Latin American policies affecting vehicle fuel industry
Amidst the growing trend of electric vehicles and hybrids, using fossil fuels to empower the combustion engine still dominates the world by far. However, with the price of oil on the rise again, Latin America has been campaigning for the use of biofuels.
In 2016, a total of 20 countries throughout the region agreed to push biofuel production, regardless if by sugar cane, corn, or some other method, according to news service BioFuelsDigest.
Below are snapshots of government policies taking place in Brazil, Mexico, and Argentina, home to Latin America’s three largest vehicle fleets.
Of all the countries throughout the region, Brazil - Latin America’s largest vehicle fleet market – is the most active in terms of biofuel production. More than half of its cars are flex-fuel. (apt to run on any mixture of gasoline and ethanol)
Volkswagen flex-fuel Gol in Brazil (SOURCE: car.blog.br)
In December, the senate passed the country’s long-awaited biofuel incentive policy, RenovaBio, and is now awaiting final approval from President Michel Temer.
Meanwhile, the Renewable Fuels Association and Grains Council in the United States are not happy with their trade relations with Brazil, and are pushing for the removal of the country’s preferential trade status.
According to the US agencies, Brazil has not been providing equitable and reasonable access to the markets due to the implementation of tariffs and quotas on ethanol imports.
One of the largest debates in Mexico right now is the battle over whether or not to permit the increasing of ethanol blending in fuel to 10% (E10) from 5.8%.
The plan, which allows E10 in Mexican cities (with the exeption of Monterrey, Guadalahara, and Mexico City), has been under debate since the country's energy regulatory commission stated last year that it would approve the increase.
While ethanol producers and providers of fuel additive Methyl tert-butyl ether (MTBE) are pushing for the increase, some environmentalists are complaining that E10 would put too much burden on the air quality.
Last year, the US International Trade Commission was expressing discontent from unfair subsidized imports (dumping) on biodiesel coming from Argentina but some changes have been made this year.
As of January, biodiesel exports have an 8% tax. Besides keeping more of the fuel at home, this will bring the market closer to the 27% export tax already being lobbied on soy oil.
In the meantime, while the European Union has lowered import duties from Argentine biodiesel exporters, the United States has increased its import duties.
Considering the main markets in Latin America, all three countries are pushing for the use of more biofuels domestically, something that is also being influenced by US trade relations, especially in Brazil and Argentina.
As for Mexico, with the North America Free Trade Agreement (NAFTA) under scrutiny, we have yet to see how it will affect relations with its Northern neighbor.
Top Photo (SOURCE: Shell)