Brazil expected to introduce tariff-free wheat import quota from 2020

Sao Paulo | Reuters — Brazil is expected to introduce a tariff-free wheat import quota of 750,000 tonnes per year starting from 2020, the president of the country’s wheat industry group Abitrigo, Rubens Barbosa, said on Tuesday.

Brazil announced the opening of the tariff-free wheat import quota earlier this year in connection with President Jair Bolsonaro’s visit to the United States, with U.S. wheat producers seen as potential beneficiaries, although the policy has yet to be instituted.

Despite being an agricultural powerhouse, Brazil is a net importer of wheat, since its tropical climate still poses challenges to expand wheat cultivation. It imported 3.9 million tonnes this year through July.

Argentina is the main supplier, due to the proximity and also because as a member of the Mercosur trade bloc it does not pay the 10 per cent import tariff that countries outside the bloc need to collect.

“We are following the issue closely in the economy ministry. By the end of the year the quota should be regulated, which will allow for imports from any country at zero tariff,” Barbosa told reporters at a press conference in Sao Paulo.

Along with the U.S., other potential beneficiaries would be Canada and possibly Russia, despite the higher transportation costs from the Black Sea region to Brazil, compared with those from North America.

Brazilian wheat millers visited Russia recently to get to know that wheat better.

But they are working to clear a restriction imposed by the Brazilian government for the Russian wheat, one that states the product must be processed at mills located near ports.

It is a precautionary measure to reduce the possibility of a disease entering Brazilian agricultural areas.

The 750,000-tonne, tariff-free quota is seen as helping mills to reduce sourcing costs.

The Brazilian government has been moving to liberalize trade. It pushed for Mercosur to close two trade deals recently, including a landmark agreement with the European Union.

Over the weekend, Brazil approved a tariff-free ethanol import quota of 750 million litres, which is seen benefiting the United States.

— Reporting for Reuters by Roberto Samora; writing by Jake Spring and Marcelo Teixeira.