(Adds finance minister’s quote, context)
By Bruno Federowski and Marcela Ayres
BRASILIA, May 21 (Reuters) - Brazil cannot afford to cut taxes because it lacks “flexibility” on the fiscal side, Finance Minister Eduardo Guardia said on Monday, highlighting the government’s attempt to cushion an increase in fuel prices.
Mines and Energy Minister Wellington Moreira Franco had said on Friday that the government was discussing possible tax cuts to reduce fuel prices, which have surged nearly 50 percent at Brazilian refineries in less than a year.
But on Monday, Guardia said to reporters that policymakers should act “carefully” given struggles to curb a growing budget deficit. He said there was no decision yet on the matter.
“We are working hard to promote fiscal consolidation without any tax increase ... but of course we cannot afford to have a reduction in tax revenue at this moment,” Guardia said.
Truck drivers blocked major roadways around the capital of the country’s largest grain state to protest increases in domestic fuel prices, affecting highways in 12 states.
State-controlled oil company Petróleo Brasileiro SA has adjusted domestic fuel prices on a daily basis to keep up with global prices, reverting from years of costly subsidies that helped to prop up its debt. (Reporting by Bruno Federowski and Marcela Ayres; Editing by Grant McCool)