End of Brazil’s small-parcel import tax could weigh on cotton demand and prices

The end of Brazil’s levy on low-value international purchases under $50 is expected to pressure prices and reduce domestic demand for cotton, according to industry representatives. Currently, about one-third of Brazil’s cotton production remains in the country to be processed into finished goods.

Márcio Portocarrero, executive director of Abrapa, the Brazilian Association of Cotton Producers, said domestic demand for cotton is likely to decline if the tax is scrapped, creating a knock-on effect across the production chain.

“With the end of the tax, consumers may once again prioritize online purchases of imported clothing not made in Brazil, which poses a risk to the entire national textile chain,” he told CNN Brasil.

“If there is a reduction in domestic demand for cotton, producers will likely seek new international markets capable of absorbing that output, increasing Brazilian cotton export volumes,” he said.

Portocarrero also said that, in a scenario in which producers already operate with tight margins, a possible decline in domestic consumption could also pressure and devalue cotton lint prices, potentially leading to a reduction in planted area.

The end of the tax could also significantly affect the retail industry, which depends on Brazilian cotton lint and seeks greater competitiveness against international rivals. The program imposes a 20% tax on purchases of up to US$50 from foreign websites and a 60% tax on purchases ranging from US$50.01 to US$3,000.

According to Federal Revenue Service data, the tax collection program Remessa Conforme has collected R$9.6 billion since its implementation in August 2024. Revenue from the tax reached R$2.88 billion that year. In 2025, the measure raised R$5 billion, while R$1.78 billion was collected through April 2026.

Abit, the Brazilian Textile and Apparel Industry Association, opposed ending the tax under the Remessa Conforme program, saying its repeal could discourage employment in domestic industry, slow the national economy and reduce competitiveness against international markets such as China.

Fernando Pimentel, Abit’s chief executive, said the measure has a chain effect on cotton lint demand.

“When it comes to cotton, the main raw material in Brazil’s textile chain, it is natural for domestic consumption to track the performance of the national textile and apparel industry itself. The greater the local production, the higher domestic cotton consumption tends to be,” he told CNN Brasil.

“If imports of finished goods through international platforms grow even further, especially under unequal competitive conditions, the trend is for national production to decline and, consequently, for domestic cotton demand to fall,” he said.

In the association’s view, exporting only raw material generates less added value, employment, income and tax revenue than processing cotton into yarn, fabrics, clothing and finished goods in Brazil.

“From an economic standpoint, a possible elimination of taxation on small international parcels could increase pressure on national industry and retail, affecting investment, production, tax revenue and formal jobs across Brazil’s textile and apparel chain,” he said.

The following chart tracks the volume of apparel imports from China over the last three years:

Apparel Imports from China | Jan 2023 – Mar 2026 | TEUs

Source: DataLiner (click here to request a demo)

According to Abrapa data, the textile and apparel sector, which is largely supplied by cotton lint, generates R$221 billion in revenue and exports US$908 million per year. Imports, even with the “blouse tax” still in place, remain dominant at US$6.6 billion, resulting in a US$5.7 billion trade deficit. The sector employs 1.31 million people across more than 25,000 companies in Brazil, according to the data.

Maintaining the so-called “blouse tax” is supported by Vice President and Development Minister Geraldo Alckmin, who says the tax program protects domestic industry, especially sectors tied to low-value products. Supporters of the measure also say revenue from the program helps meet the government’s fiscal target, which calls for a surplus of 0.25% of GDP.

In an interview with CNN Brasil, Rogério Ceron, executive secretary of the Ministry of Finance, said the issue is complex because it affects retail and domestic trade, but that the government is still discussing the measure’s repeal and its potential impacts.

In March, the Latam Pulse Brasil survey, released and conducted by AtlasIntel in partnership with Bloomberg, indicated that the the program was seen as the Lula administration’s biggest mistake up to that point. The result reflected the view of 62% of Brazilians and classified the measure as unpopular.

Source: CNN Brasil

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