The day before Brazilian Independence Day (September 7), BRASILIA, Brazilian President Dilma Rousseff announced sweeping cuts to electricity rates in a new effort to lower some of the world's highest business costs that are stifling a once-booming emerging-markets star.
“In a widely anticipated announcement, Rousseff said that cuts could drop industrial electricity rates by as much as 28 percent, while residential consumers would see rates fall on average by 16.2 percent.
With growth in the world's sixth-largest economy stalled for nearly a year now, Rousseff's measures will bring needed relief to local industries that are losing market share to foreign competitors that have lower costs.
"This reduction in the cost of the electricity will make our productive sector even more competitive," Rousseff said in a televised address to the nation ahead of the country's independence day on Sept. 7.”
This move, combined with a variety of stimulus efforts and the imposition of a new set of industrial tariffs to protect Brazilian manufacturers reflects the Brazilian government’s heterodox approach to increase Brazil’s competiveness without diminishing industrial employment or output in the face of the global economy’s sluggishness. Also, the move comes in the face of the continued controversy, largely surrounding the Belo Monte dam project, concerning Brazil’s efforts to expand hydropower generation in the Amazon basin. In order to sustain these price reductions, the Brazilian government will need to move forward quickly with these projects in the coming years; and certainly such price decreases will deepen urban support for expanding power generation around the country.