IF PRESIDENT Bush needs an example of how ethanol can help to reduce dependence on oil imports, he need look no further than Brazil.

What Saudi Arabia is to crude oil, Brazil is to ethanol — the environmentally friendly, renewable fuel of which it is the largest producer. Brazil makes the fuel by fermenting and distilling its sugar cane crop, the biggest in the world, and then using the liquid to fuel a rapidly increasing proportion of its transport fleet.

Seven out of ten of all new cars sold in Brazil are now "flex-fuel" — owners can fill them with either ethanol or petrol.

Computer sensors inside the engine then decide what will be the best mix of whatever is in the tank for optimum performance. Finding ethanol is not a problem either — nearly all petrol stations have pumps selling pure ethanol, while all regular petrol sold at the pumps is a mix called "gasohol", a blend that contains up to 25 per cent ethanol.

Ethanol produces a cleaner burn than petrol, resulting in less pollution and smog, and is kinder to the engine, leaving it requiring less maintenance.

One downside is that ethanol engines require about 25 per cent more fuel per mile than petrol. But in Brazil this is offset by ethanol's lower cost. It typically sells for 50-66 per cent of the price of petrol.

The country first turned to ethanol as a substitute for petrol after the oil crises of the 1970s. Its ethanol industry has saved it billions of dollars since then. It is also better for the environment because ethanol consumes carbon dioxide as part of its production cycle.

Besides sugar cane, ethanol can be produced from corn, sugar beet, wood chips, grass and organic waste.

Recent technological developments have overcome many of the disadvantages traditionally associated with ethanol, such as its corrosive effect on tanks and engines. Fuel injection starters and the computer sensors in the flex-fuel engines mean that starting cars in the cold is no longer an issue and the sluggish performance of ethanol-run engines is a thing of the past.

Now Brazil's main challenge is meeting demand. The country aims to double ethanol production by 2013. Already demand is straining supplies between harvests, causing ethanol prices to rise to close to where petrol becomes more cost effective for flex-fuel drivers. But the industry says expanding sugar cane plantations and new ethanol plants will quickly solve the problem.