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Cablegate: Itc Specialist Discusses Ethanol in Rio de Janeiro

VZCZCXRO1469
RR RUEHRG
DE RUEHRI #0322 3331123
ZNR UUUUU ZZH
R 281123Z NOV 08
FM AMCONSUL RIO DE JANEIRO
TO RUEHC/SECSTATE WASHDC 4707
INFO RUEHBR/AMEMBASSY BRASILIA 1033
RUEHSO/AMCONSUL SAO PAULO 5214
RUEHRG/AMCONSUL RECIFE 3481
RUCPDOC/USDOC WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS RIO DE JANEIRO 000322

SIPDIS

STATE FOR WHA/BSC, WHA/EPSC, EB/ESC

E.O. 12958: N/A
TAGS: ENRG ETRD BR
SUBJECT: ITC Specialist Discusses Ethanol in Rio de Janeiro

1. On October 21-22, International Trade Commission Trade
Specialist Douglass Newman, accompanied by Senior Pol/Econ
Specialist, visited Rio de Janeiro to meet with Brazilian contacts
on ethanol issues. Mr. Newman's focus is ethanol trade and
specifically CBI quota issues. Newmann also had meetings in Sao
Paulo and visited ethanol mills in the state of Vitoria.

2. Sandra Polonia Rios, trade specialist and consultant to Brazil's
National Confederation of Industries (CNI), discussed ethanol and
sustainability issues. Rios indicated that Andre Nassar, Director
General of the Institute for International Trade Negotiations
(ICONE), a Sao Paulo-based institute, had conducted several studies
on sustainability. ICONE has a representative on the Board of
Directors of the Institute for Responsible Agribusiness (ARES), a
think tank on agribusiness sustainability. Rios said that big
Brazilian multinational companies like giant mining company VALE and
poultry and pig producer SADIA are investing a great deal in
sustainability, not only because of trade but also because of their
own investments in "green funds" in the stock market. The pressure
for sustainability comes not only from international organizations
but also from domestic NGOs and the public opinion, she said.
However, these private sector initiatives may be jeopardized now
because of the recent global economic downturn. Rios indicated that
there probably would not be an agreement on sustainability at the
WTO because the WTO has been unable to resolve already existing
simpler issues. "Imagine a complex one like sustainability," she
offered.

3. Cynthia Maria Xavier, Manager of Ethanol Partnerships and
Marcelo Couto Moyses, Ethanol and Oxygenates Management of the
recently created Petrobras Biofuels (PB) subsidiary briefed Newman
on the company's activities and explained that PB's goal is to be
the leader in the national production of biodiesel and to increase
Petrobras' share of the ethanol supply market. The company wants to
develop technologies that will make it a world leader in the
production of biofuels, including raw materials from low value added
residual biomass. PB's total planned investment for 2008-2012 is
US$ 1.5 billion. For ethanol, PB wants to use a "tripartite model:"
an ethanol production company with 60% Brazilian ownership, 20% PB,
20% a foreign company. PB is currently negotiating an ethanol joint
venture with Conoco under this model and has already closed similar
deals with Japanese partners.

4. At the Brazilian National Agency for Petroleum, Natural Gas and
Biofuels (ANP), Newman met with Cristina Nascimento, Deputy
Superintendent for Biofuels and Product Quality; Luiz Fernando de
Souza Coelho, Supply Superintendent; Cristiane Andrade, Biofuels
Coordinator; and Eduardo da Silva Torres, Advisor to the
Superintendent of Biofuels and Product Quality. Nascimento
explained that ANP is the Brazilian federal government agency
responsible for the regulation of the energy sector, and monitors
and regulates the activities of the petroleum and ethanol
industries, in particular. Coelho discussed the ethanol blend, for
which the Ministry of Agriculture, not ANP, is responsible. He
explained changes in the blend. In the late 1970s, Brazil mandated
the blending of anhydrous ethanol with gasoline at levels varying
from 10 to 22 percent. In 2003, these limits were set at a minimum
of 20 percent and a maximum of 25 percent. Since July 2007, the
mandatory blend is 25 percent of anhydrous ethanol and 75 percent
gasoline.

5. After visiting Rio, International Trade Commission Trade
Specialist Douglass Newman did a presentation on U.S. Ethanol Policy
at the VIII Datagro International Conference on Sugar and Ethanol,
on October 28, 2008 in Sao Paulo.

MARTINEZ

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