Cotton farmers receive the news of the extension of Agreement 100 as “relief”

Although for a shorter period than expected – March 31, 2021, given the agricultural proposal that it be maintained until December 30, 2022 –, the news that the National Council for Financial Policy (Confaz) extended the validity of the Agreement 100 gave the cotton sector a breathing space. For the Brazilian Association of Cotton Producers (Abrapa), maintaining the agreement represented a relief, since the 60% discount on the Tax on Circulation of Goods and Services (ICMS) on agricultural inputs is one of the factors supporting the competitiveness in cotton production.

According to the president of the Thematic Chamber of Agricultural Inputs (CTIA) and vice-president of Abrapa, Júlio Busato, Agreement 100 makes Brazil's disparity in the market dispute with its biggest competitors less asymmetrical. If it were to be extinguished at the end of this year, all agricultural production chains would be impacted, with serious consequences for Brazilians.

“We don’t have subsidies in Brazil, and the costs of farming in the tropics are very high. In the case of cotton, more than 60% of them are pegged to the dollar. Without Agreement 100, as well as the ICMS Agreement 52/91, it is practically impossible to produce, let alone compete”, states the president of CTIA, also referring to the instrument that reduces the ICMS calculation base in operations with industrial and agricultural equipment, which will be in force until March 31, 2021, as decided at the same Confaz meeting.

“The termination of the agreements would imply a huge increase in production costs, especially with phytosanitary protection, making activities such as cotton production unfeasible, and making food and the value of the basic food basket in Brazil even more expensive,” he says.

For Busato, the announcement is welcome, but not definitive. “Everything can change with the tax reform and we need to monitor the way the matter is handled very carefully”, he considers.