Rio de Janeiro.– Brazil and Japan will sign in October a pact presaging Japanese investments here of $1.29 billion to produce sugar-based ethanol fuel as well as biodiesel, the Brazilian Agriculture Ministry announced Thursday.

The Japan Bank for International Cooperation will provide the funds to finance the Brazilian Energy Agriculture Program, according to an official communique released by the ministry.

"The investment of the resources must begin in April 2007," said Agriculture Minister Roberto Rodrigues after a meeting with representatives of the Japanese bank.

Tokyo's decision to invest in biofuels in Brazil resulted from a proposal presented in the Japanese capital by Rodrigues in May 2004, the report noted.

"I took to the JBIC the idea of agro-energy as a model for change in the manufacturing of liquid fuels," he said.

Brazil is the world's main producer and exporter of ethanol derived from sugar cane.

With an annual production exceeding 17 billion liters (4.4 billion gallons), the South American giant is also a huge user of the fuel in its transportation sector.

Last year, Brazil exported 2.6 billion liters (685 million gallons) of ethanol, mainly to the United States and Europe.

The government is also pushing a program to produce biodiesel, diesel fuel derived from oilseeds such as ricin, soybeans, sunflowers and palm.

A study conducted by Brazilian and Japanese experts on the biofuel sector in Brazil and discussed on Thursday includes goals and strategies for the production and marketing of ethanol and biodiesel, the socio-economic impacts of those activities and the responsibilities of the public and private sectors in the matter.

For Japan, the compensation for the investments will be the ability to replace imports of petroleum products with agricultural derivatives, a shift that is important in ecological terms and represents a beneficial diversification of that country's dependence on liquid fuels, Rodrigues said.

A new Japanese law obliges fuel suppliers to include 3 percent ethanol in each liter of gasoline, a requirement that generates additional demand for the alcohol of 1.8 billion liters (475 million gallons) per year and has forced Tokyo to seek to guarantee itself supply sources.