by Rafaella Barros and Marcelo Teixeira (Reuters) New legislation approved by the Brazilian Congress late on Wednesday reinstates a tax advantage to biofuels compared with fossil fuels, which should benefit companies producing ethanol in the long-term, analysts said on Thursday.
Brazil’s lower house approved the government-sponsored bill that among other things includes a provision saying biofuels should enjoy lower taxes than fossil fuels for a period of 20 years. read more
The bill added that states and the federal government should go back to preferential taxation levels to biofuels seen before May 15, when another law had changed the way fuels were to be taxed.
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BTG said Brazilian mills will be able to be more profitable on their ethanol sales with the new legislation and gave a “buy” recommendation for companies whose shares were previously hurt by the changes made in May, such as Raizen (RAIZ4.SA), Sao Martinho (SMTO3.SA), Jalles Machado (JALL3.SA) and Adecoagro (AGRO.N).
The May tax modifications ended up reducing ethanol’s competitiveness against gasoline at the pump, and pressured sugar prices on the international market as mills started to make less ethanol and more sugar.
That trend, according to the analysts, could now be reverted. READ MORE
Petrobras slashes Brazil wholesale gasoline prices 4.9%, effective July 20 (S&P Global)