Biofuels and oil. These are the main topics of the visit of Russian president Dimitri Medvedev to Brazil this week. On Tuesday, November 25, Medvedev met with Brazilian state-controlled oil multinational Petrobras president, Sérgio Gabrielli, in Rio de Janeiro, where Petrobras is headquartered.
The meeting served to open doors to oil cooperation between the Brazilian company and Russian organizations, mainly in the areas of production and exploration of oil and natural gas, research and development and biofuels.
Petrobras already has a memorandum of understanding signed with Gazprom, the main Russian company in the sector of natural gas and one of the main producers and holders of global reserves of the product. The Russian company should open an office in Rio de Janeiro next year.
The Russian president was introduced to biofuels produced from sugarcane, castor seeds, sunflower, etc. Medvedev visited an exhibition and received information about the production of biofuels in Brazil, research conducted in the country and the development of flexible fuel vehicles. Medvedev should take back figures about ethanol and biodiesel, the Brazilian trump cards for replacement for what is currently the main energy base in the world: oil.
Still in the matter of biofuels, the country may progress further in the research on the matter with an innovative project: the Bioenergy City. Scheduled for early 2009, the project should bring together efforts and investment from the public and private sectors.
Investment should exceed 80 million reais (US$ 34.7 million) in the construction of the Bioenergy City. The city chosen to house the project was São Carlos, in the interior of São Paulo.
The area belongs to the Brazilian Agricultural Research Corporation (Embrapa) Livestock Southeast and covers 240 hectares where a permanent park should be built, with spaces for business, courses and exhibitions. "It will be a kind of bioenergy Disneyland", said a private sector source.
The first definite step for implementation of this project was the signing, last week, in São Paulo, of a memorandum that homologates the Bioenergy City. The document was signed by the ministers of Agriculture, Livestock and Supply, Reinhold Stephanes, and the minister of Science and Technology, Sergio Rezende. The agreement forecasts the start of works for next year.
Another novelty for 2009 is that Embrapa, in the fist months of the year, should inaugurate the National Nanotechnology Laboratory for Agribusiness, a partnership between the Embrapa and the Ministry of Science and Technology. The laboratory should also count on studies and research for the projects to be developed in the Bioenergy City.
The agricultural Crisis
To mitigate the effects of the global economic crisis on Brazilian agriculture, the government of Brazil needs to rescue the Guaranteed Minimum Price Policy, an ancient text that is over 30 years old.
This is the opinion of the president of the Higher Agribusiness Council at the Federation of Industries of the State of São Paulo (Fiesp) and former minister of Agriculture, Roberto Rodrigues, in an interview to radio station CBN.
According to Rodrigues, the mechanism is simple: the government, through the National Food Supply Company (Conab), calculates production costs of agricultural products each year, stipulates a small profit margin and establishes a minimum price to be paid to producers at the end of the crop.
"If prices are below this minimum value, the government intervenes. It may buy, pay the difference, finance… The PGPM forecasts several forms of negotiation," he said. To the former minister, this is a mechanism that balances the market. "It is a form of target, not really a subsidy (like that in America, for example)," he said.
The results, according to Rodrigues, are immediate. Firstly from banks, "which would become more prepared to finance the farmers, as they could have greater safety in operation of the credit" (the former minister says that private banks, despite the government having made available funds for agriculture, prefer, due to the crisis, to invest in public bonds, which are safer).
The other point is that the 2009/2010 crop should be an uncertain "adventure". "It would be an opportunity in the crisis, as we would have a good crop when, due to the global instability, other producers are reducing production," she said. The funds would come from the budget of the Ministry of Agriculture.
The international financial crisis is already causing the first effects in the Brazilian industry. According to the president of the Brazilian Machinery Manufacturers Association (Abimaq), Luiz Aubert Neto, sector businessmen are careful. To him, the fourth quarter of this year remains "guaranteed" as orders had already been made, but the scenery of caution for the first quarter of 2009 is very clear.
At a moment in which businessmen are placing their foot on the brake, the benchmark interest rate increase from 13% to 13.75%, decided in the last Monetary Policy Committee (Copom) of the Central Bank, contributed to worsen the scenery.
Aubert says that interest rates reduce investment and, consequently, production. "We are, once again, close to losing a great opportunity with regard to the country we want to become," said the businessman.
According to Aubert, companies evaluate the rate of return as against interest rates when buying. "The higher the interest rate, the lower the investment," he pointed out. Aubert also said that "interest rates are crucial and that, with the whole financial crisis, the Central Bank should take it's heavy hand off it."
The Abimaq president pointed out that the sector does not want protection, but isonomy to be able to compete. "Brazil is the only country in the world that taxes the purchase of machinery. Our real interest rate is much larger, when compared to other countries. We do not need protection, but isonomy, to equal our conditions with those on the foreign market," he says.
To Aubert, exports are not bad, but they have dropped significantly when compared to the 1980s, when the Brazilian machinery industry was the fifth in the world in terms of production volume. Today, Brazil is just in the 14th position. The most recent sector figures, for August last year, for example, show that exports were 6.7% lower than in July, but 8.2% greater than in August 2007.
The lower exports expanded by 12.8% the sector trade balance deficit, which is also a matter of concern. Imports rose 3.3% in August when compared to July and 46.5% over the same period last year. In terms of value, the increase was 1.3% in August, with machinery industry revenues reaching 6.8 billion Brazilian reais (US$ 3 billion), which represents almost 14% more than in the same month in the previous year.
The crisis of the main economy in the world accelerated a process that had already begun, with certain shyness: the Abimaq has been incrementing business with South American countries. According to Aubert, it is possible to compensate part of the loss in sales to the United States by exporting to the countries in South America, for example. According to him, the region has great consumption potential.
Amazon and National Defense
The Strategic Plan of National Defense, elaborated by the federal government, covers the defense of the Amazon as a joint action for economic and sustainable development, with military presence in the region. The information was supplied by state representative Aldo Rebelo, a member of the Parliamentary Front for National Defense who had access to a preview of the document.
Rebelo classified the plan as "daring" and said that the work is at an advanced stage. The parliament member believes that the document should be delivered in time, scheduled for December. According to the representative, divergence with Paraguay and Ecuador had no influence in the elaboration of the plan.
The government of Paraguay defends the revision of the price paid by Brazil for the electric energy produced at Itaipu Hydroelectric power plant. Last week, authorities from Paraguay accused Brazilian military forces of having "violated" the territory of that country which, according to the Brazilian Foreign Office, was no more than a misunderstanding that has already been clarified.
With regard to Ecuador, the ambassador of Brazil to Quito, the capital of the neighboring country, Antonino Marques Porto, was called to Brazil after president Rafael Correa's decision of stopping the construction of San Francisco Hydroelectric Power Plant, by Odebrecht, and not paying the US$ 243 million loan made by the Brazilian Development Bank (BNDES) for construction of the mill.