Economy
Edward Finney
Oct 2 2008

Anyone who looks at a map of South America sees that it is dominated by one country. Brasil! It is immense. . approximately 10% less in area of the continental USA with about 1/2 of the population. Vast areas of this magnificant country are under or unpopulated with plenty of room to grow. And growing it is. . .not so much in population but in economic potential. Natural resource rich in minerals, timber, and oil. . immense areas devoted to food production, especially wheat, soybean, corn and sugar cane. Self-sufficient in oil and ethanol, Brasil is isolated from OPEC disruption of the petroleum market. They recently were offered a place in the OPEC organization but declined, saying that it would not be to their advantage.

Recent enormous offshore oil discoveries will soon make Brasil an oil exporting nation. And oil exploration has just begun. Not just offshore but throughout the entire country and the results to date are encouraging. Now that oil prices have reached previously unheard of extremes, it is advantages to explore everywhere there may be oil. Petrobras, the national oil company has recently ordered 146 new tankers. . all to be built in Brasil. Brasil in now #3 in the world in oil reserves after discoveries early this year (2008)in the Tupi fields in the Santos Basin called the Pré-Sal area. The present reserves there are estimated to be at 8 to 11

barrels and exploration has just begun to look for more. The oil reserves in the Pré-Sal area are the superior grade of low sulfur light oil and is accompanied by vast deposits of natural gas. It is about 300KM off shore from the state of Rio de Janeiro in deep water of about 2000M. After

penetrating a salt cap the final well depth is about 6000M. This is very deep but the technology is said to exist to extrate the oil economically. This pré-sal area is believed to reach 100´s of KM north and south and contain an unbelievable amount of oil and natural gas. Not satisfied with just oil and gas discoveries, Brasil has started to build 5 new refineries in NE Brasil and more are sure to follow.

Ethanol production is another high spot in the energy self-sufficency of Brasil. Ethanol is made from sugar cane and the tropical climate of northern and northeastern Brasil make it perfect for sugar cane production. During the oil crisis of the 1970´s, Brasil started a Pro-Alcohol program for the production of ethanol from sugar cane as the fuel for cars. Eventually, about 80% of the cars were propelled from ethanol, lowering the need for gasoline. However, as gasoline prices decreased in the following years, ethanol production decreased also and most cars returned to gasoline. To be price competetive, oil prices must be at least $75US a barrel. With today´s prices near or over $100US , ethanol production is viable again and Brasil is making flex-fuel cars that run on either gasoline or ethanol or a mixture thereof. There are also plans to export ethanol to the developed nations.

Sugar cane is the only economically feasible source of ethanol at this time. Corn, which is used as the source of ethanol in the USA costs about $0.37US a liter to produce. Sugar cane ethanol costs about $0.17US. Another disadvantage of using corn for the production is that it removes a large portion of the corn crop from the food chain. US corn is traditionallly an export crop and the shortage of exportation has raised prices considerably causing many poor nations to suffer. Also, corn is used to fatten cattle and pork before slaughter. The higher market prices and shortage has disrupted the meat industry causing inflation.

Ethanol from sugar cane causes no such problems. It is grown on land of low fertility that can be used for little else. It does not remove a food crop from the food chain. Sugar is a low value crop that can be produced cheaply in any tropical country and is. The amount of land available for cane production is enormous and ethanol production can be quickly increased if necessary. The US resistance to ethanol importation from Brasil to protect their own ethanol program will not be substaining. Ethanol from corn is not economically or politically practical. Europe will follow the same path and ethanol exportation from Brasil will be enormous, followed by oil and natural gas when the off shore fields begin producing in the near future.

The future of Brasil as as energy producer and exporter is assured. No country in the world has both oil and ethanol available in large quantities. But, just as important, Brasil will remain self-sufficient in energy. . .free from the price and supply fluxuations of OPEC. Brasil is, without a doubt in a position to become one of the major economic forces in the world in the near future. Bet on it!