Brazil Expected to Cut Energy Prices

By Ben Tavener, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – Brazilian President Dilma Rousseff is widely expected to unveil a plan to reduce energy bills, for industry and consumers, aimed at helping to stimulate the country’s struggling economy. She has also promised to clear “logistical bottlenecks”, which she says are hindering development and foreign investment in the country’s economy, in a further bid to increase market competitiveness.

A number of sources have said that average cut for industry will be around seventeen percent, and around ten percent for private consumers. It is expected the president will make the announcement before the September 7th Independence Day public holiday.

Speaking at the Council for Social and Economic Development (CDES) last week, President Rousseff said a reduction in the price of energy was the next step to stimulate growth, following on from historic reductions in interest rates.

Industry leaders – particularly those in metal and vehicle production – have long complained about high energy costs, fifty percent of which they say are surcharges and taxes.

Acknowledging the “adverse” state of the economy, the president said the government wants to increase investments in Brazil’s inadequate infrastructure and reduce production costs to give Brazil a better chance at competing globally:

“Increasing our competitiveness is vital for us to assure we can maintain levels of employment, income and quality social services, in a sustainable way, for all Brazilians. We can not be a fair country if we cannot be a competitive one.”

This is all part of the government’s battle against the operational difficulties and overheads dubbed the “Brazil cost” by economists, which are experienced by those trying to run or open a business here. These extra hurdles, as well as other challenges such as the low number of specialized workers available, are seen by experts as constraining development and foreign investment.

However President Rousseff, a trained economist, said the country’s “recipe for growth” – one of increased production and investments and strong social policies – would not deviate from its course, praising the country’s “more civilized” interest rates and the increasingly favorable exchange rate.

Business figures interviewed by The Rio Times have said the raft of new stimulus packages brought forward by the government in recent times have been a positive sign but whether the long-awaited results would come has yet to be seen:

“All this news is very refreshing; I am impressed at the sudden injection of gumption with regard to all aspects of infrastructure investment,” said David Lorimer, director of Rio-based trade consultancy firm Datamar.

The government has also offered tax breaks for specific areas of Brazilian industry, set to total around R$6 billion (US$3 billion) in 2012-13 in waived tax revenues including slashed IPI tax on industrialized products such as cars and domestic appliances, O Globo newspaper reported.

The president now seems to have her sights squarely set on providing Brazil with revamped infrastructure, capable of delivering a more competitive edge to the country’s economy. Following the recent creation of the government’s Empresa de Planejamento e Logística (Planning and Logistics Company, EPL) to help implement the infrastructure improvement plans, it is now expected that concessions to private companies for infrastructure projects on railways and roads will be extended to ports and airports in the coming weeks.