Recently, according to local Brazilian media reports, earlier this week the Brazilian government submitted a new executive order to Congress, which includes measures to tighten the use of tax credit. 

But at the same time, this measure has faced strong opposition from the agricultural sector, including affected industries such as pharmaceuticals, meat, fruits, coffee, grains, and biodiesel (vegetable or animal oils), with these exporters expected to see a reduction of 26.3 billion reais (US$4.91 billion) in revenue.

Additionally, the Brazilian Coffee Exporters Council (Cecafé) recently issued a statement saying that the purpose of this PIS-Cofins tax credit note rule is to provide export credit incentives for coffee exports. This will affect the cash flow of coffee exporting companies, impact costs,and the government’s new tax measures will force companies to rely more on banks for credit, thereby increasing expenses and adding to operational burdens. This move may trigger food inflation and unemployment in Brazil, the world’s largest coffee exporter,which is completely contrary to the vision of bringing foreign exchange earnings, economic, and social development to the country.

In addition, some industry insiders believe that due to severe weather conditions such as droughts in Vietnam in recent times leading to reduced production, the futures prices of both Robusta and Arabica coffee are currently on a continuous upward trend. However, Brazil may tighten coffee exports at present, which will undoubtedly increase the likelihood of further rises in coffee futures prices.

However, there is also positive news recently. Recently, Geraldo Alckmin, Vice President of Brazil and Minister of Development, Industry, Trade and Services, visited the Luckin Coffee store at SOHO Guanghua Road in Beijing. Moreover, Luckin Coffee signed a memorandum of cooperation with representatives of the Brazilian Export and Investment Promotion Agency, and also signed a letter of intent with partners to purchase approximately 120,000 metric tons of coffee beans from Brazil over the next two years. This collaboration is conducive to the development of Brazil’s coffee exports.