January 30, 2008

 

Brazil's wheat users doubts government will cut import tax

 

 

As the Brazilian Foreign Trade Council meets to discuss the possible reduction or removal of a 10-percent wheat import tax, the country's wheat industry doubts the decision will go its way, said Luiz Martins, president of the Wheat Industry Trade Association of Sao Paulo and chief executive of Anaconda, a wheat milling company.

 

Martins said Argentina's decision Tuesday to remove restrictions on wheat exports from that country could affect the Brazilian government's decision to allow wheat into Brazil from other countries, mainly from North America, without the import tax.

 

Argentine wheat enjoys tax-free entry into Brazil because it is a member, along with Brazil, of the Southern Cone Common Market, or Mercosur.

 

Other nations that want to export wheat to Brazil have to pay at least 10 percent  per tonne extra in trade tariffs.

 

The Trade Ministry is meeting to discuss removing that tariff, a longstanding request by the Brazilian wheat industry following Argentina's decision in early 2007 to stop new wheat exports in order to curb inflation at home.

 

Argentina is Brazil's chief wheat supplier. Brazil consumes more than 10.5 million tonnes of wheat annually and harvested just over 4 million tonnes in 2007.

 

On Tuesday, Argentina agreed to export another 2 million tonnes over the next five months.

 

Elcio Bento, a wheat market analyst at the Safras & Mercado agribusiness consultancy, said Argentina's announced volume would not all be heading to Brazil.

 

Bento expects that maybe 1.2 million tonnes would go to Brazil and the rest would be shipped to other markets.

 

Moreover, Martins estimated that Brazil needs at least 4 million tonnes between now and the next harvest, which occurs here in late September.

 

The local wheat industry has been pressuring the government to remove that tax for months, in order to make importing wheat from other countries more affordable. Tuesday is their chance.

 

"The government will reduce the import tariff today or face food inflation tomorrow," Bento said.

 

Martins was less hopeful. "The Argentina decision changes a lot," he said. "We want to see the tax removed because even with this good news today about Argentina, Argentina will not have enough wheat to supply Brazilian needs."

 

The council's decision will be made available around 2000 GMT Tuesday (January 30, 2008).