Bolsonaro betrays rural landowners and releases US wheat imports.

Hugh Bronstein and Roberto Samora, Reuters An agreement announced Tuesday between the governments of Brazil and the United States, which provides for the implementation of a tariff-free quota for Brazilian mills to import US wheat, was met with concern by members of the agricultural sector in Mercosur.

Under the agreement, the U.S. could export 750 tons of the grain annually to Brazil without paying the 10 percent tariff established for purchases of the product outside Mercosur.

In the case of Brazil, one of the world's largest wheat importers, with imports of around 7 million tons per year, tariff-free purchases of the product from the US could compete with Brazilian wheat, discouraging cultivation if there is pressure on prices in the domestic market due to increased imported supply.

In Argentina, the main exporter of wheat to Brazil, where Brazilians buy most of what they import, the news about the agreement with the US also generated complaints.

"If it remains an exception to the 10 percent tariff, that's not so bad. But if it becomes the norm, then it would be extremely worrying," David Hughes, president of the Argentine wheat industry chamber ArgenTrigo, told Reuters.

Generally, when the supply in Brazil and Mercosur is insufficient to meet the demand of Brazilians, the government authorizes a temporary tariff-free quota, with the aim of helping the industry and avoiding inflationary pressures.

However, according to the agreement signed between Presidents Donald Trump and Jair Bolsonaro, the tariff exemption for 750 tons would be permanent, becoming part of the agricultural negotiations between Brazil and the United States that took place in Washington this week.

The tariff exemption for a permanent quota, incidentally, is part of an agreement in the Uruguay Round of negotiations at the World Trade Organization (WTO), but it has never been implemented by Brazil.

"This is bad for us," said Argentine producer Jorge Bianciotto, who manages 2.300 hectares in Pergamino, in the important agricultural region of the Argentine Pampas.

Of the 1,2 million tons of wheat imported by Brazil in January and February of this year, Argentina supplied almost all of it, or 1,1 million tons, according to government data published on the website of the Brazilian Wheat Industry Association (Abitrigo), which represents the mills. From the US, paying tariffs, Brazilians imported only 10 tons in the same period.

Last year, of the 6,8 million tons that Brazil imported, 5,9 million tons of wheat came from Argentina and 330 tons from Paraguay, with the US selling 270 tons—the other countries supplied smaller volumes.

Abitrigo stated that it will only comment once it receives confirmation of the agreement.

Complaint in Paraná
"We have always worked with the government to prevent the tariff exemption from being approved... That's another 750 tons that will compete with domestic wheat, and it's well known that the Americans subsidize their wheat there," said a leader in the production sector in Paraná, the main national wheat-producing state.

Speaking on condition of anonymity, so as not to upset the government, he also said that the wheat from the US will compete with the product from Paraná that has been sold to mills in the North and Northeast of the country, two of the regions that will likely receive the largest volume of the American product, due to lower freight costs.

The leadership also stated that US exports will likely harm planting intentions in Paraná, at a time when local producers are preparing to begin cultivating the new crop.

The agreement between the US and Brazil also establishes technical conditions to allow Brazilians to import pork from the US, generating, for now, fewer protests than among farmers.

"The Brazilian pork sector has expressed its agreement with the opening, while at the same time expecting reciprocity in treatment with the authorization of all Brazilian states to export pork to the USA," said the Brazilian Association of Animal Protein in a statement.

In return, the US also agreed to send inspectors to Brazil for a "technical visit" to audit the Brazilian system for inspecting fresh beef, so that Brazilian beef can once again be exported to the United States.

With additional reporting by Roberta Rampton, from Washington.