Brazil & Argentina at war over biodiesel exports
Argentina and Brazil both have large soy industries which have looked to biodiesel production in recent times to boost revenues and expand their markets. Argentina's government has enthusiastically embraced the market for soy oil based biodiesel by implementing tax and trade incentives that effectively undercut the production costs of Brazil's producers. Current estimates put Argentinean biodiesel production costs at $0.22 per litre compared to $0.50 to produce the same fuel in Brazil. The Brazilian Vegetable Oils Industry Association, are hitting back by sending a trade envoy to Argentina to convince the Argentineans to scale back their policies. Chances are the Brazilian contingent won't meet with much success though because Argentina has clearly made the decision to become a major net biodiesel exporter.
A national biofuel law comes into affect in February in Argentina to promote biofuel exports by imposing a low export tax of five percent on biofuels such as soy-based biodiesel compared to the much higher export tax of 24 percent on crude soy oil. Argentina has its eye on the large biodiesel export markets of Europe and the U.S. but domestic demand is also guaranteed to grow via the Argentinean Biofuels Act which mandates a minimum of five percent biofuels blended into the nation's petrol and diesel fuels by 2010. Brazil has similar legislation in place requiring a minimum of two percent biofuels in domestic diesel fuel by 2008.
Analysis: Biofuels exports are allowing nations with large agricultural sectors to gain a share of the global energy market and the stakes are huge. Expect Brazil to eventually match the Argentinean tax breaks to ensure their farmers share the same opportunity to export biofuels to Europe and the U.S.
Related:
[Source: Cattle Network]
Reader Comments (Page 1 of 1)
Tim 10:49AM (3/30/2007)
It's about time that farmers, once the backbone of civilized man, can earn a good living again. I love a full circle.
Reply
Noz 12:40PM (3/30/2007)
This is going to get ugly real fast. This is going to be no different than oil today.
Reply
Howard Lee Harkness 1:37PM (3/30/2007)
In a larger context, this struggle illustrates a growing trend in the Information Age -- it's getting more difficult for governments to charge more for their services than they are worth to the recipients of those services. Embargoes, tariffs, import/export restrictions, and outright use of force are all attempts of a government to control the economic lives of its subjects (and to justify its own existence). The degree to which force is needed is a measure of the desperation of a government in the face of this growing difficulty. And in the long run, none of these measures is truly effective.
We are living in interesting times.
My prediction is that Brazil and Argentina will both lose in this one, because production of biodiesel is entirely too easy, and can be done by just about anybody with a half-million dollars worth of capital, nearly anywhere in the world. Their only hope is to somehow prevent tens of thousands of small companies all over the world from producing enough biodiesel for local use -- obviating the need for importing any of it. It's going to be tough to compete with local suppliers after considering transportation expenses.
Reply
Howard Lee Harkness 1:50PM (3/30/2007)
"It's about time that farmers, once the backbone of civilized man, can earn a good living again. I love a full circle." --Tim
Tim, there is no circle. Farming has always been a relatively tough way to make a living, and always will be. That's one reason most of US agriculture is run by megacorps. The ideal of the "Family Farm" is mostly Politically Correct wishful thinking. There aren't many left, and they are disappearing.
Reply