São Paulo – The repealed import tax on cotton, determined by the Foreign Trade Board (Camex) this week, should benefit Egypt, in North Africa. The measure reduced from 10% to zero the tax on 80,000 tonnes from May to the end of July. The benefit is valid for cotton classified in two codes of the Mercosul Common Nomenclature (NCM). Of both kinds, Brazil imported 1,120 tonnes in January and February, of which 319 tonnes, or 28.4%, came from the Egyptian market. The total volume represented US$ 2.2 million and the revenues corresponding to the Egyptians were US$ 961,000.
Specialists stated that the tax breaks should avoid expansion in cotton prices on the domestic market and should benefit exporters like Egypt, as well as garment manufacturers. “We are going to gain in quality,” said the president of the Minas Gerais Garment Industry (Sindivest-MG), Michel Aburachid, regarding the Egyptians being exporters of the kinds of cotton getting tax breaks. “Egyptian cotton is among the best in the world. Companies use Egyptian cotton to increase the price of their product,” said Aburachid. Minas Gerais is one of the five states that buy cotton of the benefited classifications.
Egypt produces long-fibre cotton, which generates textile quality articles. The fibre is dense, but results in light fabric with a delicate touch, explained the director of the institute of Marketing and Industrial Studies (Iemi), Marcelo Prado. He recalls that apart from Egypt, Brazil imports longer fibre cotton from Peru. The director stated that the use of this kind of cotton is growing in Brazil, due to industrial concern with having a differential as against imported products. But what still dominates domestic production, he said, is basic items.
On announcing the tax breaks, the Ministry of Development, Industry and Foreign Trade, to which the Camex is connected, stated that the objective of the measure is to “avoid interruption in the supply of cotton fibre to the textile and garment industry and during the period between crops in Brazil, in May, June and July this year.” A study by the National Food Supply Company (Conab) shows that in this crop in Brazil, only 886,800 hectares of cotton were grown, 36.4% less than the previous crop. The benefit was granted at the request of the Brazilian Textile and Apparel Industry Association (Abit).
Conab mentioned price retraction in the domestic and foreign market, high production cost and good soy and maize prices as factors influencing the decision of cotton farmers to reduce their area turned to the culture. Production should drop from 1.8 million tonnes to 1.2 million, a drop of 32.7%. The lower production is not greater because the sector has been obtaining productivity gains with the use of technology. In this crop, the improvement in productivity was 4.8%.
Brasil is a cotton exporter, but imports some kinds of fibres, like the Egyptian, which is not available in the country. Conab believes that cotton export, in the current crop, should total 642,000 tonnes, and imports, 216,000.
“Imports serve to supply the immediate demands of the government in the first half, in the face of the crop reduction forecasted in the states of Goiás and Bahia, in which climate problems caused delays in the sowing,” says the Conab in its crop analysis. “It is worth emphasising that the industry’s decision to buy the product on the foreign market should be taken according to the urgency of its real needs, mainly for higher quality products,” said the Conab.
In the whole of last year, Brazil imported 3,200 tonnes of cotton of the two kinds that received the import tax break (NCM 52010090 and 52010020). The volume corresponded to purchases of US$ 9.3 million. Of this total, 622 tonnes, which represent US$ 1.8 million, came from Egypt. The main supplier of these cottons, last year, was Israel, with US$ 2.6 million, followed by the United States, with US$ 1.9 million, Egypt, and then Argentina, with US$ 1.5 million. Also selling cotton to Brazil under the NCMs benefited are Germany, Spain and Turkey.
*Translated by Mark Ament
