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Last Updated: Friday, 30 March 2007, 12:36 GMT 13:36 UK
US and Brazil seek to fuel friendship
By Bruno Garcez
BBC Brasil, Washington

George W Bush and Luis Inacio Lula da Silva meet in Brazil, 9 March 2007
Presidents Bush and Lula: Strategic friendship
During Brazil's military rule in the mid-1960s, supporters of the government came up with the phrase "What's good for the United States is good for Brazil".

The Brazilian left loathed the concept, considering it to be the symbol of the country's submissiveness to American interests.

But the irony of history is that it took a left-wing Brazilian government to actually invert the principle.

Now it is the US that is turning to Brazil's biofuels programme, in order to benefit from its pioneering work in ethanol and to cut down its dependence on foreign oil.

During President George W Bush's recent trip to Brazil, the two countries signed a memorandum of understanding on the production and research of ethanol.

US state department officials have referred to the country as being a strategic partner, and claim that their teamwork is likely to fuel a world revolution in alternative energy.

So it is little wonder that Brazil's President Luiz Inacio Lula da Silva will, on Saturday, become the first Latin American leader received by George W Bush in the presidential residence at Camp David.

'National security'

But in spite of the kind words exchanged on both sides, several politicians and local producers in the US have expressed concern about the role played by America's new best friend.

Sugar cane field in Brazil
Brazil's biofuel is made from sugar cane, whereas the US uses corn

At a recent event in Washington, Senator Barack Obama told the BBC: "Brazil has done an excellent job in encouraging its own biofuels industry. America should follow suit."

A few weeks before those remarks, though, Mr Obama had made a speech in which he claimed that ''it does not serve our national and economic security to replace imported oil with Brazilian ethanol''.

His concerns probably portray the fears of his voters. The senator comes from Illinois, the second largest producer of corn and ethanol in the US.

The American version of the biofuel is obtained from corn, while Brazil uses the more cost-effective and environmentally-friendly sugar cane.

'Infant industry'

Iowa - which leads ethanol production in the US - is the home state of Republican Senator Charles Grassley.

I want to make sure we don't do anything to damage our own infant ethanol industry
Iowa Sen Charles Grassley

He is the author of a project that extends until 2009 the tariffs of US$0.54 (0.27) that the US charges on ethanol imported into the country.

Brazil wants the taxes lowered, but Americans have warned that that is unlikely to happen soon.

Sen Grassley is clear on why he believes the tariffs should stay as they are.

"I want to make sure we don't do anything to damage our own infant ethanol industry. From the standpoint of what we have in the United States, through tax incentives and tariffs, I'd say to the president, 'if it ain't broken, don't fix it'."

In Sen Grassley's view, there will come a time when "we won't need these things", but he adds that it "will be some day, not today".

The US, he says, has coped with Brazil's rising agricultural might in the past, but now, the situation is different.

"Twenty years ago, Brazil decided it was going to grow more soybeans. There was more competition with the United States, but we adjusted to that competition."

Tax payers

Bob Dinneen, president of the US Renewable Fuels Association, says Brazil and the US should continue to work together to build a world market of ethanol, but he believes "the tariffs issue is a complicated one".

George W Bush and Luis Inacio Lula da Silva speak in Brazil, 9 March 2007
The US charges tariffs on the ethanol it imports from Brazil

"There is no barrier to the entry of Brazilian products today. We imported 650 million gallons from Brazil last year'," he says.

Lowering the tariffs would, in his view, pose a burden on the American taxpayer.

"Refineries in the United States that blend ethanol get a tax incentive whether the product is imported or domestic. So in order to ensure the investments the payers are making in renewable energy are focused here, we ask the imported product to pay the incentives they are going to receive upfront."

Mr Dinneen believes that in order to be successful in its biofuel programme, the US needs to adopt tactics similar to those of the Brazilians.

"Brazil has built a heck of programme, with years of incentives and government intervention, in a way that I commend and that makes a lot of sense. I don't believe they need the additional support of the American taxpayers."

Global influence

In spite of some reservations, Brazil and the US seem to be the perfect match, according to Peter Hakim, president of Washington think-tank Inter-American Dialogue.

Venezuela's President Hugo Chavez
The US sees Brazil as a counter to the influence of Hugo Chavez

"If the US loses the high quality friendship it has with Brazil, it will suffer a setback in Latin America," Mr Hakim says.

"For the US, this relationship offsets the influence of Venezuela's Hugo Chavez, and it gives the country a credibility in the region it wouldn't otherwise have.

"Brazil, on the other hand, has international aspirations, and in order to have a global influence, it needs solid relations with the US."

The cherished partnership does not, however, lead the two countries always to see eye-to-eye, as Mr Hakim points out.

''They don't have to agree on all issues. In fact, they disagree on most topics, a range of trade matters, the war on Iraq and the Brazilian relationship with Hugo Chavez. In spite of that, both sides seem to be tolerant towards these disagreements."

US-Brazil deal to boost bio-fuels
10 Mar 07 |  Americas
Brazilian biofuels' pulling power
08 Mar 07 |  Science/Nature
Bush announces Latin America aid
05 Mar 07 |  Americas

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