UpdateBrazil unveils stimulus package for ethanol sector

23 April 2013 21:49  [Source: ICIS news]

Brazil unveils stimulus package for ethanol sector
MEDELLIN, Colombia (ICIS)--Brazil, the world’s biggest ethanol exporter, unveiled on Tuesday a stimulus package for ethanol producers in a move to boost production and investment in the sector.

The stimulus package, announced on Tuesday by Finance Minister Guido Mantega, will include credit lines specifically set aside for the sector, interest rate reductions and a reduction of the tax burden on producers.

The main objective of the package is to encourage producers to invest more in biofuel production by increasing the supply of the product to lower the price of fuel at the pumps.

The government will grant Brazilian reais (R) 970m ($480m, €370m) in credits to offset a R0.12/litre tax on ethanol and offer R4bn in loans for crop renewal this year, Mantega said.

There will also be a R2bn line of credit for ethanol stockpiling and tax credits for the chemical industry, he said.

Brazil's leading cane industry association, Unica, said after Mantega spoke that the measures, although a step in the right direction, were insufficient to revive investment in ethanol capacity to keep up with demand for the biofuel.

The plan comes as ethanol mills start processing a record sugarcane crop and rising gasoline imports by state-run Petrobras, sources in the sector said.

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

Brazil will increase its ethanol blending rate to 25% from 20% on 1 May, the government said in January. The country had lowered the blend rate to 20% in October 2011 because the country had insufficient supplies of anhydrous ethanol to meet demand.

Brazil blends anhydrous ethanol into gasoline. The country uses hydrous ethanol as a stand-alone fuel in flexible-fuel vehicles (FFVs), competing directly with gasoline.

($1 = €0.77; $1 = R2.02)

By: Leela Landress
+1 713 525 2653

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