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Argentina jumps on biofuel bandwagon, but worries persist

Argentina's government is hopping on the biofuels bandwagon by offering tax incentives for new initiatives and saying 5 percent of the nation's fuel supply must be biodiesel or ethanol-based in three years.

But many Argentines are worried that diverting farmland for biofuels -- made from corn, sugarcane, palm oil and other agricultural products -- will drive up food prices even higher.

Yesterday, that tension was due to come to a head when former US vice president Al Gore addressed experts and financiers wrangling over efficient and environmentally friendly ways of promoting biofuels development at the first biofuels congress of the Americas. Gore's documentary An Inconvenient Truth won an Academy Award earlier this year.

In the US, President George W. Bush has announced a goal of slashing gasoline consumption by 20 percent by 2017, a move requiring 132.5 billion liters of alternative fuels to replace fossil fuels.

Yet in Argentina, where a quarter of the 38 million people remain in poverty five years after an economic crisis, some fear that a growing demand for grains to make biofuels will translate into higher food prices after two years of double-digit inflation.

"This idea of using grains to make energy instead of using them for food, now that's a problem," Buenos Aires resident Pedro Marcote said. "Food prices keep going up and up."

High commodity prices have fueled Argentina's recovery but also propelled inflation in food prices. The government has slapped limits on grain and beef exports to ensure local supplies, while corn, soybean and wheat prices continue to soar.

UN-Energy, a consortium of 20 UN agencies and programs, said in a report on Tuesday that bioenergy was an "extraordinary opportunity" to reduce greenhouse gases and boost energy security and rural development.

But it also warned that "rapid growth in liquid biofuel production would also make substantial demands on the world's land and water resources" and could force food prices to rise, putting a strain on the poor.

The authorities should be careful about promoting biofuel use, said Loek Boonkamp, head of the agricultural trade and markets division of the Organization for Economic Cooperation and Development.

He estimated this year that replacing just 10 percent of the world's current petroleum use with biofuels would consume about 30 percent of all the grain, oilseed and sugar produced in the US, Canada, the EU and Brazil.

Meanwhile, investment plans are surging and companies are lining up to take advantage.

Hector Morales, executive director of the Inter-American Development Bank, said the bank has allotted US$3 billion in credit to finance biofuels projects in Latin America in the coming years.

"The region is in a uniquely favorable position to take advantage of biofuels development," Morales said.
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