September 11, 2014

With Brazilian presidential elections quickly approaching on October 5^th, the Brazilian government has announced it is expanding a tax credit for the country’s sugar and ethanol producers in an effort to spark demand.  Both industries will immediately be considered to be under the Reintegra program under which they will receive a tax credit worth 0.3% of exports – to be raised to 3% next year.  Over the past five year demand for ethanol in Brazil has been declining as the government has blocked increases to gasoline prices in an effort to contain inflation but which has also lowered demand for sugar-based biofuel.  Last year 25% of Brazil’s flex-fuel cars used ethanol – down from 82% in 2009.  This tax credit is the second recent move by the government to support the county’s sugar and ethanol industries.  Within the past weeks the government has increased the mandatory amount of ethanol to be mixed with gasoline but opponents are claiming that the government has not done enough.  Marina Silva who is challenging current president Dilma Rousseff released her own plan on August 29^th to increase ethanol consumption.

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