MercoPress. South Atlantic News Agency

Rousseff announces major shake-up of Brazilian costs beginning with lower power rates

The president said she would not rest until banks lower interest rates on credit cards

Brazil will cut energy costs for companies and consumers while pressuring banks to lower lending rates to accelerate growth, said President Dilma Rousseff in a speech on national television to commemorate the country’s independence.

Electricity rates will fall by an average of 16.2% for households and as much as 28% for producers starting next year, said the Brazilian president who has championed combating the “Brazil cost”.

“It’s a new concept, a new attitude; it means reducing production costs and the price of goods to generate jobs and income”.

Brazil’s industry pays an average of 330 Reais (162 dollars) per megawatt-hour, the fourth- highest rate in the world, according to a statement on the website of the National Industry Confederation.

Earlier in the day Brazil’s national transport regulator announced that companies that ship cargo by railway will see their average maximum freight rate reduced by 25%, the first revision of rates in the sector in 15 years.

The reduction in rail rates is part of the first revision of rates for the sector, the agency said, adding that ceiling rates for heavy cargoes such as iron ore would fall 30% on average.

The new breakdown of railway rates will be published in the government's Official Daily Register on Monday and the new tariffs will go into effect 15 days later.

The change in railway freight rates will affect 11 operators of railway concessions in Brazil that extend over 28,000 kilometres of track. This was the first revision of rates for the railway sector since the start of the modern concession model 15 years ago.

The appreciation of the Real against the dollar in recent years has exacerbated what has been defined as the “Brazil cost”, which includes some of the world's highest energy rates and taxes, stifling bureaucracy, a nearly inoperable legal system and poor infrastructure.

The government will create conditions for lower interest rates and reduce taxes while ensuring fiscal discipline, Rousseff said. The government will also seek a “fairly valued currency,” she said. The Real has lost 8% against the dollar this year, the most in major Latin American countries.

Banks need to further reduce lending rates to consumers, especially on credit cards, Rousseff said, adding she “won’t rest until that happens.” The effects of Brazil’s accelerated economic recovery would be felt from next year, pledged the president.

Car and light vehicle sales reached a record high in August, Brazil’s car dealership association Fenabrave said on Sept. 4. Retail sales in June saw the biggest monthly jump since January.

Rousseff has also stepped up efforts to eliminate infrastructure bottlenecks to drive faster growth. Last month, she announced plans to sell licenses to build and operate roads and railways designed to attract as much as 66 billion dollars in investment. The government is also preparing plans to auction concessions to operate and build new ports and airports.

Brazil will seek to spark demand by cutting taxes, Rousseff said.

”I won’t rest from searching for new ways to reduce taxes and utility rates without knocking public accounts out of balance”.