UPDATE 1-Brazil increases quota for tariff-free ethanol imports, but for only one year

(Updates with official confirmation, comments from RFA, context)

SAO PAULO, Sept 2 (Reuters) - Brazil has renewed and increased the size of its tariff-free quota for ethanol imports, but the new allotment will last only one year instead of the two years allocated to the former quota that expired on Saturday, according to the country’s official gazette.

The Brazilian government will allow tariff-free ethanol imports up to a limit of 750 million liters (198 million gallons) per year, compared to the former quota of 600 million liters annually. Imports beyond the quota are subject to a 20% import tariff.

Raising the quota is seen mainly benefiting the United States, the world’s largest ethanol producer and essentially the lone exporter of the biofuel to Brazil.

Brazilian Foreign Minister Ernesto Araujo and President Jair Bolsonaro’s son Eduardo presented the plan for a new, enlarged quota to U.S. President Donald Trump on Friday during a visit to the White House, the Foreign Ministry said on Monday.

Eduardo Bolsonaro has been tapped to be ambassador to the United States but must be confirmed by Brazil’s Senate.

Brazil sugar industry group Unica praised the decision as a step toward market openness and an eventual opening of the United States to more Brazilian sugar.

Unica has said in the past that it would only agree to the renewal of the ethanol quota if Brazil would get an equivalent tariff-free quota for sugar.

In Brazil, ethanol is made mostly from sugar cane, whereas in the United States it is made overwhelmingly from corn.

“It was important for Brazil to make a gesture in favor of trade openness with the U.S., with whom we’re seeking a broad free trade agreement,” Unica said in a statement.

Brazilian and U.S. officials have previously said the two sides are working toward a trade deal.

However, U.S. ethanol producers, who have been pressing for a total end to the tariffs, criticized the decision.

“Brazil’s decision to maintain its protectionist trade barrier against U.S. ethanol is disappointing,” said the Renewable Fuels Association in a statement.

“The token increase in the quota does nothing to provide relief to Brazilian consumers who face higher fuel prices because of Brazil’s discriminatory policy,” it said, noting that the United States does not tax Brazilian ethanol imports.

According to Brazil’s oil and fuels regulator ANP, in 2018 Brazil imported 1.7 billion liters of ethanol, greatly surpassing the quota for that year. Imports this year have also surpassed the quota, reaching 991 million liters from January to July.

Essentially all ethanol imports come from the United States and are bound for Brazil’s Northeast region, where the U.S. product is competitive during certain periods of the year. ($1 = 4.1196 reais) (Additional reporting by Lisandra Paraguassu in Brasilia and Marcelo Teixeira and Roberto Samora in Sao Paulo; Editing by David Gregorio and Rosalba O’Brien)