Brazil Slashes Electricity Rates By 18-32 Percent
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Brazilian President Dilma Rousseff on Wednesday announced power rate cuts of between 18-32 percent in order to slow down inflation, reported Reuters, giving a much-needed boost to consumers and industries, who have seen inflation rise to as much as 6.02 percent this month.
Brazilian President Dilma Rousseff on Wednesday announced power rate cuts of between 18-32 percent in order to slow down inflation, reported Reuters, giving a much-needed boost to consumers and industries, who have seen inflation rise to as much as 6.02 percent this month.
Residential consumers will pay 18 percent less for power effective immediately, said Rousseff, while industrial, agricultural and commercial users will see their electricity bills drop by 32 percent.
[quote]“This means lower expenses for each of you and for the country’s entire economy. We will reduce costs for the productive sector, which means more growth, more production, more jobs,” Rousseff said. “Brazil will have all the energy it needs to grow in the future.”[/quote]According to Bloomberg, the president had initially planned for the cuts to come next month, and the reductions were supposed to be 16.2 percent and 28 percent respectively; but the spike in inflation had warranted immediate action, with the government expecting these pressures to ease only by late March.
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The central bank’s latest projections suggest that a 20 percent cut in electricity prices should shave a full percentage point off consumer inflation by the end of 2013, a government source told Reuters on Tuesday. Over the last four months, annual inflation has accelerated up from 5.78 percent to 6.02 percent, far higher than the central bank’s inflation target of 4.5 percent.
Prior to the rate adjustment, President Rousseff had attempted to persuade utilities, such as Eletrobras and Cia Energetica de Minas Gerai, into reducing rates in exchange for the renewal of licenses for an additional 30 years, reported Bloomberg. Some companies though refused the offer as the proposed rates were not enough to meet the companies’ cash flow needs.
Luciano Rostagno, chief strategist at Banco WestLB do Brasil, warned that Rousseff’s rate cuts may only bring temporary relief to inflationary pressure.
[quote]“The government is using administered prices to control inflation, but it doesn’t solve the numerous bottlenecks the economy faces,” he said. “The inflation dynamics are very unfavourable.”[/quote]Related: Brazilian Inmates Generate Free Electricity For Town Through Cycling
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Additionally, there is concern that the rate cuts may place greater pressure on production at Brazil’s hydro-electric dams, which provide two thirds of Brazil’s power, but are at their lowest level in a decade.
Rousseff however dismissed these doubts, claiming that there was no chance that low reservoir levels at the country’s hydroelectric plants will require the government to impose power rationing, especially as the start of the rainy season will fill the country’s hydroelectric reservoirs, she said.
