Global Trade Alert

On 20 March 2012, the government of Brazil announced subsidies for the rice harvest of 2012 (April-July) worth USD 339 million (737 million real).
 
The stated amount will be distributed through the Brazilian farmerincome support programs PEP and PEPRO as well as the government purchase program AGF. Both income support programs are based on theauction mechanism further described below. The subsidies will continueuntil the stated volume has been allocated completely.
 
The announced programs constitute a production subsidy to Brazilian farmers. Both domestic and international sales are eligible.
 
The design of the Brazilian farmer income support programs can be briefly summarized as follows:

• PEP / Program for Product Outflow (Premio para Escoamento doProduto): The government first sets a minimum price for the eligibleproducts. The government then auctions off a premium to buyers of theproducts on the condition that they pay the minimum price to theproducers. The buyer submitting the smallest premium wins the right toreceive the payment.
• PEPRO / Premium Paid to Growers (Premio Equalizador Pago aoProdutor): The government first sets a minimum price for the eligibleproducts. The government then auctions off a premium to the producers. The selling price represents the difference between the reference priceand the premium reached at the auction. The farmer submitting thesmallest premium wins the right to receive the payment.

 
The final instrument announced, the Aquisiçăo do Governo Federal (AGF) program, guarantees the minimum price through government purchases.
 
The GTA includes state guarantees and other financial incentives thatare likely to affect the restructuring and performance of firms facinginternational competition, whether from imports, in export markets, andfrom foreign subsidiaries.
 
As imports on the affected tariff lines have not exceed USD 1 million for any origin in the year prior to the intervention, no affected trading partners have been identified.