June 15, 2006

Brazil studying removal of wheat import tax

Brazil's government will likely remove a 10 percent import tax on wheat in August in response to concerns that the country's no. 1 supplier, Argentina, will restrict wheat exports, Brazilian business daily Valor Economica reported Wednesday (Jun 14).

Brazil imports more than half of the wheat it consumes.

Brazil is basing its decision on the assumption the Argentina government will soon enforce a limit on its wheat exports in order to control local inflation.

The newspaper reported that the government's economic team agreed the tax had to be cut in order to curb local wheat price increases should Argentina wheat become more costly and less plentiful in Brazil.

The Brazilian Wheat Industry Association (Abitrigo) estimates an increase of about 30 to 40 percent in the price of wheat, which would end by pushing up wheat flour prices in Brazil by about 30 percent, the group said in a note last month.

Brazil currently imports its wheat tariff-free from Argentina due to trade rules in the Southern Cone Common Market (Mercosur) a regional trade group which includes Brazil, Argentina, Paraguay and Uruguay.

Brazil has been expected to increase its wheat imports this year to 6 million tonnes, a jump of 13 percent from the 5.3 million tonnes registered last season.