Ethanol: Brazil Celebrates, United States Debates AS/COA Online 06/04/09

Pumping an ethanol blend at a Brazilian fuel station. (AP Photos)

São Paulo hosted the 2009 Ethanol Summit from June 1 to 3, featuring heavyweights such as President Luiz Inácio Lula Da Silva’s Chief of Staff Dilma Roussef, Petrobras CEO Jose Gabrielli, and environmental activist and former U.S. President Bill Clinton. Speakers discussed new cellulose-based ethanol plants, forecasts of increasing ethanol usage in Brazil, and concerns about deforestation. Meanwhile, Colombia has become South America’s second biggest ethanol player and seeks to build its industry. In the United States, the discussion surrounding biofuels continues to focus on subsidies given to U.S. corn growers, corn-based ethanol’s impact on food prices, and tariffs imposed on Brazilian sugarcane-based ethanol.

At the summit, Roussef announced Brazil’s moves toward producing for commercial use cellulose-based (also known as second-generation) ethanol made mainly from woodchips and switchgrass. She also said Brazil hopes to start selling ethanol in that form domestically by the year 2012. Second-generation ethanol should capture almost 30 percent of the Brazilian market by 2020, according to the president of a private firm who spoke at the summit. Gabrielli trumpeted the fact that Petrobras will invest $2.8 billions in biofuels for the next four years and expects that ethanol will represent 75 percent of the Brazilian fuel market by 2020. But with such massive growth, questions surfaced about the dangers of deforestation. Clinton urged Brazil to take decisive steps to protect the rainforest, reduce its carbon footprint, and share its technology with potential ethanol producers like the Dominican Republic and Haiti. In December, Brazilian Environmental Minister Carlos Minc unveiled an ambitious plan to curb deforestation rates by 72 percent by 2017.

Colombia is also pinning hopes on increasing its stake in the ethanol market, given its position as the second largest producer in Latin America. Colombian Agriculture Minister Andrés Fernández said last month that, with six new projects dedicated to ethanol coming online this year, the country’s production capacity should increase twofold. He also said Colombia plans for a fifth of the cars made or imported to have engines using fuel made up 85 percent ethanol blend by 2012. Still, the increases use of ethanol elevates fears that prices on food containing sugar will rise, as they did happened last year in the United States with corn-related products, El Espectador reports.

In the United States, where corn-based ethanol dominates the industry, the debate continues. The Wall Street Journal reports on two federal studies that found corn-based ethanol carries a high price tag for consumers and questionable environmental advantages. In an article for BusinessWeek, automobile journalist Ed Wallace suggests “we must immediately drop the 51 cents per gallon blending credit for ethanol creation in America and drop the 54 cents per gallon tariff on imported Brazilian ethanol.” Lula and U.S. President Barack Obama discussed the 54-cent tariff imposed to Brazilian sugarcane-based ethanol by Washington during his March 14 visit to the White House without any effect. Obama said then that the measure “it is not going to change overnight” but hinted that “over time this source of tension can get resolved.”

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Washington Weighs Cuba Travel Bans AS/COA Online 04/09/09

Cubans await family members arriving from Miami. (AP Photo)

Updated April 13 – A trip by seven members of the Congressional Black Caucus to Havana put U.S.-Cuban relations in the spotlight as hemispheric leaders prepared to meet at the Summit of the Americas. The delegation, led by U.S. Representative Barbara Lee (D-CA), met with the Castro brothers in separate meetings, marking the first official U.S. visits since President Raúl Castro took office last year and for former President Fidel Castro since 2006.

The visit came just before as President Barack Obama turned back restrictions (read a White House fact sheet) for Cuban Americans wishing to visit or send money to family back on the island. Fulfilling a presidential campaign promise, Obama took the action before the Summit of the Americas, which runs April 17 to 19 in Trinidad and Tobago and will serve as the new president’s introduction to many Latin American leaders and, thereby, the hemisphere. Relaxing the restrictions could affect an estimated 1.5 million Americans with family members in Cuba, calculates The Wall Street Journal. El País reports that Cubans hopes to experience an increased inflow of somewhere between $300 million and $500 million as a result of the change.

The changes will also allow U.S. telecommunications firms to bid for licenses on the island as well as for a freer flow of humanitarian goods.

