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President George W. Bush’s statement at the G8 summit that “the United States, for national security reasons and economic security, needs to diversify away from fossil fuels” reflects a growing understanding that America’s dependence on foreign oil must be curbed. What is less clear from the President’s remark is how he plans to achieve this goal. If the President is looking for a way to do so, other than the much touted hydrogen economy, he should take a look at Brazil’s track record.

During the 1973 Arab oil emabrgo Brazil was importing almost 80 percent of its fuel supply. Within three decades it cut its dependence by more than half. How did they do it? During that period the Brazilians invested massively in sugar based ethanol industry to the degree that about a third of the fuel they use in their vehicles is domestically grown. They also created a fleet that can accommodate this fuel. Half the new cars sold this year in Brazil will be flexible fuel vehicles which can run on any combination of gasoline and ethanol. Bringing hydrocarbons and carbohydrates to live happily together in the same fuel tank has not only made Brazil close to energy independence but has also insulated the Brazilian economy from the harming impact of the current spike in oil prices.

Though the Brazilian economy is only one-eighth the size of the U.S. economy it does not preclude a similar model from being implemented in the U.S. Two things should happen to make this a reality. First, we need most new cars sold in the U.S. to have fuel flexibility. For an auto manufacturer adding such capability costs as little as $150 per car. All it takes is a fuel sensor and corrosion-resistant fuel line. In fact, GM, Ford and Volkswagen have already produced millions of them.

The bigger challenge is expanding the ethanol market, making ethanol a nationwide fuel rather than a fuel additive or a boutique fuel used by mid-Westerners. Unfortunately, this can never happen as long as the main source of ethanol in the U.S. remains corn or grain sorghum. These crops yield far less sugar per acre than the Brazilian sugar cane, and the refining uses substantial amounts of energy. Making ethanol from cellulosic biomass like switch grass and rice straw might become feasible in the future but for now the only ethanol source that makes economic sense and that does not require the 51 cents per gallon tax subsidy is sugar.

Yet, in the U.S. corn growers and major refiners such as Archer Daniels Midland oppose imports of sugar ethanol and got their champions in Congress to impose a stiff tariff of 54 cent per gallon of imported ethanol to protect the local industry. This policy is also supported by the American sugar-cane industry which has little incentive to diversify into ethanol production because import quotas support U.S. sugar prices far above world levels. As a result of this protectionism only 240 million gallons of ethanol can enter the country tariff-free, a drop in the bucket in comparison to the 3.4 billion gallons produced last year and even smaller in comparison to the 8-billion-gallon by 2012 mandate proposed by the Senate Energy Bill.

Unfortunately, the U.S. is not able to ramp up sugar production to the level allowing it to implement the Brazilian model. Sugar needs a long, frost-free growing season and expansion of sugar growing beyond Florida, the Gulf Coast and Hawaii is limited. Which is why Latin American and Caribbean countries like Brazil, Guatemala, Panama, Trinidad and Tobago, Costa Rica, El Salvador and Jamaica-- all low-cost sugar cane producers--could become key to U.S. energy security. Brazil, the Saudi Arabia of sugar, already exports half a billion gallons of ethanol a year and could flood the U.S. with cheap ethanol. “We don't want to sell liters of ethanol, we want to sell rivers," Brazil’s Agriculture Minister Roberto Rodrigues said last year.

Expanding U.S. fuel choice to include biofuels imported from our neighbors in the Western Hemisphere also has geopolitical benefits. Sugar is now grown in 100 countries many of them are poor. Encouraging these countries to increase their output and become fuel suppliers could have far-reaching implications for their economic development. By creating economic interdependence with its neighbors in the Western Hemisphere the U.S. will guarantee that those poor countries do not fall on the side of China which has already set its sights on Western Hemispheric energy supplies and has built the world’s largest ethanol plants. As its appetite for energy grows China will vie for Western Hemispheric ethanol and strengthen its foothold in America’s backyard.

This is one reason it is good that the Central American Free Trade Agreement (CAFTA) was approved by Congress. Among other things CAFTA can be a vehicle for Caribbean countries to export to the U.S. alternative fuel that can displace Middle East oil. Blocking ethanol imports to the U.S. to protect corn growers is tantamount to blocking gasoline imports to protect domestic gasoline producers. Such policy makes ethanol protectionists in Congress the biggest obstacle for full-scale deployment of ethanol in the U.S. Any reasonable policymaker should see beyond the local political expediencies and recognize that we’d be far better off importing ethanol from the Caribbean than oil from Saudi Arabia.