Brazil’s World Cup of Sugar Subsidies

(Chuck Muth) – The World Cup begins this week in Brazil, and I got to wondering how the world would react if the Brazilian government decided to spot the Brazilian team two goals before the start of every game.

Hey, it’s not like such a move would be unprecedented in the South American nation – at least as far as the nation’s sugar industry is concerned.

In fact, a recent article in the Financial Times noted that the mood of sugar industry executives at an annual gathering in New York last month “was as gloomy as the skies over Manhattan.”

Why?

Because Brazil continues to prop up its sugar industry with subsidies that allow farmers to sell “below the cost of production,” thus artificially deflating the world price of a commodity already suffering from a global glut.

“Brazil holds the key to the world sugar price,” the Times reports, “as the South American country is the leading player in the sugar market, accounting for more than 20 percent of the world supply and almost 60 percent of global sugar trade flows.”

A “dominant producer” that spots its farmers extra, undeserved and unearned points assuring a completely unlevel playing field for every other sugar-producing nation in the world, including the U.S.

Ah, but as the saying goes, a government powerful enough to give you anything you want is powerful enough to take whatever you have.

And even though the Brazilian government gives sugar producers lots of subsidy goodies, it also has placed a cap on the cost of bio-fuels in an effort to stem inflation, thus “squeezing ethanol margins.”  And “many are pessimistic about the industry’s ability to persuade the government to rethink its fuel policy.”

So in essence what you have here is the Brazilian government spotting its soccer – sorry, football – team two goals at the start of the game while simultaneously capping the number of goals the team is allowed to score at two.

Not exactly free and fair competition.

The U.S. government cannot and should not change its present sugar policy unless or until Brazil and every other sugar producing nation agrees to play by the same rules, start from the same starting block, and play on the same level field.