ASUNCION (Reuters) - Paraguayan farmers are hoping to cash in on a low-calorie sweetener being made by the Coca-Cola Co. from a native plant long prized by indigenous people in the poor South American country.

A farmer holds a crop of Stevia in Asuncion July 24, 2007. Stevia, a shrub whose extracts are up to 300-times sweeter than sugar but without the calories, has been the sweetener of choice among Paraguay's Guarani Indians for centuries. Paraguayan farmers are hoping to cash in on the low-calorie sweetener being made by the Coca-Cola Co. from a native plant long prized by indigenous people in the poor South American country. REUTERS/Jorge Adorno

Stevia, a shrub whose extracts are up to 300-times sweeter than sugar but without the calories, has been the sweetener of choice among Paraguay’s Guarani Indians for centuries.

Coca-Cola announced in May it would team up with U.S.-based agricultural company Cargill Inc. to produce a stevia-based sweetener, and Paraguay’s farmers hope demand for stevia will increase even though it is not approved as a food additive in the United States or the European Union.

“Little by little, the world’s realizing this product has benefits and can revolutionize the food industry,” said Juan Carlos Fischer, the head of the Paraguay Stevia Chamber, a trade group representing producers.

The Paraguayan government said recently it had offered Coca-Cola an arrangement to be a leading stevia provider and opened up a $2 million credit line to producers to encourage farmers to increase production.

Officials say they want to expand stevia plantations from the current 3,200 acres to 123,500 acres

by 2014.

“This is going to have a tremendous impact on our agricultural sector because it’s going to create jobs,” said Industry and Commerce Minister Jose Maria Ibanez.

“SWEET HERB”

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As some low-calorie and diet drinks face criticism for contributing to obesity, Coca-Cola plans to use its new stevia-based sweetener called Rebiana in soft drinks marketed to health-conscious consumers initially in Asian and South American markets.

Most non-diet soft drinks in the United States are sweetened with high-fructose corn syrup, a cheap alternative to cane sugar. Both are frequently blamed for adding inches to waistlines.

Lower-calorie sodas are made with artificial sweeteners like saccharin, aspartame and sucralose -- the last two more commonly known as NutraSweet and Splenda.

Stevia must win regulatory approval in the United States and the European Union, where it can be used as a dietary supplement but not as an additive in food and beverages.

Still, Paraguayan producers are hopeful Coca-Cola’s involvement will signal its eventual approval.

Stevia has long been available in several South American and Asian countries. Although native to Paraguay, China is the world’s biggest producer of the herb.

The shrub became known to Europeans in 1899 when Swiss biologist Moises Bertoni discovered it in the Paraguayan forest. Long before that, the Guaranis used it, calling stevia “the sweet herb.”

Some Paraguayan scientists say stevia has shown medical benefits including aiding in diabetes treatment.

Faced with possible Chinese competition, farmers say weather conditions in Paraguay enable it to have nearly five harvests a year, compared to two in China.

But some warn the country must move quickly to help farmers move from small production capacities to something more efficient and export-oriented.

“We’ve got real potential, but we’ve got work to do,” said farmer Ruben Sanbrai.