Brazil sets 0% import tax on Thai paddy rice
In September 2020, the Brazilian government decided to reduce the import tax on rice products to 0% from 11 September to December 31. This decision was a measure to propel the recovery of the Brazilian domestic market from the effects of the COVID-19 pandemic.
Impact of COVID-19 on the domestic rice market
As a result of COVID-19, Brazil has suffered from domestic price hikes, inflation and economic instability, evidenced by the Brazilian real losing 30% of its value in 2020. Brazilian producers had harvested a contracted 2018/19 rice crop which was then heavily depleted as a result of COVID-19 related retail purchases. The country has, therefore, been left in need of additional rice supplies to meet the local demand and to lead to a decrease in domestic rice prices for financially strapped consumers.
Shift in import markets
Over the past 5 years, Brazil has imported its paddy and milled rice from MERCOSUR countries Argentina, Paraguay, and Uruguay. However, export prices have sharply risen recently in Paraguay and Uruguay, which has led Brazil to consider importing from alternative countries such as the US and South Asian countries such as Thailand. As a result of all these factors, in September Brazil placed a duty-free tariff for up to 400K tons for all regions outside of MERCOSUR countries, removing the previous 10% tariff that was placed for paddy rice and the 12% tariff that was attached to white rice, until December.
Source: ITC Trademap
Impact on paddy rice imports from Thailand
Previously, Thailand was subjected to a 12% tax on rice exports to Brazil, therefore the 0% tax is set to immensely benefit Thai exporters and improve export volumes to Brazil. This has already been evidenced by Thai rice export numbers to Brazil in September and October 2020, where exports reached 26,163 tons, a drastic improvement from the 433 tons that was exported to Brazil during the same period in 2019. Imports have been forecast at 850K tons, which is the highest level since 2003.
Source: USDA
Market Outlook
In 2021, South American rice prices are expected to decline following new-crop supplies and the duty-free tariff rate quota is also expected to end by December 31 2020. As a result, it is expected that the traditional MERCOSUR countries will resume to meet the Brazilian rice demand in the coming year. This may lead to a contraction in paddy rice imports from Thailand and other regions outside MERCOSUR due to the increased competition from Argentina, Paraguay and Uruguay, along with the return of the 10% import tariff on paddy rice.
Sources:
Vinanot. “Brazil imposes a 0% import tax on paddy in Thailand's favor.”
AgFax. “Global Markets: Rice – Brazil Seeks Imports from Non-Traditional Suppliers.”
The Nation Thailand. “Brazil's zero tariff on rice imports to benefit Thai exporters.”
AgFax. “Rice Market: Brazil Looks to Temporarily Suspend Tariffs on Imports.”