Since August 2017, the U.S. ethanol industry has been in intense discussion with the
Brazilian government about the country’s ethanol tariff rate quota (TRQ). On Dec. 14,
2020, the trade relationship became bitter when Brazil applied a 20 percent duty on all
U.S. ethanol imports as a measure to protect the domestic industry after a difficult year
of limited demand due to COVID-19 mobility restrictions.
Following the tariff imposition, the U.S. Grains Council undertook several strategies to
reverse the decision, including approaching possible in-country partners that could share
trade interests. The Council found a strategic ally in the Brazilian Association of Fuel
Importers (ABICOM), which represents 85 percent of the fuel supply market.
After various meetings, ABICOM agreed to work with the Council to develop a formal
request to the Brazilian Foreign Trade Chamber (CAMEX) to drop the 20 percent duty
on U.S. ethanol imports as the best solution to alleviate supply shortages and the
resultant price inflation in the north and northeast regions of Brazil.
ABICOM believed that by zeroing the duty, the country would guarantee a reduction of
R$ 0.18 per liter ($0.15/gallon) in the gasoline prices at the pump. Once presented with
the plea to the CAMEX, the Council helped the association reach the ministries involved
in the decision to present its arguments, supported by its close relationship with key
contacts in the Brazilian government. As a consequence, the Ministry of Economy
performed its own analysis of the information provided, confirming the reductions in price
($0.16/gallon) and driving the Brazilian government to eliminate the duty on all ethanol
imports until Dec. 31, 2022, as a measure to reduce inflation in the country.
Brazil is one of the largest ethanol export destinations for the U.S. ethanol industry, with
76 million gallons of ethanol purchased in 2021, valued at $153 million. With the
elimination of the duty, it is expected that import levels will grow by 20 percent in 2022
over 2021 import levels.
In the past five years, the Council has invested $43,146 of USDA Market Access
Program (MAP) funds and $116,431 of Agricultural Trade Promotion (ATP) program
funds to support increased U.S. ethanol exports of $125.2 million, creating a return on
investment (ROI) of $958 for every $1 invested.