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IDB targets $3 billion in Private Sector Biofuel Projects

Calling biofuels a “transformative opportunity” for Latin America and the Caribbean, IDB President Luis Alberto Moreno detailed a broad pipeline of investment projects and technical assistance programs designed to help the region’s countries reach renewable energy targets in a sustainable way.

“Biofuels could bring investment, development and jobs to rural areas with high levels of poverty, while reducing dependence on imported fossil fuels” in several IDB member countries, Moreno said at a briefing at IDB headquarters organized by the Interamerican Ethanol Commission. “In this respect, we think biofuels can further our core mission, which is to bring economic opportunity and a better quality of life to the region’s low-income majority.”

Moreno cautioned against unrealistic expectations regarding biofuels. He said the IDB is closely examining questions regarding cost, subsidies, labor conditions and the impact of biofuels on land use and food production.

Given the varied needs and potential of the region’s countries, Moreno said the IDB is taking a “deliberately flexible” approach in its biofuels work program. In Brazil, the world leader in biofuels, the Bank is focusing on leveraging private sector investments to expand production capacity.

Moreno said the IDB’s Private Sector Department is structuring senior debt financing for three Brazilian ethanol production projects that will have a total cost of $570 million. The department’s Brazil pipeline also includes loans for five biofuel transactions or projects with biofuel components that will have a total cost of nearly $2 billion. These investments will contribute to Brazil’s goal of tripling annual ethanol production by 2020, according to Moreno. 

The IDB is also eager to support the Brazilian government’s goal of becoming a global center of excellence for research and development in biofuels, Moreno said. The Bank is holding discussions with senior Brazilian officials with a view to facilitating technology transfer and technical assistance, so that other countries in the region can benefit from Brazilian know-how.

Moreno said the Bank is offering a different set of services to countries like Colombia, Costa Rica and El Salvador that have been producing and exporting biofuels on a smaller scale for several years. In Colombia, the Bank’s Inter-American Investment Corporation is considering financing for a $20 million palm-based biodiesel enterprise that will eventually produce up to 100,000 tons of fuel per year.

In Costa Rica and El Salvador, the IDB is financing feasibility studies and technical assistance in areas such as regulation, market development and public education, to help both governments reach their target of replacing 10 percent of domestic gasoline consumption with ethanol.

Recognizing that climate and soil conditions in many rural areas are not ideal for large-scale biofuel production, Moreno said the IDB is also supporting small-scale projects such as biodiesel based on low-input oilseed plants that are already widely cultivated in the region. “These projects could provide an affordable source of fuel to isolated rural communities, while creating a new source of revenue for subsistence farmers,” Moreno said.

To reflect this diverse reality, Moreno said the Banks’ private sector department is preparing a green energy-lending program that will provide at least $300 million in lending and technical assistance for renewable energy and energy efficiency projects throughout the region—with an emphasis on small-scale investments.

Moreno said the IDB has also been financing technical meetings of the Mesoamerican Biofuels Working Group, made up of representatives from Central American and Caribbean governments that are expected to announce a regional biofuels initiative in the coming weeks.

The Interamerican Ethanol Commission is a private sector group cochaired by Moreno, former Florida Gov. Jeb Bush and Roberto Rodrigues, president of Superior Council of Agribusiness of the Sao Paulo State Federation of Industries. It was formed last year as a forum for disseminating information about ethanol, facilitating private investment in biofuels, and promoting the creation of a hemispheric market in biofuels. At the briefing, Moreno described the private sector as a “crucial partner” in the Bank’s biofuels strategy, and he invited questions from the audience, which included 250 representatives of business, government, the research community and the media.

In addition to speeches by Moreno, Bush and Rodrigues, the briefing included a first-look presentation of “A Blueprint for Green Energy in the Americas,” a comprehensive study of biofuels markets through 2020 commissioned by the IDB and carried out by Garten Rothkopf, an independent consultancy. The study, which surveys the development of biofuels in 50 countries worldwide and the trends shaping markets, policies, regulations, investment and growth, offers strategic recommendations for building and maintaining competitive biofuels industries in the region.

The briefing was covered by C-SPAN.