Agriculture Ministry to invest in Brazil’s wine sector

Minister Tereza Cristina (Agriculture, Livestock, and Supply) announced on Wednesday (07/03) that the government will create a fund to modernize Brazil’s wine sector to prepare winemakers for the demands of the Mercosur-European Union agreement.

The fund’s resources will come from the Tax on Industrialized Products (IPI) in the sector (imported and exported products) and can be used to renovate crops (from 2 to 3 hectares), financing, equalization of interest rates, and improvement of logistics.

Ministra @TerezaCrisMS anuncia fundo para modernização do setor de vinho https://t.co/TintZDXx4M ??

? Embrapa pic.twitter.com/AP9sHcHSmt

— Ministério da Agricultura (@Min_Agricultura) July 4, 2019

According to the minister, the ministry is yet to decide whether to create the fund by an interim measure or a bill in the parliament.

The treaty eliminates tariffs for wine bottles of up to 5 liters and champagne in a term of 8 years. The exceptions are bulk wines, musts (a type of sweetened mixture intended for alcoholic fermentation), grape juice. In the case of sparkling wines, those with a price above US$8 FOB/liter will be exempt from tariffs once the agreement comes into force. After 12 years, the duties for sparkling wines will become null, and free trade begins effectively.

“It is more than enough [deadline for market liberalization] so that the sector can evolve and become more and more competitive. This sector can find help to become modernized and be competitive. We will have resources for them to be able to invest in the production and industrialization of these products,” said the minister.

The secretary of Commerce and International Relations, Orlando Leite Ribeiro, said that the fund could eventually receive resources from the Union. According to the secretary, the estimate is to reach R$150m.

“This is one of the already agreed instruments with the sector. There are other instruments need utilization so that the sector can acquire strength. The idea is to take initiatives that can strengthen the sector so that once the expiration period is reached [end of tariffs], we can be in a better competitive position,” said the secretary.

Argentine wine

In Argentina, the entities concerning the wine sector remain divided concerning the effect that the agreement of free trade between Mercosur and the European Union will have on the wineries of the country.

In a statement released yesterday (07/03), Bodegas de Argentina – a chamber that gathers more than 250 wineries from all wine provinces – said the agreement “will boost Argentine wine exports to the European Union, the main market of export after the United States.”

“We believe that with the signing of a zero-tariff agreement between the two blocs, Argentina will benefit,” said the executive director of the entity, Juan Carlos Pina. According to the executive, “the main obstacle to the export of Argentine wine to Brazil is the tax burden on wine and not the potential import of European wine.” He added: “This agreement is fundamental, since the future of Argentine wine is export, as it is today with our competitors in the Old and New World.”

However, COVIAR – Corporación Vitivinícola Argentina – which brings together the entire value chain of the sector, warned in a statement yesterday that there are “serious risks if a progressive tariff convergence process requires an establishment.” The entity also stressed that the free trade agreement could be a big step for the Argentine industry only if it contemplates the asymmetries of all markets.

Currently, the wine industry annually exports 200m liters of bottled wine for US$800m to more than 130 countries, this being one of the few that Argentina shipments to the world in significant quantities, with high added value and its brand.

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