Thursday, March 15, 2007


The following is my last comment to the concepts and proposals expressed by Mr. Oppenheimer in his “Memo to Bush” published by the Miami Herald on March 04.

Following on my second comment to your imaginary memo addressed to Mr. Bush let me further expand my thoughts about the proposals you include in that document.

Proposal # 1: …”The ''Hemispheric Bio-fuels Initiative'' that you are scheduled to announce in Brazil, under which the United States and Brazil will jointly develop ethanol production in Central America and the Caribbean, is a good start. It should help Caribbean Basin countries reduce their oil import bills and start exporting ethanol to the United States”….
The following questions are the first thing that came to my mind when I first read this proposal in your “Memo to Bush”.

Can you seriously believe that a person with long and ever increasing family ties to the oil industry would honestly advocate a policy to substitute oil for bio-fuels?

Do you really expect that the President’s close collaborators, all of whom come from high positions in the oil industry and most likely will return to work for the oil industry at the end of their tenure (Cheney, Rumsfeld, Rice, etc.) would support such a policy?

You really have to be naïve or an accomplice in a well thought scheme to undermine bio-fuels to believe that the above is even possible and, having said this, I can not help but to wonder which of the two better describes your position Mr. Oppenheimer.

While I will concede that the above mentioned questions raise doubts about Mr. Bush’s bio-fuels initiative based on a biased pre-judgment of his real intentions, the answer to the following question provides an un-avoidable and most objective conclusion.


Will the pompous “Bio-fuels Initiative” announced by Mr. Bush allow the United States to accomplish the national security imperative of becoming independent from foreign oil by advocating a strategy that makes it dependant from Latin American bio-fuels?
The answer is simple; NO! Latin Americans should therefore be weary of Mr. Bush and Mr. Oppenheimer intentions when they say otherwise.

Our interest indeed is quite the opposite. As eloquently put in a letter sent to president Bush by Sen. Chuck Grassley, an Iowan Republican and ranking member of the Senate Committee on Finance, …"I appreciate that increased consumption of ethanol in such countries might eventually benefit the U.S. ethanol industry and U.S. farmers; I fail to understand, however, why the United States would consider spending U.S. taxpayer dollars to encourage new ethanol production in other countries; production that could directly compete with U.S. produced ethanol."
In light of the above you do not need to be a genius to understand why we tax the import of Brazilian ethanol and are not willing to even discuss the option of eliminating those duties.

It makes more sense for us to spend our money subsidizing the development of our own technology for bio-fuels from crops and other sources that are available in the US.

Our land is not suited for sugar cane and therefore the Brazilian technology does not help us. Importing Brazilian bio-fuels could slow our own development in this field and potentially make us dependent from foreign bio-fuels.

We can not ignore though that Brazil is a major competitor in the ethanol production business and that the weather in Latin America, Central America and the Caribbean does favor the production of ethanol from sugar cane. Transforming sugar cane into ethanol is a more efficient and less expensive process than doing it from corn, which is what we do.

It would seem logical then to work together with Brazil to set the international specifications and standards for ethanol so that it can become a tradable commodity. Further, it is also logical for us to partner with the only other efficient technology available to produce ethanol before it starts spreading throughout the region. After all, in the next ten years South and Central America together with the Caribbean could very well be producing as much ethanol as Brazil and make the region the largest producer of ethanol in the world.

Stepping in early is the key to winning the ethanol game. In Wall Street, we call this “compassionate” strategy “cornering the market” and no one is better than us at it.

Will this benefit Latin America?

I do not know, but if I was a Latin American country I would certainly be with my eyes wide open. There are major issues that need to be addressed before you can answer this question. Issues, Mr. Bush is not addressing.

What land will be used for ethanol? Will it be current land being used for the production of food and/or value added food products? Will it be new land put into production at the expense of natural forests?

What water will be used? Will the use of water favor the inefficient irrigation of sugar cane over the efficient irrigation of vegetables, fruits and beans?

How much land should be dedicated to ethanol crops? Should the land used for ethanol crops be proportionate to the land used for the production of food?

Is the financing going to be available to local investors in each country? Will American companies be the owners of the land? Are Brazilians going to be the owners of the mills?

Will ethanol be used to reduce and if possible eliminate the oil dependency of the Latin American countries or will it be used to generate foreign currency?

Should it be currency, I am not sure it is in the best interest of Latin America to become an important supplier of bio-fuels to the US. We just destroyed a far away country and are looking to pick up a fight with another only because they have oil. Imagine what we would do in Latin America if we ever become dependant from their bio-fuels.

Further, I am not sure that the elitist model of the Brazilian ethanol revolution, which Mr. Bush and even Mr. Oppenheimer seem to feel comfortable with, is good for Latin America. Brazil is one of the largest producers of ethanol in the world but 70% of that production is controlled by 18 families and a few independent consortiums. Not exactly a model for wealth distribution.

Financing companies under professional management that eventually are forced to go public would seem like a much better alternative and would certainly allow for a better distribution of the ethanol wealth. Publicly traded companies would also provide Latin American pension funds with valuable titles to invest on through their local stock markets.

I believe there is a need for a comprehensive “energy initiative” in Latin America that makes the region self sufficient and guarantees them adequate conditions for long term economic development. I also believe that this initiative should be far reaching and include clear policies that deal with the questions herein mentioned. Further, I believe we should participate and support this “energy initiative” because it is in our best interest for Latin America to develop.

The question is though; Is this what president Bush has in mind? I don’t think so!

No comments: