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Brazil approves quota, 20% tax on ethanol imports

Brazil approves quota, 20% tax on ethanol imports

BRASILIA: Brazil’s government on Wednesday approved taxing ethanol imports for the first time in a move to protect local producers from growing shipments coming from the United States. Brazil’s Agriculture Ministry said the country’s foreign trade chamber, known as Camex, approved a 20-percent tax on ethanol imports, which would be levied only after a tax-free quota of 600 million liters per year is surpassed.

Brazilian ethanol imports reached 1.29 billion liters in the first half of the year alone, a 330 percent increase compared to the same period a year earlier. The move ends an agreement between the world’s two largest ethanol producers, Brazil and the United States, to keep global ethanol trade free of taxes to boost the industry. It should add to trade tensions between the two agricultural powerhouses. The U.S. government in June banned imports of Brazilian fresh beef over food quality issues. The tax will be in place for two years, and after that would be reevaluated. The measure enters into force after publication in the official gazette, which should happen in coming days. “The decision will give us some short-term relief,” said Eduardo Leao, a director at Brazil cane industry group Unica. He said there is a “structural surplus” of ethanol in the U.S. due to restrictions in traditional export markets for the country, such as China and Europe. “Brazil became the destiny of that surplus,” Leao said.