Brazil likely to extend zero-tariff ethanol imports past U.S. election, sources say

Source: By Lisandra Paraguassu and Rodrigo Viga Gaier, Reuters • Posted: Thursday, September 10, 2020

BRASILIA/RIO DE JANEIRO, Sept 9 (Reuters) – The Brazilian government is planning to extend a tariff-free ethanol import program for three months, two sources with knowledge of the matter told Reuters on Wednesday, a measure likely to please U.S. President Donald Trump’s administration.

Brazil allowed a non-tariff quota for imports of 750 million liters per year of ethanol to expire at the end of August, resulting in U.S. producers having to pay a 20% tariff.

The tax-free import quota was used entirely by U.S. corn ethanol producers, who were happy to sell to Brazil to make up for low sales due to the coronavirus pandemic.

Trump, who faced pressure from the U.S. farm lobby, had urged renewal of the non-tariff quota. Some ethanol-producing states are key to Trump’s re-election bid.

But Brazil’s farm sector has lobbied President Jair Bolsonaro’s government to drop the ethanol import quota or get something in return.

On Tuesday, Bolsonaro and Agriculture Minister Tereza Cristina met with representatives of the sugar-ethanol sector, said the sources, who requested anonymity to discuss private matters.

The president told the industry representatives about the plan to extend the ethanol quota for three months, while the representatives asked the government to initiate talks regarding Brazilian sugar exports, which face significant tariff barriers in the United States, the sources said.

The three-month extension is designed to keep the U.S. election from exerting too much influence on any trade negotiations, one of the sources said.

Ethanol negotiations between Brazil and the United States have become politically controversial in recent months. In late July, local media reported that Todd Chapman, the U.S. ambassador to Brazil, told Bolsonaro the nation could help Trump get re-elected if it cut import barriers to U.S. ethanol, an account the ambassador denied.

Brazil’s Agriculture Ministry, the president’s office and Unica, Brazil’s largest sugar-ethanol trade group, did not immediately respond to requests for comment on Wednesday. (Reporting by Lisandra Paraguassu in Brasilia and Rodrigo Viga Gaier in Rio de Janeiro. Writing and additional reporting by Gram Slattery. Editing by Leslie Adler.)