Government plans to cover possible increase in energy costs

Brazil’s government will only be able to deliberate on a possible rise in its spending in an attempt to cover the price of electric energy as of April, said Finance Minister Guido Mantega on Friday (Feb. 21). According to him, the government awaits the end of the rain season in the country’s central-south region so they can evaluate the level of the reserves and ascertain the viability of reassigning the budget with the Energy Development Fund (“CDE”), a fund intended to cover the reduction of electricity tariffs.

On a teleconference with foreign journalists and international financial institutions, Mantega said that the economic team is currently only working with $3,8 billion set by the Federal Budget for the fund this year. He explains that the total amount earmarked shows an improvement compared to 2013 as, last year, resources came from public debt securities.

“For now, it is still not clear whether energy costs will rise in 2014, nor whether we’ll distribute them between the public sector and energy tariffs,” he added.

Avoiding to confirm the need for new budget assignments for the CDE, the minister said that the government is ready to cover a possible rise in energy costs. “We will, if necessary, make a supplementary sacrifice and we’ll be able to have other sources of income [for the CDE] which haven’t been predicted,” he said. Mantega, however, did not say what sources he was referring to.

The minister also restated that an increase in spending in the energy sector will not be detrimental to meeting the primary surplus target (saving resources in order to pay the interest on the public debt) – 1.9% of Brazil’s GDP. If new budget assignments for the CDE prove necessary, the government may increase spending cuts in other areas and ensure that the target is met.

On Thursday (20), Mantega and Plannnig Minister Miriam Belchior announced the withholding (with the possibility of granting, in the future) of $18.58 billion to meet the fiscal target of 1.9% of the GDP.

Translated by Fabrício Ferreira