Biofuel power games

Observations on Latin America

While Washington's attention has been absorbed elsewhere, what the US likes to think of as its backyard has been showing dangerous signs of independence. (This is not the first time - one has only to think of the strides Latin America took during the Second World War.)

The US administration, suddenly waking up to what is going on, is preparing an ambitious offensive. The strategy, which will be announced formally during George Bush's hastily organised trip to Latin America early next month, will be built on "bio-energy". It sounds environmentally friendly and innocuous but, in reality, biofuel is to be used as a weapon to weaken the ringleader of the left, Venezuela's charismatic president, Hugo Chávez.

Latin America's move to the left has been gaining momentum. On 9 February President Evo Morales of Bolivia signed a decree to nationalise a Swiss-owned tin smelter, sending 200 soldiers to occupy the plant. Part of the finance for the takeover is coming from Venezuela.

The move has great symbolic importance, for the smelter once belonged to Gonzalo Sánchez de Lozada, the former president and close ally of the US (who actually speaks English better than Spanish). In the 1990s Goni, as he is known, sold key sectors of the Bolivian economy to foreign companies at knock-down prices.

This is no isolated case. When Morales took over in January 2006, the state's share of the economy was a meagre 7-8 per cent. He plans for it to have risen to a quarter by the end of this year. That kind of change - and the message it sends to the rest of the developing world, that there really is an alternative to neoliberalism - marks the beginning of a new epoch.

In Ecuador, another left-winger, Rafael Correa, declared at his inauguration in January that "we are leaving behind the long dark night of neoliberalism". Presenting him with a replica of Simón Bolívar's sword, Chávez said that the great 19th-century South American liberator was "once again striding across the continent". Shortly afterwards, Chávez announced a second, more radical, phase in his own government. He says that by 2021, which will mark the 200th anniversary of South America's independence, Venezuela will have constructed something completely new - "Bolivarian socialism".

Washington is keenly aware that this swing to the left is sustained partly by Chávez's petrodollars. Apart from funding social welfare programmes throughout the region (including, in a deliberately provocative gesture, the donation of oil to poor families in the US), Chávez has ambitious plans for South American integration, in a rival vision to Bush's stalled Free Trade Area of the Americas. He has got Presidents Lula in Brazil and Kirchner in Argentina to sign up to a $20bn, 5,000-mile gas pipeline to run the length of the South American continent.

Caught on the hop, Washington is fast coming up with a counter-strategy. Noting that Brazil is already the world's largest manufacturer of ethanol and has ambitions to export biofuel technology, the US is offering Brazil "a new partnership through ethanol". It wants the two nations, which together produce 70 per cent of the world's ethanol, to promote biofuels in the rest of South America. It could be a tempting offer for Brazil, particularly if the US offers financial support.

Biofuels are often touted as a technical fix for the global environmental crisis, but this is clearly not the case in the US. David Pimentel, an ecology expert from Cornell University, has shown that it takes 70 per cent more energy to produce maize-based ethanol than the final product contains.

Although Brazil's ethanol, made from sugar cane, has many other problems (such as reducing the land available for food cultivation by small farmers), it does make environmental sense, in that it has a 1:6 energy ratio. Thus, if the US were really interested in combating global warming, it would abolish the substantial tariff barriers that keep Brazil's ethanol out of the US market. This it has repeatedly refused to do.

It is clear that the US biofuel project is a wheeze to create a highly profitable activity for multinationals, particularly those in the energy sector, and to reduce US dependence on imported oil from countries in the Middle East and Latin America that have broken free from Washington's domination.

The new partnership with Brazil is a further refinement of this strategy. It has only one aim: to reduce South America's dependence on oil, and thus to weaken Chávez's influence.

Earlier this month, R Nicholas Burns, the US under-secretary of state for political affairs, let the cat out of the bag. "Energy has tended to distort the power of some of the states we find to be negative in the world, like Venezuela and Iran," he said in São Paulo. "So the more we can diversify our energy sources and depend less on oil, the better off we will be."

This article first appeared in the 19 February 2007 issue of the New Statesman, Iran - Ready to attack