31 Dec U.S. can learn from growth of biofuels in Latin America
This last column of the year finds me in my bi-annual trek to Colombia, country where I first came to during 1972 to teach English as part of a college work/study program, followed by two years later, 1974, my first post-college job as a sales rep for Pfizer in Bogota.
Colombia is, quite simply, an amazing country, which I have written about in past articles. With a population today of about 44.4 million people, ties for the 3rd highest population in Latin America after Brazil with 184 million, Mexico with 109 million, surpassing Argentina’s 40 million people. Colombia, by the way, is just slightly less than twice the size of Texas (and twice the size of France), and can be reached by plane from Miami in 2-½ hours.
When you think of Colombia, what comes first to mind is probably: coffee (Juan Valdez), drug cartels (cocaine), and violence (guerilla movements). Not known to most Americans is its spectacular geologic and topographic beauty, high-level of culture and education (known as the “Athens of Latin America”), elegantly dressed businessmen and women, abundance of natural resources, and probably the best, clearest Spanish spoken in Latin America.
Located next to oil-rich Venezuela (and Hugo Chavez), Colombia does not have the abundance of oil of its neighbor but Colombian oil exports represent today about 25 percent of GDP (Colombia does have one of the largest deposits of coal in Latin America, as well as large natural gas deposits). Borrowing from the successful Brazilian example of converting its vast hybrid biotech sugarcane crop into renewable biofuels (ethanol), Colombia could certainly tap into this extensive natural reservoir, as it, too, has large sugarcane fields.
As it turns out, I happen to be visiting the heart of Colombia’s main agricultural region, Cali – a city of about 3 million (the capitol – Bogota, has over 8.2 million people in the greater metropolitan area, and lies at about 8,600 feet above seal level), and the principal city in the Cauca Valley’s very fertile agricultural sector. As you fly into Cali’s airport (served by a number of U.S. airlines such as American and Continental), you are struck by this sea of green. The Cauca Valley is one of the few places where sugarcane cane be grown all year round (Cuba and Brazil are other such places), and local farmers get 2-½ crops per year out of the soil due to the vast amount of sunlight throughout the year.
Cali, founded in 1536 by the Spanish conquistador Sebastian de Belalcazar, some 3,300 feet above sea level, lies at the base of some spectacular mountains (part of the Andes range); one mountain featuring a large statue of “Christ the King (Cristo Rey) similar in form to the famous monumental Christ statue overlooking Rio de Janeiro from Corcovado (“Hunchback”) Mountain. Both show a Christ figure with arms opened to the multitudes. On another, even higher mountain in Cali, there are featured three crosses symbolizing the crosses of Golgotha in Jerusalem during Christ’s crucifixion (although all three crosses have no figures on them).
Each of these mountains lies some 2,500 to 3,000 feet higher than the city (or some 5,700 to 6,000 feet above sea level). I had the arduous task of climbing up a rather rustic and strenuous route to the three crosses mountaintop, something I have always wanted to do in my 35 years of coming to Cali. I didn’t think I was going to make it, but with the help of a climbing partner, we finally struggled to the top in about 1-½ hours. According to my partner, there is an annual race to the top, with the winners averaging 17 to 18 minutes – how, I can never imagine, after having worn myself out during my own trek. But the views of the Cauca Valley and Cali were worth it!
Colombia’s economy is on solid ground and for once it is not due to the drug trade, according to both local papers and the CIA’s website (www.cia.gov). 2007 GDP growth of about 7 percent has been the highest in recent history, and the Colombia peso revalued 11 percent against the dollar this year (and has revalued about 25 percent since 2002 and about 50 percent since 1995). Its $375 billion GDP (on a purchasing power parity basis) put it at about the size of Chicago (Chicago’s GDP would it have made it the 19th largest country in the world – no small feat). Inflation has been below 6 percent annually for the last four years. There are just under 30 million cell phone users in Colombia versus around eight million telephone land lines (it can take one year or more to get a landline versus about one hour to get a cell line), and about seven million Internet users.
