The Brazilian federal government has renewed for 12 months a 20% import tariff on six types of polyethylene (PE) and polypropylene (PP) resins, granting a request from Braskem, the petrochemical company currently in financial distress. The decision was made on Thursday (27) by Camex, Brazil's foreign trade chamber, a body that brings together ten ministries, according to reporting by Folha de S.Paulo.
At the same meeting, the chamber approved two antidumping measures against polyethylene terephthalate (PET) resins imported from Malaysia and Vietnam, a material used to make water and soft drink bottles, which will now face additional tariffs to enter Brazil. According to Abiquim, the chemical industry association, the package also covers requests concerning 22 other products from the national chemical industry, beyond those backed by Braskem.
The tariff renewal comes at a delicate moment for the petrochemical company. On Monday (24), Braskem filed for out-of-court debt restructuring, a Brazilian procedure similar to a pre-negotiated bankruptcy, and acknowledged a debt of US$ 10.9 billion; a court approved the procedure on Friday (28), the company said. Competition from foreign producers is one of the drivers of the crisis, and the company argued before Camex that the global market is unbalanced by excess supply.
Chemical industry welcomes it, plastic processors object
Abiquim said in a statement that the decision acknowledges the severity of global production overcapacity and the urgency of keeping the trade defense instrument that has allowed the domestic market to rebalance. Abiplast, the association representing companies that buy resin to make packaging and other goods, sees the opposite effect: in its view, the Camex measures will raise the cost of medicines, food and cosmetics.
"The final consumer is the one who will pay this bill, buying a more expensive product because the government decided to protect this company [Braskem]", Abiplast president José Ricardo Roriz Coelho told Folha.
Braskem had not responded to the newspaper's request for comment by the time the story was published on Friday morning. On the production side, the 20% tariff protects the price of Brazilian-made resins against cheaper international supply, easing cash flow for the petrochemical company under restructuring and for other local manufacturers. On the buyer side, plastic processors and consumer goods industries will pay more for raw material, a cost Abiplast expects to reach store shelves in packaging, medicines and food.