VZCZCXYZ0000
OO RUEHWEB

DE RUEHAC #0005 0062127
ZNR UUUUU ZZH
O 062127Z JAN 09
FM AMEMBASSY ASUNCION
TO RUEHC/SECSTATE WASHDC IMMEDIATE 7500
INFO RUCNMER/MERCOSUR COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEBAAA/DOE WASHDC PRIORITY

UNCLAS ASUNCION 000005 
 
OPIC WASHDC PRIORITY 
 
SIPDIS 
 
STATE FOR WHA/BSC MDASCHBACH, WHA/EPSC FCORNEILE 
 
E.O. 12958: N/A 
TAGS: ECON PREL EAGR EPSC PA
SUBJECT: BOOSTING BIOFUELS IN PARAGUAY 
 
¶1. (SBU) SUMMARY: A public-private working group approached 
the Embassy December 23 to outline an ambitious plan to 
dramatically increase Paraguayan sugarcane-based ethanol 
production. They asserted a five-fold increase in five years 
is quite feasible, if more favorable access to the U.S. 
market were apparent to help offset high transport costs. 
Such plan to increase ethanol production by Paraguay -- 
already the world's fourth-largest soy producer -- could have 
a positive impact on President Lugo's job creation 
imperative, and on USG efforts to promote the use and 
production of multiple sources of renewable energy supplies. 
END SUMMARY. 
 
¶2. (SBU) A seemingly cohesive public-private working group on 
biofuels met the Charge and Econoff December 23 to discuss 
Paraguay's plans to grow the sector. Led by Vice Minister of 
Energy Carlos Buttner, officials from the Ministry of Foreign 
Affairs, the Ministry of Agriculture, the Ministry of 
Commerce and Industry, and key private sector representatives 
presented an ambitious plan to increase Paraguay's 
sugarcane-based ethanol production, and solicited support to 
gain duty-free market access to the U.S. 
 
¶3. (SBU) The participants stated there are currently 7 
ethanol-producing plants in Paraguay with a combined capacity 
of 120 million liters per year. Given domestic regulations 
that require on average a 24 percent ethanol-blend for 
gasoline, all of the current production is locally consumed. 
Production in 2008 reached 80 million liters, compared to 60 
million liters in 2007. The projection for 2009 is production 
of 90 million liters, and a local demand of roughly 100 
million liters. 
 
¶4. (SBU) Participants explained that Paraguay seeks to become 
a net exporter of sugar-based ethanol by 2013, and they see 
the U.S. as the main market. Two projects with a combined 
capacity of 50 million liters per year are expected to begin 
operations in 2010, and several existing plants are looking 
to expand capacity to a combined total of 470 million liters 
per year by 2013. The plan described by participants is that 
Paraguay reaches a capacity of 590 million liters per year by 
2013 to supply local demand (projected at 250 million liters) 
and export the difference. The total investment needs, mostly 
directed at the production plants, are estimated at about 500 
million USD. Private sector representatives remarked that 
they have been slow to invest because of uncertainty about 
market access opportunities. Participants claimed that 
Paraguay's enormous potential is constrained by high 
transport costs, and the current U.S. tariff structure prices 
them out of our market. They asserted that Paraguay by 2013 
could realistically export to the U.S. about 200 million 
liters, if more favorable market access conditions were 
provided. Participants indicated that Paraguay's position is 
in support of the diversification of ethanol-producing 
countries to make the fuel a common and widely available 
commodity -- a process referred to as "commoditization". They 
emphasized that over 80,000 new jobs in the ethanol 
production-chain would be the direct social benefit of being 
able to export to the U.S. 
 
¶5. (SBU) The Charge discussed USG initiatives that can 
support Paraguay's plans. He described the Overseas Private 
Investment Corporation (OPIC) initiative to support renewable 
energy projects, including biofuels, and the opportunities 
for technical exchanges outlined in the bilateral Memorandum 
of Understanding on biofuels, currently awaiting the setting 
of a date for signature by the Ministry of Foreign Relations. 
 
¶6. (SBU) COMMENT: The mixed public-private sector working 
group appeared organized, knowledgeable, and technically 
competent. In fact, several of the participants would make 
fine candidates for the country-specific International 
Visitor Leadership Program on biofuels planned for Paraguay 
in 2009. The private sector clearly is intent in scaling up 
production if market access opportunities are sufficient to 
offset high transport costs. Though ambitious, if the plan to 
boost Paraguay's ethanol production is carried out it would 
yield significant economic and social returns, particularly 
in the all important job creation imperative. Paraguay's plan 
and its expressed support for the "commoditization" of 
ethanol could also positively contribute to USG efforts to 
promote the use and production of renewable energy supplies 
by multiple sources. END COMMENT. 
 
Please visit us at     http://www.state.sgov.gov/p/wha/asuncion 
 
FITZPATRICK