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.
Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com
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