Brazil Suspends Import Tariffs as Exports to China Create Shortages at Home

Brazil suspended its import tariffs on corn and soybeans, as well as processed byproducts, in an attempt to alleviate shortages and high prices. The suspensions only apply to countries not in the Mercosur trade bloc of South American countries, which are not subject to the tariffs.  

The country’s booming exports to China have left Brazil’s domestic industries, from soybean crushers to pork and poultry producers, scrambling to secure enough supply. This comes as La Niña-induced drought is bringing about delays in planting and damaging crop prospects as Brazil enters a new growing season. As a result, Brazil faces shortages of corn and soybean inventories at a time when all-time lows in the Brazilian real make imports even more expensive.   

Brazil suspended its 8% import tariff on soybeans, soybean meal, and soy oil through Jan. 15, 2021, and on corn until March 31, 2021. A tariff on rice imports also was recently suspended until the end of this year. 

China has ramped up its imports of corn and soybeans as it rebuilds its hog population in the wake of the African swine fever epidemic and has set targets to achieve self-sufficiency in animal proteins. Brazil, as the world’s biggest producer of soybeans and No. 3 producer of corn, has profited from China’s growing import demand, particularly as the historically weak Brazilian real results in higher revenue in domestic currency terms. 

It’s unclear how much the tariff suspension will boost Brazil’s domestic supplies, since imports need to be purchased using sharply devalued Brazilian reals. Imports have already increased—to 477,365 tonnes of soybeans so far in 2020 versus 117,284 tonnes in the same period of 2019. Most of that has come from neighboring Paraguay and Uruguay, fellow Mercosur members and far smaller producers than Brazil. 

A suspension of tariffs implies that imports from outside the Mercosur region will be needed going forward to fill the supply gap until new harvests occur in 2021.

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