The illegal drug trade still exists, of course, but annual revenue is down from $3 billion/year to $1 billion/year due to extensive U.S. government support to eradicate this illegal crop (but still with significant U.S. consumer support to use it). The strong drug cartels have been broken, but smaller ones still thrive. The Colombian government has worked to help rural populations replace lost income due to growing the coca plant with other legal agricultural crops. The leftist guerrilla movements still exist but are largely concentrated to the jungle and llanos (Colombia’s great plains region), and it is once again safe to travel most of the countryside.
Colombia, like many countries in Latin America, will be late to the game in biotechnology as applied to research in new medicines (although its rich biodiversity could certainly play a role here); however, because of the predominance of agriculture, agricultural biotechnology is quickly becoming an important part of local research put into practical considerations.
Although this country has historic ties to Spain (and was a Spanish colony during colonial times), it is today probably the most pro-U.S. country in Latin America, and many of its citizens (that can afford to) travel to the States frequently, and some even have second homes there, as well as study in U.S. universities. One family member of mine (by marriage), is currently doing a Ph.D. at Princeton, after having completed a masters at Cambridge, and postgraduate work at the Sorbonne in Paris.
The impact of biotechnology on agriculture
But the topic here is agriculture, and the role that biotechnology is playing in increasing productivity throughout Latin America. According to a December 17, 2007 article in Business Week on Monsanto, the world leader in agricultural biotech, five years ago China, India, and Brazil (3 of the 4 members of the BRIC countries) planted almost no genetically engineered crops. China and India planted more than 17 million acres of biotech crops last year, and Brazil can’t build roads quickly enough to reach its ever-growing soybean fields, which totaled 29 million acres (including cotton plantings).
According to this same article, 7 percent of the world’s farm acreage is now planted with genetically-engineered seeds. Although fast-growing Brazilian agriculture has driven it to become a world leader, it still trails Argentina with 45 million acres of genetically-engineered crops, second only to the U.S.’s 137 million acres.
Leading Countries with Biotech Crops – 2007
|Country||Acres of Genetically-Seeded Crops (millions)||Key Crops||% Increase|
|1. U.S.||136.5||Alfalfa, canola, corn, cotton, papaya, soybeans, squash||+40%|
|2. Argentina||45||Corn, cotton, soybeans||+33%|
|3. Brazil||28.8||Soybeans, cotton||N/A|
|4. Canada||15.3||Canola, Maize, soybeans||+74%|
|8. South Africa||3.5||Corn, cotton, soybeans||366%|
|9. Colombia, France, Germany, Portugal, Czech Republic, Iran. Slovakia, Honduras||<1.3 (each)||Corn, rice, cotton,|
Source: Business Week, 12/17/07
Surprisingly, all of Western and Eastern Europe biotech crop acreage combined is less than that of Brazil. Latin American countries such as Paraguay, Colombia, and Honduras have as much or more biotech acreage than many major European countries.
And it is really all about productivity! According to the Business Week article, in 1970 the average corn harvest in the U.S. yielded 70 bushels an acre. In 2006, these yields are now more than double at 150 bushels an acre, and Monsanto experts believe that this can be pushed to 300 bushels an acre by 2030.
The initial focus of ag biotech was a widespread effort to create new biotech seeds, resistant to key herbicides such as Monsanto’s Roundup, which would allow the farmer to spray the crop directly and not have to worry about the effect of the herbicide on the crop while it acted to kill weeds that robbed the crop of soil nutrients.
The second wave of ag biotech focused on a wide range of crops with the goal of trying to make these crops resistant to various insects and crop diseases, as well as weather conditions such as drought, or its opposite force, prolonged flooding! This wave created a lost of resistance in Europe, Australia, New Zealand because of the potential impact of genetically modified foods (GMO’s) on the population: the Frankenfoods effect. Many European countries banned use of these seeds and seed traits.
As the Business Week article notes, Monsanto, the forerunner in the development of such new biotech seeds and seed traits, fought this resistance unsuccessfully for years. In the last few years, Monsanto has shifted its strategy to focus on much fewer crops and crops that fall into two categories: biofuels and commodity grains used for animal feed or industrial use. The commodity crops are: corn, soybeans, cotton and canola. The result has been an explosion of use with growth even in Europe, as consumer fears have dissipated due to the non-use in common agriculture crops directly consumed by consumers.
