Brazil reaches out to Biden amid ethanol trade spat

Source: By Bill Tomson, Agri-Pulse • Posted: Sunday, January 24, 2021

Ethanol plant

Brazil is making it known that the Bolsonaro administration wants a strong relationship with the U.S., but the friendly words come amid rising U.S. frustration over Brazil’s ethanol tariffs.

“We are sure that, from this day on, with the presidential inauguration, our governments will have the opportunity to know each other better, undo misunderstandings and work together,” said Brazilian Ambassador to the U.S. Nestor Forster in a statement issued by the embassy.

But there was no misunderstanding when Brazil reimposed a 20% tariff on U.S. ethanol in December, according to U.S. government officials. The two sides had been negotiating for months to reinstate a quota that would allow the U.S. to ship 198 million gallons of ethanol annually to enter Brazil duty-free.

Brazil was asking for increased access to the tightly guarded U.S. sugar market in return for reestablishing the tariff-rate quota, but the demands were too high and the talks failed, according to sources who asked not to be named because of the sensitivity of the issue. U.S. negotiators essentially resigned to the failure.

So U.S. ag leaders turned to the incoming Biden administration.

“We urge the incoming Biden Administration to respond with strength, leveraging various U.S. government tools and authorities to make it clear that protectionist barriers are unacceptable,” the U.S. Grains Council, Growth Energy, Renewable Fuels Association and National Corn Growers Association, said in a statement after the 20% tariff went back in place.

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The U.S. exported a small amount of ethanol to Brazil in November while the quota was temporarily in place to give negotiators time to talk, but there hasn’t been any sales since the negotiations broke down.

The U.S. exported above-quota ethanol to Brazil in 2017 and 2018 – meaning that it was subject to the 20% tariff because the quota was already filled – but that was an unusual situation, says Brian Healy, director of global ethanol market development for the U.S. Grains Council. Sugar prices in Brazil were high enough to make U.S. ethanol attractive to importers despite the 20% tariff.

Brazil – once the largest foreign market for U.S. ethanol – is not buying any of the fuel, but Forster is stressing the need for strong bilateral ties.

“On the Brazilian side, we have been reaffirming our willingness to further deepen our ties with the United States, within a long-term perspective, so as to promote the well-being of our peoples and to strengthen democracy, prosperity and security,” he said.

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