A new industrial tax on cosmetics wholesalers and producers is due to come into effect in Brazil this month is likely to drive up the retail price of make-up, perfume and personal care products.

Trade association Abihpec has warned that retail prices are likely to rise by as much as 12 percentage points above inflation, potentially leading to a decrease in sales. Abihpec President João Carlos Basílio warns of a 17 percent drop in sales of hygiene and beauty products this year. 

Lower consumer spending on cosmetics could represent a serious setback for the country’s beauty industry, which is the third largest in the world behind the United States and China, according to Euromonitor International.  

Brazilian consumer goods company Hypermarcas, has already revealed tat it will raise the retail price of cosmetics products in July after a 7 percent price increase in April. Natura SA also announced a 2.5 percent price increase on various products in June, following an average 3.7 percent increase in February.

Rising unemployment and a likely recession have already impacted on the profitability of beauty salons, according to a report by Reuters.