Brazil loses leadership in orange juice exports to the US market to Mexico

Driven by the exemption from tariffs under the North American Free Trade Agreement (NAFTA), exports of orange juice from Mexico to the United States overturned the leadership of Brazilian juice in the American market. A survey carried out by CitrusBR with data from the United States Department of Agriculture (USDA) shows that in the last 28 years, American imports of Mexican FCOJ jumped from 9.772 tons to 74.680 in 2019, a growth of 664,2%. In this way, Mexico's share of the US market increased from 6% to 46%.

In the same period, Brazil's sales fell 50,7%, from 144.538 tons to 71.114 tons in 2019. As a result, Brazil's share, which was 89% in 1993, fell to 44% last year. “When we look at the period, US imports continue at a level of around 155 thousand tons of FCOJ. What changed was Mexico's aggressive entry into this market”, analyzes the executive director of CitrusBR, Ibiapaba Netto.

The explanation for the increase in Mexican products lies in the difference in tariff regimes. Since 2008, Mexico has been exempt from tariffs for placing its juice in the US, thanks to NAFTA. Brazilian juice is taxed at US$415,86 per ton to access that market. In the period between 2008 and 2019 alone, the Brazilian FCOJ was charged US$548 million in import taxes, while Mexico failed to pay US$405 million thanks to the validity of NAFTA. “The expansion of the Mexican FCOJ on American imports comes at the expense of a heavy tax on Brazilian products”, assesses Netto.

The survey also shows the impact of tariffs on the performance of Brazilian exports and the difficulty in maintaining leadership in the FCOJ market. When we evaluate the exporter's net receipt after applying import tax deductions, customs clearance and freight costs, sea in the Brazilian case and land for Mexicans, what we see is a great loss in the value of the national product.

While Mexican juice has an FOB value of US$1.378,75 per ton, the Brazilian competitor receives US$66 for the same ton of FCOJ 894,95° Brix – a difference of US$484,9 per ton in favor of the Mexican exporter. “On the Brazilian side, we have some efforts that try to put national orange juice on the map of international agreements”, ponders the executive, who cites as an example the Mercosur/European Union agreement, finalized in 2019. “The agreement provides for an immediate tariff reduction 50% which will reach 0% within 10 years. But there is no deadline for this ratification to happen,” he says.

The tariff issue highlighted in the American market could also compromise the performance of Brazilian orange juice in other markets. To enter Europe, juice from Brazil pays a tax of 12,2% compared to 4,2% for Mexican juice. Brazil, via Mercosur, is also negotiating a trade agreement with South Korea so that the tariff for orange juice is reduced to zero, as is already the case for juice produced in Florida, which little supplies that country. “This would be an important milestone since, in the past, Brazil exported more than 30 thousand tons per year and today it practically no longer exports to that destination”, assesses Netto.