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Geopolitical
Diary
Stratfor
The letter's circulation comes a day after World Bank Vice President for Latin America Pamela Cox offered to participate in Brazil's expansion of sugarcane ethanol production in Africa and elsewhere. Castro and his ally, Venezuelan President Hugo Chavez, probably are concerned that the Brazilian-U.S. ethanol initiative, launched during Bush's recent Latin American tour, threatens Venezuela's influence in Central American and Caribbean countries through its subsidized oil Petrocaribe initiative. Chavez currently offers many countries in the region such favorable oil prices that they might side with him rather than with the United States if diplomatic push comes to shove. But actual economic development is generally preferred to handouts, and if ethanol can create jobs and revenue, these countries might take a neutral stance or favor Brazil and the United States outright. Furthermore, if the United States can significantly decrease oil consumption, it could become less dependent on Venezuela's supply. Castro's letter, combined with the World Bank's entry into using sugarcane-based ethanol production as a development tool, will prompt significant debate within Latin America, Africa and environmental and development communities about the costs and benefits of expanding ethanol production. The letter is likely to be only the first salvo in a battle for hearts and minds on the issue, and Castro is likely to fund environmental groups that warn of the harmful effects of industrial agriculture. Perhaps more significant, Castro might have found the perfect topic with which the Latin American left can tap into the regional psyche's deep suspicions about U.S. power, exacerbated by a fear of mercantilist colonial exploitation that is rooted in the region's earliest formative experiences. From the 17th century to the 19th century, Europe's hunger for sugar funded the colonial development of northeast Brazil, much of Central America and the Caribbean, including Cuba. And U.S. demand for ethanol could now provoke a sugar revival in these same areas. This development, rich in historical overtones, provides plenty of fuel for thought -- and for propaganda. The most definitive characteristic of the sugar plantations was that they were run on African slave labor; far more slaves crossed the Atlantic to grow sugar than to grow cotton and/or tobacco. Farm labor advocates likely will compare the conditions of those days to the conditions of many laborers today. There also are the issues of soil depletion and water use and contamination. Then there is Amazon jungle being cut down to make room for more farmland. Finally, there are the images of Americans driving their sport utility vehicles -- watch for them in political cartoons next to Europeans drinking sugared tea. To top it all off, Castro warns that U.S. and European demand for ethanol will consume the world's food supply. A slightly more reasonable concern is that it will drive food prices up -- and it will. Already, while more U.S. farmland is used for corn, the price of other grains has risen, driving up meat prices as well. But food prices are abnormally low, and higher prices would be a mixed blessing for developing economies, since they also would entail higher returns on exports. In fact, many of the countries that have been so upset about U.S. agricultural subsidies should welcome the development. Food prices will rise, and as they do, Chavez and other populist leaders in Latin America could take advantage of the situation to appeal to the public's fear that its basic well-being is being compromised. These and other images will be compared to those presented by the other side, creating an opportunity for many Latin American countries to pull themselves out of crippling poverty; they might not have oil like Venezuela or copper like Chile, but they can grow sugar, and prices are soaring. This has the potential to reinvigorate stagnating rural areas and relieve migrant pressure on urban slums. Technology-sharing arrangements with Brazil and financial and technical assistance from the World Bank, combined with preferential tariff waivers from the United States, all sweeten the deal. In his letter, Castro does not issue a full-on assault against ethanol production -- in fact, he praises Venezuela's limited production to improve its fuel mixture, as well as Brazil's technological ethanol achievements. It is likely that Castro, Chavez and environmentalists will team up to make a distinction between sugarcane-based ethanol grown in limited amounts for domestic consumption, which will be deemed good and acceptable, and that grown for export, which they will say carries dire consequences. It is unclear which countries will take such a message seriously, but the remarkable historical context of the situation suggests that cries of neocolonial exploitation will encounter fertile soil. © Copyright 2007 Strategic Forecasting Inc. All rights reserved.
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