BIOFUELS ROUNDTABLE FOR A/S SULLIVAN IN SAO PAULO

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E.O. 12958: N/A
TAGS: EAGR ENRG EFIN EINV ECON BR
SUBJECT: BIOFUELS ROUNDTABLE FOR A/S SULLIVAN IN SAO PAULO


1. SUMMARY: Assistant Secretary of State for the Bureau of
Economic, Energy, and Business Affairs, Daniel Sullivan held a
roundtable on biofuels developments on December 12 at the American
Chamber of Commerce in Sao Paulo. Biofuels interlocutors applauded
the USG's progress on the U.S.-Brazil Memorandum of Understanding
(MOU),but lamented that Brazil's private sector has been more
active than the Brazilian government on many biofuels initiatives.
The assembled group told A/S Sullivan that the number one roadblock
to furthering worldwide ethanol expansion is the lack of information
for industry and consumers especially in how to utilize and
commoditize ethanol. Post will continue working on ways to engage
the private sector in advancing the MOU. END SUMMARY.


2. Alfred Szwarc, an adviser to the Board of the Brazilian Sugar
Cane Industry Union (UNICA),lamented that the U.S.-Brazil MOU had
not moved more quickly, but noted that he thought both sides had
made significant progress on standardization, as well as some
efforts at establishing the framework for making ethanol a
commodity. [Note: UNICA is the leading sugarcane agribusiness
association in Brazil with 100 members, representing 50 percent of
the total production of sugar cane, sugar, and ethanol. End Note.]
Szwarc was part of a November scientific visit to the U.S. and
commended both sides on developing an ongoing scientific exchange,
but noted there should be further advancement on including third
party countries into the process. A/S Sullivan concurred that the
most progress had been on issues where the two governments had a
leading role and noted that public-private integration can
potentially delay implementation, but underscored the importance of
the private sector in expanding ethanol as a global commodity.


3. Commercial Manager for Coimex Trading Company Manfred Wefers
outlined Coimex's role as a Brazilian logistics company specializing
in logistics, imports, exports, and infrastructure development. He
briefed A/S Sullivan on Coimex's progress in building the world's
largest private container terminal which will include a liquid
terminal for ethanol storage at Santos, Brazil's largest port. He
also outlined Coimex's plan to build a U.S. port terminal for
imports of ethanol either in Tampa, Savannah, or Jacksonville.
Coimex is banking on the continued growth of ethanol consumption and
sees the near absence of ethanol storage and filling containers in
the U.S. Southeast as an opportunity. Wefers stated that these
facilities could receive ethanol at a competitive price from Jamaica
and other Caribbean Basin Initiative countries where Coimex has
production and dehydration facilities. In Jamaica, Coimex has
worked with the Jamaican government (GOJ) to promote the use of
gasoline blending to include five percent ethanol, which he said the
GOJ hopes to implement next year.


4. Plinio Nastari, President of Datagro Publications Ltd., gave a
brief regional overview for A/S Sullivan. He discussed his work in
Central America to encourage production, noting that El Salvador has
been very receptive, as well as some initial signs of interest in
Honduras and Guatemala. Sullivan highlighted that CAFTA countries
exports of ethanol have increased by 400 percent because of the duty
free access, and lauded El Salvador's efforts on implementing
ethanol gasoline blending. [Note: Datagro is recognized by many as
the top industry newsletter for the sugar and ethanol sector in
Brazil. Nastari is also President of Plinio Nastari Consulting
(PNCP),which provides consulting services to sugar mills, trading
companies, and the Brazilian government. End Note.]


5. Nastari urged A/S Sullivan to convey to Washington that the U.S.
needs to signal to these countries the potential market for ethanol
production. He suggested three concrete ways the U.S. could help in
developing an ethanol market. First, he recommended the USG
support, through USAID or World Bank, specific consulting projects
that would put planned projects into action. Secondly, he
underscored the need for the USG to encourage private sector
development of a liquid futures market for ethanol. Finally, he
urged A/S Sullivan to support the inclusion of ethanol as an

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environmentally friendly product within the WTO.


6. In response to A/S Sullivan's request to define the largest
roadblock to furthering ethanol expansion, Nastari said the lack of
information and insufficient marketing left consumers and industry
unaware of some basic facts regarding ethanol. As an example, he
pointed out the fact that any car can use up to ten percent ethanol
blend without any modifications to the engine. He also noted many
potential producing countries erroneously compare sugar cane prices
to ethanol prices instead of molasses to ethanol when making
investment decisions. He noted molasses producers should be
producing ethanol as well because the profit comparison for molasses
and ethanol is much more advantageous for ethanol while with sugar
it is not as advantageous.


7. Pedro Bentacourt from General Motors (GM) highlighted that in
the last five years Brazilian sales of flex fuel cars totaled almost
2.5 million cars. He noted that GM Brazil's CEO is leading a
subgroup within the industry to develop standardization and
development of ethanol as a global commodity. GM is very open to
working with others, to the point of disclosing technology to
improve market access, he said. Bentacourt agreed with Nastari that
the biggest roadblock in addition to developing infrastructure and
industry standards is accurate and widespread access to information.
He said GM developed a campaign in the U.S. to encourage gas
stations to expand capacity for ethanol pumps at its own expense,
but the lack of infrastructure and understanding of the market is a
big roadblock for them.


8. COMMENT: Ethanol industry interlocutors provided a frank
discussion for A/S Sullivan outlining their concerns about delays in
implementation of the MOU; however, they agreed with the Assistant
Secretary that the bilateral initiative is moving more quickly than

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anticipated. Their collective comments on the need to improve
information and infrastructure in Brazil ring true. Post will
continue to engage the private and public sectors on biofuels issues
and in advancing progress on the MOU. END COMMENT.


9. This cable was coordinated with A/S Sullivan's delegation.

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