Brazil, Venezuela vie for energy clout

Brazilian President Luiz Inácio Lula da Silva goes north; Venezuelan President Hugo Chávez heads south.

Both have energy at the top of their agendas. President Lula da Silva, on a five-country tour of Mexico and Central America, is promoting alternative fuels, particularly ethanol. President Chávez, on a four-nation tour of South America, pledges new deals for gas plants and bonds purchases, all paid for with petrodollars.

A coincidence? Perhaps. But their trips this week underscore, at least symbolically, aspirations to lead Latin America, with energy driving their politics.

"There is a lot of jockeying, a lot of dancing going on these days, on both Chávez's and Lula's part," says Michael Shifter, the vice president for policy at the Inter-American Dialogue in Washington. "There is this subtext of oil versus biofuels, what Chávez has and Lula is trying to promote."

Analysts disagree on the size of the rift between the two leaders who, while friendly, have rival visions. Still, one thing is for sure: it's never been better to be an energy-needy nation in the region.

Lula's trip has been dominated by energy pacts: Earlier this week, he traveled to Mexico – Mexico and Brazil boast the region's largest economies – where he and Mexican President Felipe Calderón agreed to develop technology for oil and gas exploration and cooperate on biofuels expansion. Brazil, with its sugar cane-produced ethanol, wants to position itself as a global biofuels leader.

Lula later traveled to Honduras, Nicaragua, and Panama, announcing plans for biofuel deals. He was expected to inaugurate an ethanol-dehydration plant in Jamaica.

Biofuels vs. gas and oil

Chávez's trip has also focused on energy deals. In Argentina, he bought $500 million in Argentine bonds, and promised to buy another $500 million by the end of the year, and to invest in a regasification plant for liquid natural gas. His other stops included Uruguay, Ecuador, and Bolivia, where he said he would sign a series of energy pacts.

But unlike Lula's trip, which is focused ultimately on domestic goals, analysts say, Chávez's tour is a renewed bid to transform the region, particularly by countering US influence.

"Lula is a man of good instincts. But he doesn't have a vision … He doesn't think in terms of deep-seated transformations," says Larry Birns, director of the left-leaning Council on Hemispheric Affairs in Washington. "Chávez, on the other hand, has nothing but vision.

"The difference between the two," he continues, "is that for Lula, it's basically doing business as usual, it's kind of day-to-day stuff, without ... gigantic reforms, whereas for Chávez, every day is a transformative day."

Divisions between two leaders

Chávez and Lula share the stated goal of regional integration, particularly on the energy front. But divisions have surfaced lately.

When President Bush visited Brazil in March to herald cooperation on ethanol production, Chávez – as well as Cuban leader Fidel Castro – quickly condemned the effort, saying that ethanol production, particularly from corn, will drive up food prices and hurt the poor.

Venezuela's efforts to join the South American trade bloc Mercosur have also been stalled. While Argentina and Uruguay have approved Venezuela's entry – a stance reiterated by Argentine President Néstor Kirchner during Chávez's visit this week – lawmakers in Paraguay and Brazil have yet to do so. Some have questioned Chávez's commitment to democracy in the wake of Chávez's refusal to renew the license of an opposition-aligned television station, Radio Caracas Television, or RCTV.

For many analysts, Chávez's tour is a reminder to South America that he still wields great power.

"He has recently become a little irritated," says Mr. Shifter, particularly with the positions of Brazil and Paraguay on RCTV. "He is wanting to remind South American governments that they should be grateful ... that he has lots of money and is prepared to spend it, and they need it." This is particularly true as they face an energy crisis during an unusually cold winter.

While there is some distance between Chávez and Lula these days, no one expects a confrontation between two leaders who depend on each other economically and politically.

Riordan Roett, director of the Latin America Studies Program at the Johns Hopkins School of Advanced International Studies in Washington, D.C., says that Lula is taking a more low-key approach to positioning his country than is Chávez.

"Brazilians are much more moderate; they are trying to contain Chávez as much as they can," he says. "The Brazilians are taking a very realistic long-term perspective on their role in the hemisphere."

But while analysts view his trip as more pragmatic, it also had diplomacy at its roots too. Lula spoke of boosting trade ties with Mexico so that Latin America "could begin to dream of a stronger integration." Many observers see this as an effort to counter Chavez's role in the region. Lula spoke of boosting trade ties with Mexico so that Latin America "could begin to dream of a stronger integration." Many observers see this as an effort to counter Chávez's role in the region.

"There is a lot of pressure in Brazil on him to become a regional power, and there has been a lot of frustration with the protagonism of Chávez," says Shifter. "Lula has been pretty eclipsed. He sees an opportunity in Mexico and Central America, because of ethanol, and the biofuel initiative, to establish himself as a Latin American leader."

Small countries gain

The biggest winners in this jockeying are countries with high poverty rates that are typically ignored because of their small economies. Nicaragua, for example, is benefiting mightily from the attention of both.

On his trip this week, Lula offered technical assistance to Nicaraguan President Daniel Ortega to produce ethanol. The pledge comes in the wake of promises by Chávez, during trips earlier this year, to provide the Central American nation with cut-rate oil and a new refinery, which would be the biggest on the isthmus.

• Wires services were used in this report.