Bush and Alcohol in Brazil

An awful lot of baloney in Brazil

Bush wants a show of cooperation with the Brazilians over biofuels - while keeping the stuff out of the US.
Ian Williams


March 7, 2007 8:00 PM |

President Bush begins his tour of Latin America this week, hitting Brazil on March 9, in his attempt to woo America's backyard away from the seductions of Hugo Chavez. In an iconic display of content-free concern, Bush wants to engage Lula, the Brazilian president, in a show of cooperation over biofuels, in which Brazil is world leader - while keeping the stuff out of the USA.

Once upon a time, anyone who drank cachaça, Brazilian rum, could see why the Brazilians decided it may be better to use it to run their cars than stock their bars. However, times have changed. Aged cachaça and the caipirinhas made from them are high-end drinks in the world's cocktail lounges.

And the gasohol in Brazilian cars that used to cover the smell of alcohol on the breath of drivers is now an ecological blessing for a world where the oil is running out and the temperature is running up. Brazil's sugar plantations produce fuel that can compete on the world markets with the black stuff from the Gulf, and it is selling its technology to other sugar-producing countries. Renewable bio-fuels are good for the carbon cycle and global warming, and reduce dependence on fossil fuel which tends to come from countries whose rulers get uppity with Washington. They can also create economic opportunities in the developing world.

There are legitimate concerns about what the expansion of Brazilian sugar-cane production may have on its own society. However Lula has little choice but to use whatever comparative economic advantages the global economy gives him, while trying to spread the gains around domestically.

But the response from the industrialised world is, as usual, to protect its own climatic disadvantages with discriminatory trade practices. In Europe they subsidise sugar beet production - developed by Napoleon to beat British control of the Caribbean cane fields. But in the US, Brazil's hoped for biofuel market, there is a 54 cents a US gallon tariff imposed by the country that wants to impose free trade on everyone else in the world.

Two of the most potent lobbies, major sucklers at the teat of corporate welfare, have dressed themselves in a green figleaf with the bioscam. Archer Daniel Midland, and the exiled Cuban sugar barons, one of whom was, you may remember, important enough to interrupt Bill Clinton in his sort of suckling with his intern in Oval Office are generous donors to both parties.

Their campaign cheques are a sound investment. American biofuels and sweeteners made from corn or maize (as the British prefer to call it) can only compete with Brazilian sugar and ethanol because of the tariff wall, and because Washington subsidises corn syrup production and sugar production to the tune of billions of dollars.

So not only are American consumers paying over twice the world price for sugar, while their government effectively stomps on the chances for economic development of significant parts of the Caribbean and Latin America, but the diversion of a large proportion of corn towards syrup and ethanol production is raising American and world corn prices. Milton Friedman would not have approved.

The American companies concerned are fighting any attempt to reduce or remove the 54 cents a gallon ethanol tariff. Their spokesman told Businessweek that the tariff offsets the 51 cents a gallon tax credit for biofuels - making it fairly plain that the purpose of the tax credit was not to encourage better use of renewables but to boost the bottom line of Archer Daniels Midland and their colleagues.

So Bush's concern for biofuels will have all the sincerity of a Scooter Libby denial, and give Hugo Chavez yet more ammunition to highlight the hypocrisy of the gringos. Well done W.