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August 22, 2019

Brazilian State of Santa Catarina imposes a 17% Tax on Ag Inputs

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

As the farmers in the state of Santa Catarina in southern Brazil prepare to start planting their 2019/20 crops, the governor of the state just made their financial outlook much more uncertain. He has signed into law a 17% tax on agricultural inputs starting on August 1st with the only exception being veterinary medicines and vaccines.

The Agriculture and Livestock Federation of Santa Catarina (Faesc), is vehemently opposed to a tax that goes from 0% to 17% just as farmers are preparing to plant their crops. With seed, fertilizers, and chemicals now more expensive, there are concerns that it could disrupt crop production and it might even delay the onset of planting especially for corn. The tax will be charged even if the input was purchased before August 1st because the tax must be paid when the farmer picks up the product at his co-op or retail store.

They feel it will disrupt the domestic market and exports by increasing costs, lowering productivity of both crops and livestock operations, increase unemployment, increase food costs and the cost of living, and force farmers to purchase their inputs from other states that do not charge the tax.

Faesc sent an open letter to the governor decrying the increase in tax from 0% to 17% stating that it will destabilize the all-important agricultural sector of the state that is responsible for 30% of the state's gross domestic product and 50% of the state's employment.

In their letter to the governor, they emphasized how important agriculture is to the state and national economy with the following statistics stating that Santa Catarina is:

  • Major producer and exporter of pork in Brazil.
  • Second major producer and exporter of chicken.
  • Major producer of apples and onions.
  • Second major producer of rice, tobacco, pears, peaches and garlic.
  • Major exporter of honey.
  • Fourth largest producer of milk and grapes.
  • Fifth largest producer of wheat.

Brazil's livestock production is concentrated in southern Brazil where there is a chronic shortage of corn forcing it to be brought in from central Brazil at a high transportation costs. This tax could result in even lower corn production in the region due to the higher costs of production making the corn shortage in the region even worse.