Brazil & Argentina at war over biodiesel exports

Argentina and Brazil both have large soy industries which have looked to biodiesel production in recent times to boost revenues and expand their markets. Argentina's government has enthusiastically embraced the market for soy oil based biodiesel by implementing tax and trade incentives that effectively undercut the production costs of Brazil's producers. Current estimates put Argentinean biodiesel production costs at $0.22 per litre compared to $0.50 to produce the same fuel in Brazil. The Brazilian Vegetable Oils Industry Association, are hitting back by sending a trade envoy to Argentina to convince the Argentineans to scale back their policies. Chances are the Brazilian contingent won't meet with much success though because Argentina has clearly made the decision to become a major net biodiesel exporter.

A national biofuel law comes into affect in February in Argentina to promote biofuel exports by imposing a low export tax of five percent on biofuels such as soy-based biodiesel compared to the much higher export tax of 24 percent on crude soy oil. Argentina has its eye on the large biodiesel export markets of Europe and the U.S. but domestic demand is also guaranteed to grow via the Argentinean Biofuels Act which mandates a minimum of five percent biofuels blended into the nation's petrol and diesel fuels by 2010. Brazil has similar legislation in place requiring a minimum of two percent biofuels in domestic diesel fuel by 2008.

Analysis: Biofuels exports are allowing nations with large agricultural sectors to gain a share of the global energy market and the stakes are huge. Expect Brazil to eventually match the Argentinean tax breaks to ensure their farmers share the same opportunity to export biofuels to Europe and the U.S.

[Source: Cattle Network]

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