Brazil Sees U.S. Ban on Beef Imports as Ethanol Payback

(Bloomberg) -- Washington will likely take time to lift a ban on Brazilian fresh-beef imports amid frustration at the South American country’s decision to keep quotas on tariff-free imports of U.S. ethanol, according to people familiar with talks in Brazil.

The breakdown in negotiations on fresh beef can be traced back to what’s seen as a failure from Brazilian officials to make good on a promise President Jair Bolsonaro personally made to his counterpart Donald Trump during a trip to Washington, according to the people, who have direct knowledge of the talks and asked not to be named because the discussion isn’t public.

The U.S. Department of Agriculture said in a statement issued through a spokeswoman that it is “completely untrue” the department is continuing the beef ban in retaliation and said the measure is based “solely because of food safety and animal health concerns.”

Bolsonaro had pledged U.S. ethanol would come into the country free of taxes, but later bowed to pressure from local producers. The news was relayed to U.S. Agriculture Secretary Sonny Perdue by Brazil’s Agriculture Minister Tereza Cristina Dias during a telephone conversation in August, days before the quota was renewed, the people said.

During the call, Dias argued that removing ethanol tariffs would anger pro-agribusiness lawmakers just as Bolsonaro needed votes to approve an overhaul of the pension system, the cornerstone of his government’s economic agenda, the people said.

Perdue said this was not what the two presidents had agreed upon, adding that he vowed to maintain the ban on Brazilian fresh beef as retaliation, according to the people. Dias later met with Perdue in Washington in the hopes of changing his mind, but returned empty handed.

Brazil eventually increased the quota of ethanol allowed to enter without paying tariffs to 750 million liters, from 600 million liters. Imports that exceed that pay a 20% tariff.

Brazil’s agriculture ministry said in a statement that “the two countries are historic trading partners and have long agreed on this issue.” Brazil’s presidential office declined to comment.

The U.S. Agriculture Department’s Food Safety and Inspection Service will conduct a new on-site audit of Brazil’s meat inspection system once that country “has submitted all corrective actions for the audit findings, and FSIS has reviewed and found those actions adequate,” according to the statement.

“USDA understands the importance of this issue to Brazil and looks forward to resolving it once food safety and animal health can be fully assured,” the department said in the statement.

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