New legislation approved by Brazilian Congress reinstates a tax advantage to biofuels compared to fossil fuels, which should benefit ethanol companies in the long-term, analysts said on Thursday. The so-called PEC of Benefits includes a provision saying that among other things biofuels should enjoy lower taxes than fossil fuels for a period of 20 years. The approved 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. “From our perspective, this measure is very positive for agribusiness companies, as it will maintain competitiveness of biofuels in the long term,” Citi analysts Gabriel Barra and Joaquim Alves Atie said in a note. “With a constitutional guarantee that renewable fuels will pay lower taxes than fossil fuels (recognizing fossil fuels’ negative externalities), ethanol and other biofuels could enjoy a much stronger outlook ahead,” said investment bank BTG Pactual in a report.
Sources: Reuters/UDOP (*Translated by Ia Niani)