Brazil Extends Ethanol Import Tariff Suspension

Agriculture, Brazil, Business News/Analysis, Federal Agency/Executive Branch, Marketing/Market Forces and Sales, Opinions, Policy

December 30, 2022

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by Jesse Allen (American Ag Network) There’s good news on the export front this week for the U.S. ethanol industry. Brazil is again suspending its 20 percent ethanol import tariff–a suspension Renewable Fuels Association head Geoff Cooper says the U.S. industry feared would expire in January.

“And so, we were pleasantly surprised when the Brazilian government announced that it’s going to be extending the suspension of that tariff through the end of January 2023. So that gives us another month, gives us some breathing room to keep talking, and it allows USDA and our friends at USTR to continue working with the Brazilian government to try and find a permanent resolution.”

Which Cooper says could be helped by Brazil’s new incoming Lula government. But Cooper says Brazil’s years old and inconsistent tariff has made a big dent in U.S. ethanol exports.

“I think it was 2018 when we exported more than 500 million gallons of ethanol to Brazil. And I think, this year, we’ll probably do something around 60 to 80 million gallons by the time this year is all said and done.”

RFA wrote to former U.S. Trade Ambassador Robert Lighthizer during the Trump years to urge retaliation against what it said then was Brazil’s “path of protectionism and obstruction.” That, while Brazil continues to enjoy duty-free access to the U.S. market. READ MORE

Brazil Exempts US Ethanol From Import Tax Through March 2023 (Bloomberg)

Brazil Extends Suspension of Ethanol Import Tariffs (Hoosier Ag Today/NAFB News Service)

BRAZIL SUSPENDS ETHANOL TARIFF (Brownfield Ag News)

Brazil’s fuel tax exemption to last 1 year for diesel; 2 months for gasoline, ethanol (Reuters)

The ethanol industry now has breathing room to continue talks with Brazil (RFD TV; includes VIDEO)

Brazil extends import tariff suspension for ethanol (Ethanol Producer Magazine)

Lula’s Extension of Fuel-Tax Break Hits Shares of Ethanol Makers (Bloomberg)

Lula’s fuel tax U-turn likely to hit sugar, ethanol industry (Reuters)

Lula’s Inauguration: The Challenges Facing Brazil’s New President (Wilson Center)

Excerpt from Bloomberg: Brazil’s federal government extended the import tariff exemption on US ethanol through March 2023, according to a decision from the Economy Ministry published in the official gazette on Monday.

“This is a positive first step toward a permanent resolution and it sends a favorable signal to the marketplace,” Geoff Cooper, CEO of the US Renewable Fuels Association, says in a note
- The group expects to work with incoming President Luiz Inacio Lula da Silva to restore free ethanol trade between both nations, he says
Brazil government also granted import tariff exemption to dozens of products, according to the resolution. READ MORE

Excerpt from Bloomberg: Renewal of tax exemption seen hurting profitability at mills; Adecoagro shares slump as much as 10% in New York on Tuesday — Shares of Brazilian sugar and ethanol producers are getting pummeled at the start of the year after President Luiz Inacio Lula da Silva decided to extend a tax break on a variety of fuels.

Sao Paulo-based Sao Martinho SA has plunged 12% to become the worst-performing name on the 89-member Ibovespa equity index in January, while Raizen SA, a joint venture between Royal Dutch Shell and Brazilian conglomerate Cosan SA, is down over 9% in the first two sessions of 2023.

…

The weakness has been fueled by the president’s move to extend the tax break for gasoline and ethanol for two months, in a nod to consumers. The exemption has the majority of local mills selling ethanol below production costs, according to an industry group. The decision also reduced to zero certain taxes on diesel, biodiesel, liquefied petroleum gas and natural gas until Dec. 31.

Lula’s measure will likely depress revenue for some companies, Citigroup Inc. analyst Gabriel Barra wrote in a report. READ MORE

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