TUESDAY, JUNE 3, 2014
By Jeffrey T. Lewis
SÃO PAULO–The two main candidates challenging Brazilian President Dilma Rousseff in the October elections have criticized her government’s policies regarding the sugar-derived fuel ethanol.
Aecio Neves of the Brazilian Social Democracy Party and Eduardo Campos of the Brazilian Socialist Party trail Ms. Rosseff in opinion polls, though some recent surveys have shown them gaining ground.
Mr. Neves promised to give ethanol greater importance in the country’s energy sector and to use government policy to promote innovation in the industry. Ms. Rousseff’s energy policy has made many mistakes that are hurting the ethanol industry, according to Mr. Neves.
“No sector has been as incapacitated by the government’s inability to conduct macroeconomic policy” as the sugar and ethanol sector, he said late Monday at an event organized by ethanol producers.
Mr. Neves attacked Ms. Rousseff’s use of state-controlled oil company Petrobras and other national companies to conduct economic policy, while declining to be more specific.
Both Mr. Neves and Mr. Campos have in the past criticized the government for forcing Petrobras to keep the price of gasoline at artificially low and money-losing levels. That policy means ethanol producers have to keep the price of their fuel lower than it should be to stay competitive.
“It’s the only oil company in the world that the more gasoline it sells, the bigger loss it has,” Mr. Campos said on Monday night at the same ethanol industry event.
With Brazil’s annual inflation rate perilously close to the 6.5% upper limit of the government’s target range, Ms. Rousseff is loath to let the price of gasoline rise to reflect its cost to Petrobas. Since the company doesn’t produce enough gasoline at its refineries in Brazil, it must import the fuel and then resell it at a loss.
Brazil is the world’s second-biggest producer and consumer of ethanol, which is made from the country’s abundant supplies of sugar cane, and has the world’s biggest fleet of cars that can run on both gasoline and pure ethanol.
Mr. Neves accused the government of abandoning the ethanol sector in favor of the oil industry. Petrobras is in the middle of a multi-billion-dollar, multiyear plan to extract oil from offshore fields located miles beneath the surface of the ocean.
Both candidates said they would use tax policy and other incentives to encourage research into making Brazil’s ethanol industry more efficient and competitive and to make so-called flex-fuel engines that can use both gasoline and ethanol more efficient.
Mr. Campos said that, if elected, he would change tax treatment for fuels to favor the sale of ethanol in a revenue-neutral way. “I’m not talking about tax increases; I mean doing it in a way that differentiates between (the two fuels) without increasing the tax burden, ” he explained. Revenue from fuel taxes would be dedicated to improving urban transportation networks, which would help Brazil’s young people and the poor, Mr. Campos said.
A poll released two weeks ago by the Ibope polling group showed 40% of respondents supporting Ms. Rousseff, up from 37% in the previous poll in April. Mr. Neves got the support of 20% of voters, up from 14% and Mr. Campos came in third with 11% support, up from 6% previously.