Brazil Min:Expect Japan July Ethanol Decision Brazilian Development, Industry and Foreign Trade Minister Luiz Fernando Furlan said he expects the Japanese government to confirm this summer the extent of its commitment to ethanol use.
Brazil Min:Expect Japan July Ethanol Decision
By James Simms
Of DOW JONES NEWSWIRES
TOKYO (Dow Jones)--Brazilian Development, Industry and Foreign Trade Minister Luiz Fernando Furlan said he expects the Japanese government to confirm this summer the extent of its commitment to ethanol use.
The prospects appear to be good for Japan to use sugar cane-based ethanol from the Latin American nation by 2010, as Tokyo is considering ways to reduce greenhouse gas emissions under the Kyoto Protocol. Japanese companies also have set up joint ventures with Brazilian state oil giant, Petrobras SA (PBR), to transport and market the fuel.
"They told us that they should decide - up to July of this year," Furlan told Dow Jones Newswires in a recent interview.
An aide added that after a Japanese trade mission to Brazil this summer, Brasilia "will know what direction they are moving" on whether or not to make an ethanol and gasoline blend mandatory in Japan, which currently allows up to a 3% ethanol mix.
Such a fuel would still produce carbon dioxide when burned in engines. But it's considered more environmentally friendly because carbon dioxide is absorbed from the atmosphere as the cane grows and allows users to accrue carbon credits that can be traded or used to offset other emissions.
A 3% blend, or E3, would allow Brazil to sell 1.8 billion liters of ethanol per year to Japan, Furlan said. That would be a majority of the country's 2.6-billion-liter export volume. However, its capacity is expected to reach 7 billion liters in four years because nearly 100 new production plants are under construction in the world's largest producer and exporter of ethanol, he said.
While one Japanese official said there isn't a groundswell of opinion to mandate ethanol use, the government is working on a test project on the southern island of Okinawa to grow sugar cane and manufacture E3 fuel as part of government efforts to replace 500,000 liters of oil with biomass fuels by 2010. Japan also is studying the feasibility of blending gasoline with an alternative additive: ethyl tertiary-butyl ether, or ETBE, which can be produced from ethanol and iso-butane gas.
Either way, however, Japan would need to import a huge volume of ethanol from Brazil.
The Brazilian minister also said that his country is in talks with the state-backed Japan Bank for International Cooperation regarding the funding of ethanol export infrastructure in his nation.
He noted that in Brazil, 77% of automobiles sold now can use an ethanol and gasoline mixture - more than triple from just a year ago. Ethanol accounts for 20% of the nation's fuel consumption, Furlan said, adding that that also helps the nation's trade balance at a time of $70-a-barrel oil.
Petrobras signed a new agreement Monday furthering ethanol export studies with Japanese trading company Mitsui & Co. (8031.TO). In March this year, Petrobras set up a joint venture with Nippon Alcohol Hanbai to export ethanol. The new company, Brazil-Japan Ethanol Co., serves as Petrobras' agency in Japan.
Meanwhile, in May 2005 Petrobras, Mitsui and Brazilian iron-ore giant Companhia Vale do Rio Doce (RIO) jointly signed an agreement to study ethanol logistics in Brazil.
Economic Outlook Strong Due To More Exports, Output
With domestic inflation tempering and despite some market concerns of a global rate tightening cycle, Furlan said he expects Brazilian interest rates to keep falling.
"The central bank will keep dropping interest rates," he said. "We'll probably begin next year at the level of 14%. I understand that we should target - at least have - one-digit, real-term interest rates."
The reference Selic base rate is currently 16.5% against inflation of 5.3%.
While a strong critic of high rates, Furlan said a Finance Ministry proposal to lower key import tariffs to lower inflation and stem the rise of the Brazilian currency, the real, isn't tenable now because it would give away bargaining chips in the Doha round of World Trade Organization talks.
The minister also reiterated that he believed that economic growth would be about 5% this year, a full point higher than he said a month earlier. Stronger industrial production data and a continued increase in exports and expansion in the trade surplus are bolstering growth, he noted.
Furlan arrived in Tokyo Sunday to discuss economic and energy issues with Japanese government and business officials, including trade and economy Toshihiro Nikai, who also handles energy issues. He departs for Brazil Thursday.
-By James Simms, Dow Jones Newswires; 813-5255-2929; james.simms@dowjones.com
-Edited by Tomoko Hosaka |
