Brazil reduces electricity costs
On January 24th Brazilian President Dilma Rousseff announced a plan to drastically cut energy costs throughout the country. The plan calls for cuts of up to 18% for home owners and 32% for businesses (industry, agriculture, trade and services).
The reductions will come as a result of government action to reduce or eliminate taxes related to energy, which represent 12.5% of total costs. In addition, the government is in the process of renewing approximately 20 concessions for energy suppliers due to expire between 2015 and 2017.
The president is hoping to increase industrial productivity and bring to country back to growth rates not seen since the downturn in the global economy.
Electricity prices are a big component of the so-called "Brazil cost" - the mix of taxes, high interest rates, labor costs, infrastructure bottlenecks, and other issues that have made the economy less competitive.
The cost reductions have generated huge expectations among industry experts. According to Carlos Antônio Cavalcanti, the director of infrastructure at FIESP (Industry Federation of the State of São Paulo) when it comes to industry, “energy holds the same weight as both exchange and interest rates. The strengthening of exchange rates and the reduction of the Selic rate combined with lower energy costs will help to reindustrialize the country”.
Source: Blog Fora de Pauta, BBC Brasil, Folha de São Paulo
For further information on the Brazilian market, please contact Mr. Daniel Berners, dberners@berners-consulting.net.