UPDATE 1-Brazil extends tax aid to sugar and ethanol sectors

miércoles 10 de septiembre de 2014 10:50 GYT

(Recasts with official confirmation and program details)

By Alonso Soto

BRASILIA, Sept 10 (Reuters) - Brazil will include the struggling sugar and ethanol industries in a tax refund program to help them offset higher operational costs and the impact of a weaker local currency, Finance Minister Guido Mantega said on Wednesday.

The government will extend the benefits, part of a program known as Reintegra, to the sectors immediately via a presidential decree, giving producers a tax refund equivalent to 0.3 percent of the value of their exports, Mantega said. Next year that refund will climb to 3 percent of exports.

Producers can use the refund either as a credit against their income tax or as a cash payment.

A government official had earlier told Reuters that the measures could cost Brazil about 900 million reais ($392.76 million) in tax revenue next year.

Facing a tough re-election race, President Dilma Rousseff has tried to send market-friendly signals in hopes of recovering the trust of both voters and investors after the economy sank into a recession this year.

But extending the Reintegra program to mills should put extra financial pressure on the government, which is struggling to meet a key fiscal savings target this year.

The decision is the latest in a string of measures that the administration has implemented with limited success to shore up the ailing sectors. Sugar and ethanol mills have been hit especially hard by Rousseff's efforts to keep domestic gasoline prices artificially low to avert a surge in inflation.   Continuación...