Brazil Hikes Duty on Chinese Toys as Currency Gains 37% against Yuan

Brazil raised its tariffs on toy imports from China in a bid to help the South American country’s manufacturers hurt by a 37 percent gain in the real against the yuan over the past two years.

Duties on 14 types of toys ranging from dolls and puzzles to tricycles and electric train sets will be increased to 35 percent from 20 percent until the end of 2011, the Foreign Trade Chamber said in an e-mailed statement on 27 December 2010.

The chamber said it was acting on a request from Brazilian toymakers to help them “fight” an increase in imports, 90 percent of which come from China. The higher tariffs will affect goods whose imports totaled $290 million between January and November of this year, according to trade ministry data.

Brazilian imports of Chinese goods in the 12 months through August increased 37 percent to $21.4 billion, from $15 billion in all of 2009, according to a study published this month by Brazil’s state-development bank. The surge in Chinese imports, boosted by the yuan’s competitive exchange rate, threaten to displace domestic sales by Brazilian manufacturers and has “important implications” for the country’s industrial development, said the bank, known as BNDES.

The real’s 37 percent gain against the yuan over the past two years is the third-best performance among major currencies tracked after the Australian dollar and South African rand. The 12-month non-deliverable forwards suggest traders are betting that the yuan will strengthen 2.2 percent in one year from its current spot value of 6.625 per U.S. dollar.

Toy sales in Brazil will reach 3 billion reais ($1.8 billion) this year, 49 percent of which will come from products made abroad, according to estimates by Brazil’s toymakers association. In 2009, imported toys accounted for 46.8 percent of 2.7 billion reais in sales, the group said.