GOVERNMENT OF BRAZIL SET TO INVEST OVER USD 175 MILLION

UNCLAS BRASILIA 001856 SIPDIS DEPT FOR EWHITE OES/EGC; JMIOTKE OES/FO; PBATES OES; TSCOTT OES/STC; WPOPP WHA/BSC S/P FOR MANUEL DEPT PASS USTR FOR MSULLIVAN DEPT PASS TO SLADISLAW DOE SIPDIS E.O. 12958: N/A TAGS: SENV TNGD KSCA EAGR BR SUBJECT: GOVERNMENT OF BRAZIL SET TO INVEST OVER USD 175 MILLION TOWARD BIOFUEL RESEARCH ¶1. The following is an excerpt from an article published in the August 31 issue of the Brazilian daily Valor Economico: Begin Text: President Lula's Chief of Staff, Minister Dilma Rousseff, announced Aug 30, 2006, during the first national biofuels meeting, that the Government of Brazil (GoB) has set aside over USD 175 million in the budget for various ministries to invest in research and development of biofuels by 2008. She was quoted as saying "We (the GoB) are very concerned with the logistics and infra-structure of biofuels. She continued by saying that Petrobras would be responsible for over USD 60 million. At the event, President Lula announced a USD 21 million investment for the implementation of a biodiesel refinery in the state of Goias. The unit will be ready by February 2007, and will produce 100 million liters of biodiesel through the purchase of 100 thousand tons of vegetable oil. The president of the company, Alberto Borges de Sousa, mentioned that 30 % of the future production has already been sold by Petrobras in auctions. However he added that in order to reach industrial equilibrium, the refinery will have to sell 80 % of what it produces. Minister Rousseff also mentioned in one her lectures that the investments would also come from the Ministry of Mines and Energy, Ministry of Science and Technology (MCT) and Embrapa (Brazilian Agricultural Research Corporation). The MCT predicts investing USD 17 million in biodiesel research and USD 5 million in the development of ethanol. Rouseff projects savings of USD 160 million a year worth through the substitution of diesel imports by biodiesel. She also mentioned the availability of agricultural land for the production of biofuels. According to her, the production of the necessary biodiesel to allow a 5% mix of that fuel in normal diesel fuel will occupy 1 %, or 4 million hectares, of the total agricultural land of the country. She also said that Brazil's industrial sector must pay attention to the opportunities of developing technologies. She continued by saying that the enzyme and seed industry could benefit from biodiesel and ethanol. "It's an opportunity that appears every 100 years. It is a strategic sector since it produces wealth, income and jobs", she said. The Minister also mentioned the possibility of moving up the deadline for the mandatory 5 % biodiesel mix to regular diesel, originally set to January of 2013. "We have to be very careful in order not to put ourselves into trouble", she warned. The original deadline calls for 2 % (or 1 billion liters a year) mandatory mix by January 2008. The 5 % mix would raise the demand to 2.4 billion liter a year. End Text ¶2. Comment: Presently, most GoB research is funneled through the Ministry of Science and Technology and Petrobras (a company partially owned by the government.) The research is focused on: better efficiency, production of hydrogen fuel cells using ethanol, production of bioethanol from the biomass from sugarcane, industrial use of ethanol and using ethanol as an input for fuel cells. Research is also done on sugarcane focusing on the different kinds of sugar cane including the GMO varieties. ¶3. Recently, the state government of Maranhco reported that they will receive USD 25 million from various banks including Bank of Brasil, the Brazilian National Development Bank (BNDES) and some banks from Japan for Research and Development for their ethanol program. Most of the investments into research in biofuels in Brazil come from the private sector according to Brazilian Exame magazine. Recent estimates from the Brazilian Association for Industry Machines and Equipment show that approximately USD 1.7 billion will be invested in biodiesel infrastructure in the next three years. End Comment CHICOLA