Amid claims that imports have an unfair advantage over domestic fertilizers, the Brazilian government is considering imposing a 3 percent tariff on all imported fertilizers. Alexandre Mendonca de Barros, an economist at MB Agro, told local media that the duty is needed to even the playing field.
A fertilizer company official told Green Markets that the problem is not the imports, but rather the interstate tax system in Brazil. If an NPK blender imports an item, as long as it is commercialized in the Brazilian state listed on the shipping documents, it is exempt from the interstate tax.
“It makes more sense,” this official said, “for the government to give a similar tax break to Vale or Petrobras instead of imposing a new tax.”
The imposition of an import duty would raise the price of imports to a level that would make them more expensive for the blenders when compared to local production. It would, said local businesses, strengthen the market hand of Vale and Petrobras. And that scares local distributors and farm groups.
“I’d rather deal with five Russian fertilizer companies than deal with Petrobras,” Leonn Lauterbach, a manager of local distributor Fluid Fert, told Reuters. He added the tax could encourage Petrobras and Vale to raise prices. In the end, Lauterbach said, small companies such as his will be squeezed out.
The Brazilian fertilizer industry complains that northern hemisphere fertilizer producing countries such as Russia and Canada use their winter, or off season, to “dump” their products in Brazil below production value.
Representatives of “northern hemisphere” companies would not comment on the record, but they did reject out of hand – in very colorful and unprintable language – the claim that any material was being dumped in Brazil.
If the government does impose the new tariff, one fertilizer official wondered how the Vale products from Peru and Argentina will be treated.
“Will they be hit with the 3 percent, or treated as a domestic product?” he wondered.
The current government has declared that achieving fertilizer self-sufficiency is a vital national goal. Earlier this year the government leaned on Vale to step up its mining operations in potash and phosphate rock.
In the end, the goal is to dramatically reduce the need to import fertilizer in the next five years.
One trader noted that if the new tariff is imposed, the cost will be passed on to the local distributors and farmers. This, he said, would cause another set of problems for the government when the farmers demand more subsidies to help them cover the new cost of inputs.
Political observers say the tariff may not be considered until the new government takes office in January.