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Japan and Brazil Sign Biofuel Deal

Brazil's Ministry of Agriculture, Livestock, and Supply and the Japan Bank for International Cooperation (JBIC) signed, February 3, the first phase of a term of reference for the future implementation of a bilateral biofuel program aimed at exporting ethanol and biodiesel fuel to the Japanese market.

Between April and December, Brazilian and Japanese technical specialists will assemble a detailed picture of Brazil's agricultural production of energy sources and define strategies for the modernization of the sector and the expansion of fuel alcohol production in Brazil.

The use of biofuel is already a reality in various countries. In 2003 the Japanese government regulated a law that authorizes the mixture of up to 3% of alcohol with gasoline.

Now their interest has turned to financing long-term projects capable of increasing Brazilian production and guaranteeing the continuous and regular exportation of this product to Japan.

This will allow Brazil to accumulate exportable surpluses to supply the Japanese market, which, at the outset, already presents a demand of 1.8 billion liters per year.

Brazil current annual consumption amounts to approximately 13 billion liters of fuel alcohol, pure or mixed with gasoline. Japan is also interested in importing castor oil to produce biodiesel (a mixture of the oil with diesel derived from petroleum), which will start to be used in Brazil this year. The future bilateral agreement should also provide incentives to the production of biodiesel in Northeast Brazil.

Accoridng to the executive secretary of the Ministry, Luiz Carlos Guedes, the likely cooperation agreement will permit investments to expand the area of sugar cane plantation, install new refineries, and modernize the infrastructure for warehousing and transporting ethanol.

"This agreement would have extraordinary economic, social, and environmental significance and would strengthen the relationship between Brazil and Japan even more," he underlined.

The representatives of the Japanese bank did not reveal the amount of investments that could be made in Brazil in the biofuel sector.

According to the director of the institution, Toshitaka Takeuchi, Brazil is the bank's main partner in Latin America, with a portfolio of US$ 8 billion for investments in the areas of petroleum, sanitation, agriculture, and logistics, among others.

Takeuchi emphasized that the term of reference signed yesterday represents only the first phase of a strategic medium and long-term project.

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Translation: David Silberstein

Editorial Notes: Friday, 04 February 2005

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