Import tax of 16% levied on truck tires and latex was zeroed in 2021; industry expects the return of the charge

12/19/2022

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The estimate is that Brazil can achieve self-sufficiency in the production of natural rubber with a slight expansion in the production area — Foto: Anna Caro

The natural rubber production sector and the Brazilianl tire industry have been pressuring the federal government to reverse the measure that, at the beginning of 2021, zeroed the import tax on truck tires, rubber artifacts, and items such as latex. There is an expectation that the proposal to tax foreign purchases again at 16% will be approved by the Foreign Trade Chamber (Camex) on Monday.

Without the tariff since January 2021, imports have hit record highs in recent months. The purchase of tires jumped to 518,000 in November from 143,000 per month, on average, before the tax exemption. That’s 3.5 million units imported this year. Interlocutors of the transition team say that the tax rate will be re-established in 2023, but rubber tappers and the industry say that the problem gains scale every day and can generate a “dismantling” of the production chain.

Producers who began extracting rubber in September had their production refused by processing plants, which don’t have the demand to process the quantity that was planned before. “Monthly production volumes are being canceled. People are leaving the activity, converting the rubber areas into sugar cane or soy. It’s the opportunity cost”, said Fernando do Val Guerra, executive director of the Brazilian Natural Rubber Producers and Graders Association (Abrabor).

In São Paulo, the council of processing plants informed the cancellation of purchases of 60% of the total volume of the tire industries in November and December, which generates a liquidity shortage in the chain. “This is a reflection of the flood of imported products,” said Mr. Val Guerra. The United States and China, which also zeroed import taxes at the beginning of the pandemic, established tariffs of 17% and up to 50%, respectively, for the import of these items, said Abrabor’s director. “All production came to Brazil,” he said.

The segment says that the import tax exemption for cargo tires was assertive at the peak of the pandemic, but that it should have been temporary, just to combat the inflationary surge at the time when there was a shortage of containers and ships for sea freight. The tire industry, on the other hand, claims that the decision was taken too fast and that its effects have left companies at their limit. If the measure is not reversed, he warns, there is a risk of shrinking production and layoffs.

“If nothing changes, we have scheduled layoffs that are going to happen when employees return from the collective vacation, which is not standard, the drop in production forced the stoppage, and this is complicated,” said Klaus Curt Müller, president of the National Tire Industry Association (Anip). The entity represents giants such as Bridgestone, Continental, Goodyear, Michelin, and Pirelli. The segment has 20 plants in the country and invoices R$36.4 billion a year.

Mr. Müller complains about the government’s lack of sensitivity to the theme and lack of support for the development of the local industry. Production has dropped in recent years and is back to 2012 levels, he said. “We are at the limit. The sector has R$1.5 billion in investments that are in slow motion. This shows that we are going backwards, and in this situation, you have to shrink everything,” he added.

Mr. Val Guerra points out the lack of a specific policy, or a “state plan”, to give security and predictability to the natural rubber segment, with the provision of long-term contracts and income insurance linked to rubber plantations. The country cultivates about 250,0000 hectares with rubber trees, of which 180,000 are in full production, and produces little more than 200,000 tonnes per year, for an installed demand of 417,000 tonnes. Most of the production (66%), processing (80%), and consumption is in São Paulo. Production and processing move about R$30 billion per year

The estimate is that Brazil can achieve self-sufficiency in the production of natural rubber with a slight expansion in the production area. With 1 million hectares of rubber plantations in production, the country could export and supply the entire demand of the U.S. The advance would take place in degraded pasture areas of Cerrado, the second-largest biome in the country. Asia holds 92% the world’s production of natural rubber, which is estimated at 14.5 million tonnes in 2022.

“It is a sector in which the whole industry is already installed and can export processed products, unlike the other agricultural and mineral commodities that come out in natura,” said Mr. Val Guerra. “Depending on rubber imports for tire manufacturing in a road country is critical. It is a macro strategic issue. In the West region, Brazil is the only country that has rubber production and tire factories. This fact alone should have more attention from the government to the sector”, added Mr. Müller, from Anip.

Sought by Valor, the ministries of Agriculture and Economy did not comment.

*By Rafael Walendorff — Brasília

Source: Valor International

https://valorinternational.globo.com/