Lula Enters the Inner Sanctum
In the world of unwritten rules, when it comes to conveying interest, closeness or ranking, the president of the United States has Camp David. An invitation for an official visit sends a clear message, one that does not go unnoticed. In this case, Brazil is in. The South American country, the "B" in the emerging economies of BRIC (Brazil, Russia, India and China), has long expressed its ambition to play an influential role in the world, and is increasingly doing so, for many good reasons. The White House's nod only confirms what many have already been noticing.
The invitation to Brazilian President Luis Inazio Lula Da Silva following U.S. President George W. Bush's visit to Sao Paulo a few weeks ago, is an honour that hasn't been bestowed on a Latin American president since 1991, when Bush Senior hosted Mexico's then-president Carlos Salinas de Gortari.
The U.S.-Brazil agenda is centered on two main issues: alternative fuel–ethanol–and the DOHA round at the World Trade Organization. On both issues each country has its own interests and point of view, but beyond the divergences, they understand the need for each other as interlocutors and the benefits from working together.
Not all Ethanol is Created Equal
Brazil is self-sufficient when it comes to oil, and 40 per cent of its gasoline consumption has been replaced by ethanol. The U.S. is a confessed oil-addict, and even the most ambitious ethanol program would have very little impact over the next decade. But both countries see the potential in turning ethanol–and later on, other bio-fuels–into globally-traded commodities, and many agree. India, China, South Africa and the European Union have all joined Brazil and the U.S. in launching the International Forum on Bio-fuels.
Both countries account for 70 per cent of the world's production of ethanol. Brazil's comes from sugarcane, whereas the Americans make it from corn, a process that is more costly and less efficient. The U.S. has a very powerful corn producers' lobby, and this sector is heavily subsidized. Brazil's is a competitive industry, though in need of new technological breakthroughs and an improvement in the country's infrastructure. The U.S. protectionist policies inflate corn prices–an effect bound to worsen, along with the growing demand. Brazil wants the U.S. to drop its tariff barriers for imported ethanol, a call that has so far been refused.
The rationale behind the drive for ethanol stems from varying concerns: from fossil-fuel dependence to global warming. And as with all initiatives, this one is not short on critics. In his bombastic style, Cuba's Fidel Castro wrote in an op-ed last week in Granma that 3 billion people will be sentenced to an early death through starvation, as food will be used to run cars. Others have been more subtle, pointing to the impact of the U.S. insistence on corn-based ethanol for technology development and resource allocation. Aside from debating the economic rationale, others have called into question the environmental virtues of ethanol. These are really nuanced issues demanding well-informed discussions, beyond sound bites and rhetoric.
In an op-ed of his own for the Washington Post, Mr. Lula explained why sugarcane production does not threaten either the tropical rain forest or food production. He argued how the Amazonian soil is not suitable, and provided arable land figures to make his case. But President Lula summarises his main argument by pointing out "the real challenge in providing food security lies in overcoming the poverty of those who regularly go hungry."
Fuelling Development Opportunities
It is in this context that the world strategy for promoting crop growth for bio-fuels seems to make more sense. Rather than approaching the issue as food being displaced by fuels, it is the development potential of viable agro industries what should be considered. The U.S.-Brazil agreement signed during Bush's visit opens the possibilities of partnerships with other countries of the hemisphere. Some Central American and Caribbean nations have already met this initiative with excitement. Although expected, an announcement of the partnerships didn't come out of Camp David.
This creation of opportunities for agricultural development in other countries based on the bio-fuels potential should come hand-in-hand with the open access to markets and the end of the unfair competition represented by the subsidies to farmers in the developed world. And this was the second issue on the Lula-Bush agenda.
The WTO Doha round has been stalled for quite some time now and needs to be revamped if there is to be any hope of successful conclusion. The key obstacle has been agriculture subsidies. The U.S. and Brazil have already locked heads on this issue, but if both are willing to show some flexibility and play a leadership role, chances are the Doha round could move forward. On the side of the rich countries, the U.S. would have to persuade Europe–and Canada–to go along with a reduction of subsidies, and on the side of the G20, Brazil could assert its leadership, whilst making some concessions on the opening of its services and industrial sectors.
Naturally, there is much more on the table for Brazil and the U.S. than the energy and trade agendas. By signalling that Brazil is in, yet respecting the differences in opinions, the U.S. reiterates its new approach to Latin America, aimed at building some much needed credibility. Equally, by continuing to be a rational interlocutor with an independent mind, and a reliable partner committed to openness and democracy, Brazil moves closer toward the coveted world-player status it so desires.
Vladimir Torres is an Ottawa-based Latin American affairs analyst.
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