Inor Ag. Assmann
The
China
factor
TaxationturnsBrazil intothemainsupplierof
soybeantoChina, thebigglobal importer,
but thingsarechanginghereandthere
China is the biggest soybean consum-
er in the world. Alone, the Asian giant con-
sumes 61% of global demand of the oil-
seed, and concentrates its purchases in
the United States, Brazil, Argentina and
Paraguay. A difference in taxation, howev-
er, is responsible for China’s preference for
Brazil, whilst acquiringmore soybeanmeal
from Argentina, for example. It is a condi-
tion that bothers the Brazilian producers
and has been the target for intensive ne-
gotiations between the governments and
the economic sectors in question.
“The fact is, Argentina maintains the
tax reintegration system along the entire
supply chain, and for taxation questions,
China seeks to purchase soybeans from
Brazil and then transform the crop into
oil, meal and other derivatives in its terri-
tory”, says Carlos Cogo, director at Carlos
Cogo Consultancy. “It is a smart strategy.
While paying less tax here, more jobs are
generated in that country”.
According to the analyst, fromJanuary
through August 2016, Chinese demand for
the Brazilian kernels was up 3% from the
same period in 2015. “This growth rate
slowed down, as wewere used towitness-
ing jumps of up to de 6% or 7% in the first
half of the year”, he concedes. For his part,
Cogo understands that although high-
er consumption levels in the global mar-
ket are good for Brazil, the Chinese be-
havior causes some concern. “There is no
doubt about the fact that domestic prices
soared considerably and, in an attempt to
decompress the prices in its market, the
Chinese government interfered with do-
mestic supply auctions, in a situation sim-
ilar to what is happening with other com-
modities, like cotton. The slowly growing
economy also weakens the market slight-
ly”, the consultant acknowledges.
“For 2017, both the US Department of
Agriculture (USDA) and the Food and Agri-
culture Organization of the United Nations
(FAO) are projecting stronger demand in
China, which is good for Brazil”, he argues.
Although Brazilian segments have been sig-
naling the need to alter this model of ex-
ports, seeking to concentrate foreign sales
on meal and oil, which would generate in-
come and jobs and would add value to the
national product, this would only happen
with a comprehensive taxation pact, which
is out of the question at this moment from
the federal government’s viewpoint.
Therefore, Brazil is supposed to contin-
ue shipping soybeanmeal to Europe and to
some Asian countries, but to China just ker-
nels. The approach by the Minister of Agri-
culture, Livestock and Food Supply (Mapa),
Blairo Maggi, in a recent visit to Asia, of in-
terest to Brazil in negotiating the taxation
matter in order to sell more industrialized
products –meal and oil – and less kernel,
strengthened the expectation of the supply
chain for amore robust future for the sector.
With an eye to balancedpricing, the
Asian giant is getting rid of stock
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