Brazil and India will exchange information on policies and practices for initiatives through a joint working group formed by representatives of Foreign Affairs and Ministries of Energy

The government of Brazil published this week the final version of the memorandum of understanding with India to develop joint initiatives in the bioenergy industry. The objective of the agreement is to seek cooperation for the energy sector, such as the production of ethanol, biodiesel, biokerosene, biogas and other fuels, such as biomass.

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“The US is a big player in the ethanol sector and doesn't want to open its market. Meanwhile, India is also very strong in this sector and, in order not to have one more competitor, Brazil decided to align itself with it to try to have more weight in the definition of prices, technologies and possible negotiations in the future”, informed Vinícius Vieira, professor from FGV's Institute of International Relations, to the BNamericas portal.

Initially, countries will exchange information on policies and practices for bioenergy initiatives through a joint working group formed by representatives of Foreign Affairs and Ministries of Energy. The deal was first announced in January, when Brazilian President Jair Bolsonaro visited India.

India is already a long-standing partner of Brazil in the energy sector. The countries had a similar technological cooperation agreement for mixing ethanol in transport fuels between 2002 and 2004. In the first half of 2020, the Asian country was the third largest importer of Brazilian oil, buying 1,9Mt (million tons), behind China and USA.

“For Brazil, it is very interesting to have an alternative to China in Asia. If Brazil is aligned with India on ethanol and other broader energy issues, the country will be able to negotiate better with the Chinese,” said Vieira.

Brazil should become one of the five largest oil exporters in the world due to the expected rapid growth in production from the pre-salt region in the coming years, and India could be an important ally in this context. India is the third largest consumer of oil in the world and its consumption growth rate is expected to surpass that of China in the mid-2020s, according to information from the International Energy Agency.

India's energy demand on the rise

Furthermore, India's energy demand could double by 2040, with electricity demand potentially tripling as a result of increased ownership of electrical appliances. Meanwhile, Brazil's energy production potential for the coming decades is far greater than expected consumption, according to its 2050 energy expansion plan, which was put out for public consultation earlier this year.

The Asian country also has extensive experience in refining initiatives and, earlier this year, Reuters reported that the Indian group Essar could be interested in making bids for assets in Petrobras' divestment program for refineries.

Brazil could also benefit from India's investment capacity, taking advantage of the ideological similarities between Bolsonaro and Prime Minister Narendra Modi. The Indian power transmission company Sterlite has already been making inroads into the Brazilian market, participating in recent tenders.

“I believe Bolsonaro realized that, in addition to his affinity with Modi, with regard to right-wing populist styles, there are also affinities in the way they deal with the market. Today India has a lot of money, with high savings rates, so it has capital to invest and Brazil needs foreign investment,” said Vieira.

Strengthening relations with India is also seen as a strategic geopolitical move by the South American nation amidst the China-India conflict and the US-China trade war. “Brazil has a great opportunity to explore these conflicts and momentarily align itself with India as a guarantee of possible tensions”, added the FGV professor.

*Source: BNamericas