Bloomberg News

Brazil Said to Consider More Fuel Tax Cuts to Fight Inflation

September 28, 2011

Sept. 28 (Bloomberg) -- Brazil’s government may further cut a tax on fuels as it seeks to offset the impact of a weaker real on planned imports of ethanol, a government official who works at the Presidential Palace said.

President Dilma Rousseff’s administration is assessing the impact of the weaker real on foreign purchases of ethanol to decide whether it needs to further reduce the so-called Cide tax, said the official, who asked not to be named because the discussions aren’t public.

Brazil decided to cut the ethanol mix in gasoline to 20 percent from 25 percent by Oct. 1 as part of the drive to keep fuel prices under control. Yesterday it reduced the Cide tax by 16 percent to offset an increase in import costs of gasoline that could either squeeze Petroleo Brasileiro SA’s profit margins or lead to price increases.

The government planned to import up to 1 billion liters of ethanol to boost supply after cold weather damaged sugar cane crops, the Agriculture Ministry’s Agroenergy Secretary Manoel Bertone said Aug. 30. It may reduce imports as a 13 percent drop in the real against the dollar this month increases the cost of foreign purchases, the person said.

--Editors: Harry Maurer, Robert Jameson

To contact the reporters on this story: Carla Simoes in Brasilia Newsroom at csimoes1@bloomberg.net

To contact the editors responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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