The possible elimination of a 54 cents-per-gallon tariff on imports of
Brazilian ethanol has become a vital issue in Brasília due to the country’s
potential economic, environmental, and social repercussions. Lifting the tariff
would ultimately produce a surge in demand for Brazil’s domestic bio-fuels in
the U.S., where crude oil imports currently dominate the domestic energy
industry.
Not being able to handle the positive economic impact this move could have in Brazil, various domestic and overseas environmental organizations have uttered concerns over threats to the Amazon rainforest, a region that comprises nearly 60% of the nation’s expanse.
They argue that higher sugar-cane ethanol exports, resulting in enhanced earnings to the nation’s economies, could do harm to the Amazon by transforming the rainforest into a normal agricultural terrain. Currently, Brazil is home to 336 sugarcane plantations which have enlisted 10.3 million hectares of land usage.
Should the U.S. tariff be lifted, demand for sugar-cane ethanol will further skyrocket, making it difficult for Brazil’s President Lula to convey anything but unqualified support for such an expansion. The fact is that Brazil now finds itself immured in the conflictive engagement of attempting to simultaneously expand its economy while still addressing its poverty, income inequality, and racial concerns.
Most of all, this blueprint does not even begin to lay siege to the country’s overpowering split between rich and poor – which makes it a nation of two nations.
Ethanol in the U.S. and Brazil
The United States and Brazil are currently the world’s top producers of ethanol and bio-fuels, accounting for 70% of the global supply. Brazil alone produces 4.4 billion gallons of ethanol, due in large part to its ability to rely upon sugarcane methodology for producing ethanol rather than the corn-base process formed in the U.S.
Thanks in no small part to ethanol’s demonstrable advantages over petroleum, such as its minimal adverse impact on the environment; approximately 75% of Brazilian automobiles now possess the capability to run on some combination of gasoline and ethanol.
The recent triggering of the ethanol boom has gradually further intertwined the rather erratic economic relationship between the largest North and South American countries. In 2006, more than half of Brazil’s exported ethanol was sold to the U.S., with that figure expected to rise dramatically in the coming years as Washington’s interest in ethanol swells. The rise in U.S. demand for Brazilian ethanol could increase exponentially if the 54 cents-per-gallon tariff on bio-fuel is lifted.
The burdensome import tax has been challenged in the U.S. Congress on a number of occasions. The latest attempt to rescind it was on June 20, when Republican Senator Judd Gregg (R-New Hampshire) led a push to overturn the tariff, citing the current over-reliance of the U.S. on Venezuelan oil as his motivation: “I would rather buy ethanol from Brazil than oil from Venezuela. It just makes a lot more geopolitical sense in how we protect ourselves.”
Brazil’s friendly geopolitical position weighs in favor of its worldwide strategies importance which inevitably will service the cause of the potential improvement of the country’s strengthened economy. But at the same time, its ability to threaten the U.S.-based corn ethanol methodology that would come from the lifting of the U.S. tariffs can not be ignored.
However, the measure affecting ethanol, known on Capitol Hill as part of the “farm bill,” was shot down in the Senate by a vote of 56-36 in favor of continuing the tariff, thus protecting the price of U.S. corn. Republican Senator John Thune of South Dakota explained his nay vote: “Eliminating the ethanol tariff would send a mixed signal to producers, investors and farmers who sell their products to ethanol plants.”
Senator Thune’s thoughts appear to be the prevailing sentiment within the U.S. Congress. Lewis Perelman, a senior fellow at the Homeland Security Policy Institute in Washington, is not very optimistic that any transformation will be revealed in the short term.
He explained, “I don’t see the political landscape changing anytime in the foreseeable future. Politicians and American citizens alike seem content with the way things are.”
To date, there has been no realistic threat to the survival of the ethanol tariff in the House or the Senate. Most members of Congress believe that releasing the import tariff would be a disservice to American corn farmers more than it would abet the welfare of the American public, as rationalized by the recurring refusal to cancel the ethanol tariff.
Who Is Holding Brazil Back?
Lula feels ebulliently confident about his country’s future prospects, a point he made clear at a May 2007 press conference, when he asserted, “Brazil in 2007 is another country. I do not need to talk about economic stability, nor investment credibility, nor foreign debt, nor foreign reserves… All these things are practically resolved.”
Lula also has identified Brazil as having the potential to drastically expand its economy, a goal that appears to sit at the top of his agenda. He aims to maximize the production of sugar-cane-base ethanol in response to the high demand for biofuel in the energy market.
