round, under the jurisdiction of the World Trade Organization (WTO). It is still unknown if the negotiations, which have been dragging on for seven years, will be a priority for the new administration. According to Nassar, the resumption of talks depend on what is in American interests. “The negotiations will not promote a great opening of trade, they will be more political. It is not the most important thing in the world, but it is important for us to finish this up so we can move on to something more ambitious.”

The expectation, in general, is favorable, he says. “Given the past eight years of American unilateralism, which was what we saw in the Bush administration, the Democrats are entering with an attitude of being more open to international conversation, which is good. Since this will be translated only in practice, it is something that is still unclear, but the tendency is to think that the way Obama is proposing is positive for Brazil.”