The cash will be used to fund research and development of a new strain of sugarcane that is resistant to droughts, a vaccine for rabies and other projects. By stepping up biotechnology funding, Brazil, the world's biggest grower of sugarcane, oranges and coffee and home to 20 percent of the planet's living species, aims to meet rising demand for its crops and reduce its dependence on foreign pharmaceutical makers such as Pfizer Inc.

``Brazil has strengths that put us in a position to stand out in these new technologies,'' said Lula, 61, during a ceremony today at the presidential palace in Brasilia. ``This policy will help Brazil realize this potential.''

Biotechnology has already fueled growth among Brazil's ethanol makers. Developments of more-productive cane strains over the past three decades have helped the South American country make the biofuel at a lower cost than gasoline. Ethanol cost Brazilian distributors about 37 percent less on average than gasoline last week, the National Petroleum Agency said.

A Cheaper Biofuel

In the U.S., where ethanol is made from corn, the biofuel has cost an average of 99 cents a gallon more than gasoline for the past nine years, according to data compiled by Bloomberg.

By developing new cane varieties, Brazil could expand crops into areas that don't receive as much rain as the center-south region of the country, where 85 percent of Brazil's sugar and ethanol are produced. The government will research new species that can better withstand droughts that are frequent in the northeast, where cane productivity is 30 percent lower than in the center-south, the Agriculture Ministry said.

The government may fall short of its investment goals in coming years because spending controls and bureaucracy in the Latin American country slow the allocation of earmarked funds, said Anderson Galvao, director at Celeres, a Uberlandia, Brazil- based crop forecaster and researcher.

``Brazil needs to speed up the process of actually sending funds that have been approved for research,'' Galvao said in a telephone interview from Cuiaba, Brazil. ``Often, approved funds never reach the researchers.''

Approval Delays

Delays to get innovations approved by the biotech regulator may also thwart Brazil's efforts, Galvao said. The lower house has passed a bill that aims to speed up the process by allowing approvals through a simple majority at the regulator's board instead of the current two-third majority. Senators haven't voted on the bill yet.

Brazil is home to a 10th of the world's genetically modified crops. Planting in Brazil of biotech crops, including herbicide-tolerant soybeans, jumped 22 percent last year to 11.5 million hectares, the non-profit International Service for the Acquisition of Agri-biotech Applications, or ISAAA, said last month.

Brazil, where about 40 percent of the population lives on less than $2 a day, is also seeking to boost domestic production of generic drugs that cost less than medicines made by major pharmaceutical makers such as Pfizer, the world's largest.

Copy-Cat Drugs

Pfizer is among drug companies losing revenue to copy-cat versions of its medicines worldwide. The New York-based company last month said it would eliminate 10 percent of its workforce because of competition from cheaper generic drugs.

Lula also created a group to help the 1,700 existing biotech research organizations communicate more easily, Trade Minister Luiz Fernando Furlan said.

``Brazil has the full potential to attract all the resources needed in this area,'' Furlan said at a news conference in Brasilia yesterday. ``What we lack is the connection of good projects with the funds.''

To contact the reporters on this story: Katia Cortes in Brasilia at kcortes@bloomberg.net ; Carlos Caminada in Sao Paulo at at ccaminada1@bloomberg.net