(Recasts, updates with analyst comments, specifies tax,
separate impact for diesel)
BRASILIA/RIO DE JANEIRO, April 30 Brazil will
raise refinery-gate gasoline prices 10 percent and diesel
prices by 15 percent on May 2 in the first hike in 2-1/2 years,
but a tax cut should reduce a subsequent rise in inflation, the
government said on Wednesday.
The much-expected decision allowing state-run oil company
Petrobras (PETR4.SA)(PBR.N) to raise the prices of two key
fuels came after two days of meetings between Petrobras
executives, President Luiz Inacio Lula da Silva and his
ministers, who were concerned about stoking inflation.
Finance Minister Guido Mantega said shortly after Petrobras
announced the hike that the government would reduce the
so-called CIDE economic domain tax so motorists at the pump
feel no impact from the refinery-gate gasoline jump.
He said CIDE, which will fall to 18 centavos (11 U.S.
cents) from 28 centavos a liter of gasoline and to 3 centavos
from 7 centavos for diesel, was created as an anti-cyclical tax
intended to mitigate the impact of price hikes on consumers.
Diesel prices would still increase over 8 percent for
consumers and a huge fleet of trucks and buses, Mantega said.
Inflation has been rising, fueled by growing demand during
an economic boom, as well as high food prices.
World oil prices have nearly doubled since the last fuel
price hike in Latin America's largest country where Petrobras
accounts for nearly all crude production and refining.
Analysts say the price lag for gasoline and diesel is
between 20 and 30 percent, which has hit Petrobras cash flow at
a time it needs to pump billions of dollars in recent important
oil discoveries to boost production. Still, the rise,
especially for diesel, exceeded some expectations.
"We have various positive aspects that will help Petrobras
stock -- prices rising a bit more than expected although maybe
not enough yet, the government acknowledging that it is a
needed hike and reducing the tax," said an analyst with a big
foreign bank who wished to remain anonymous.
"If they (the government) want to stick to a policy of
benefiting consumers, fine, but they are not going to do it at
the cost of Petrobras' revenues. It's a very good sign and a
strong commitment," the analyst added.
Gilberto Pereira de Souza of BES bank was less upbeat,
saying that, in the case of diesel, "with a 30 percent lag, a
15 percent hike doesn't resolve much, but it's better than
Petrobras stock closed 3.18 percent higher at 42.2 reais
before the announcement, underperforming a 6.3 percent jump in
the broader market fueled by Brazil's winning of a much coveted
investment-grade credit rating from Standard & Poor's.
Analysts say it is likely to rise more after Thursday's
Labor Day holiday to price in the fuel hike.
Petrobras, a publicly traded company, is formally free to
set fuel prices, but the government has de facto control over
the prices of gasoline, diesel and cooking gas. The prices of
other oil products like aviation kerosene or naphtha, are
adjusted regularly in line with market levels.
The company, which made Brazil self-sufficient in oil for
the first time in 2006, has already complained that its cash
flow is getting too low to finance its oil exploration program,
especially in the newly-found reserves deep under the ocean
floor in the so-called subsalt cluster.
Petrobras' five-year investment plan envisages an ambitious
capital expenditure of $122 billion.
(Reporting by Andrei Khalip, Denise Luna and Ana Nicolaci da
Costa; Editing by David Gregorio)