Brazil is experiencing an economic boom. Photo: adam79 (flickr)

While much of the world fights off fears of recession and economic stagnation, Brazil is having an economic boom. Its steady growth rate has boosted production and has made Brazil a major player in world trade.

Brazil owes much of its new fortunes to its two burgeoning industries of oil and ethanol. Oil was recently discovered off the coast of Rio de Janeiro, which is estimated to hold between 5 to 8 billion barrels. With this discovery, foreign investment has been flooding into the country as companies try to develop this profitable resource.

Brazil is also experiencing windfall profits in agriculture, specifically ethanol. In recent months, ethanol has been gaining in popularity as an alternative fuel because of the rising cost of oil. Brazil, as the world’s largest exporter of ethanol, has greatly benefited from this rapid increase in demand.

Brazil has always been known as a country with a wide gap between the very rich and very poor. In 2004, the bottom 10 percent of the population received only 0.9 percent of the national income while the top 10 percent received 44.8 percent, according to UNDP figures. A surprising and encouraging result of this economic boom is that the gap is finally growing smaller. From 2001, Brazil's income inequality gap has shrunk 6 percentage points as more people moved up into the growing middle class. As well, the bottom 10 percent of Brazil’s population had a 58-percent increase in their incomes.

The government has played a major role in creating this upward social mobility in Brazil. They have used Brazil’s growing wealth to increase funding for many social programs for the poor. One very popular program is the Bolsa Familia program that gives small subsidies to help the poor buy food and other necessities. Millions of people have used this program to help lift themselves out of poverty and destitution. Once they are on a stable financial footing, many Brazilians have then applied for a microloan to start some type of business so that they can have a good income in Brazil's expanding formal economy.

These programs have been very successful in improving Brazil’s entire society. From 2004-2006 the number of people under the poverty line — earning less than $80 a month — decreased by 32 percent.

These statistics, at least, suggest that more and more Brazilians are able to climb out of poverty.

Photo: tlindenbaum(flickr)

Ethanol is traditionally used as an additive to fuel, but these days it's adding to something else: the global food crisis.

Most U.S. ethanol is made from corn, the kind used mostly to make high fructose corn syrup and feed for cattle, chicken and pigs. But it seems a little backwards to devote farmland for fuel when 850 million people go hungry each year, according to the UN, a number expected to increase by 100 million in the next year.

Ethanol’s supporters say its environmental, economic and strategic benefits outweigh any link to higher food prices. The National Corn Growers Association claims greenhouse gases could be reduced by 20 percent if we used 15 billion gallons of ethanol in our cars.

As an example of its economic advantages, The Ethanol Factbook reported that:

A 40 million gallon per year ethanol plant will cost about $60 million to build, expand the economic base for the local economy by $110 million, generate an additional $19.6 million in household income, improve the tax revenue for the state and local governments by $1.2 million, and create nearly 700 permanent jobs.

Ethanol also has the potential to reduce our dependence on Middle East oil.

Moreover, many supporters of ethanol claim that there is a very low correlation between higher food prices and expanded ethanol production. “We think that there are enough elements in current commodity markets that resulted in very high prices for cereals and oilseeds and even they would have happened without this hike in biofuel production," says Loek Boonekamp, a top official for the Organization for Economic Cooperation and Development.

Skeptics of ethanol say there’s not enough research to prove ethanol is beneficial in the long term, that it is fueling increased food prices, and that ethanol-based corn subsidies help only a select few.

Environmental benefits? Two independent scientists looked at the footprint of biofuels, and found that the way they’re produced creates more harm than good to the environment.

The latest World Bank assessment on rising food prices found that, “Almost all of the increase in global maize production from 2004 to 2007 (the period when grain prices rose sharply) went for biofuels production in the U.S.” The New York Times reported that, “Work by the International Food Policy Research Institute in Washington suggests that biofuel production accounts for a quarter to a third of the recent increase in global commodity prices.”

What’s clear is that ethanol is coming under fire — even here in the U.S. — as food prices climb higher. According to the L.A. Times, “Some analysts believe the rapid increase in the use of corn to make ethanol has left the nation with little room to maneuver through weather-related disasters in the Midwest.”

Economist Jeffery Sachs argues we should redouble scientific efforts to grow biofuels on land that’s not suitable for growing food, but that we should end our “misguided” corn-to-ethanol subsidies. “Farmers hardly need them given world demand for food and feed grains.”

Regardless of the arguments for and against, ending ethanol subsidies may not provide the immediate assistance that UN Chief Ban Ki-Moon is looking for to solve the world’s food crisis. It would take time for farmers to convert their fields. Factor in growing time, and the impact might not be felt for several seasons.

But some experts say the conversions would take immediate pressure off food prices. At the very least, this is a great opportunity for the U.S. government to show that they are concerned about the world's growing hunger.

Photo: dziner (flickr)

Like all policy choices, the decision of many developed nations to pursue greater conversion to ethanol and biodiesel has consequences. But who will pay the costs associated with the shift from oil to biofuels? According to the World Politics Review, it is the world’s poor who are going to suffer the most from the negative effects of the biofuel craze.

With current technology, almost all of the biofuel produced today has to be made from corn or soybeans. Though other sources may be able to be used in the future, the use of crops for fuel rather than food has already taken a huge toll on the world’s commodity markets. The UN Food and Agriculture Organization estimates that global food prices have increased by almost 40 percent in the last year, after a 14 percent increase in 2006. Many countries have introduced price controls on staple foods, and food shortages have caused protests in Pakistan and Indonesia.