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Farmers' Hopes Sprout as Brazil Bets on Biodiesel

The country mandates use of the renewable fuel, with an eye toward helping small growers.

September 19, 2006|Marla Dickerson | Times Staff Writer

PORTO NACIONAL, Brazil — For the better part of his 64 years, Sebastian Luis de Sousa has scratched out a meager living in the paprika-red soil of central Brazil.

So when offered a chance to grow castor beans to produce an alternative fuel called biodiesel, the rawboned father of nine reckoned he had nothing to lose. The $200 he earned this summer from his tiny harvest wasn't much. But rising demand for renewable fuels has De Sousa wanting to expand his 7 1/2 -acre farm.

"I want to buy more land," he said, rolling a prickly castor bean seedpod in his calloused palm. "This is an important thing that Brazil is doing."

Already the world's largest producer of ethanol, Brazil is now betting on biodiesel, with an eye to helping small farmers like De Sousa capitalize on what some see as the next big thing in green energy. Derived from animal fats or vegetable oils, this substitute for petroleum diesel is generating ten of millions of dollars from investors.

Major companies, including U.S. agribusiness behemoth Archer Daniels Midland Co., are building production plants, encouraged by a federal mandate requiring every liter of diesel fuel sold in Brazil to contain 2% biodiesel by 2008, rising to 5% by 2013.

Brazil's state-owned petroleum giant, Petrobras, is already selling a fuel blend with 2% biodiesel at hundreds of its retail gas stations. The company is investing in manufacturing facilities. It is also patenting a fuel known as H-Bio that it says will save millions of barrels of oil by using vegetable oil in the refining process to create a low-polluting petroleum diesel.

Even McDonald's Corp. has collaborated with Brazilian researchers looking to power vehicles with recycled French fry grease from its restaurants.

The involvement of big players is crucial if Brazil hopes to reach its goal of embracing biodiesel on a massive scale. Current production is modest but is projected to jump to 840 million liters by 2008, which would put Brazil among the world's large producers. Still, officials aim to involve more subsistence farmers such as De Sousa, who have yet to profit from the nation's biofuel bonanza.

No country has been more successful at displacing fossil fuels with green energy than Brazil. Hammered by the oil shocks of the 1970s, the nation committed itself to developing a domestic ethanol industry to reduce its dependence on imported petroleum.

Today, 40% of the fuel that powers passenger cars here is made from homegrown sugar cane. That's been a boon for Brazilian agriculture. But the economic fruits have been reaped by a small number of large farmers growing a single crop.

With biodiesel, officials see a chance to spread the wealth from a fast-growing fuel whose demand in Brazil could top that of ethanol.

At present, petroleum diesel accounts for more than half of all the vehicle fuel consumed in Brazil, about 42 billion liters a year, thanks to the country's heavy dependence on truck and bus transport.

By promoting a cleaner-burning alternative made from Brazilian-grown castor beans, soybeans, palm oil and other crops, the government hopes to slash diesel imports and improve air quality in its cities, as well as generate rural income and employment.

President Luiz Inacio Lula da Silva, who is running for reelection, has touted biodiesel production as a way to spark development in some of the poorest regions of the country, particularly the rural northeast.

Biodiesel producers who want to qualify for hefty tax breaks must purchase 10% to 50% of their raw materials from small growers, depending on the region.

That requirement is how farmer De Sousa got connected with a firm called Brasil Ecodiesel, which provided him with seed and technical advice in addition to purchasing his crop of castor beans.

Rodrigo Augusto Rodrigues, the government's biodiesel coordinator, said the effort could eventually involve 360,000 family farms nationwide, up from about 2,500 at present. He said the varied crops provided by small growers would keep the farmers on the land and provide them a reliable stream of income.

"We don't want to repeat the same mistakes we made with ethanol," Rodrigues said. "The social aspect is critical."

But some energy experts are dubious that peasant farmers toiling on tiny plots will be more than bit players. Large-scale cultivation and ruthless efficiency were crucial to the nation's success with ethanol. Mass-produced soybeans, though not the most efficient raw material, are fast emerging as the crop with the greatest potential to help producers achieve economies of scale.

"There is a lack of focus in this biodiesel program," said Luiz Augusto Horta Nogueira, former director of Brazil's National Agency of Petroleum, Natural Gas and Biofuels. "One group of stakeholders is looking to substitute large amounts of diesel. Others want rural development.... It's a real problem."

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