NEW GOES UNDECIDED ON FUTURE OF BIOFUELS

UNCLAS SAN SALVADOR 000686 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: ENRG EAGR PREL EAID ES SUBJECT: NEW GOES UNDECIDED ON FUTURE OF BIOFUELS REF: 07SANSALVADOR1168 NOTAL ¶1. (SBU) SUMMARY: According to new Minister of Economy Hector Dada, the Government of El Salvador (GOES) is undecided about its biofuels policy but appreciates the assistance provided under the U.S. - Brazil Biofuels Initiative. The National Energy Council (CNE) will be developing an overall energy policy, including a biofuels policy. Initiative consultants publicy presented new feasibility studies July 14 highlighting El Salvador's potential to be a leader in biofuels. Moving the decision for biofuels to the CNE suggests the new GOES will not introduce an ethanol law in the near term, and the private sector is unlikely to move forward without government action first. END SUMMARY. ¶2. (SBU) During a July 13 meeting, new Minister of Economy (MINEC) Hector Dada informed Charge, Econoffs, and OAS representatives that the Funes Administration did not yet have a biofuels policy. Dada praised the assistance provided under the U.S. - Brazil initiative and indicated that the GOES would like to continue cooperation. Dada noted that the GOES would like to diversify the country's energy matrix and reduce dependence on foreign oil, and ethanol could be very useful in this respect. According to Dada, the National Energy Council (CNE) will be responsible for formulating an overall energy policy, including biofuels. The Charge advised Dada that the U.S. is committed to continuing the biofuels initiative, but next steps in El Salvador depend on the GOES. ¶3. (U) Created in 2007, the CNE is headed by the Minister of Economy and includes the Ministers of Environment, Finance, and Public Works, the Technical Secretary (Presidency Chief of Cabinet) and the Director of the Consumer Protection Agency. MINEC Director of Energy Policy Luis Reyes will represent the Minister of Economy on the CNE. ¶4. (U) In a July 14 public event including the Charge, Dada, and OAS representatives, consultants from Energy and Security Group, Hart Energy Consulting, Arkel Sugar and Delta-T presented preliminary results of two recently completed feasibility studies. (NOTE. The Brazilian Charge didn't participate because he was ill. END NOTE.) Local press coverage focused on findings that El Salvador has the potential to be a regional leader in biofuels. The consultant groups also provided technical training on biofuels production June 13 to industry groups. ¶5. (SBU) Julio Arroyo, Director of the Sugar Association of El Salvador, told Econoff July 14 that sugar producers will not make the necessary investments for ethanol production without the GOES first mandating an e10 blend and/or providing financial incentives. ¶6. (SBU) COMMENT: So far, the CNE has been more conceptual than functional and has not convened a meeting since it was created. Moving the decision for biofuels to the CNE as part of an overall energy policy suggests a slow process, and the new GOES is unlikely to introduce an ethanol law in the near term. With high international sugar prices and relatively low gasoline prices now prevailing, the private sector does not have the incentive to move forward on ethanol production without the support of the GOES. END COMMENT. BLAU