Author: Peter Baker

Source: Washington Post 

President Bush announced a new energy partnership with Brazil on Friday to promote wider production of ethanol throughout the region as an alternative to oil, the first step in an effort to strengthen economic and political alliances in Latin America. 

The agreement, reached as Bush kicked off a six-day tour of the region, was crafted to expand research, share technology, stimulate new investment and develop common international standards for biofuels. The United States and Brazil, which make 70 percent of the world's ethanol, will team up to encourage other nations to produce and consume alternative fuels, starting in Central America and the Caribbean.

The new alliance could serve not only to help meet Bush's promise to reduce U.S. gasoline consumption but also to diminish the influence of Venezuelan President Hugo Chávez, the fiery leftist who has used his country's vast oil reserves to build support among neighbors. Analysts have called it the beginning of a new OPEC-style cartel for ethanol makers, a characterization U.S. officials dispute because they say they want to expand, not control, production.

"It's in the interest of the United States that there be a prosperous neighborhood," Bush said during a hard-hat tour of a fuel depot here with Brazilian President Luiz Inacio Lula da Silva. "And one way to help spread prosperity in Central America is for them to become energy producers, not become -- not remain dependent on others for their energy sources."

Lula, pointing to economic and environmental benefits of ethanol, said the alliance marks "a new moment for the global car industry, a new moment for fuel in general in the world and possibly a new moment for humanity."

But ethanol politics are complicated at home and abroad. Under pressure from farm-state lawmakers in the United States, Bush on Friday refused to discuss Lula's desire to reduce a 54 percent tariff on imported Brazilian sugar-cane ethanol, which protects domestic corn-based ethanol producers. That led to charges of double standards, given the Bush administration's longtime advocacy of free trade.

The emphasis on ethanol has also drawn criticism from environmentalists and others who complain that it will create more problems. Because the United States makes ethanol from corn, it has already caused price increases, for example, for tortillas in Mexico. Brazil makes ethanol from sugar cane, and critics say increased production would result in further deforestation of the Amazon.

Greenpeace issued a statement saying that limits on carbon emissions, which Bush opposes, would be a better way to reduce greenhouse gases blamed for global warming. "The U.S. government must take a giant leap forward quickly in order to make the necessary steps to combat global warming," said John Coequyt, an energy specialist with Greenpeace. "An aggressive focus on ethanol, without a federally mandated cap on emissions, is simply a leap sideways."

Some specialists, though, said the deal could have a significant impact on energy.

"This is the first effort to jump-start a Western Hemisphere ethanol market, involving both trade and local development, which would reduce the pressure of high oil prices on the balance of payments of countries in the region," said Dan Yergin of Cambridge Energy Research Associates. "It also represents the fact that Brazil is moving to the fore as an energy leader, along with Venezuela, in the region."

But analysts expressed skepticism that Bush would be able to wean Latin Americans away from Chávez. "Bush may be aiming at Chávez with his 'ethanol diplomacy,' but Lula clearly is not," said Mark Weisbrot, co-director of the Center for Economic and Policy Research in Washington. "He is happy to have good commercial relations with the United States and expand these in any area, but he has made it clear that he is not going to downgrade his good relations with Venezuela."

The ethanol pact came as Bush sought to renew U.S. commitments to a region estranged from the United States. The president appeared irritated when a Brazilian journalist asked during a brief news conference what he was doing to "make up for the losses" in relations with the region.

"I strongly disagree with your description of U.S. foreign policy," Bush replied. "That may be what people say, but it's certainly not what the facts bear out."

The president repeated his assertion that he has doubled direct foreign assistance to Latin America to $1.6 billion since 2001, without mentioning that his latest budget actually proposes cutting that aid to $1.47 billion. Moreover, analysts question his math, saying he is using a false comparison to exaggerate increases in aid.

Rogerio Schmitt, a political analyst here, said Lula hoped to use the meeting with Bush to project himself as an alternative to Chávez, able to enter partnerships with leaders of all ideological leanings. Whether the United States would equally benefit by being seen as an alternative to Chávez is another matter, he said. "Most people in Brazil see Chávez as a lunatic, a fool," Schmitt said. "But his popularity here is still probably higher than President Bush's."

The ethanol alliance follows Bush's pledge to reduce the projected use of gasoline in the United States by 20 percent over the next 10 years.

Brazil, a pioneer in biofuel technology since the 1970s, has become the world's largest exporter of ethanol and reinvented its own economy as a result. About 40 percent of Brazil's non-diesel gasoline consumption has been replaced by ethanol, and more than 70 percent of the cars and trucks now sold in Brazil are flex-fuel vehicles that consume either gasoline or ethanol.