Brazil Said to Plan Ethanol Tax Cut, Low-Cost Loans for Mills

Source: By Arnaldo Galvao & Raymond Colitt, Bloomberg • Posted: Wednesday, April 24, 2013

Brazil, the world’s biggest ethanol exporter, plans to reduce taxes and extend low-cost credit lines for producers to help boost output and lower prices, a Finance Ministry official with knowledge of the plan said.

The measure may be announced after a meeting of producers with President Dilma Rousseff and Finance Minister Guido Mantega today as reported by Folha de S.Paulo earlier, said the official, who asked not to be named because he wasn’t authorized to make public comments. The plan includes cutting the PIS/Cofins tax on mill revenue, the official said.

Rousseff’s government has cut electricity rates, reduced payroll and food taxes and increased the benchmark interest rate for the first time in almost two years last week to stem inflation that exceeded the central bank’s target range. The plan comes as ethanol mills start processing a record sugar-cane crop amid declining international prices for the sweetener and rising gasoline imports by state-run Petroleo Brasileiro SA. (PETR4)

Sugar has dropped 19 percent in the past 12 months in New York as supplies from top producer Brazil may exceed demand.

Ethanol output in Brazil, where the fuel is made from sugar-cane, will rise to 25.8 billion liters (6.8 billion gallons) in the 2013/2014 crop year that started this month, from 23.6 billion in the previous season, the government said April 9.

Petrobras increased imports of fuel and other refined oil products to 505,000 barrels a day in the fourth quarter, from 394,000 barrels a year earlier, and has sold the fuel at a discount to international prices.

Gasoline Blend

Brazil is also raising the mandatory amount of ethanol mixed into the gasoline blend sold at pumps to 25 percent next month from 20 percent now.

In addition to ethanol blended with gasoline, most Brazilian cars can also run on pure ethanol sold separately at service stations. The U.S., where ethanol is made from corn and used as an alternative gasoline additive, is the world’s largest producer and consumer of the biofuel.

Folha de S.Paulo newspaper reported earlier today that the Brazilian government will announce the tax cut and credit lines for ethanol producers after Rousseff’s meeting with producers.