Colombian agriculture and biotechnology
Colombia agriculture represents a little over 16 percent of its Gross Domestic Product. This has changed significantly over the last 50 years when it represented more than 50 percent, according to the Food and Agricultural Organization (FAO) of the United Nations. Besides being the second largest producer of coffee in the world, it is the 9th largest producer of cocoa, and the 10th largest producer of sugar cane.
Colombia coffee, which has been successfully branded worldwide with the “Juan Valdez” image and trademark, is beginning to be marketed by the Colombian Coffee Federation in a strategy similar to Starbucks with cafes emerging all over the country and in key large cities in the U.S. The problem, however, is the world price of coffee is still low. Colombia coffee currently garners only $1.41/lb (up from the days that I worked in Colombia when prices bordered on $1 per pound). U.S. consumers however pay between $5 to 8/pound in the supermarket for this coffee which is the only country in the world which brands its coffee.
Biofuels in Colombia
Colombian gas prices to local Colombia consumers are high, particularly given that income levels are 25 percent o 33 percent of U.S. levels (even on a purchasing power parity basis), regular gas is over $3.25/gallon and premium is over $4/gallon, as the world price of oil approaches $100/barrel. The opportunity for Colombia to participate in the surge for production of renewable biofuels has become an opportunity for local farmers who previously cultivated illegal crops to participate in this lucrative legal business.
Cartagena, Colombia was the site of the Third Annual Biofuels Americas Conference held in March, 2007, with participation from 30 countries. During this conference, Colombia’s president Alvaro Uribe announced a new law for the promulgation of biofuels in Colombia and encouraged other South and Central American countries to pursue the development of these renewable fuels.
Uribe has made biofuels a key priority in his second term as president. Uribe’s plan is to double the amount of acreage dedicated to biofuels over the next four years, according to a recent article (10/18/07) in the Des Moines Register. The U.S. Agency for International Development (AID) is helping Colombia in this movement. Given the high price of oil, crops for biofuels are now becoming an attractive alternative to former illegal crops for local farmers.
Colombian sugarcane conversion into ethanol is currently yielding about 250,000 gallons/day from the Cauca Valley. The Cauca Valley has about 500,000 acres of sugar cane, of which only 25 percent are being used for biofuels, according to an October 12, 2007 article from the Inter Press Service. Colombian gas currently has a 10 percent mix of ethanol but Uribe’s plan is to elevate this level to 25 percent during the next 20 years. Cassava and African palm oil are other key biofuel crops under development. There are about 320,000 acres of cassava crop planted currently in Colombia.
Colombia, like Illinois, with large coal deposits, has initiated “clean coal” liquification projects. There is an opportunity here for Illinois universities and private sector to collaborate with the Colombian government and private sector to share technologies.
Like the U.S. , and particularly the Midwest, critics of biofuels in Colombia have two main arguments: 1) more energy is consumed to create the fuel than the fuel itself creates, and 2) as farmers shift use of key crops to biofuels use, the cost of food will go up significantly. As a result, biotechnology can place an important role in improving the yield of fuel, whether it is bioethanol or biodiesel, from these crops.
Colombia, like Brazil is blessed with two key natural resources that even the U.S. doesn’t have: (1) abundance of natural sunlight throughout the year, and (2) a tremendous array of biodiversity in plants.
Higher yield alternatives
We, in the U.S., tend to think that all good ideas and technologies need to come from within our country, and yes, biotechnology was first developed in the United States, but the impact of agricultural biotechnology around the world will dramatically change food production, as Monsanto has already shown, and offer an alternative to traditional oil. As the price of oil reaches and surpasses the $100/barrel level, the U.S. clearly needs to intensify its biofuel efforts (particularly in higher yield crops, other than corn and soybean) and reduce its longtime dependence on traditional fuels: oil. The U.S. can learn from research efforts into other crops in both Brazil and Colombia.
A happy and healthy New Year to all my readers! See you soon!
Previous articles by Michael Rosen
• Michael Rosen: 2007: The best and worst of times for Big Pharma
• Michael Rosen: Combination therapy: Back to future or wave of future?
• Michael Rosen: Angel investing slows during first half of 2007
• Michael Rosen: University research and life science collaborations drive new approaches to disease
• Michael Rosen: The ease of biotech beyond the Midwest and the U.S.
This article previously appeared in MidwestBusiness.com, and was reprinted with its permission.
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