Demonstrators upset with Bush's visit here worry that the president and his biofuels buddy, Brazilian President Luiz Inacio Lula da Silva, really have visions of an OPEC-like cartel on ethanol.
But Bush and Silva said increasing alternative fuel use will lead to more jobs, a cleaner environment and greater independence from the whims of the oil market.
"It makes sense for us to collaborate for the good of mankind," Bush said at Silva's side, after touring the depot, a maze of tanks and pipelines on the outskirts of the city. "We see the bright and real potential for our citizens being able to use alternative sources of energy that will promote the common good."
The agreement itself was signed Friday morning by Secretary of State Condoleezza Rice and her Brazilian counterpart, White House spokesman Gordon Johndroe announced.
Bush's focus on energy during the first stop on his eighth trip to Latin America comes as the president's nemesis in the region, Venezuelan President Hugo Chavez, is using his vast oil wealth to court allies. Bush's trip also includes visits to Uruguay, Colombia, Guatemala and Mexico.
At the fuel depot, Bush, sporting a white hard hat, fingered sunflower seeds and stalks of sugar cane and sniffed beakers of clear ethanol and yellowish biodiesel. For decades, Brazil has been making ethanol with sugar cane grown and nearly eight in 10 new cars already run on the fuel.
Biodieseal is a newer endeavor, and Silva said that by 2010, 5 percent of Brazilian biodiesel will come from abundant plants, such as African palm, cottonseed, sunflower and castor beans, grown by smaller farmers.
"It will help create jobs and income in the poorest regions of our country, especially in the northeastern semi-arid region, where many of these crops are actually native," Silva said at the facility, which his operated by a subsidiary of the state-owned Petrobras.
One roadblock in the Bush-Silva ethanol talks is a 54-cent tariff the United States has imposed on every gallon of ethanol imported from Brazil. Bush says it's not up for discussion.
The president did not see any of the protesters that have marred his visit during his hourlong motorcade to the depot. But about a half mile from where he spoke, a large white balloon hung in the sky emblazoned with blue letters that said "Bush Out" in both English and Portuguese. The "s" in Bush was replaced by a swastika.
Anti-American sentiment runs high in Brazil, especially over the war in Iraq. Bush missed the demonstrations earlier in the day protesting his visit.
Riot police fired tear gas and beat some protesters with batons Thursday after more than 6,000 people held a largely peaceful march through the financial district of Sao Paulo. About 4,000 agents, including Brazilian troops and FBI and U.S. Secret Service officers, are working to secure Bush's stay in the city that lasts about 24 hours.
Authorities did not disclose the number of injuries in Thursday's demonstrations, but Brazilian news media said at least 18 people were hurt and news photographs showed injured people being carried away.
Undeterred by protests, Bush says he's on a goodwill tour to talk about making sure the benefits of democracy -- in the form of better housing, health care and education -- are available to all Latin Americans, not just the wealthy.
But Bush's trip was widely viewed locally as a way for the president to counter the influence of Chavez, the populist ally of Cuba's Fidel Castro who has led a leftward political shift in Venezuela, Ecuador, Bolivia and Nicaragua.
To taunt Bush, the Venezuelan leader will speak at an "anti-imperialist" rally in a soccer stadium on Saturday in Buenos Aires, Argentina, about 40 miles across the Plate River from Montevideo, where Bush will meet Uruguay's president, Tabare Vazquez.
"I believe the chief objective of the Bush trip is to try to scrub clean the face of the (U.S.) empire in Latin America. But it's too late," Chavez said before the rally in an interview with Argentine state television Channel 7. "It seems he's just now discovered that poverty exists in the region."
In Sao Paolo, protesters carrying stalks of sugar cane spoke against the ethanol agreement. They warned that increased ethanol production could lead to social unrest because most operations are run by wealthy families or corporations that reap the profits, while the poor are left to cut the cane with machetes.
"Bush and his pals are trying to control the production of ethanol in Brazil, and that has to be stopped," said Suzanne Pereira dos Santos of Brazil's Landless Workers Movement.
Bush said he wants to work with Brazil, a pioneer in ethanol production, to push the development of alternative fuels in Central America and the Caribbean. He and Silva also want to see standards set in the growing industry to help turn ethanol into an internationally traded commodity.
In January, Bush called on Congress to require the annual use of 35 billion gallons of ethanol and other alternative fuels such as biodiesel by 2017, a fivefold increase over current requirements. To help meet the goal, the president also is pushing research into making ethanol from material such as wood chips and switchgrass.