WorldCity Business Magazine

Ethanol: Fuel for a Hemispheric Partnership

by Thomas F. "Mack" McLarty and Jorge L. Arrizurieta

With the new Congress now at work in Washington, it’s time for a new bipartisan consensus on free trade with our southern neighbors. No commodity holds more promise for bridging the gaps than ethanol.

At the end of last year, lawmakers extended a 54-cent-a-gallon tariff on imported ethanol through January 2009.

The protectionist barrier is aimed primarily at Brazil though the truth is that, at the present time, there isn’t much ethanol supply to import anyway.But ethanol’s influence throughout the Western Hemisphere will be enormous soon enough extending far beyond its value as an energy source. A proactive, far-sighted U.S. ethanol policy could fuel greater hemispheric partnership not only strengthening energy security throughout the Americas, but bridging trade differences in Washington, building stronger relationships between the United States and its Latin neighbors, and helping poor nations boost their economies and build better lives for their people.

That is why we joined(then)Florida Governor Jeb Bush, Brazil’s former Minister of Agriculture and President of the Superior Council of Agrobusiness (FIESP) Roberto Rodrigues and Inter-American Development Bank President Luis Alberto Moreno in launching an organization called the Inter-American Ethanol Commission (IEC).

The Commission’s aim is to promote the production and consumption of ethanol in the Americas. It will serve as a clearinghouse for scientific and technical information on ethanol in the Americas, promote private sector investment by helping governments create a suitable business climate for the industry, use the fuel as a bridge to resolve trade differences throughout the hemisphere, and work with poor nations to develop ethanol as a source of energy to drive economic development.

The IEC will put into action Brazilian President Luiz Inacio Lula da Silva’s proposal for the U.S. and Brazil – the world’s leading ethanol producers to pool ethanol innovations and resources and assist other nations in addressing their energy deficits. In the process, our two nations will build goodwill as partners with an antidote to oil dependency and poverty.

Already, Colombia, Argentina, Costa Rica, El Salvador, Guatemala and Jamaica have made ethanol development a top priority. With U.S. and Brazilian technological know-how and investment capital, their plans for ethanol development could turn into realities.

The ethanol push comes at a time when economies throughout the hemisphere are growing. A recent report by the International Monetary Fund showed that real growth throughout Latin America and the Caribbean in the past three years is the “most vigorous” period of economic expansion since the 1970s.

But more can and should be done to ensure that growth is widespread across economic sectors and sustainable in the long term. Ethanol is uniquely positioned to create that self-grown commodity that can not only supply energy needs, but provide a stable export.

The U.S. will certainly be a strong partner in an ethanol alliance. According to estimates, the domestic ethanol industry is poised to produce a commendable 4.7 billion gallons this year, and industry experts predict producers will add at least 7.5 billion gallons to the nation’s energy supply by 2012. U.S. investors, including Bill Gates, are getting behind the effort as new ethanol plants are being planned across the American landscape and outside the Corn Belt from California to Florida.

But we should aim even higher.

(The Former) Governor Bush has called on the administration to double U.S. ethanol consumption goals to reach a target of 15 billion gallons by 2015, supplanting about 10 percent of our gasoline demand. Under the governor’s plan, called “15-by-15,” the U.S. would not only rely on homegrown ingenuity in bio-fuels development, but would look to other hemispheric nations as ethanol suppliers.

Already, some leading Congressional Democrats have called for greater ethanol consumption in the U.S., opening the door to imported ethanol, as the demand for a clean, renewable energy source escalates. And respected Republican Senator Richard Lugar has argued that “it makes strategic sense to import environmentally friendly ethanol from a reliable friend like Brazil,” pointing out that our nation’s Midwestern ethanol producers currently have little prospect “of marketing large volumes of their product on the east coast.”

By the time the ethanol tariff expires in January 2009, the U.S. ethanol industry will surely have been given sufficient time to gain its competitive footing. By then, if not before, we should remove from our tax code the glaring contradiction that treats imported oil as a tariff-free commodity, but severely penalizes the renewable source on which the U.S. is banking to reduce our energy dependency and which can be an important bridge to stronger partnerships within our hemisphere. WC

Thomas F. “Mack” McLarty III served as chief of staff and?special envoy to the Americas for President Bill Clinton and is president of Kissinger McLarty Associates, an international strategic advisory partnership.

Jorge L. Arrizurieta is chair of Akerman Senterfitt’s international policy group and served as U.S. alternate executive director of the Inter-American Development Bank and president of Florida FTAA.