Brazil Readies Fresh Aid for Sugar and Ethanol Producers

Source: By PAULO TREVISANI And JEFFREY T. LEWIS, Wall Street Journal  • Posted: Thursday, September 11, 2014

BRASILIA—Brazil’s government on Wednesday unveiled measures to help the country’s sugar and ethanol industries.

Finance Minister Guido Mantega said the government will offer tax benefits as part of a broader program designed to stimulate sales abroad. Sugar and ethanol producers will receive a tax credit equivalent to 0.3% of the value of their exports for the remainder of this year and get a 3% credit from the beginning of next year. Ethanol is produced from sugar.

The new plan “will make Brazilian exports cheaper and compensate for any eventual” appreciation of the Brazilian real, Mr. Mantega said.

Brazil is the world’s biggest producer and exporter of sugar, and the second-biggest producer of ethanol, after the U.S.

Brazil’s sugar and ethanol producers have complained the government of President Dilma Rousseff has discouraged investment in new production capacity by subsidizing the price of gasoline, among other things.

Ms. Rousseff is caught up in a tough re-election campaign. Presidential candidate Marina Silva, who has led Ms. Rousseff in recent polls, has vowed to end gasoline price subsidies and approve measures to increase the use of ethanol as an alternative to fossil fuels.

The new ethanol measures are “important for the sector, but still not enough to confront the grave crisis” affecting the industry, producers’ group Unica said. The group called for the government to implement “clear, stable and consistent” long-term measures to help the sector regain its competitiveness and to encourage investment in new capacity.

Forty-four sugar mills have closed since 2009, according to Unica, with about 400 in operation last year.

Brazil has the world’s biggest fleet of flex-fuel vehicles run either on gasoline or 100% ethanol.