ethanol imports

Bolsonaro’s goodwill gesture for Trump, Brazil thinks of extending tariff-free quota for US ethanol imports

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As per an internal report, a day after the lapse of Brazil’s tariff-free import of ethanol from US, the Latin American country might be considering reimposition of the zero-import duty provision in US ethanol import for 90 days. Some believe that Brazilian leader Jair Bolsonaro is contemplating over the idea as a goodwill gesture to US President Donald Trump, especially with US elections looming ahead.

The officials from either side are believed to be holding discussions towards the reimposition of non-tariff quota of 750 million liters (198 million gallons) per year which expired on Monday. Expiration of the quota implies that US ethanol producers would have to pay 20% duty, unless the Brazilian government decided otherwise.

Brazilian President’s soft corner for US might be good for its bilateral ties but has sparked a lot of criticism back home. Brazil’s powerful sugar cane milling lobby is pressuring the government to drop a tariff-free import quota for ethanol which has expired already.

“The final decision will be made by President Bolsonaro,” Renato Cunha, the head of the sugar and ethanol producers’ association Novabio. He added, “In the future, can reopen negotiations that include US sugar tariffs,” said Cunha, who also heads the cane association of the northeast region (Sindacucar).

It’s believed to be a hard decision for Bolsonaro to take as his final take on free-quota’s continuation or dropping involved risk of angering his own population or his close ally Trump. Brazilian domestic ethanol industry that has already been badly hit by a pandemic-driven slump in market consumption and demands has all its hopes on their leader. Besides, in reinforced free-quota it would also invite wrath of country’s Brazilian lawmakers, connected with farming, which strongly opposed extension of deal unless the US made any offer in return such as opening its market to Brazilian sugar imports.

“A 20% tariff would absolutely erode the volume that we’re sending to that market,” Renewable Fuels Association president Geoff Cooper said in an interview last week.

But what Bolsonaro fear for his nation was any from of retaliation from US — including tariffs on other products imported from the South American country. Trump raised the prospect of retaliatory tariffs, declaring in August that “as far as Brazil is concerned, if they do tariffs, we have to have an equalization of tariffs.” Brazil also gets preferential treatment under US Generalized System of Preferences, which the Trump administration already ended for India and Turkey last year.

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