Gasoline price will drop by less than 1 cent with alcohol exemption, says expert

Gasoline price will drop by less than 1 cent with alcohol exemption, says expert

Without presenting any calculations, the Ministry of Economy said that the measure of zeroing the Import Tax on anhydrous ethanol by the end of 2022 could lower the price of a liter of gasoline by up to R$ 0.20. The product makes up 27% of the gasoline blend.

Experts, however, say that the reduction for the consumer will be very small, or even nil.

For consultant Dietmar Schupp, a specialist in fuel taxation, the exemption that came into effect this Wednesday (23) will lower only R$ 0.004 per liter in the national average price.

The tax on anhydrous ethanol imported from outside Mercosur was 18%. The rate was levied essentially on alcohol coming from the United States, a country that also taxes Brazilian ethanol.

The exemption was announced on Monday (21), as another measure to try to contain inflation amid the soaring prices of international raw materials after the start of the war in Ukraine.

In addition to ethanol, commodities such as coffee, soy oil and sugar were also benefited.


The amount of alcohol imported into Brazil to compose the gasoline mixture is relatively small.

Data from the ANP (National Agency for Oil, Gas and Biofuels) show that, in 2021, Brazil produced 11.4 million m³ of anhydrous ethanol and exported 5.4% of this volume. Total imports were 432 thousand m³, equivalent to 3.8% of the anhydrous ethanol produced in Brazil.

According to Dietmar Schupp, only 2% of the anhydrous ethanol currently sold in Brazil is imported. The reduction of R$ 0.20 per liter projected by the government would only occur if all the ethanol mixed with gasoline came from outside the country.

In the opinion of Mauricio Canêdo Pinheiro, professor at the Brazilian School of Economics and Finance at FGV (Fundação Getúlio Vargas), the exemption on anhydrous ethanol will have a small effect on the price for the consumer. This is because the share of imported alcohol is low and the product makes up only 27% of the gasoline mix.

“These are factors that dilute the effect of the measure”, says Pinheiro.


The Ministry of Economy states that the estimate of BRL 0.20 was based “on a partial equilibrium model”, but that “the study is not available for publication”.

The economic team claims that the exemption will increase the share of imported ethanol in the domestic market, with a price shock that will reach the consumer.

“For 2022, Brazilian ethanol production should total 28.3 billion liters in the 2021/22 crop, a drop of 13.7% compared to the previous crop. In the United States, the expectation is for an increase in the crop”, says the ministry.

Fuel importers, directly benefiting from the exemption, corroborate the government’s version.

“Although Brazil is a major producer of ethanol, we have some import windows due to seasonality. It is not a significant volume per year, but it is not negligible”, says Sérgio Araújo, president of Abicom (Brazilian Association of Importers of fuels).


The expectation of a price shock from the Import Tax exemption is contested by domestic producers.

“Today there is no room for American ethanol to enter here, even with zero tax”, says Alexandre Andrade Lima, president of Feplana (Federation of Sugarcane Planters of Brazil).

“The price of American ethanol is high with this global fuel crisis and today there is no market here. It may be that later on, ethanol will enter, but at the moment [a isenção de impostos] won’t have much influence.”

Renato Cunha, from SindSugar-PE, the Pernambuco sugarcane producers’ union, says that the exemption represents a benefit without reciprocity in the US and that it can cost many jobs in Brazil.

Rodrigo Zingales, executive director of AbriLivre, an association that represents fuel resellers throughout Brazil, says that exempting US ethanol will benefit few market agents and that consumers will hardly benefit.

“The government should be investing heavily in sugar and ethanol production, but it is doing the opposite, subsidizing imported products,” says Zingales.

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