Biofuels, and specifically ethanol, have a mixed history in Latin America. Countries like Venezuela and Cuba have been outspoken in their opposition to biofuels because they often require the use of raw materials used for food, including sugarcane and corn. It is not just the use of foodstuffs that is objectionable to these countries but the impact of the increased demand for these products on global commodity prices.

 

Some countries like Mexico, Argentina, and Peru have openly supported biofuels but have not made development of ethanol and biodiesel a high priority. Argentina has developed a small soy-based biodiesel industry, while Peru has been experimenting with jatropha, a drought-resistant plant found in Peru's deserts, to produce ethanol. The Mexican Congress approved a bioenergy law in 2007 that promotes development of ethanol with corn, sugarcane, and celluloid plants.

 

The two countries in the region that have made the strongest commitment to developing biofuels are Brazil and Colombia. Both countries view ethanol as a means to reduce greenhouse gas emission and create energy security.

 

Brazil built its ethanol industry in 1973 in response to the energy crisis that year. Ethanol production surged under former President Luiz Inácio Lula da Silva, primarily as an effort to create fuel for Brazil's new flex-fuel vehicles. In Colombia, former President Alvaro Úribe's administration made a big push to develop ethanol production, partly to take advantage of the country's ample supply of sugarcane and to boost the supply of cleaner gasoline on the domestic market.

 

While the two South American countries claim great success in developing a biofuel industry, they are also facing many challenges and criticisms. In Brazil, sugarcane supplies are no longer adequate to meet the growing demand for ethanol, and many cane producers would rather channel their output into sugar production. As a result, the price of ethanol has risen, prompting President Dilma Rousseff's administration to take steps to regulate the market. Read more...   

 

For the past four decades, Brazil has moved to replace petroleum with highly efficient sugarcane-based ethanol, primarily to protect against recurring global oil crises and address concerns about the effect of greenhouse-gas emissions on the environment. Despite the immense promise of the ethanol industry, however, Brazilian drivers who choose to fill their tanks with the biofuel continue to face uncertain supplies and unstable prices.

 

Even before being sworn in on Jan. 1, 2011, Brazil's President-elect Dilma Rousseff met with her agriculture minister-designate Wagner Rossi to request that he confer with ethanol producers to inform them how dissatisfied the government was with the high prices of the product at the pumps. At that time, Rossi said Rousseff wanted him to express that the government was worried about producers' inability to keep prices stable."

 

The new president's dissatisfaction with the ethanol pricing structure is likely to trigger yet another change in the industry's long history in a country that is also the world's largest sugar producer.

 

Ethanol industry created in response to 1973 oil crisis

After the first oil crisis in 1973, the Brazilian military government moved to reduce the country's dependence on imported Middle Eastern petroleum. Government agencies started investing in technologies to produce alcohol as fuel, and in 1975 the Proálcool (Programa Nacional do Álcool) was implemented.  Read more...    

 

In what President Felipe Calderón's administration is calling a historic move, the state-run oil company PEMEX awarded its first-ever contracts to foreign and Mexican private companies to conduct oil exploration and extraction activities in the Carrizo, Magallanes, and Santuario fields in Tabasco state. The move to bring in private investors to primary activities was made possible by reforms the Congress approved in 2008 to overhaul PEMEX . But critics are suggesting that the contracts go beyond what is allowed under the 2008 changes and therefore violate the Mexican Constitution.

 

Even though PEMEX is venturing into new territory by offering contracts for extracting crude oil, there are precedents for the oil company to hire private companies for primary activities. During the administration of former President Vicente Fox, PEMEX awarded multiple-services contracts to private consortia to explore for natural gas in the Burgos Basin in northeastern.

 

The newly approved exploration and extraction contracts are built on incentives, with private companies risking their own capital for exploring and constructing infrastructure. Any oil that is extracted is sold exclusively to PEMEX at a price established during the bidding process. 

 

The new contracts involve some of PEMEX's smaller crude-oil fields, representing only about 1.5% of Mexico's proven reserves. The company said it plans to open up much larger projects, including exploring for deep-water reserves, sometime in 2012 or 2013. There has been no direct mention of opening bids for the Cantarell and Ku Maloob Zaap fields, which together account for more than half of Mexico's crude-oil reserves. Read more...