Latin American Ethanol Exports Exploit U.S. Legislative Loopholes

Published: 21 May 2008

By Tomas Piccinini

U.S. biofuels producers remain competitive against Latin American producers due to an amount of legislative barriers, tax incentives, and transportation costs that level biofuel prices on entrance to the U.S. market (the largest market in the world and main destination of Latin American exports). However, U.S. importers and Latin American exporters have found loopholes in these legislative barriers, and are entering the U.S. market with lower prices.

The United States is the largest biofuels producer in the world. However, Brazil continues to experience the highest growth rates, and is anticipated to have a most promising future. Moreover, it has better natural advantages and an extensive knowledge in the area. As a matter of fact, Brazil would be the leading producer and exporter in the world if it were not for U.S. import tariffs and transportation costs. These are allowing U.S. producers to remain competitive against Brazilian biofuels. If it weren't for these barriers, Brazil would take over the ethanol market. Brazilian production costs are 40 to 50 percent lower than those of the United States.1

Taking advantage of a number of loopholes in U.S. legislation, Latin American companies export biofuels at lower costs, avoiding import tariffs. This generates lower prices, and is affecting local U.S. producers that cannot compete in a free market against Brazilian imports. What keeps U.S. producers competitive is a 54 cents per gallon tariff to all biofuel imports, which added to transportation cost, adds up an imported biofuels price that can be reached by local companies.

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