Friends Working on Common Goals on Economy, Energy
By Senator Richard G. Lugar and Brazilian Ambassador to the U.S. Roberto Abdenur
As submitted to the Miami Herald
May 6, 2006

The United States and Brazil share many things: a hemisphere, a dedication to promoting democracy and human rights, and the vigor that comes from being multiethnic societies.

Those of us who have long wished that these two important countries of the Americas establish a true partnership have seen encouraging signs recently. For instance, Brazil has sent troops to Haiti as the leading force of a United Nations peacekeeping mission. Our two nations already have a strong economic relationship; the U.S. is Brazil's biggest export market and the largest foreign direct investor in Brazil, while Brazil is, after Mexico, by far the most important U.S. economic partner in Latin America.

In November of last year, on the occasion of the visit by President Bush to Brasília, the two governments agreed to substantially increase by 2010 the volume of their bilateral trade, from the current figure of $35 billion.

While these are steps in the right direction, our two countries need to accelerate their cooperation. The economic and political environment in the Americas is changing rapidly, creating new challenges for each that we can meet better if we do so together. Brazil has special influence in the region, due to the size of its economy, its population, its land mass, its natural resources and its significant economic, political and cultural ties with its neighbors. Brazil and the United States should combine their strengths to contribute to the economic, social and political development of the region.

Similarly, efforts at lowering trade barriers in the Americas, which have been so important in the past in stimulating growth, are now on hold, in part because the United States, Brazil and Mercosul have differences over important issues. Resolving these differences would be a boon to both countries.

And we both face challenges to our energy security from the sharply rising worldwide demand for energy. Higher world energy prices, greater vulnerability to energy shocks and increased potential for conflict are consequences that will affect all nations, big and small.

But amidst this new energy threat, we also have an opportunity to fashion a win-win response that could benefit both our countries. The key is ethanol, which Brazil long ago saw as an important element of its energy strategy and now provides 18 percent of the country's automotive fuel, thanks to a booming sugarcane-based ethanol industry. As a result, Brazil, which years ago had to import a large share of the petroleum needed for domestic consumption, recently reached complete self-sufficiency in oil.

For its own energy security, the United States-by far the world's largest oil importer--similarly needs to break oil's near-monopoly on the transport sector by turning to ethanol for a much larger share of its auto fuel supply. Although the U.S, using corn, produces nearly as much ethanol as Brazil and is expanding its annual production by 25%, the four billion gallons produced is still a tiny fraction of the 140 billion gallons of gasoline consumed.

Using E-85 fuel, a blend of 15 % gasoline and 85% ethanol, and easily available flexible-fuel technology so that cars can burn E-85, the U.S. could dramatically lower its oil dependence. Gaining consumer acceptance will spur the expansion of ethanol production and infrastructure. That means spreading the availability of E-85, now largely limited to the Midwest, to markets from coast to coast.

One solution might be for the U.S. to import more Brazilian ethanol to blend on the U.S. east coast, where transportation costs significantly raise the price of Midwest ethanol. That would, however, require the politically difficult step of ending the protective tariffs on Brazilian ethanol that now shelters the U.S. industry.

It makes strategic sense to import environmentally friendly ethanol from a reliable friend like Brazil in our own hemisphere. After all, the U.S. doesn't tax imported crude oil, which pollutes and often comes from unstable suppliers.

Policymakers would need to consider the impact on the U.S. ethanol industry, where breakthroughs in making ethanol out of cheap and widely available biomass promise to lower costs and increase supplies. Currently, ethanol makers are highly profitable and are literally overwhelmed by demand. They have little immediate prospect of marketing large volumes of their product on the east coast.

Some analyses suggest that increasing foreign supplies to accelerate the United States' switch to E-85 will create a bigger ethanol pie for all.

What is clear is that dropping the tariff would, at a stroke, remove a major source of friction between the two countries, as well as strengthen the energy security of both. This bold gesture of friendship could launch new and productive bilateral negotiations on trade and broader cooperation on other issues.

Together, Brazil and the U.S. could undertake an international joint action to globalize the production and utilization of ethanol, including by sharing their technology with potential producers of ethanol throughout the world, particularly in developing countries.

We share common goals. We should start sharing common programs to achieve them.

U.S. Sen. Richard Lugar, Republican of Indiana, is chairman of the U.S. Senate Foreign Relations Committee. The Hon. Roberto Abdenur is the Brazilian ambassador to the United States.