COMMODITIES: Brazil’s Sugar Faces Huge Barriers on Global Market

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Aug 24 1998 (IPS) - Brazil’s sugar, which faces high market barriers in the industrialised North and even in neighbouring Argentina, is the biggest symbol of the protectionism faced by the country’s exports.

For that reason the product is Brazil’s “absolute top priority” in free trade negotiations with the rest of the Americas and the European Union (EU), said Foreign Minister Luiz Felipe Lampreia.

A 153-percent duty, to be reduced gradually to 123 percent by the year 2001, blocks access by Brazilian sugar to the United States.

In the EU, the barrier is even higher – a 320-percent tariff, which is to be cut to 147 percent.

And in Japan, Brazilian sugar pays a duty that more than triples its cost, designed to bring its price into line with domestic production.

Even within the Southern Common Market (Mercosur), which links Brazil, Argentina, Uruguay and Paraguay, sugar is the only product totally excluded from free trade.

Argentina charges an average duty of 20 percent, and its parliament vetoes any agreement to lift it as long as Brazil maintains subsidies that it supposedly grants through its fuel alcohol programme.

Nevertheless, Brazil’s sugar stood out in the first half of the year as the fastest growing of the country’s leading exports.

Sales of raw sugar amounted to 461 million dollars, 64.1 percent up from the same period in 1997, while sales of refined sugar totalled 348 million dollars, a 73.1 percent increase, according to the Secretariat of Foreign Trade.

That expansion was due to Russia, which doubled its imports this year, to a total of 250 million dollars in the first half. Sugar is Brazil’s leading export to Russia, which due to its acute financial crisis is expected to reduce imports over the next few months.

But that will not affect Brazil’s sugar exports, because Russia already purchased the amount projected for the entire year in the first half, while it has suffered serious beet crop losses, said Claudio Manesco, spokesman for the Sao Paulo Agribusiness Union (UNICA).

So far this year, 1.08 million tonnes of Brazilian sugar have been placed on the Russian market, close to last year’s total of 1.2 million tonnes.

Lacking access to the rich EU, US and Japanese markets, Brazil sells its sugar mainly to east European countries and the Middle East. This year UNICA projects a three-percent increase on the 7.2 million tonnes exported last year.

But sugar prices have plunged 13 percent. Of an annual average of 125 million tonnes of sugar produced worldwide, less than 30 percent is traded on the international market. Brazil is the world’s biggest exporter, selling nearly half of its total production of more than 16 million tonnes.

UNICA says sales to the United States could rise to nearly one billion dollars if the duties and quotas imposed on Brazil’s sugar were eliminated.

Brazil’s sugar is “the most competitive in the world” due to its low cost, said Manesco.

Moreover, according to Luiz Cotta Martins, former secretary of the Group of Sugar Exporting Latin American and Caribbean Countries, the main factor maintaining equilibrium on the global market is also found in Brazil – its national programme of fuel alcohol, used as a substitute for gasoline.

But the programme has been in decline since subsidies for the alternative fuel began to be reduced this decade and the production of cars running exclusively on fuel alcohol nearly ground to a halt.

Several government measures, like the requirement that official vehicles run on fuel alcohol, have alleviated the problems facing the distilleries, which are currently bearing the cost of storing 1.3 billion surplus litres of fuel alcohol.

The government recently decided to buy 500 million litres of the alternative fuel, to further mitigate the sector’s troubles. Mixing alcohol with diesel fuel – to reduce air pollution – and boosting exports are other alternatives to resolving Brazil’s over- production of fuel alcohol.

But fuel alcohol also faces barriers in the United States, although a movement in that country headed by a coalition of political leaders is advocating the use of fuel alcohol as a green- friendly alternative to gasoline.