In our edition of February 11, we carried a report on a proposal made by Biocapital, Brazil's second largest producer of bio-diesel, to invest US$300 million in an ethanol project here. The investors, it said, were interested in a joint partnership venture with the Guyana Sugar Corporation, and had already had preliminary talks with the company and were now awaiting word from the Guyana government on the proposal. Ethanol is seen as an alternative to the fossil fuels contributing to global warming, and the Brazilians are the largest producers of ethanol from sugar cane in the world, using 20 to 25% of ethanol in all the fuel they consume.
Brazil's proposal would involve the acquisition of 50,000 hectares of land in Region 6, and the setting up of a distillery, and our report stated that the project would complement development plans for ethanol production from sugar cane in the State of Roraima situated on the other side of the Takutu River. Brazilian interest in the project was connected to what Brazilian Ambassador Arthur VC Meyer called Guyana's "competititve advantages," a reference to the US market where this country would benefit from preferential quotas under Caribbean Basin arrangements. Brazil's ethanol exports to the US, in contrast, are subject to high tariffs.
More than a month later on March 18, we reported that Biocapital was still awaiting detailed information on policies and practices from the Guyana Office for Investment (Go-Invest) in order to proceed further with their proposed investment. They had met various officials of the Government of Guyana when they were in the country last November, and they had also met with Prime Minister Sam Hinds when he was in Brazil for the last Mercosur meeting, but as of last month, they still had heard nothing further.
In the meantime, of course, ethanol has made an entrance onto the geopolitical stage with dramatic effect. The Americans, previously lukewarm on the subject, have now alighted on it as a possible weapon against President Chávez's oil diplomacy. Last month, President Luiz Inácio Lula da Silva of Brazil met President Bush in the White House to discuss support for sugar-based ethanol projects in Central America and the Caribbean. The two nations they represent are the largest ethanol producers in the world, although US ethanol comes from corn and not sugar cane, which as Andres Oppenheimer points out in his column today (see page 7) is more expensive to produce than the sugar-based version, and more harmful to the environment.
President Chávez, of course, has not been slow to grasp the implications of the possible new ethanol alliance; it represents a direct threat to his increasing influence in the region through the agency of PetroCaribe, and gives the White House a potential new lease of life south of the Mexican border. He had previously been a strong supporter of bio-fuels and had promulgated a scheme to place 700,000 acres in Venezuela under sugar cane cultivation for the purposes of ethanol production. Only in August last year the Venezuelan state oil company PdVSA had signed an agreement with its Brazilian counterpart to produce ethanol and it was also envisaged there would be Cuban participation in the project at the level of technical support.
But now Mr Chavez has done a volte face. The first indication of his new approach came during his visit to Jamaica, when he said there were "ethical" reasons to oppose ethanol. Since then his close ally, President Castro of Cuba, clearly now much recovered, has written two commentaries published in the state paper Granma attacking Mr Bush's ethanol proposals. He was careful to avoid any remarks about Brazil, confining his verbal assault to the corn-based ethanol produced by the United States. The Miami Herald reported him as writing with his customary theatrical flourish that the US President was condemning more than three billion people "to premature death" by converting "food into fuel." However, he came close to Brazil when according to the daily he went on to comment that the production in Cuba of alcohol from sugar cane was "no more than a dream or a delirium."
President Chávez - no slouch himself in the drama department - was reported by the Miami Herald as telling Jamaicans that filling a vehicle's tank with ethanol means filling it "with energy for which land and water enough to feed seven people have been used." As such, the land would not be utilized to feed poor people, but to fill "rich people's cars." So now, it seems, Venezuela's original grand plan for 700,000 acres under sugar cane has been reduced to 250,000 acres. According to Venezuela's Minister of Agriculture, the revised proposal was to produce ethanol as a fuel additive, but not as an alternative to petrol.
That all of this had more to do with geopolitics than food security was suggested by the Miami Herald's report that Nicaraguan President Daniel Ortega, who had been scheduled to visit Brazil about a fortnight ago in relation to a possible ethanol agreement, had cancelled the trip at the last minute. Apparently the official reason given was that there was a mechanical problem with his plane. It surely was not the most convincing excuse the Brazilians must have heard in their long years in South American diplomacy.
President Chávez, of course, is anxious to convince the Brazilian President of the "error of his ways" - to use the words of the Miami Herald. He will fail, of course, although that will not mean that there will be any hiatus between the two for the moment. However, the seeds of a deviation in approach - which eventually could have wider ramifications - have already been sown, and depending partly on Washington's capacity for flexibility, we may be seeing the germ of new trends on the South American continent.
And as for Guyana, one must presume that given President Chávez's attempt to integrate the region using oil as his chosen instrument, a Brazilian ethanol intervention which would make this country less dependent on Caracas and by extension chip away at the Bolivarian dream would not be well received on the western side of the Amakura. From Guyana's point of view, however, a proposal which would allow us to reduce our fuel import bill substantially, feed the national grid, re-invigorate our sugar industry, make us less dependent on a neighbour illegally claiming five-eighths of our land, and permit us greater diplomatic manoeuvrability constitutes an offer which should not be refused. As such, therefore, one can only ask why in heavens name the government is dilly-dallying.