The biofuel scramble for Brazil

If the foreign investment in the Brazilian ethanol industry constitutes a new "Great Game," who might end up the loser? A lesson from Afghanistan.

Published April 18, 2007 4:38PM (EDT)

In his blog devoted entirely to the topic of Brazilian ethanol, Henrique Oliveira wrote last Friday that the maneuvering of multiple foreign powers to grab a piece of Brazil's biofuel pie reminds him of "the Great Game" of the 19th century, in which Britain and Russia strove for influence and control over the strategically important region of Central Asia.

It is hard not to draw an analogy with the fight for hegemony that took place in Asia between Tsarist Russia and the British Empire, from the end of the Napoleonic Wars in 1815 to the beginning of World War I almost a century later.

The armies, spies, mercenaries, and agents provocateurs that played the game in Asia have now been replaced by investment bankers, consultants, and lawyers, at the service of governments and corporations, private and state-owned, vying for control over the most lucrative sectors not only of the Brazilian sugar and ethanol industry, but of other commodities as well. Iron ore, bauxite, orange juice, soy, corn, chicken, and beef, all of which have in Brazil a major producer, are at the top of the list.

For Oliveira, the injection of foreign investment generally seems to be a good thing -- he is a gung-ho promoter of Brazilian ethanol as a model for how developing nations can bootstrap themselves into a position of influence and power in the global economy -- even if there are some obstacles that need to be overcome.

Just as the players of the Great Game in nineteenth-century Asia had to deal with searing desert heat and blistering mountain cold, investors in the Brazilian sugar and ethanol industry have to contend with impossibly-complex tax structures (exercised at the national, state, and municipal level), a labyrinthine labor legislation calibrated to favor workers over capital (on account of the dire human rights record in Brazilian industry and agriculture in general), and a growing legion of NGOs and political agents that can, and often do, interfere with the conduction of business...

This is the first time I've ever seen blistering mountain cold equated with worker-friendly labor legislation, but that's not my primary gripe with Oliveira's Great Game analysis. To complete the analogy, one needs to consider what effect the power politics of Russia and Britain had on the countries that they sought to manipulate.

Exhibit A: Afghanistan. While historians continue to argue whether Russian and British imperialism can be held primarily responsible for Afghanistan's ensuing abysmal failure at state-building, it would be even more difficult to argue that the result of the Great Game was in any way positive for Afghanistan. No, far easier to declare it an unmitigated disaster for the locals, a colonialist intrusion that resulted in centuries of wars against a succession of foreign powers, and was at least partially responsible for the rise of the Taliban. And the rest of Central Asia hasn't fared much better.

If used as an analogy for the biofuel scramble for Brazil, the Great Game should come with a warning label: Be careful what you wish for. Allowing the rest of the world to exploit your abundant resources has rarely been a winning economic development strategy for poor nations in the South looking to catch up to the North. Brazil is no Afghanistan, to be sure, but it still could end up a loser in this game, if it isn't careful.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Afghanistan Brazil Globalization How The World Works Latin America