TRADE
Yet Brazil is laying the groundwork for more export. Japan appears to be a key emerging trading partner. Accentuating the relationship, Japan's Crown Prince Naruhito was scheduled to visit Brazil in June to boost trade ties. Brazil has the largest overseas Japanese community, an estimated 1.5 million. Sumner Growing global demand for alternative fuels will mean more Brazilian exports, predicts the research firm Fitch Ratings in New York City. Climate, geography and geology, cheap land, low labor costs and government incentives all give Brazilian ethanol an edge. More than half of Brazil’s sugarcane crop now goes to ethanol, and the balance may well continue to tip in that direction. Daniel A. Sumner, director of the Agricultural Issues Center at the University of California-Davis, thinks that Brazil has limited capacity to expand sugar production—but with prices high enough “there is certainly room to push out ethanol supply there,” says Sumner. As for importers, the United States is a prospect for growth, its protective tariff notwithstanding. California’s Low Carbon Fuel Standard takes effect in January 2010, just 18 months from now. Demand for low-carbon fuels will rise
dramatically in that state. “California will likely be the first battleground between domestic and foreign ethanol producers,” says Rahul Iyer, executive vice president at Primafuel Inc. of Long Beach, Calif.
Not So Far Apart Wherever the epicenter turns out to be, producing nations are laying the groundwork for more trade. Key players took an important step in February when the United States, European Union and Brazil released an analysis of quality and emissions standards—and found that they’re not so far apart. Eventual agreement on ethanol-quality standards is likely to mean lower costs for producers and shippers, who would no longer be required to meet a patchwork of specifications nation by nation and region by region. The joint analysis by the U.S. Commerce Department’s National Institute of Standards and Technology and corresponding agencies in Brazil and the EU showed nine of 16 ethanol specifications the governments reviewed are “in alignment” and all but one of the remaining specifications could be aligned short-term. The hard-to-align standard is water content.
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