Luiz Prado
Luiz Prado is a journalist and an economist with a PhD in Biology and Human Ecology. He dedicated his life to environmental protection and sustainable development, acting in governmental positions, large consulting companies, international financial organizations, and private equity investment funds. He is now an independent consultant and can be reached at : www.luizprado.com.br
Brazil is the biggest looser in the failure of the last Doha negotiations. This because its only claim was the phasing out or significant
reduction of trade barriers on ethanol – although under the cover of agricultural products in general.
Most surprisingly, the Brazilian
Ministry of Foreign Affairs was not able to convince President Lula that highly industrialized nations see agricultural products as a key
part of their national security.
Over the last years, concerns about the end of the era of fossil fuels or at least the fast increases in
prices of oil have pointed to biofuels as one of their highest concerns in what refers to national security. Therefore, it would have
been easy to foresee that they would not agree with less trade barriers in that area. President Lula may have just played the wrong cards
or else played it straight in order to blame the very rich countries for poverty.
Historically, the Brazilian sugar cane industry has close ties to political power. For centuries – ever since Brazil was a colony – sugar
cane has been marked by distortions in tenure, exploitation of cheap labor, and violence in rural areas. Prior to his election, Lula
blamed the owners of sugar cane plantations for these features. And then, a few years ago, all in a sudden, Brazil was surprised by a
speech in which sugar cane planters were referred to as “heroes” – yes, that was the word – of efficiency in biofuels. In a grandiose vision, Brazil was to become “the Saudi Arabia of biofuels”.
The Brazilian National Program of Alcohol, was not conceived as a source of “clean fuels”, but as a political response to the first oil
shock of the early 70s. Under heavy influence of the sugar cane industry, for decades the Brazilian government has heavily subsidized its
product, with no concerns about energy balances or social and environmental costs. With guaranteed prices, the sugar cane industry was
able to take over some of the best agricultural lands in the country, moving away the production of agricultural products – included
perishable ones - , which results in an additional social and fuel cost of transportation.
Over the last years, governmental subsidies were phased out while end-users of ethanol came to subsidize it directly at the pump station.
End users have not the option of buying plain gasoline – it is always mixed with a floating percentage of ethanol. Ethanol content in the gasoline is periodically reviewed by the government based on the seasonal interests of the sugar cane and ethanol industry. When international prices of sugar are higher, the industry increases its production while lowering the production of ethanol, and the ethanol content in the gasoline goes down. And the reverse is also true.
Being a partner with the government in such an arrangement against consumers’ interests is most surely an outstanding deal. As for making
sure that the Brazilian ethanol gets to international markets without any trade barrier is another issue. For the moment, large investors
in biofuels are buying land in Brazil to produce them. The US trading company Bunge just announced a project for 100,000 hectares of sugar cane in one of the most vulnerable ecosystem in Brazil, with a 15-year tax exemption ( www.luizprado.com.br). Not too bad.
Brazil claims it produces the most efficient ethanol – from sugar cane – in terms of energy balance. In Brazil, it is a taboo issue, but
internationally there are doubts both about whether the sugar cane industry is not competing with the food industry and also whether the
energy balance of the sugar cane derived ethanol is positive if considered all inputs, from water used in the irrigation and in the
processing of sugar cane to fertilizers.
The word “commodity” has only recently entered the Brazilian presidential speech. It is not clear whether Lula fully understands the
strategic meaning of becoming a supplier of commodities as opposed to turning into a an exporter of knowledge based products, with a much
higher added value and a much lower consumption of natural resources. In fact, as it is now, based on the governmental mantra about
liberalization of the international market of such commodities, Brazil exports land – wood products, iron and ore, raw agricultural
products and alike. In other words, Brazil basically mines natural resources and the government made of this mining a center piece of its development strategy. Not very wise, not at all creative.
As it is clear now that the so called invisible hand of the market is not at all enough to take good care of energy and food security
under condition of climate change, zoning would surely be a more appropriate tool to deal with agricultural production.
Now that globalization has come to a dead end, President Lula and his minister of foreign affairs are blaming the wealthy countries for
whatever potential short falls of Doha’s failure.
