Subsidies heavily inflate Brazilian sugar industry, report says
By Derrick Cain
© Copyright Agri-Pulse Communications, Inc.
WASHINGTON, April 17, 2013 - The Brazil sugar industry receives about $2.5 billion annually in direct payments and indirect assistance from its government while controlling 50 percent of the global market share of sugar exports, according to a report released today by the American Sugar Alliance.The report, conducted by Patrick Chatenay, a sugar and ethanol expert from the UK-based company ProSunergy, “unearthed Brazil's web of subsidies,” said Jack Roney, ASA director of economics and policy analysis, during a conference call with reporters.
“This report underscores the importance of maintaining the current U.S. sugar policy, which was designed to shield consumers from foreign market manipulation and ensure an affordable, homegrown supply of a food staple,” Roney said. “U.S. sugar producers are highly efficient, but to disarm unilaterally while foreign subsidies run rampant would lead to job loss and leave us dependent on unreliable, subsidized foreign sugar.”
The report said that Brazil portrays its success in the international market as a result of natural endowments and savvy private operators.
“Its competitiveness is said to be the result of market forces only,” the report said. “This is indeed the image which Brazil projects in international circles.
However, the report said the “immense power” of Brazil's sugar industry is actually “founded upon many years of strong government intervention.”
The report said the Brazilian government transfers the cost of pension liabilities from farmers to other economic agents, provides soft loans to agriculture, forgives and reschedules agricultural and tax debts, and makes possible arbitrage between sugar and ethanol markets, among other assistance.
“The immense power of Brazil's sugar industry is founded upon many years of strong government intervention in its sugar and ethanol sectors,” Chatenay said. “The government policies that built this magnificent and powerful industry date back to the 1970s.”
Policies in Brazil and other countries make sugar one of the world's most distorted commodity markets, Chatenay said. “The world market price is a ‘dump' price…[it] should never be used as a yardstick to measure what benefits or costs may accrue from free trade in sugar.”
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