Mar 24, 2022

Brazil Suspends 18% Import Tax on Ethanol Until End of 2022

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

Brazil announced that the import tax on ethanol and six types of food products would be suspended immediately until the end of 2022 to combat fuel and food inflation. By eliminating the 18% import tax on ethanol, the government estimates that it would reduce the price of gasoline at the pump by R$ 0.20 per liter or approximately $0.15 per gallon.

The National Corn Ethanol Union (Unem) is concerned that if ethanol imports increase, it could infringe on the expanding corn ethanol sector, which is the leading clean fuel in Brazil. It could also result in job losses in rural areas and reduce the price farmers receive for their corn. Unem is concerned that increased ethanol imports could jeopardize the R$ 6 in investments recently announced for new corn ethanol plant construction and expansion of existing facilities.

In 2013/14 there were 37 million liters of ethanol produced from corn in Brazil. That is expected to reach 4.2 billion in 2022/23 and 10 billion by 2030/31. Most of the corn ethanol facilities in Brazil are in the center west region especially in the states of Mato Grosso, Mato Grosso do Sul, and Goias.

Analysts in Brazil feel this announcement was more of a political statement than a serious attempt to control domestic inflation. It is unlikely that Brazil will increase their imports of ethanol because the price of imported ethanol with zero tax would still be 8% to 10% higher than locally produced ethanol.

The food products included in the tax suspension included coffee which had a tax of 9%, , margarine (10.8%), cheese (28%), pasta (14.4%), sugar (16%), and soybean oil (9%). According to the government, these are the food items that are the most responsible for rising domestic food prices.