Brazil Cuts Electricity Rates By 16-28 Percent To Boost Economy

The Brazilian government has introduced major cuts in taxes for electricity producers and distributors, reported Reuters on Tuesday, in a move that will cut electricity cost for households up to 16 percent – and to businesses by up to 28 percent.

“This is the biggest reduction in electricity rates that the country has ever seen,” Rousseff said after signing the measures before an audience of business leaders.

The Brazilian government has introduced major cuts in taxes for electricity producers and distributors, reported Reuters on Tuesday, in a move that will cut electricity cost for households up to 16 percent – and to businesses by up to 28 percent.

“This is the biggest reduction in electricity rates that the country has ever seen,” Rousseff said after signing the measures before an audience of business leaders.

[quote]”Reduced energy costs … will improve Brazil’s international standing, slow inflation and encourage investment…[and] will benefit both the businessman and the consumer,” she added.[/quote]

According to Brazil’s Finance Minister Guido Mantega, cheaper electricity will slow inflation down by between 0.5 and 1 percentage points next year.

More importantly however, the cuts are meant to spur growth in energy-intensive industries, such as steel, aluminum and petrochemicals, who are struggling to compete internationally . Electricity rates in the country are presently the third highest in the world – and the government action should help Brazilian companies lower sky-high production cost, says Reuters.

In exchange for reduced power costs, Brazil’s Energy Minister Edison Lobão has also announced the renewal of 20 concessions for electricity generators due to expire between 2015 and 2017, accounting for about one-fifth of the country’s generating capacity.

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The new measures and the $65 billion infrastructure plan announced last month will allow the country “to guarantee the continuity of the growth process with social inclusion,” Rousseff said.

After a decade of strong performance, Brazil grew below the Latin American average in 2011 and so far this year. If the electricity initiative is successful, the President plans to use a similar blueprint to reduce taxes for other industries in coming months, possibly including telecoms, officials have told Reuters.