For the second time this month, Brazil is taking action to stimulate its ethanol industry after falling demand prompted criticism of President Dilma Rousseff.

Brazil will expand a tax credit to sugar and ethanol producers to spur demand for the biofuel, Finance Minister Guido Mantega told reporters in Brasilia today. Under the program, known as Reintegra, producers will receive a tax credit worth 0.3 percent of their exports.

“Ethanol and sugar will enter immediately in the Reintegra program,” Mantega said. “This will help exporters because it cheapens the Brazilian export and pays a devaluation of the exchange rate.”

Demand for ethanol in Brazil has declined over the last five years. Producers blame Dilma, whose effort to contain inflation by blocking state-run Petroleo Brasileiro SA (PETR3) from raising gasoline prices has depressed demand for the sugar cane-derived biofuel.

The credit should be raised to 3 percent next year, Mantega told the newspaper O Globo yesterday.

Only 25 percent of Brazil’s flex-fuel vehicles used ethanol last year, down from 82 percent in 2009, as prices compared to gasoline have risen in most parts of of the country, according to a December report from the sugar and ethanol consulting company Datagro.

Unica, an ethanol industry group, said government measures are insufficient.

“Brazil needs a long-term view, especially on ethanol and biomass, with clear public policies,” Unica said in an e-mailed statement.

Dilma’s opponents are highlighting problems in the sugar and ethanol industry ahead of the Oct. 5 presidential elections. Marina Silva, who is challenging Dilma, vowed to boost ethanol consumption in a plan released Aug. 29.

The export tax credit follows last week’s decision by senators in Brazil to increase the mandatory amount of ethanol added to gasoline sold at service stations.