Japan and Brazil are in the process of signing an US$8 billion agreement that would ensure significant ethanol exports to Japan. Brazil in turn will gain significant investments from Japanese firms. From this deal, Japan could be expecting as much as 1.5 billion gallons of ethanol per year. To put that into perspective, Japan currently only receives about 60 million gallons, or roughly 7% of what Brazil produces.

Japan’s National Development Bank would help in financing the distilleries, which would be built or purchased, Folha reported. Costa told the newspaper that the investment in each distillery could total $200 million.

Petrobras also announced earlier this week that it signed a memorandum of interest with Mitsui and a Brazilian construction firm to study the construction of a pipeline in Brazil that would be used to help export ethanol to Japan. No amount was disclosed on how much the pipeline could cost.

This may not sound like significant news to many people, but ethanol is viewed as the next replacement for gasoline in the United States. The US is the largest producer of ethanol, but is not a major exporter. In fact, Brazil is considered as the largest exporter and their ethanol comes form sugarcanes, making them much cheaper than corn-based ethanol.

I’m not a huge fan of supporting ethanol mainly because it does not offer performance improvement in vehicles. In addition, it is my opinion that in order to produce ethanol, we still need petroleum based services/products. However, I think that any other solution is prohibitively expensive and years away. Alternatively, ethanol is already prevalent in Brazil and I am surprised that US businesses are not quickly recognizing the need for ethanol. In fact, if the US government is touting ethanol as the next generation of fuels, wouldn’t it be logical to increase spending on firms promoting ethanol use and improving and expanding ethanol refueling facilities across the US? Change is slow, but hopefully progress is being made.

Source: BusinessWeek