Brazil should resume
soon its shipment of soy to China, after
a two-month-long embargo. Losses from the ban are estimated
at US$ 1 billion, according to the Brazilian Ministry of Agriculture.
Lower prices for the product have raised speculation on the ill-will
of Chinese importers, who are now negotiating better terms.
by: Luis
Waldmann
Brazil, the world’s second-largest soybean producer, came to terms with China
after a two-month-long ban on Brazilian soy on grounds it didn’t meet safety
standards.
Losses stemming from the
embargo are estimated at US$ 1 billion, according to the Ministry of Agriculture.
Moreover, it will affect Brazil’s trade surplus this year, which soared to
a record US$ 24.8 billion in 2003 from US$ 13.1 billion in 2002.
Twenty-three Brazilian
companies, including U.S.-based Cargill and Louis Dreyfus, had been barred
from exporting soy products to China. The alleged presence of fungicide-contaminated
seeds in the shipments prompted China to refuse 359,000 tons of Brazilian
soybeans in the first 45 days of the standoff.
"It
is likely that opportunism might be fueling the denial of these
shipments in order [for Chinese importers] to buy at lower prices,"
Luiz Fernando Furlan, the Brazilian Trade Minister, told Rio
de Janeiro-based O Globo newspaper last week. Turned-down
ships headed instead to Europe, Furlan added.
Current prices, down by
one third compared to those in the same period of 2003, have raised speculation
on the ill-will of Chinese importers, who would now be seeking to negotiate
better terms.
"It’s not that Brazilian
soy is flawless, but the same commodity is accepted in other notoriously demanding
countries," said Folha de S. Paulo newspaper in an editorial.
"The episode again demonstrates how sanitary rules often double as trade
barriers."
During the Brazilian government’s
haste to solve the deadlock, President Luiz Inácio Lula da Silva is
believed to have intervened personally. However, President Lula’s state
visit to China in late May—one week after Chinese authorities withheld
the first shipment—did little to soothe the standstill.
The President said he
felt "betrayed by the Chinese", according to Folha de S. Paulo
writer Kennedy Alencar.
But the ban also harmed
some in China. Chinese soybean crushers came to a halt, Pedro Wang, director
of the Shanghai Gaoyuan Investment & Development Co., told the newspaper.
The Chinese government
is partly to blame, Wang added, by limiting loans across the board in an attempt
to cool down the country’s skyrocketing economy.
By the new rules China
introduced in early May, soybean shipments must not contain any contaminated
seeds. Brazilian norms, published a week ago, allow one such seed per kilogram
(2.2 pounds).
China is Brazil’s third-largest
trade partner and could be slated to overtake Argentina this year, remaining
only behind the United States.
Soy, iron
ore and pulp lead Brazilian exports to China, which increased
by 50 percent to US$ 4.5 billion in 2003 from US$ 3 billion
in 2002. China bought US$ 1.3 billion worth of Brazilian soy
in 2003.
Luis Waldmann is a freelance writer based in Rio de Janeiro and can be reached
at editor@bnbureau.com.br.
