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ASA - American Sugar Alliance : Brazil’s Sugar Subsidies Expand as Global Prices Fall

08/05/2013 | 04:01pm US/Eastern
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August 5, 2013                                                                                                                                                                            202-271-5734 (cell)

From the International Sweetener Symposium: 

Napa, Calif.-Patrick Chatenay, a UK-based researcher and global sugar policy expert, quantified more than $2.5 billion a year in hidden Brazilian sugar subsidies earlier this year. But since his study was published in April, Brazil has announced additional incentives to help its sugar and sugarcane ethanol sector, he said today at the 30th International Sweetener Symposium.

"There is a clear acceleration in Brazilian subsidization," Chatenay said. "The sugarcane ethanol usage mandate was recently increased, $450 million a year in new tax rebates were just announced, and the country also will make available $3 billion in new soft loans for 2013."

These "soft loans" are a popular way for Brazil to subsidize its sugar sector, according to Chatenay. Such low interest loans are often coupled with future debt forgiveness to have the same effect as a direct subsidy.

In addition to loans and debt forgiveness, Chatenay said Brazilian producers benefit from some direct government payments, ethanol blending requirements, favorable interest rates and preferential treatment under the tax code. He estimates that without these subsidies, Brazilian producers would need a 15 percent rise in sugar prices to achieve the same financial returns.

"Brazil controls roughly half of all global sugar exports, and this dominance was made possible by three decades of massive government support," Chatenay explained. "Brazil openly advocates for trade liberalization, and as such, it should be held to account for the government support it gives its own industry."

In addition to increasing its subsidies, Brazil has increased its sugar production this year, and global prices have fallen as a result.

U.S. sugar producers have called on Brazil and other foreign countries to end market-manipulating programs. Under a "zero-for-zero" sugar policy, which was introduced by Rep. Ted Yoho (R-FL) in June, there would be a global subsidy ceasefire where all countries, including America, would halt government sugar policies and compete on a true free market.

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For more information about the International Sweetener Symposium, visit www.sugaralliance.org



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