Will rice, beans and meat become cheaper with tax cuts?

Will rice, beans and meat become cheaper with tax cuts?

The federal government decided to cut the import tax for products such as rice, beans and beef. The measure is valid until December 31 of this year and, according to the Ministry of Economy, aims to make products cheaper.

However, experts consulted by the UOL say that prices will not decrease with the tax cut, as Brazil imports a small volume of these three items.

One of the few foods that Brazil imports in large quantities is wheat, which was not taxed in the last announcement by the federal government. José Augusto Castro, executive president of AEB (Brazilian Foreign Trade Association), says that 70% of the volume consumed in Brazil comes from abroad.

“The planted area is insufficient. Brazil tries to increase production, but has not yet succeeded. This wheat comes from Argentina, Russia, Ukraine, the United States and Turkey,” says Castro.

rice is left

“We don’t expect any price impact at first. Rice, which is an important item for the basic food basket, has surplus production in Brazil. The country is trying to export this surplus, because we don’t have enough domestic demand”, says Lucílio Rogério Aparecido Alves, a professor at Esalq-USP (School of Agriculture Luiz de Queiroz of the University of São Paulo).

Alves says that the surplus added to a drop in the price of rice caused imports in the last 12 months (until April this year) to fall 25.5% compared to the previous year.

The small volume of rice that is imported comes from Paraguay — which means that there is no import duty, because the country is part of Mercosur, and there is an agreement within the bloc to exempt the tariff.

Imported beans volume is less than 5%

Marcelo Lüders, president of Ibrafe (Brazilian Institute of Beans and Pulses), says that most of the imported beans come from Argentina (a country that is also part of Mercosur). The country imports 3% to 4% of what is consumed in the domestic market.

“By reducing the import tax, there is no effect on the price of beans. We have nowhere to bring the product from”, says Lüders.

The carioca bean, which stands out in the country’s consumption, is not consumed in other parts of the world, so everything that is planted in Brazil is for the domestic market. That’s why producers try to plant the exact amount for consumption, because if there’s leftovers, you can’t export to other countries.

In fact, the world has been looking to Brazil and Latin America in hopes that countries will produce more beans in the coming years to meet growing global demand.
Marcelo Lüders, president of Ibrafe

The specialist says that the incentive to plant the grains is low and that the producers end up preferring to use the spaces for soy and corn plantations.

“There is more attractiveness for the producer to plant soybeans or corn, for example, because he knows what the sale value will be, since there is the future price. Beans don’t have that, so production is left to the taste of the market, without stimulus, and this is causing our production area to decrease every year”, says Lüders.

Meat production is enough

In the case of meat, the price should not change with the cut in the import tax. Brazil is the world’s third largest exporter, second only to the United States and Australia, according to Castro.

Today, reducing the tax to encourage the import of beef does not have an impact on the price, because we have nowhere to buy it. It could backfire, because if Brazil buys from the United States or Australia, prices will rise even more due to the increase in global demand.
José Augusto Castro, Executive President of AEB

Brazil imports a small volume of beef from Uruguay, but the domestic market is mainly supplied with local production. Uruguay is also part of Mercosur and there is no import tariff.

How to lower prices?

For Fabrizio Velloni, chief economist at Frente Corretora, an effective way to reduce food prices would be to cut domestic taxes on basic food items.

“We have cascading taxes that make products more expensive. Taxation rates should be zeroed for basic basket items. This would generate a tax issue, but it would take the pressure off the basic food basket”, says Velloni.

Guilherme Rosenthal, co-founder of Vixtra, a fintech for foreign trade, says that the drop in taxation can be advantageous for products that are more imported, such as construction materials.

“This import tax reduction is valid for imported items, but it makes national items face greater competition and hold the price”, says Rosenthal.

Government says measure will make imported goods cheaper

In a note, the Ministry of Economy says that the government’s objective with the tax reduction is to reduce the economic consequences of the pandemic and the war in Ukraine.

“The government’s objective is to alleviate the negative economic consequences resulting from the covid-19 pandemic and the war in Ukraine – mainly the high cost of living of the lower-income population and the increase in the cost of companies that consume these inputs in production and commercialization of goods”, says the ministry in a note published on its website.

The ministry also says that the measure “will contribute to the cheapening of almost all imported goods, directly benefiting the population and companies that consume these inputs in their production process”.

Source: Uol

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