UPDATE 3-Brazil will not bail out electric utilities, Levy says
(Adds potential change to electricity loan terms)
By Alonso Soto
BRASILIA Jan 13 (Reuters) - The Brazilian government will not give any extra funds to indebted power utilities this year to avoid further harm to its finances, Finance Minister Joaquim Levy said on Tuesday in another sign of fiscal restraint to regain markets' trust.
Speaking at a breakfast meeting with reporters in Brasilia, Levy also said that to bring electricity rates more in line with reality, consumers should pay the rising prices caused by lower output from hydroelectric power plants.
"Fare realism" will help consumers and companies better plan for the future and ease the burden on strained government coffers, Levy said.
Later in the day a government source told Reuters that Brazil might also ask a group of banks that lent roughly 17.8 billion reais to electric distributors to extend the deadline for repayment. If banks agree, that would help reduce the urgency for distributors to raise rates this year, easing short-term inflationary pressure.
Levy's comments on Tuesday reinforced a series of recent belt-tightening measures meant to convince investors that President Dilma Rousseff will move away from the interventionist policies that have hurt confidence in Brazil's once-booming economy.
To recover credibility in financial markets, Levy said the government would have to cut spending and raise some taxes.
"This is a year of economic adjustment and rebalancing to regain growth," said Levy, adding that any tax increase would have a minimal impact on economic activity. Continuación...