Disenchanted by Lula’s triumph, Brazilian farmers fear new taxes on the sector

Since the victory of Luiz Inácio Lula da Silva in the presidential runoff held on the 30th of last month in Brazil, the agricultural producers of that country have been showing their disappointment at the defeat at the polls of Jair Bolsonaro and at the change of government that will take place on January 1st. Yesterday was a bad day for those who agitated the versions of fraud and for those who still had expectations of seeing a change in the election result after the decision of the Electoral Justice to reject the appeal presented by the Liberal Party to annul the votes of the ballot for “irreparable failures” in five of the six models of electronic ballot boxes used.

“Most of the producers are sad and/or outraged, as they would have preferred Bolsonaro’s re-election. Many believe that there was fraud and consider Lula’s victory illegitimate, so they hope that ‘something’ will happen so that Lula does not take office on January 1,” Daniele Siqueira, market analyst for the Brazilian firm AgRural, told LA NACION.

After Lula’s triumph became known and to this day there have been intermittent protests by carriers and producers who block routes and access to port terminals. These protesters even went so far as to demand the intervention of the Brazilian army to prevent the new president-elect from taking office.

“The blockades are acts of a self-convoked minority, without central coordination, but that reflect the feelings of the majority of the farmers. The entities that represent the sector are against the blockades and possible acts of violence, but in general they support peaceful demonstrations, which are a right of all citizens,” said Siqueira.

The first roadblocks were led by carriers, which were later joined by self-convened producersCAIO GUATELLI – AFP

From the Brazilian Association of Vegetable Oil Industries (Abiove) they complained about the fact that the roadblocks shot up 20% (50 reais per ton) the value of freight in the Mato Grosso area, the main producer of oil. Brazil beans. “Roadblocks and violence by some protesters left transport companies afraid to use local routes,” André Nassar, Abiove’s president, told Reuters.

Siqueira added that so far the blockades, despite being numerous, have not caused significant interruptions in the flow of grains in the internal and external markets. “The question that has no answer today is whether the protests will be able to gain strength close to Lula’s inauguration, on January 1,” warned the analyst.

In the same way, Vlamir Brandalizze, a specialist in the Brazilian grain market at Brandalizze Consulting, told LA NACION that the protests did not affect the shipments of merchandise to the ports, while most of the cuts have already been released and that the shipment program is being developing smoothly. “What we have here is a rural producer discouraged by the election results,” the consultant acknowledged.

This discouragement already has a correlate in the decisions of many Brazilian producers. “Businesses for the purchase of machinery and equipment slowed down a lot and few are acquiring these tools. We anticipate that this situation will continue until at least the beginning of 2023,” said Brandalizze.

And regarding the grain trade, the specialist explained that “73% of the soybeans of the 2021/2022 cycle have been sold, compared to 81% last year and with an average 79%. As for the new harvest – it starts in January – only 23% of the expected volume was sold, compared to the average 40% for this time of year.”

For Siqueira, the relationship between the electoral result and sales decisions is partial. “The first week of November, just after the second round of elections, grain trade was quite slow – for both soybeans and corn – because producers were still stunned by Lula’s victory and because the dollar, contrary to expectations, it fell against the real after the former president’s victory. But in the following weeks, the dollar rose again and sales resumed a rhythm closer to normal”, he explained.

In full rural discontent, and despite the questioning of the producers, the day before yesterday the Legislative Assembly of the State of Goiás approved the creation of the State Infrastructure Fund, which will be solved with a new tax that will tax sales of up to 1.65% of products such as corn, soybeans, sugar cane and meat, but that will not apply to family farmers who sell food directly to the final consumer. The initiative presented by Governor Ronaldo Caiado (Brazil Union), which will enter into force on January 1, is a copy of similar taxes that apply in Mato Grosso and Mato Grosso do Sul to deal with infrastructure works such as rural roads.

“In Paraná there was a similar project in the Legislative Assembly, but due to strong discontent in the rural sector, the local government withdrew the proposal and should not present it again,” said Brandalizze.

Before the approval of the new tax, the Brazilian Association of Soybean Producers (Aprosoja) questioned the Goiás governor’s initiative because, as they predicted, “it will withdraw part of the investment capacity of rural producers in a scenario in which Plans are already being reviewed due to the national political situation, such as, for example, many cancellations of machine orders and other resource allocations”.

In addition, in a statement released by Aprosoja, the entity said that if the new tax is confirmed “Brazil will begin to follow in the footsteps of the Argentine governments, which for decades taxed local production through withholdings, a populist policy of taxing exports that resulted in the suffocation of investment capacity, bringing even more poverty to the neighboring country. ”.

In that line, When asked if, in light of Lula’s inauguration, the fear of the rural sector is to see a policy towards the rural sector replicated in Brazil similar to that in force in Argentina, Brandalizze pointed out: “Yes, there is that fear among producers and that of seeing new taxes. There are already taxes on all products used by farmers, from machinery, fertilizers, pesticides, fuel, everything has a tax and a new one would make production unfeasible for those who are further from the ports. The costs in Brazil are higher than in Argentina and do not admit new taxes. However, the new government will find it difficult to create new taxes because there will be a majority in the Legislature against Lula. Therefore, these initiatives should not pass”.

On the productive level, As of the 17th of the current AgRural, it surveyed the progress of soybean planting on 80% of an area planned for 43.2 million hectares (up 4%), compared to 86% at the same time in 2021 and the average 78% of the last five years. “The progress of the work is within a normal range and, for now, we expect a volume of 150.50 million tons of soybeans. according to the trend lines that we use, which will only be replaced by the conditions of the crops in each State starting next month,” said Siqueira.

Until the 17th of the current soybean planting progressed over 80% of the 43.2 million hectares planned
Until the 17th of the current soybean planting progressed over 80% of the 43.2 million hectares planned Paulo Fridman – Corbis News

It should be remembered that in its latest monthly report the National Supply Company (Conab), under the Ministry of Agriculture of Brazil, projected soybean production 2022/2023 at 153.54 million tons, while the Department of Agriculture of the The United States estimated 152 million tons.

“There were excessive rains in Paraná and Santa Catarina (southern Brazil) in October that delayed planting a bit. This excess humidity and the low temperatures also delayed the development of the crops. Some areas that are starting to flower now – around two weeks late – have low height and this could limit productivity. However, the above happens only in some areas of these States, it is not something general. Now, in November, the most worrisome are the dry spots in the midwest and southeast, especially in western Mato Grosso, southwest Goiás, and in Minas Gerais. Although for the moment there is no real threat to productivity, it is necessary that it rain well in the last days of November and especially in December, when many crops, particularly in Mato Grosso, will be filling grains. In the other states there are no serious setbacks, but in Rio Grande do Sul more regular rains would be welcome,” the specialist explained.

In summary, Siqueira indicated that from the beginning of planting there was a pattern of rains and temperatures different from that of a year ago “and this reinforces the expectation that despite La Niña there will be no losses in the south of the country or that, if there are any, they will be less serious than those registered in the previous campaign”.

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Disenchanted by Lula’s triumph, Brazilian farmers fear new taxes on the sector