The federal government is reportedly considering a higher tax on gasoline to reduce Brazil's growing fiscal deficit. The move would benefit the country's ethanol producers. Finance Minister Henrique Meirelles is considering raising the so-called Cide, a tax on gasoline prices, as an alternative to the return of the CPMF, the Folha de S.Paulo newspaper reported on Tuesday, without citing where it got the information.
Any discussion of possible tax increases is still premature because the government is still assessing the country’s financial problems, Meirelles told reporters in Brasilia less than a week after being named to the post. A possible increase in the CIDE tax on gasoline to R$0,10 per liter from 0,60 reais, as suggested by sugar mills, would help stimulate demand and raise ethanol prices by up to 25 percent, according to Antonio de Pádua Rodrigues, technical director at Unica.
At those prices, mills could divert more sugarcane to biofuel production than to sugar, he said. In Brazil, most cars run on either gasoline or ethanol. Drivers typically choose ethanol for their cars when it costs less than 70 percent of the price of gasoline because biofuel made from sugarcane yields about 30 percent less energy per liter.
Ethanol production in the Center-South region, where most of Brazil’s sugar and ethanol is produced, is expected to be between 27,5 billion and 28,7 billion liters in the 2016-2017 harvest, close to last season’s level of 28,2 billion, as sugar prices are more attractive, according to Unica. However, average ethanol prices are expected to remain above last harvest’s levels, Rodrigues said in a telephone interview from São Paulo.
Michel Temer, who took over as Brazil’s interim president last week while Dilma Rousseff faces an impeachment trial, is moving quickly to assemble an economic team aimed at renewing investor confidence. Ethanol producers have not started talks with the new government about fuel taxes but expect to begin discussions “soon,” Luis Roberto Pogetti, chairman of ethanol and sugar trader Copersucar, said in a telephone interview on Tuesday. Cosan, which co-owns the world’s largest sugarcane processor with Royal Dutch Shell, rose 3,2 percent to close at 35,25 reais in Sao Paulo, its highest since October 2014.
Source: Exame – 18/5/16