In March 2007, U.S. President George W. Bush traveled to Brazil to forge agreements on sugar-cane ethanol cultivation and exportation. During his visit, Bush signed an agreement with Lula to broaden development of biofuels such as ethanol. Prospects for economic growth are appearing rapidly, and Lula has cagily taken note of Brazil’s potential to dominate the global energy market. But the fact is that huge obstacles await Lula’s optimism regarding the future of sugar-cane ethanol, and that a block will be posed by the politics of corn.
Lula’s surging support for the expansion of sugar-cane ethanol production is evident, as demonstrated when he labeled ethanol producers as “national and world heroes.” Also, government subsidies valued at over US$ 2 billion are being provided to sugar-cane producing mills across Brazil. These affirmations and positive actions provoke at least some well-merited criticism, as recent revelations have made public the horrendous conditions workers are subjected to on sugar-cane plantations.
Tom Phillips of the Guardian Unlimited has reported on these intolerable realities, illustrating the often neglected treatment of the workers (called cortadores de cana – sugar cane cutters) when he describes the plantation town of Palmares Paulista as a place where, “lopsided red-brick shacks crowd together, home to hundreds of impoverished workers who risk life and limb to provide the local factories with sugar cane.”
In June 2007, a raid on a plantation in the Amazon exposed more than 1,000 laborers working 14-hour days under reprehensible circumstances, according to the Houston Chronicle. Vivian Sequera of the Associated Press reported that “Many of them [workers] were sick because of spoiled food or unsafe water, slept in cramped quarters on hammocks and did not have proper sanitation facilities.”
Deeply embedded in the appalling conditions of the cortadores de cana lies another quandary being routinely faced by Brazilian migrants: Migrants enter onto this kind of work because of their inability to secure jobs elsewhere.
In tandem, the market for ethanol is escalating, also causing an elevated requirement for workers who are desperate enough to function under often such atrocious surroundings, ultimately making it difficult to lodge human rights cases springing from alleged violations by management.
Lula vowed to find a “common denominator to prevent Brazil from losing the golden opportunity it has with ethanol and biofuel.” Aside from episodically attempting to stage government talks regarding the deplorable conditions of the cortadores de cana, the Lula administration has achieved only minimal progress in protecting those cultivating and processing sugarcane.
“Anti-Deforestation” Finds Company
Many environmental organizations are expanding to monitor campaigns of sugarcane-ethanol production. In addition to the risk of damaging the Amazon, disputes over the burning of coca leaves have surfaced due to the toxic pollution it releases into the air.
Lula has openly deprecated the trepidations of environmentalists who believe such fears are entirely merited. He has remarked with shocking pedestrian boilerplate rhetoric, “The Amazon isn’t a place to plant cane… the cartel of the world’s powerful is trying to prevent Brazil from developing, trying to prevent Brazil from being transformed into a great nation.”
In addition, the production of soybean-based bio-diesel has massively increased cultivation, positioning the Amazon as a prime location for potential soybean expansion. Already, upwards of 20% of the Amazon rainforest has been destroyed, highlighting Brazil’s absolute necessity to address the enormous risks embedded in increasing sugar-cane ethanol production, notwithstanding Lula’s eternal optimism, and his lapses into often ill-founded fantasy.
As Brazil waits for the momentous decision concerning the fate of the U.S. tariff on ethanol, Lula continues his crusade to call down the spotlight of publicity on Brazil’s emerging role in the global energy market, staunchly insisting that its economy will experience profound growth.
Lula now finds himself trapped between the goal of being a leader in the energy market, and the fundamental need to stamp out the abuse of labor rights and deal with the environmental shortcomings that are found in the country. To that end, although the government is not directly culpable for the abuses now flourishing in the country, it remains an embarrassing and sensitive situation due to the profound importance of Brazil’s reputation at this point in its history.
Furthermore, the fact that Lula himself was able to achieve prominence by working as an activist for labor rights earlier in his career which provides for a painful irony, considering the negligible attention his administration has awarded to the human rights abuses committed by his country’s major sugar-cane ethanol companies.
This analysis was prepared by COHA Research Associates Anna Gangadharan and Albert Larcada. The Council on Hemispheric Affairs (COHA) – www.coha.org – is a think tank established in 1975 to discuss and promote inter-American relationship. Email: coha@coha.org.
