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DE RUEHSO #0003/01 0041030
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P 041030Z JAN 08
FM AMCONSUL SAO PAULO
TO RUEHC/SECSTATE WASHDC PRIORITY 7798
INFO RUEHBR/AMEMBASSY BRASILIA 8941
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RUEHRC/USDA FAS WASHDC 0716

UNCLAS SECTION 01 OF 02 SAO PAULO 000003 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR WHA/BSC, WHA/EPSC, EEB/AMONSARRAT 
STATE PASS USTR FOR KATE DUCKWORTH 
STATE PASS FED BOARD OF GOVERNORS FOR ROBITAILLE 
STATE PASS EXIMBANK 
STATE PASS OPIC FOR DEMROSE, NRIVERA, CMERVENNE 
NSC FOR TOMASULO 
TREASURY FOR JHOEK 
USDOC FOR 4332/ITA/MAC/WH/OLAC 
USDOC ALSO FOR 3134/USFCS 
 
E.O. 12958: N/A 
TAGS: EAGR ENRG EFIN EINV ECON BR
SUBJECT: BIOFUELS ROUNDTABLE FOR A/S SULLIVAN IN SAO PAULO 
 
¶1.  SUMMARY: Assistant Secretary of State for the Bureau of 
Economic, Energy, and Business Affairs, Daniel Sullivan held a 
roundtable on biofuels developments on December 12 at the American 
Chamber of Commerce in Sao Paulo.  Biofuels interlocutors applauded 
the USG's progress on the U.S.-Brazil Memorandum of Understanding 
(MOU), but lamented that Brazil's private sector has been more 
active than the Brazilian government on many biofuels initiatives. 
The assembled group told A/S Sullivan that the number one roadblock 
to furthering worldwide ethanol expansion is the lack of information 
for industry and consumers especially in how to utilize and 
commoditize ethanol.  Post will continue working on ways to engage 
the private sector in advancing the MOU.  END SUMMARY. 
 
¶2.  Alfred Szwarc, an adviser to the Board of the Brazilian Sugar 
Cane Industry Union (UNICA), lamented that the U.S.-Brazil MOU had 
not moved more quickly, but noted that he thought both sides had 
made significant progress on standardization, as well as some 
efforts at establishing the framework for making ethanol a 
commodity.  [Note: UNICA is the leading sugarcane agribusiness 
association in Brazil with 100 members, representing 50 percent of 
the total production of sugar cane, sugar, and ethanol.  End Note.] 
Szwarc was part of a November scientific visit to the U.S. and 
commended both sides on developing an ongoing scientific exchange, 
but noted there should be further advancement on including third 
party countries into the process.  A/S Sullivan concurred that the 
most progress had been on issues where the two governments had a 
leading role and noted that public-private integration can 
potentially delay implementation, but underscored the importance of 
the private sector in expanding ethanol as a global commodity. 
 
¶3.  Commercial Manager for Coimex Trading Company Manfred Wefers 
outlined Coimex's role as a Brazilian logistics company specializing 
in logistics, imports, exports, and infrastructure development.  He 
briefed A/S Sullivan on Coimex's progress in building the world's 
largest private container terminal which will include a liquid 
terminal for ethanol storage at Santos, Brazil's largest port.  He 
also outlined Coimex's plan to build a U.S. port terminal for 
imports of ethanol either in Tampa, Savannah, or Jacksonville. 
Coimex is banking on the continued growth of ethanol consumption and 
sees the near absence of ethanol storage and filling containers in 
the U.S. Southeast as an opportunity.  Wefers stated that these 
facilities could receive ethanol at a competitive price from Jamaica 
and other Caribbean Basin Initiative countries where Coimex has 
production and dehydration facilities.  In Jamaica, Coimex has 
worked with the Jamaican government (GOJ) to promote the use of 
gasoline blending to include five percent ethanol, which he said the 
GOJ hopes to implement next year. 
 
¶4.  Plinio Nastari, President of Datagro Publications Ltd., gave a 
brief regional overview for A/S Sullivan.  He discussed his work in 
Central America to encourage production, noting that El Salvador has 
been very receptive, as well as some initial signs of interest in 
Honduras and Guatemala.  Sullivan highlighted that CAFTA countries 
exports of ethanol have increased by 400 percent because of the duty 
free access, and lauded El Salvador's efforts on implementing 
ethanol gasoline blending.  [Note: Datagro is recognized by many as 
the top industry newsletter for the sugar and ethanol sector in 
Brazil.  Nastari is also President of Plinio Nastari Consulting 
(PNCP), which provides consulting services to sugar mills, trading 
companies, and the Brazilian government.  End Note.] 
 
¶5.  Nastari urged A/S Sullivan to convey to Washington that the U.S. 
needs to signal to these countries the potential market for ethanol 
production.  He suggested three concrete ways the U.S. could help in 
developing an ethanol market.  First, he recommended the USG 
support, through USAID or World Bank, specific consulting projects 
that would put planned projects into action.  Secondly, he 
underscored the need for the USG to encourage private sector 
development of a liquid futures market for ethanol.  Finally, he 
urged A/S Sullivan to support the inclusion of ethanol as an 
 
SAO PAULO 00000003  002 OF 002 
 
 
environmentally friendly product within the WTO. 
 
¶6.  In response to A/S Sullivan's request to define the largest 
roadblock to furthering ethanol expansion, Nastari said the lack of 
information and insufficient marketing left consumers and industry 
unaware of some basic facts regarding ethanol.  As an example, he 
pointed out the fact that any car can use up to ten percent ethanol 
blend without any modifications to the engine.  He also noted many 
potential producing countries erroneously compare sugar cane prices 
to ethanol prices instead of molasses to ethanol when making 
investment decisions.  He noted molasses producers should be 
producing ethanol as well because the profit comparison for molasses 
and ethanol is much more advantageous for ethanol while with sugar 
it is not as advantageous. 
 
¶7.  Pedro Bentacourt from General Motors (GM) highlighted that in 
the last five years Brazilian sales of flex fuel cars totaled almost 
2.5 million cars.  He noted that GM Brazil's CEO is leading a 
subgroup within the industry to develop standardization and 
development of ethanol as a global commodity.  GM is very open to 
working with others, to the point of disclosing technology to 
improve market access, he said.  Bentacourt agreed with Nastari that 
the biggest roadblock in addition to developing infrastructure and 
industry standards is accurate and widespread access to information. 
 He said GM developed a campaign in the U.S. to encourage gas 
stations to expand capacity for ethanol pumps at its own expense, 
but the lack of infrastructure and understanding of the market is a 
big roadblock for them. 
 
¶8.  COMMENT: Ethanol industry interlocutors provided a frank 
discussion for A/S Sullivan outlining their concerns about delays in 
implementation of the MOU; however, they agreed with the Assistant 
Secretary that the bilateral initiative is moving more quickly than 
 
SIPDIS 
anticipated.  Their collective comments on the need to improve 
information and infrastructure in Brazil ring true.  Post will 
continue to engage the private and public sectors on biofuels issues 
and in advancing progress on the MOU.  END COMMENT. 
 
¶9.  This cable was coordinated with A/S Sullivan's delegation. 
 
WHITE