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Brazil May Expand Ethanol Production to Jamaica to Avoid US Tariffs

17 November 2005

Bloomberg. Brazil is considering the possibility of building ethanol plants in Jamaica to have access to the US market without being hit with a standard import duty.

Brazilian ethanol—made from sugar—costs less to produce and thus sells for less than US ethanol distilled form corn. Accordingly, the US taxes most imports of ethanol at $0.54 cents a gallon to protect US corn farmers and ethanol distillers.

There is a loophole in that tariff, however. Ethanol imported from Caribbean Basin Initiative (CBI) nations under the Caribbean Basin Trade Partnership Act is exempt from the duty. This is the same loophole that Cargill tried to leverage in 2004 by moving Brazilian ethanol through an intermediate plant in El Salvador. (Earlier post.)

Jamaica is a CBI nation.

According to the report, Brazil’s state development bank has offered to finance Coimex Trading Co., the largest Brazilian-owned commodities exporter, and Aracatu, a Brazilian sugar producer, to build the ethanol distillery and invest in the Caribbean island’s state-owned sugar industry.

On its part, Jamaica currently sells almost all its cane sugar for refining by Tate & Lyle Plc in London. Jamaican Agriculture Minister Roger Clarke said last year he was concerned that many of Jamaica’s 41,000 sugar workers will lose their jobs as a result of the European Union cutting prices for cane sugar from former colonies, as well as domestically produced beet sugar. Jamaica is a former colony of the UK.

“Jamaica has no intention of rolling over and dying because of the injustice done by the EU,” Derek Heaven, executive chairman of the Sugar Industry Authority of Jamaica, said by telephone from the capital, Kingston. “If the Brazilians show they are willing to invest in Jamaica, then Jamaica has absolutely no intention of rejecting this investment.”

One of the Brazilian companies said it “wants to take over” all five sugar mills of state-owned Sugar Company of Jamaica, which produces 65 percent of the island’s raw sugar, Heaven said in the interview, without saying which Brazilian company.

All of which may mean that Jamaica might indeed become a high-volume, low-cost exporter of ethanol to the US.

November 17, 2005 in Brazil, Ethanol | Permalink | Comments (9) | TrackBack (2)

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Mallory (a new poster) has the audacity to suggest our government is actually blocking the importation of clean, low cost ethanol. Now Mallory, are you suggesting our government is doing something really stupid or worse? Unfortunately for consumers, th... [Read More]

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Comments

Waay to go America for establishing such a "free trading" policy.

Nothing environmental here, just pure business sense. Tropical countries should really consider applying special tax to American oranges to protect local pineapple and banana, is it not?

Can you imaging a 100% import duty on ethanol from Brazil to protect the local OIL and FARMING industries in a country with serious OIL shortages. OIL and FARMER LOBBIES are way too strong. The next thing will be heavy import duties on CLEAN electricity to protect the local dirty COAL power plants. Even neighbours, with a free trade agreement, are treated with the same disregard and injustice.

If crude OIL imports were treated the same way as Brazilian Ethanol, the OIL import duty should be 100 ++% instead of zero %. Can you imaging what a $120 barrel for imported crude OIL, about 66% of all local consumption, would do to the price of gas?. In the long term, it may be an excellent solution to chase the gas guzzlers off the roads and favour the sale of more efficient cleaner vehicles and balance the trade and budget deficits.

I'm not sure why we're concerned. The country could easily consume all of the ethanol that Brazil can send us + what we produce domestically. As the oil market gets tighter I bet this tariff disappears.

By the way, the $0.54 cents a gallon tax on Brazilian ethanol will make them more expensive or same price compare to local one?

It varies, but the Brazilian ethanol should still end up being a few cents less expensive on the gallon. That's before transportation and other costs.

I'm for free trade and decreasing our reliance on oil. I don’t think its bad that a US tax subsidies are directed to create renewable sources within the US rather than for Brazilian producers. Brazil already heavily subsidies it’s ethanol production. What many forget is that Brazilian agricultural practices are generally unregulated mega multi national corporations defrosting lands at amazing rates. Developing US ethanol infrastructure will more quickly find efficiencies in energy balance and cellulose technology (corn stover, yard waist). That’s our Holy Grail.

i want the specifications or moderations to be done to a vehicle yo run it fully on ethanol

I think you should get a little more information on the subjects you are commenting. Brazilian government doesn't spend a single cent subsidizing ethanol since 1999.

Ethanol from Brazil should be duty free right now and ask Brazil to reduce the duty for agricultural equipment from US.
US produce the equipment and Brazil the Ethanol.
For a very simple reason Sugar Cane doenst grows in here in US as grows in a Tropical country as Brazil,
Also Brazil is 30 years advanced in Ethanol comparing to USA.

FOB in Brazil $1,66 / gallon
Freight $ 0.06/ gallon
Duty $ 0.54 / gallon

Total = $2.26/gallon
Delivery in any port of USA

Gas in many places right now is at $3.90/gallon

If USA cut the 0.54 we will have much more affordable fuel and much cleaner air

What is going on with our COUNTRY .

Why pay more for OIL

Why protect the farms, Corn should for food not for fuel

The volume of ETHANOL production in Brazil is enough to supply all Brazil, China and USA

And the good think is Sugar cane doesnt increase the FOOD price, Brazil has a lot of space and enough production of soy, corn, rice, beef also.

So why not DUTY free for ETHANOL since it helps everyone????


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