American legislators have gone a step further. Bipartisan proposals making their way through both houses of U.S. Congress seek to lift the travel ban for all Americans. Senators Byron Dorgan (D-ND) and Michael Enzi (R-WY) introduced the Freedom to Travel to Cuba Act. A similar bill in the House drew 120 co-sponsors and calls for allowing Americans “to exercise their right to travel to Cuba.” Another House bill seeks to ease restrictions on selling agricultural products to Cuba.

Washington’s moves on Cuba could end up being a focal point at the Summit, much to the chagrin of the White House. “In a way, we believe it would be unfortunate if the principal theme of this meeting turned out to be Cuba,” says Ambassador Jeffrey Davidow, the White House advisor for the summit. Yet, as The Economist suggests in an article about the upcoming conference, the uninvited Cuba could end up being the 800-pound gorilla in the room.

Latin American leaders expressed their support to end the 47-year-old U.S. embargo in a December summit held in Brazil. “I am unable to understand the continued blockade of Cuba. It doesn’t make any sense,” said Brazilian President Luiz Inácio Lula da Silva. Reinstatement of Cuba into the Organization of American states (Havana was suspended in 1962) could be another proposal that comes up in Port of Spain. “It has turned out that we are the isolated country,” said Rep. Emanuel Cleaver (D-MO) after returning from Cuba on Tuesday.

Some of the warm steps from Washington have drawn optimism in Havana, including from Fidel. In his weekly column, the octogenarian former leader detailed his meeting with the U.S. lawmakers and hailed the visit, making reference to the historical nature of Obama’s electoral win.

But human rights on the island remains a thorny issue, prompting criticism of the congressional delegation to Cuba. A Washington Post editorial decries that fact that lawmakers didn’t meet with political dissidents in jail or visit their families. “The black U.S. lawmakers’ concerns weren’t for the 300-plus Cuban prisoners of conscience listed by Amnesty International or the hundreds of dissidents working from their homes under the watch of a totalitarian regime,” writes Miami Herald columnist Myriam Marquez.

With all the buzz about U.S.-Cuban ties and power shifts in Havana, are changes underfoot in Cuba? As one man interviewed in Havana put it to the New York Times, “Politics here is a sport whose spectators are all blind. Everyone knows things are happening. No one is sure what. So you stop trying to watch.”

Read AS/COA analysis of the recent reshuffling of Raúl Castro’s cabinet.

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ARENA, FMLN Face Off in El Salvador AS/COA Online 03/10/09

Rotating campaign ads show the faces of ARENA’s Ávila (L) and the FMLN’s Funes. (AP Photo)

Update: FMLN candidate Mauricio Funes has been elected as the next president in El Salvador after winning with approximately 51 percent of the vote, ending the 20-year rule of the ARENA party.

Salvadorans head to the polls on March 15 to elect their next president. Voters will choose between the governing Alianza Republicana Nacionalista (ARENA) party candidate Rodrigo Ávila and the opposition’s Farabundo Martí National Liberation Front (FMLN) candidate Mauricio Funes. Recent polls and international media forecast that the leftist FMLN candidate appears poised to unseat ARENA, which has held power since 1989. Ávila says that a Funes victory would bring in a government similar to that of Venezuelan President Hugo Chávez.

A poll conducted by Central America-based CID-Gallup released two weeks before the elections shows Funes leading the race by more than five percent over his opponent. But the election is not won yet; President Antonio Saca noted that the key to win the election remains in the hands of undecided voters, who make up as much as 20 percent of the electorate.

Funes, a former television journalist, has long been outspoken critic of the government. The FMLN nominated him in September of 2007. Since then he has attempted to calm critics who point to the leftist roots of his party. In an interview with the Honduran newspaper La Prensa, Funes said his political platform uses Brazilian President Luiz Inácio Lula da Silva as point of reference rather than Chávez. He also said that, as president, he would not join regional agencies such as the Bolivarian Alternative for the Americas if doing so would threaten bilateral relations with the United States.

Ávila, a former chief of the national police, closed his campaign with a massive rally at the Cuscatlán Stadium in San Salvador shouting the slogan “Country yes, Communism No.” In an interview with Univision’s Jorge Ramos, Ávila extolled the economic improvements gained under two decades of ARENA rule. He also defended his record as a police chief in the 1990s. Ramos also interviewed Funes a week earlier.

The state of the economy and security stand as priority issues in the election. El Salvador has the second-highest homicide rate in the world after Iraq, reports the Miami Herald in an article about Salvadoran gangs. The Economist Intelligence Unit predicts a marked slowdown in the country’s GDP growth through 2010 and warns that, “regardless of the final outcome in the presidential election, no party will have an outright majority in Congress, complicating policy implementation in the next four-year term.”

