p

Stepping in front of cameras at Camp David last month with Brazilian President Luiz Inacio Lula da Silva, George W. Bush was ringingly clear on the biofuel issue.

"Not only are we committed domestically to promoting an alternative fuel industry, we're committed to working with Brazil," he said. "And that's why we support (President Lula's) initiative on the international biofuels forum."

Yet, like most issues involving the region, the reality tends to be much more complicated than appearances on the surface. Alvaro Vargas Llosa, director of The Center on Global Prosperity at the Independent Institute in Washington, pointed out there is a 'huge disconnect' between the goals of the Brazil/US alliance on the biofuels issue and the realities of the current US trade polices.

In a nutshell, the idea is that if various Latin American countries that benefit from Venezuela's oil subsidies turn to biofuels, the influence of Hugo Chavez will be eroded in the region.

"The idea is to encourage Brazil to export its technology to those countries and help them build distilleries for ethanol production," he wrote. "But there is a hitch: Due to various preferential trading arrangements, Caribbean and Central American countries don't face the tariffs that currently hurt Brazilian exports to the U.S."

While the concerns with biodiesel are thorny enough, the problems with the centerpiece of the "memorandum of understanding" signed on the issue in Sao Paulo last month, ethanol, are positively Gordian.

The sticking point there is the current U.S. tariff of 54 cents per gallon on foreign ethanol that Bush has made clear is not going to change anytime soon. A big reason for that is sugar.

As the Bush administration races to finalize various free-trade agreements across South and Central America before the presidential elections next year, it is unlikely to take the chance to rankle the Democratic-controlled Congress to do so.

A good example is the pending free trade agreement with Peru where many groups associated with the U.S. sugar industry view the treaty as one more threat to their livelihood. The U.S. currently has broad quotas on the import of sugar that make the import of the product for refining an impossibility. And removing those restrictions will be difficult.

According to the Sugar Alliance, a national advocacy group, those restrictions help ensure the stability of an industry that is responsible for the direct and indirect employment of more than 146,000 Americans in 19 states -- including approximately 61,000 direct full-time jobs.

So although sugarcane ethanol produced in Brazil is more than three times more efficient than corn-based ethanol produced in the U.S. there is little likelihood either will gain access to these shores anytime soon.

But the issues become even murkier in light of the U.S subsidies designed to encourage the use of alternative fuels. Currently, U.S. law subsidizes ethanol production at 51 cents per gallon and production of other so-called biofuels at up to $1 per gallon. Those incentives tempt farmers to sell crops to biofuel distilleries or, if they instead sell to food manufacturers, to demand higher prices than they otherwise would.

The net gain of all this? The replacement of only about 3 percent of the US oil consumption.

It's a point that makes countries on the other end of this issue somewhat resentful, as Lula made clear in his own statements during the the Camp David press conference.

"It is necessary to eliminate the trade barriers to ethanol, so that we can really reach a true energy commodity," he said "I dream that, at the most, 15 to 20 years from now, that the world will surrender to the biofuels."

That scenario plays to the fears of other groups as well. According to the Earth Policy Institute in Washington, D.C., one-fifth of corn and almost one sixth of the U.S. grain harvest overall goes toward ethanol production. Their concern is that an explosive growth in the ethanol industry could drive up food prices in countries that are struggling to feed huge swaths of the population living in impoverishment.

If nothing else, the Brazil/US alliance prompted a fiery retort by Chavez's close ally, Fidel Castro. In an article that appeared in Granma, Cuba's official newspaper, he likened the US policy as "the internationalization of genocide."

Dozens of nations do not have oil and cannot produce corn or other grains to make ethanol because they lack water, he said. The surge in demand for corn will push up grain prices, while the threat of a U.S. invasion of Iran is keeping oil prices high, Castro wrote.

While the heat of the rhetoric may seem excessive, the point of Castro's statements ring true to many who otherwise may not have much in common with is particular political view.