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August 31, 2020

Brazil Backtracks on Suspension of Tariffs for Imported Grain

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

There was a lot of confusion in Brazil last week concerning the potential suspension of the 8% tariff on imported soybeans, corn, or rice from countries outside the Mercosul Trading Block. Earlier last week, the Brazilian government announced that they might temporarily suspend the import duties on soybeans, corn, and rice from countries outside of the Mercosul Trading Block starting in September. At the time, the Brazilian Minister of Agriculture stated that Brazil will not run out of these commodities before the 2020/21 harvest and that this was just a precautionary step should additional imports be needed.

A strong pushback to this proposal started immediately from various commodity groups and members of the Brazilian Congress who argued that removing the tariff would lower the prices paid to Brazilian farmers. The pressure worked and by the end of last week, the Minister of Agriculture had tabled the proposal stating that she had never authorized it and that the proposed tariff suspension was still in the "study phase."

A member of the Brazilian Congress from the state of Rio Grande do Sul stated that the Minister's decision was prudent and that a decision to suspend tariffs must be based on concrete facts. He stated that Brazil is not running out of these commodities and if the government wanted to control inflation, which was one of the reasons given for the suspension of the tariffs, it could be accomplished by other means.

There was also immediate pushback from agricultural officials from the other members of the trading block. They stated that Brazil does not have the authority to unilaterally suspend the tariff and they pointed out that any adjustment to the tariff must be negotiated with and agreed upon by the other members of the trading block.

The fact is that the domestic supplies of all three of these commodities is tight in Brazil due to increased export volumes thus far in 2020. As a result of the tight supplies, the domestic prices for soybeans, corn, and rice are at record levels or close to record levels in Brazil.