Exports of ethanol from Brazil to the European Union are growing fast, up by 70 percent in the first half of 2007, compared to 2006. The growth comes in the face of tariff head winds that are even stronger in the EU than in the U.S. -- the EU levies a 19 eurocent-per-liter tariff, which, if my calculations are correct, comes out to almost twice the 54 cent-per-gallon charge in the U.S.
Imagining how fast export growth would be without any tariffs explains why the world's biggest agribusinesses are scrambling to get a piece of Brazil's ethanol industry. But this latter-day "Great Game" isn't proving to be smooth sailing, reports the Wall Street Journal on Monday. Some of Brazil's sugar cane barons, who've been in the same business for three centuries, are reluctant to sell out to foreign capital.
Tut tut, admonish the Journal's Antonio Regaladao and Grace Fan, who observe that Brazil's fragmented, inefficient and outmoded producers could use a strong dose of international know-how.
Big companies, which have better access to credit and capital, could also help consolidate, modernize and expand Brazil's ethanol industry.
In other words, Archer Daniels Midland and Cargill could speedily transform Brazil's sugar cane states into the equatorial equivalent of Iowa -- one big mechanized monoculture, running from horizon to horizon.
But there are some drawbacks. As currently constituted, Brazilian ethanol production depends upon the labor of poorly paid machete-wielding cane cutters. The reliance on what has been called "slave labor" could, says the Journal, "expose international companies to liabilities." For example, the international bank HSBC got some bad press over the summer when the news emerged that it had lent money to a sugar mill where federal officials, reports the Journal, had "'rescued' 1,108 workers laboring under 'degrading' circumstances that included 13-hour work days and poor sanitary conditions."
Liabilities? Really? How the World Works would like to hear more about the potential legal problems international agribusiness companies face for exploiting cheap labor in developing nations. Public relations setbacks are one thing, but as far as we know, cheap labor is the point of securing overseas sources of production for modern multinational corporations.
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