July 26, 2017 / 12:22 AM / 2 years ago

Brazil trade chamber postpones decision on taxing U.S. ethanol

BRASILIA (Reuters) - Brazil’s foreign trade chamber, Camex, has put off for 30 days a decision on whether to impose a tariff on ethanol to curb a surge in imports from the United States, a senior government official who attended the meeting told Reuters on Tuesday.

The official said the chamber, which represents eight ministries, could not agree on applying a tariff and may consider quotas for imported ethanol at its next meeting.

The quota proposal to be discussed would allow in 500,000 tonnes a year of ethanol and apply a 20 percent tariff on any imports beyond that quota, the source said.

Brazil’s ethanol producers, particularly in the northern of the country where most of the U.S. ethanol is entering the market, had demanded tariff protection and the Agriculture Ministry recommended a 17 percent levy.

But other ministries opposed the tariff as bad for relations with the United States because it could bring retaliation by a U.S. government that is keen to protect U.S. businesses.

Brazilian ethanol imports jumped 330 percent in the first half of 2017 compared to the same period a year earlier to around 1.3 million cubic meters, mostly from the United States.

Experts say a tariff would destroy the free trade in ethanol that the United States and Brazil established in 2009.

“Today’s delay is another opportunity for cooler heads to prevail and for Brazil not to turn its back on market-driven competition,” said Joel Velasco, Latin America expert at Albright Stonebridge Group.

Velasco, who led the efforts of Brazil’s sugar cane lobby UNICA to expand biofuel markets in the last decade, said a quota would undermine the credibility that the sugarcane industry has built around the world.

Writing by Anthony Boadle; Editing by Jonathan Oatis and Bill Trott

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