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European Union

Brazil Seeks to Pressure EU on Sugar Subsidies in 2006 Harvest

Strategic Insights

— 1 min read

Brazilian Agriculture Minister Elizabete Serodio stated that her country will press the European Union to dismantle its sugar subsidy program by the start of the 2006 harvest, following a World Trade Organization ruling that deemed the subsidies market distorting. Brazil loses an estimated $1 billion per year due to the subsidies, and industry officials expect E.U. exports to slump by 3.8 million tons once the subsidies are stopped.

Key Takeaways:

  • Brazil plans to pressure the European Union to dismantle its sugar subsidy program by the start of the 2006 harvest, not 2007 as initially planned.
  • The World Trade Organization upheld a complaint by Brazil, Australia, and Thailand that the EU's sugar subsidies were market distorting, giving the EU until mid-August to present a proposal to eradicate $2.4 billion in annual payments to farmers.
  • Brazilian sugar industry officials expect E.U. exports to slump by 3.8 million tons once the subsidies are stopped, and Brazil is likely to pick up a large portion of the E.U.'s current business.
  • Brazilian sugar millers are slated to invest an average of $1 billion a year for the next five years to expand their sugar-processing capacity.
  • The Sao Paulo Sugarcane Producers' Association, or Unica, plans to fight to have the WTO decision implemented as quickly as possible.
  • Elizabete Serodio, secretary of international relations of the Agriculture Ministry, stated that Brazil will call in the WTO to arbitrate if the EU delays compliance with the WTO ruling.

Statistics:

  • Brazil loses an estimated $1 billion per year due to EU sugar subsidies.
  • The EU's sugar subsidies amount to $2.4 billion annually.
  • Brazilian sugar exports are projected to reach 17.2 million tons in the 2005-2006 harvest.
  • EU sugar exports are expected to slump by 3.8 million tons once the subsidies are stopped.
  • Brazilian sugar millers plan to invest $1 billion per year for the next five years to expand their sugar-processing capacity.

Sources:

  • Dow Jones Newswires, "Brazil Seeks to Pressure EU on Sugar Subsidies in 2006 Harvest," August 2, 2005.
  • World Trade Organization, "WTO Ruling on EU Sugar Subsidies," April 28, 2005.
  • Procana, "Brazilian Sugar Millers to Invest in Capacity Expansion," recent estimates.
  • Unica (Sao Paulo Sugarcane Producers' Association), quoted by Dow Jones Newswires, August 2, 2005.

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