Brazilians Betting Obama Will Be Green Enough to Help Brazil

Brazilian president Lula hold ethanol jar Brazil is hoping that its ethanol may gain momentum and space in the United States market during the administration of Barack Obama, who has already shown himself drawn towards environmental causes. Thus, the US may become sponsors of renewable energies.

Obama's campaign commitments included reducing carbon emissions by 80% until 2050, reducing dependence on oil imports, developing and implementing clean energy technologies and making the United States a leading country in issues pertaining to climate change.

The world's leading economy aims to consume 136 billion liters of ethanol in 2022. The current consumption is 30 billion (against 25 billion in Brazil).

"Should Obama maintain those ethanol consumption goals, then he may deem it necessary to complement the United States output with imports, and in this case, the expectation is that he would accept a reduction, for a certain export volume, of the tariff currently charged on Brazilian ethanol," says the director general at ícone  (Institute of Studies on Trade and International Negotiation), André Nassar.

Presently, the United States charges a tariff of US$ 0.54 per gallon of Brazilian alcohol, which inhibits the entry of the product in that country.

Nassar believes that Obama's concern with increasing energy efficiency may also translate into the United States' participation in the post-Kyoto Protocol and in a new clean development mechanism for carbon trade, with the adoption of goals for reducing emission of greenhouse gases.

"The Americans have a very heavy energy matrix in terms of CO² emission. If they are to clean up that matrix, that tends to open up opportunities to Brazil, most of all in ethanol, which is our main exportable source of renewable energy," he underscores.

Besides selling more ethanol to the United States, Brazil could attract United States investment in clean energy and also develop partnership for technology transfer, research and development.

As for the myth of Democrat protectionism and what it might represent for Brazilian agribusiness, Nassar explains that the subsidies granted to grain and questioned by Brazil are provided for in the United States Agricultural Law, the so-called Farm Bill, and vary according to international market prices.

The current law was passed halfway through last year and is valid until 2013. "In terms of agricultural policy and subsidies for grains, Obama's swearing in does not change anything. The law is the law and that is it," sums up Nassar.

He warns that during Bill Clinton's Democrat administration, especially in 1998 and 1999, prices decreased sharply, and the president was met with pressure from the Congress so as to grant complementary subsidies to the agricultural sector. That, according to him, might happen once again, but is unlikely.

"The United States deficit has never been so high, and the moments at which they over subsidized the agricultural sector were those with the lowest deficits. I believe that even if farmers push Obama, calling for more than stipulated by the Farm Bill, they will not get what they want."

The third topic of interest to the Brazilian agricultural industry is the Doha Round of the World Trade Organization (WTO). It is not yet known whether the negotiations, which have been dragging on for seven years, are going to be a priority for the new government. According to Nassar, the resumption of talks depends on the interest of the United States.

"The negotiations are not going to promote a large opening of trade, they are going to be more of a political signal. It is not the most important thing in the world, but it is important in order for us to close this subject and move on to more ambitious things," he claims.

The expectation, as a whole, is a favorable one. "In the face of the last eight years of United States unilateralism, which is what we experienced with the Bush administration, the Democrats are coming in with a stance of greater opening for international talks, which is a good thing.

"Exactly how that is going to come through in practice is not yet clear, but I tend to think that the form that Obama is proposing is a positive one for Brazil," he evaluates.



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