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March 9, 2007 8:59 pm

Bush and Lula sign green fuel deal

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Presidents George W. Bush of the US and Luiz Inácio Lula da Silva of Brazil on Friday signed a green fuels agreement that promises co-operation on technology and development but fails to address the central issue of access to the US market for Brazilian producers.

Mr Bush was in São Paulo on the first stage of a five-nation tour of Latin America. The initiative is one of a number designed to restore US credibility in a region increasingly under the sway of “21st century socialism”, led by Hugo Chávez, president of Venezuela.

Mr Bush and Mr Lula agreed action in three areas: development of the next generation of biofuels technology – a reference to cellulose-based fuels; development of biofuels production in smaller oil-dependent countries; and setting standards to establish ethanol and other biofuels as tradable commodities.

Brazil and the US produce almost three quarters of the world’s ethanol. Brazil’s sugar cane-based industry is far more efficient than the US maize-based industry, but Brazilian producers are denied access to the US market by tariffs of 54 cents per gallon and subsidies of 51 cents per gallon paid to US producers.

“It was great to see the presidents of the two biggest countries in biofuels using strong language on the future of the ethanol industry,” said Marcos Jank of ICONE, a São Paulo trade think-tank.

The two presidents avoided discussion of tariffs and their joint MOU accord says issues of trade and tariffs should be raised in “other multilateral, regional or bilateral fora”.

Mr Bush has set a target of reducing US consumption of gasoline by 20 per cent over the next 10 years. A quarter of the reduction would be achieved through greater efficiency and the rest by the use of biofuels.

To do so only from domestic sources would mean increasing current US production seven-fold, from 5bn gallons to 35bn gallons a year, equal to the entire world’s production today.

“What we are going to see now is the US Congress opening up, not to replace US production but to complement it,” he added.

Mr Bush’s visit was preceded by violent demonstrations in São Paulo on Thursday evening that left several people injured in confrontations with police. On Friday night, Mr Chávez was expected to address an anti-Bush rally in Buenos Aires at the invitation of Néstor Kirchner, president of Argentina.

Mr Bush was due to continue to Uruguay, where President Tabaré Vázquez is seeking closer trade relations with the US. He then travels on to Colombia, Guatemala and Mexico.

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