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The Brazilian government announced a significant reduction in import tariffs to zero for a selection of food products, in a move aimed at addressing the country’s rising inflation and declining government popularity.
The tariff cuts, which were announced late last week, apply to nine food items including various oils, corn, sardines, pasta, biscuits, coffee, sugar, and beef. These products make up approximately 4% of the Consumer Price Index (CPI) basket, with beef constituting the majority of this segment.
The decision comes as food inflation, despite a slight decrease in January, has been persistently high over the past three months, exceeding 7%—a rate not seen since early 2023. The central bank’s agricultural commodity price index points to the possibility of food inflation escalating to around 15% in the upcoming months, which could contribute an additional 1.5 percentage points to the overall inflation rate.
Previously, the Brazilian government had appeared more tolerant of inflation above its target when the primary drivers were services linked to a robust labor market and consumer spending.
However, the prospect of a surge in food prices, which could significantly reduce household purchasing power, has raised greater concern. This issue is particularly pressing as the Brazilian economy shows signs of slowing and the government’s popularity is on the decline.
In addition to the tariff removals, the government has also increased the duty-free import quota for palm oil. These measures are intended to mitigate the impact of potential reciprocal tariff policies from the United States.
Despite these efforts, analysts from Capital Economics have expressed skepticism about the effectiveness of the tariff reductions in curbing food inflation.
They argue that because Brazil is a major producer and net exporter of many of these food products, local prices are likely to remain influenced by domestic factors. This is especially true for coffee and beef, which have experienced significant price increases due to climate conditions affecting harvests and grazing areas.
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