Food and fuel: Brazil breaks new records

Earlier this year Brazil announced that 85% of the new cars sold in 2007 in that country were flex-fuel. That brought the total number of flex-fuel cars in Brazilian roads to over 50%. Last month, the Brazilian Association of Car Dealers issued its March 08 sales numbers: sales of flex-fuel cars increased by 26.7% compared to the same month last year.

Of course, in order to support this great demand of flex-fuel cars, there must be a high-volume production of ethanol. Not just that, but an increasing volume land used for sugar-cane production. Indeed, this is what happened: consumption of ethanol increased from about 3.5 billion gallons in 2006 to 4.4 billion gallons in 2007. The projected volume for 2008 is 6.4 billion, with exports of ethanol decreasing due to increased internal demand.

Is all this coming at the expense of food production? That's not what the numbers say in Brazil. The figures just released today show that Brazil is moving towards a record-breaking year in crops production, with a 7.8% increase over last year, propelled not just by soybean and corn, but also rice, beans and wheat.

Sugar-cane production in Brazil takes up only about 1% of the total arable land in the country, comprised of close to 750 million acres. It is worth noting that about 17% of this total is "land in rest" to restore fertility for crop production.

So, there's plenty of room for both land for food and land for fuel. When asked last week about the world food crisis, the Brazilian President Lula said: "of course this is bad, because there's a lot of hungry people, but I think it's good news for Brazil, because we can plant and export more food".

Now that it is clear that land for fuel has nothing to do with the food crisis, our leaders need to follow Brazil's example, as it can have a huge impact in in world's politics and economy:

a) By increasing the production of flex-fuel cars, demand for gasoline should decrease, and therefore oil prices should decrease;
b) Oil will stop being a strategic commodity, and therefore the political clout of oil-rich countries should decrease, leading to greater geo-political stability;
c) With oil prices going down, world economy can only gain, as a major component of overall production and transportation costs is energy

Brazil has a long history with ethanol - over 30 years - and during this period we certainly saw the country reaching a new status in world's economy. This should tell us something.