But currently, fuel distributors get a subsidy when they add ethanol to gasoline. They use the subsidy to pay for the ethanol. If the tariff goes away, the subsidy/mandate goes away too and reduces demand for ethanol. So I'm not convinced there is any net advantage for Brazil.
Furthermore, you KNOW that Congress will only back down from this gradually. They may cut back on the scheduled mandate increase, slice a bit of the tariff/subsidy, and exempt the west coast (California hates the ethanol mandate), etc. But they'll be under great pressure to protect the existing investment in Midwest ethanol plants. McCain hates the ethanol subsidy/mandate, so maybe he can make a difference if elected.
Meanwhile the cost of Brazil's inputs for ethanol production, such as fertilizer and diesel, are sky-rocketing. Brazilians are threatening to nationalize the fertilizer industry over high costs. They want it both ways: government intervention at home, but free markets abroad. |
