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June 9, 2015

Mato Grosso Debating 9% Export Tax on Soybeans and Corn

The legislators in Mato Grosso are debating the possibility of imposing a 9% export tax on soybeans, corn, and cotton that is exported out of the state. At a time of severe budget cuts in Brazil, the lawmakers are eying the agriculture sector as a way to make up for the funding shortfall. Needless to say, producers in the state are vehemently opposed to the idea of an additional tax when commodity prices are at some of the lowest levels in years.

According to Otavio Celidonio, the director of the Mato Grosso Institute of Agricultural Economics (Imea), the proposed tax would lower prices for producers in the state the equivalent of placing the state an additional 600 kilometers further away from Brazilian ports. Mato Grosso producers already have the highest cost of production in Brazil and the highest cost of transportation due to the distance to Brazilian ports. Adding on a 9% tax would make the situation even worse.

Agriculture accounts for 50% of the Grosso Domestic Product in the state and placing an additional tax on exports would impact the state's economy and be especially hard on small and medium size producers who are already struggling with low prices. If the tax is implemented, Celidonio feels it would accelerate the process of larger producers buying out smaller producers in order to maximize their labor and administrative cost and increase their purchasing power for inputs. The proposed tax is still in the debate stage and no timetable has yet been determined for a final decision.