The National Democratic Institute prepared a report on January legislative elections as well as the March 15 presidential elections. According to their data, ARENA had outspent the FMLN through January 18, with the former accounting for 65 percent of campaign spending and the latter just 19 percent. In the January election, the FMLN won a plurality of votes in the Legislative Assembly by winning 35 out of 84 seats. However, ARENA won the mayoralty of San Salvador, ending over a decade of FMLN control of the capital.

Some have wondered what role Washington will play in this election, given past U.S. involvement in Salvadoran politics. A Boston Globe op-ed recalls the country’s 2004 election, when the Bush administration drummed up fears by implying that an FMLN victory could result in a change in migratory status for Salvadorans living in the United States. According to the U.S. State Department, Salvadorans working in the United States sent $3.8 billion in remittances in 2008, benefiting more than 22 percent of the population. As expected, in December the U.S. Citizenship and Immigration Services bureau extended the Temporary Protected Status for Salvadorans until September 2010. Still, over 200 American academics wrote to Secretary of State Hillary Clinton asking for a U.S. government statement of impartiality.

Angus Reid Global Monitor offers a timeline and background information on the election.

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Brazil Fights Recession with Investments AS/COA Online 01/27/09

Brazil announced a sharp rise in Petrobras investments. (AP Photo)

Brazil began 2009 facing deteriorating economic conditions and rising unemployment. But, through recent actions, the Brazilian government seeks to steer the economy into safer waters by committing billions of dollars to create jobs and propel Petroleo Brasileiro (Petrobras) into the heavyweight category of oil production companies. Furthermore, U.S. President Barack Obama signaled his interest to work with Brazilian counterpart Luiz Inácio Lula da Silva to move forward on biofuels and the Doha round of global trade talks. Lula will visit Washington to meet with Obama in March.

With the goal of jumpstarting the ailing economy, Brazil’s Central Bank reduced its overnight lending rate by a full percentage point to 12.75 percent on January 21. The move intended to stimulate economic activity at a moment when financial markers signaled the danger of recession; private consumption has shrunk, December job losses hit their highest level since 1999, and analysts predict GDP growth may not reach the 2 percent mark in 2009. The Economist Intelligence Unit’s ViewsWire augurs that industrial growth could be close to zero and private consumption may drop to 0.9 percent in 2009—down from 6.2 percent last year. The analysis applauds the cash infusion of more than $42 billion into the Brazilian Development Bank (BNDES), designed to stimulate the creation of new employment. The fund helped create 2.8 million jobs in 2008 alone, according to BNDES data. “The businessmen who used to shop for funds on the international market and are not managing to obtain capital due to the financial crisis will be able to resort to the BNDES,” said Brazilian Finance Minister Guido Mantega last week.

In tune with the government’s actions, Petrobras unveiled a plan on January 23 that promises a 55 percent expenditure increase over the next five years. The package includes investments of more than $174.4 billion, with $28 billion alone to finance exploration of recently discovered pre-salt oil fields. The company also hopes to double its total oil and natural gas output by 2015, counting on the Tupi oil field and three other offshore camps to begin production. The day after the plan’s release, the first fully Brazilian-made natural gas platform, with capacity to generate electricity for 300,000 people, started operations. This also marks a step forward for Brazil’s naval industry, which will build another eight platforms to be deployed by 2013.

Washington’s new administration has signaled interest in working with South America’s largest economy this week in the fields of energy and trade. Following Monday’s phone conversation between the presidents of both countries, a spokesperson from Lula’s office announced that Obama “is interested in continuing discussions to advance the Doha round” of trade negotiations. In his January 26 edition of his radio show, “Café com o Presidente”urged Obama to push Doha forward.

A new report by AS/COA’s Trade Advisory Group entitled Building the Hemispheric Growth Agenda: A New Framework for Policy proposes creation of a hemispheric energy partnership that would include Brazil: “[A]s a starting point to greater regional integration, the United States and other willing partners across the hemisphere, perhaps as an E4 or E5, should join together to formulate a mutually beneficial hemispheric energy agenda roughly analogous to the original European Coal and Steel Community.” The report also suggests that the new U.S. administration should scrap the 54 cent-per-barrel tariff on Brazilian ethanol and consider a pact for a civil nuclear program similar to the one signed with India during the Bush administraion.

A December AS/COA panel analyzed the investment climate for energy in the region, with an emphasis on Brazilian energy and Latin American integration.

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