Brazil government dedicates funds, tax breaks towards ethanol production

The federal government of Brazil is set to offer BRL970m ($480m) in credits towards tax breaks along with BRL4bn ($1.9m) in loans for crop renewal during 2013, finance ministry stated.

Brazil finance minister Guido Mantega also added that the government would provide additional credit facility of BRL2bn ($998.5m) for ethanol reserves and tax credits for the chemical industry, Bloomberg reported.

Further, the government will extend reduction in taxes and low-cost loans to the mills to boost the country’s ethanol production.

Mantega added that the measures, to begin from May 2013, are aimed at encouraging investments in the sector and increasing production to reduce demand for gasoline.

They can also ease the inflation, Mantega remarked.

Meanwhile, the announcement from the government comes at the time when ethanol mills are processing a record sugar-cane crop with prices dropping for the crop.

Also, the rising gasoline imports by major companies such as state-run Petroleo Brasileiro have driven the government to increase the ethanol production.

Brazil President Dilma Rousseff noted: "The ethanol sector is here to stay and, from time to time, we need to revisit it to see what we can do to help our producers."

"Sometimes the price provides returns, other times it doesn’t," added Rousseff.

However, the stakeholder of two ethanol plants, Grendene chairman Alexandre Grendene Bartelle, was quoted by Bloomberg as saying that although the incentives would further the investments from some companies, it is not likely to lure new companies into the industry with increasing costs.

"Maybe some companies will expand plantations or mills, but we won’t see companies making big investments in new projects," Bartelle added.

Mines and Energy Minister Edison Lobao nonetheless said that the ethanol output in Brazil would rise to about 28 billion litres from 23 billion accounted in 2012.