Brazil
Government raises ethanol import quota without tariff for 12 months. Measure benefits US
The counterpart would be the opening of the American sugar market, according to the association of sugarcane producers.
09/02/2019 - 14:07 / Updated on 09/02/2019 - 21:15
BRASILIA - In an action that directly benefits US exporters, the government has decided to increase by 150 million liters the amount that can be imported from duty-free ethanol. Ordinance of the Ministry of Economy, published in an extra edition of the Official Gazette last Saturday, expands from 600 million to 750 million liters the quota of ethyl alcohol that can be bought abroad without the import tax of 20%. Anything beyond this limit will be taxed with the tax.
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The measure will last for 12 months and responds to a request made by US President Donald Trump in March this year, during President Jair Bolsonaro's visit to that country. The Brazilian government, however, signaled that expansion could be allowed as long as Washington opened the US market for Brazil's sugar - which has not yet happened.
The previous quota was valid until last Friday, but there was no consensus within the government as to whether or not the amount should be increased. The Ministry of Agriculture was against, but lost the dispute to the Ministry of Economy.
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markets Coincidentally, the decision to increase the untaxed import tax quota was taken the day after a meeting with Trump at the White House, the Minister of Foreign Affairs (Ernesto Araújo), the advisor for international affairs of the Presidency of the Republic (Filipe Martins) and Deputy Eduardo Bolsonaro (PSL-SP).
markets Coincidentally, the decision to increase the untaxed import tax quota was taken the day after a meeting with Trump at the White House, the Minister of Foreign Affairs (Ernesto Araújo), the advisor for international affairs of the Presidency of the Republic (Filipe Martins) and Deputy Eduardo Bolsonaro (PSL-SP).
Data from the Ministry of Economy show that the increase in quota is not a determining factor for import growth. This is because domestic ethanol consumption is 1.7 billion liters, while the authorized surplus volume is 150 million liters. Along with Brazil, the US is the leading exporter of fuel.
From January to July this year, Brazil imported $ 490 million of ethanol - about 790 million liters. The US was the main supplier market, with 93% of supply.
From January to July this year, Brazil exported $ 449 million - the equivalent of about 700 million liters - of ethanol. USA (66%) and South Korea (17%) were the main destination markets.
Brazil exports sugarcane alcohol, which emits less pollutants during the production cycle. It buys corn ethanol, considered less technologically and environmentally advanced.
REACTION
The measure displeased ethanol producers in the Northeast. The President of the Sugar and Alcohol Industry Union of Pernambuco State (Sindaçúcar-PE), Renato Cunha, stressed that, about two years ago, the government made a commitment to producers that the exemption of 600 million liters per year would not be renewed.
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He recalled that the US did not give back to Brazil to sell more sugar to American refineries.
- We do not even have a logical explanation of why this increase of tax waiver of about $ 270 million. Can not understand what account the federal government did to give up tariff of 750 million liters, or more than 25% of what it was in the past cycle - said.
Unica's president, Evando Gussi, considered the measure positive, because the pressure from the United States was to totally liberate the market without fees.
According to the executive, in the agreement discussed with the Americans, the Brazilian government would have placed as conditions to continue the full opening of the market that they also review the current taxation on Brazilian sugar and make it mandatory to add 115% of ethanol to gasoline, against current 10%.
- There was a great pressure from the Americans for a broader opening of the market. But this opening of the Brazilian market needs to be accompanied by the opening of the Brazilian sugar market, which is very restricted, Gussi said.
According to the executive, while the ton of sugar costs $ 266, the surcharge to export to the US market is $ 339 a ton. Another point considered important by alcohol producers for the total opening of imports in the country, is the United States make mandatory the mixture of 15% of methanol in gasoline.
According to the president of Unica, with that, of a surplus of American ethanol of 5 billion liters annually annually, the American market would need another 20 billion liters of product per year.
"Any new talk about increasing quotas for ethanol exports to Brazil presupposes that we need to talk about these two issues (taxation of sugar and ethanol surcharge on US gasoline)," said Gussi.
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