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Brazil cuts import tax on wheat

24 May 20222 min reading

The Brazilian government cut import tariffs for several categories of goods, focusing on food staples in an attempt to reduce consumer inflation. Import tariffs on beef, chicken, corn, wheat flour, wheat, cookies and bakery products were eliminated through the end of the year.

Brazil has been battling persistent consumer inflation ever since the onset of the COVID-19 pandemic. In 2021, the country’s annual consumer price inflation index (IPCA) hit a six-year high of 10.06 percent. By April 2022, the 12-month IPCA hit above 12 percent. Last month saw the largest monthly jump in inflation in 26 years. According to the government statistics body IBGE, inflation is mostly driven by food and fuel prices. The inflationary pressures have been reinforced by the disruption in commodity trade and supply chains on the account of the Russian invasion of Ukraine.

Imported wheat typically accounts for more than half of Brazil’s domestic consumption, making Brazil the fourth-largest global wheat importer. Over the last five years, Brazil imported between 6 and 7 million metric tons of wheat annually. Imports are typically comprised of about 90 percent wheat, and 10 percent of wheat flour. Over the last two seasons, Brazil saw a decrease in import demand on the account of an uptick in production, coupled with a steep devaluation of the domestic currency. As the Brazilian real depreciated, dollar-dominated wheat imports became more expensive and reduced mills’ willingness to make large purchases unless necessary to meet demand.

Most of Brazil’s wheat and wheat flour imports are duty-free purchases from Mercosur-neighbor Argentina, which supplied over 70 percent of Brazil’s wheat imports in 2020/21. Uruguay and Paraguay were responsible for about 6 percent each of Brazil’s imports, while the United States accounted for 5 percent of Brazil’s imports.

 


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