Brazil Cuts 5% of Ethanol Added to Gasoline

The Brazilian federal government announced that the percentage of alcohol mixed with gasoline sold at gas stations will be reduced from 25% to 20%.

This will lower alcohol consumption by 1.2 billion liters per year, but since gasoline is more expensive than alcohol, prices are expected to go up at the pump.

The Minister of Mines and Energy, Silas Rondeau, estimates that in some states, such as Paraná and São Paulo, prices may rise as much as 2.6% but that the average increase should amount to 1.3%, nationally.

In a press conference, the Minister asserted that gas prices should start to fall in April, when the sugarcane harvest gets underway. The decision to reduce the portion of alcohol mixed with gasoline, he said, was not aimed only at balancing supply and demand.

"Mixing alcohol with gasoline was a decision taken in the past to stimulate alcohol production," he argued. Therefore, he said, the 20% mixture will be maintained, even when the inter-harvest period is over.

The government is considering other ways to favor alcohol producers, such as lowering the rate of the CIDE (Contribution on Intervention in the Economic Domain) levied per liter of alcohol. The rate is currently 0.28%.

Alcohol producers had promised the government they would hold the price of alcohol at US$ 0.49 (R$ 1.05) during the present inter-harvest period. Now they are warning that they can’t uphold their side of the bargain.

"At this moment they have manifested their inclination to break the accord, but the bind about which they are complaining will certainly vanish when mid-April rolls around," he foresees.

"Therefore, we hope they will make a better assessment of the situation." According to the Minister, another possibility is to eliminate duties on imported alcohol.

Agência Brasil

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