UPDATE 1-Brazil ends ethanol import tax exemption, U.S. disappointed

Roberto Samora and Marcelo Teixeira
·2 min read
1

(Updates with U.S. ethanol industry, Brazil minister comments)

By Roberto Samora and Marcelo Teixeira

SAO PAULO, Feb 2 (Reuters) - The Brazilian government has ended a tax exemption on imports of fuel ethanol, with immediate effect, according to the country's agriculture ministry, a move that would mostly hurt the United States ethanol industry.

Ethanol imports will now have to pay a tax of 16% to enter Brazil until the end of the year. That levy will rise to 18% in 2024, the agriculture ministry said in a statement late on Wednesday.

The United States is a regular supplier of ethanol to Brazil's Northeast region and the tax change could impact that trade.

"We were disappointed by Brazil's decision to restore a high tariff rate on U.S. ethanol imports," Geoff Cooper, president and chief executive of RFA (Renewable Fuels Association) said on Thursday.

"As the world's two largest ethanol producers and consumers, the U.S. and Brazil should be setting an example of cooperation and open markets - not protectionism and market interference," he said.

Brazil's former administration of right-wing President Jair Bolsonaro had suspended the ethanol import tax last March as part of other measures to reduce fuel costs, that included scrapping federal taxes on local sales of all fuels.

The decision by the new administration of leftist President Luiz Inacio Lula da Silva to end the exemption on ethanol imports comes only days before he travels to the United States to meet President Joe Biden - the first meeting between the two since Lula took the post early in January.

RFA said it hopes the issue will be addressed in the meeting at the White House.

Brazil Agriculture Minister Carlos Favaro said the tax exemption was hurting the local sugar and ethanol industry and had to end.

The ministry said Brazil mills have the capability to supply ethanol to the whole country without the risk of prices going up. (Reporting by Marcelo Teixeira; Editing by Bill Berkrot)