* Residential rates cut 18 pct, industrial bills slashed 32
* Rousseff says cheaper power aimed at boosting economy
* Inflation accelerates to 6.02 pct on 12-month basis
By Leonardo Goy
BRASILIA, Jan 23 Brazilian President Dilma
Rousseff on Wednesday announced a deeper-than-expected cut in
electricity costs, hoping to contain a recent spurt in
inflation, give manufacturers a leg up and boost the sputtering
Residential consumers will pay 18 percent less for power,
while industrial, agricultural and commercial users will see
electricity bills drop 32 percent, Rousseff said in a television
She dismissed as "alarmist" recent reports that Brazil was
facing an energy crisis and possible power rationing because of
a drought that crimped hydroelectric capacity.
Rousseff's left-leaning government, now in its third year,
is struggling to regain investor confidence and reignite solid
growth in a Brazilian economy that boomed for much of the decade
before she took office.
Despite flat economic activity, data released on Wednesday
showed inflation is running above 6 percent on an annual basis,
well above Latin American peers such as Chile and Mexico.
The IPCA consumer price index rose 0.88 percent
in the month to mid-January, the statistics agency said. That
surpassed all estimates in a Reuters poll, and put inflation at
6.02 percent in the last 12 months.
Since Rousseff took office in early 2011, Latin America's
biggest economy has struggled with uncompetitive industries,
rising consumer debt and falling investment. Activity likely
expanded just 1 percent last year, a striking decline for a
country that grew 7.5 percent in 2010 and was considered a star
performer among emerging markets for most of the past decade.
Rousseff and her economic team are racing to ensure 2013 is
not another lost year for the economy.
Brazilian officials see the cut in electricity prices as one
of their best tools available to help revive factories from
their malaise and ease pressure on prices, a major concern in a
country with a long history of runaway inflation.
Brazil's central bank expects the electricity cuts could
shave a full percentage point off of the IPCA index by the end
of 2013, Reuters reported on Tuesday.
Inflation typically spikes early in the year in Brazil due
to seasonal factors such as annual tuition increases, though
this year a surge in food costs that has dragged on for months
is putting additional pressure on prices.
The government expects those pressures to ease by late
March, after which annual inflation should start to ease and
close the year well within the official target range, a senior
member of Rousseff's economic team told Reuters on Wednesday.
"Inflation is not going to be the story of the year," the
source said on condition of anonymity.
Brazil's $2.5 trillion economy still enjoys record-low
unemployment and healthy government finances. Polls show that
most Brazilians are happy with Rousseff and the economy, thanks
in part to the residual glow from the previous decade's boom.
Yet some economists say an extended slump could lead
companies to start laying Brazilians off, which would endanger
Rousseff's expected reelection bid in 2014.
Even some traditional areas of strength, such as
agricultural commodities, have shown worrying signs.
Brazil's current account deficit widened in December to the
biggest on record, and will barely shrink in January, the
central bank said on Wednesday, citing weak demand for raw
material exports that has eroded its traditional trade surplus.
The current account deficit jumped to $8.413
billion in December, the biggest monthly shortfall since at
least 1980. That exceeded all estimates in a Reuters poll
forecasting a $6.5 billion deficit.
Accelerating imports and more corporate profits sent
overseas will also contribute to an estimated $8.3 billion
current account gap in January, Tulio Maciel, the bank's head of
economic research told reporters.
An increasingly unequal balance of payments also raises the
question of whether Brazil can continue to cover the shortfall
with foreign direct investment, whose growth has stagnated since
a jump in late 2010.