Argentina's government amends biofuels law to include incentives for sugarcane ethanol

Argentina's president Nestor Kirchner has presented a project to parliament aimed at changing the existing biofuels law in order to include ethanol from sugarcane as a biofuel that should be promoted. The current legislation, adopted in April, only provides incentives for biodiesel. It mandates a 5% blend in the nation's fuel by 2010 and provides tax breaks and incentives for projects aimed at supplying the domestic market that are at least 50% owned by Argentines.

The initial biofuels law didn't provide incentives for ethanol producers, sugarcane growers and sugar producers. But according to the Ministry of Planification, Argentina could be producing 300 million liters of ethanol by 2010 to achieve another 5% blend, representing a market value of $200 million. This production should receive similar incentives as those for biodiesel producers, it says.

The law proposal comes at a time when investors are queuing to enter the country. Earlier this month, hungarian-born investor George Soros announced his intention to invest between US$300 and 400 million in Argentina's ethanol sector.

Argentina is a major agricultural producer with a large potential for the production of sustainable biofuels from sugar cane (map, click to enlarge). According to José Alperovich, the governor of the Northern province of Tucumán, the country's largest sugarcane region, the bill opens a new era:

It is like finding petroleum in Tucumán. We can produce ethanol seven times more cheaply than those who make the fuel from corn. This is going to generate a lot of new employment in the province.

Around 71% of the country's cane production is concentrated in Tucumán. There the crop occupies nearly 40% of the arable area. The sugar industry already constitutes the main economic activity in the province but the new production is expected to add another 20,000 direct jobs.

Other provinces in Northwest Argentina stand to benefit, notably Jujuy and Salta. According to the Minister for Planning:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: biodiesel :: ethanol :: sugar cane :: Argentina ::

The sector will become of fundamental imporance to the gross domestic product of the provinces and will have strong beneficial social and cultural impacts.

Record oil prices are a ballast on the country's budget. The production of bioethanol from sugar cane destined for the internal market will allow the country to decrease its dependence on oil products, and reduce the impacts of oil price shocks.

Argentina is the world's eight largest sugar exporter and registered a record output in this year's campaign with a production of 2.44 million tonnes.

At the beginning of this month, hungarian-born investor George Soros announced his intention to invest between US$300 and 400 million in Argentina's ethanol sector. The new law proposal accomodates these plans and is set to attract further investments.

The country is facing presidential elections and rising food prices (notably those of tomatoes) have become a critical factor. The food price increase is the result of high oil prices. For this reason, the sitting president wants the alternative fuel bill to pass as soon as possible. President Kirchner's wife, Cristina Fernandez de Kirchner, is expected to win the elections.

Map: land suitability for rainfed sugar cane, high inputs. Source: FAO, Land and Water Development Division.

References:
Agrodiario: El Presidente firmo la ley de bioetanol desde la caña de azucar - October 12, 2007.

Univision: Argentina impulsa la producción de etanol para biocombustibles - October 10, 2007.