Brazil energy minister says gov't looking at ethanol industry tax breaks

BRASILIA: Brazil's government could cut taxes on sugarcane-derived ethanol, Energy Minister Edison Lobao said on Monday, as part of an effort to alleviate pressures on the sector from rising costs that have left the biofuel struggling to compete with gasoline.

Potential tax relief would come on top of other government help including its decision to restore mandatory ethanol content in gasoline back to 25 percent from the current 20 percent starting May 1, boosting demand for the fuel.

If enacted, the possible reduction of the taxes - known as Pis and Cofins - would provide additional relief. Costs are rising in the sugar and ethanol industry due to more expensive labor, land and inputs which have been squeezing profit margins.

"We're examining a set of measures, (tax cuts) among them," Lobao said.

Ethanol producers were given a boost last week with the announcement from state-controlled oil producer Petrobras that gasoline prices would rise at the pump for the first time since 2006, enabling ethanol prices to climb without making the biofuel less competitive.

Brazil began producing ethanol-burning cars in the 1970s with limited success. But the sector took off a decade ago with the launch of flex-fuel cars that can burn ethanol, gasoline or any mix of both, enabling drivers to opt for whichever is cheaper.

Separately, Lobao said a long-awaited new mining code would be sent to Congress by March, once the government had prepared the final draft. It is expected to give concession holders deadlines to develop mining sites and to deter speculators who buy and sell mining rights without ever developing the deposits.

It will also create a new mining agency to speed up the granting of mining rights and do away with the existing National Department for Mineral Production (DNPM).

Royalties paid on mineral production may also rise under the new code, but the government said it would seek to offset this with tax cuts elsewhere to maintain the sector's international competitiveness.