Government drops plan to curb food exports amid inflation concerns

Amid persistent food inflation and declining approval ratings for President Lula, the federal government considered measures to restrict food exports in an effort to curb rising agricultural prices in the short term. However, following negative backlash, officials signaled to the private sector that such measures would not be implemented.

Proposals to combat food inflation were discussed during a meeting on Tuesday (25) with Mr. Lula and his ministers. The idea of interfering with agribusiness exports was shelved after Agriculture Minister Carlos Fávaro threatened to resign if the proposal moved forward.

People familiar with the matter said the government considered imposing export quotas on agricultural products and taxing a portion of the output destined for international markets. The goal was to keep the domestic market well-supplied and drive down food prices. Another proposal on the table involved reducing import tariffs on certain items.

Within the executive branch, the initiative was termed “managed trade,” but consensus was lacking. Some officials viewed the measures as “heterodox and interventionist,” with concerns focused on the meat and sugar sectors. They argued that while the plan could provide short-term relief, it posed economic risks in the medium and long term.

Others argued that the government has limited options to address one of the population’s main concerns—rising food prices—given increasing domestic demand and higher export volumes following the opening of new international markets and favorable exchange rates.

Political risks

It remains unclear which government officials were involved in the initial discussions on Monday. However, sources said the proposal could have been presented to Mr. Lula for approval. The idea of taxing exports has circulated within the Workers’ Party (PT) and the administration since late last year but did not gain traction. It resurfaced recently amid rising inflation, leading to meetings at the Chief of Staff Office.

On Tuesday, Agriculture Minister Fávaro, Agrarian Development Minister Paulo Teixeira, Geraldo Alckmin, vice president and minister of Development, Industry, Commerce, and Services, met with President Lula, along with representatives from the National Supply Company (CONAB). No formal measures were announced.

Mr. Fávaro informed the presidential office that he would resign if the measure advanced, arguing that it would harm the national economy, citing Argentina’s experience with export taxes (“retenciones”) that led to international market losses.

He is scheduled to meet with representatives of the meat, sugar, ethanol, and biodiesel industries at the Chief of Staff Office on Thursday. Announcements of measures to tackle food inflation are expected only after Carnival.

Officials close to Mr. Fávaro said he is increasingly frustrated with radical factions within the PT and the administration’s leadership. He is also uneasy about the government’s confrontational stance toward agribusiness, which leaves him isolated in defending the commercial agriculture sector.

In recent days, the administration faced criticism for having to issue a provisional measure to secure funding for the “Plano Safra” agricultural support program.

A member of the group that proposed the measures described them as “one of several possible actions” to counter inflation. People familiar with the matter said the idea originated from the Ministry of Agrarian Development (MDA), allegedly with support from the Chief of Staff Office. The MDA denied this. One person noted that there was “no legal basis” for the proposal and that Mr. Lula had already vetoed it. Other ministries involved either opposed the measure or were not included in the discussions.

The Ministries of Development, Industry, Commerce and Services (MDIC), Agriculture, Finance, and Agrarian Development did not comment.

By Rafael Walendorff, Andrea Jubé, Fabio Murakawa, Renan Truffi, Estevão Taiar and Luiz Fernando Figliagi

Source: Valor International

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