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.