Brazil's Lula government extends tax exemptions for biodiesel, ethanol

The recently inaugurated Brazilian government of President Luiz Inacio Lula da Silva has revealed that a federal tax exemption for fuels including biodiesel and ethanol will be extended.

The measure, signed by the president, was published on Monday by the country's official gazette and extends the tax exemption for diesel and biodiesel for a duration of one year, while a gasoline and ethanol tax exemption will last for two months.

The former government of Jair Bolsonaro had, earlier this year, passed a tax reduction bill applying to fuel including gasoline, diesel, and ethanol in an attempt to gain popularity ahead of the country's October general election.

Following Lula's win at the end of October, however, there has been uncertainty in the market over the past few days as to whether or not the reductions would be extended.

Meanwhile for imports, the government revealed at the end of December that it was also further extending its suspension of the country's import tariff on ethanol.

The suspension of the import tariff on ethanol will now last until at least the end of the month, according to Brazil's ministry of finance website.

This extended the suspension announced in March 2022 of tariffs on US ethanol and several other products until the end of last year, Agricensus understands. 

The extension was welcomed by US biofuels lobby the Renewable Fuels Association (RFA), which called the extension "a positive first step toward a permanent resolution and it sends a favorable signal to the marketplace."

"As we look ahead to 2023, we stand ready to work with incoming President Lula da Silva and his administration to restore free and fair ethanol trade between our nations," RFA president and CEO Geoff Cooper said.

Brazil has imported 1.7 million mt of ethanol in the first eleven months of 2021, with South Korea, the Netherlands, and the US the key suppliers responsible for about 80% of the total.