Under pressure to contain the effects of the war in the Middle East on the Brazilian population, the government of Luiz Inácio Lula da Silva begins another week with the promise to issue a provisional diesel subsidy measure in partnership with the states. The new subsidy could be important to reduce the resistance of large distributors to joining the first subsidy program published by the Union.
Sector executives point out that government aid is not enough to cover the difference between external market values and the price limits defined by the government. Fearing effects on inflation and demonstrations by truck drivers, the Union, in turn, does not rule out adjustments to the table, but argues that the new program with the states should reduce the gap.
According to vice-president Geraldo Alckmin, only Rio de Janeiro and Rondônia refused to join the federal government’s proposal and other “two to three states” were still evaluating it. The proposal provides for a subsidy of R$1.20 for imported diesel, the cost of which would be shared between the Union and state governments. According to the executive secretary of the Ministry of Finance, Rogério Ceron, the total fiscal impact will be R$3.5 billion to R$4 billion.
Initially, the edition of the MP was scheduled for last week, so that it would be valid for two months, until May 31st. But there were delays amid negotiations with the states and the Minister of Finance, Dario Durigan, stated that he would wait for Lula’s return to Brasília to publish the measure. Lula traveled to Ceará and Bahia and only returned to the federal capital on Good Friday.
Durigan, in an interview with Globonews, highlighted that the price of diesel will be more expensive in states that do not join.
“The president is traveling, we will wait for the president to return to edit this provisional measure, which has already been agreed with the states. I hope that, in the meantime, these very few states that have not yet joined will also join, so that we have a benefit for the population in these states, which is our main concern”, stated the minister.
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Distributors resist
The new subsidy could be important to change the resistance scenario of large distributors to the first aid proposed by the federal government. Vibra, which operates the BR gas station network, Ipiranga and Raízen, owner of the Shell network — decided not to join for now, as revealed by the newspaper Folha de S.Paulo and confirmed by GLOBO with interlocutors who requested anonymity.
On the other hand, Petrobras, Mataripe Refinery (operated by Acelen, an energy company controlled by the Mubadala Capital fund, from the United Arab Emirates), Sea Trading Comercial, Midas Distribuidora and Sul Plata Trading joined, according to the National Petroleum Agency (ANP).
The refining park of Petrobras, the country’s largest diesel manufacturer, and Acelen account for around 70% of the country’s entire diesel demand. The remaining 30% is imported. The three large distributors that decided not to join buy diesel from Petrobras and Acelen refineries, but they also account for around half of Brazilian imports of the fuel.
The Union offered to pay R$0.32 per liter of fuel to producers and importers. On the other hand, companies cannot sell above a price set by the government. According to experts and executives, much of the companies’ resistance is related to the maximum prices set by the government amid the escalation of fuel prices on the international market.
For importers, the limit is R$5.28 to R$5.51 per liter, depending on the region. For distributors that sell diesel produced in the country, the ceiling is R$3.51 to R$3.86 per liter.
Because of the difference, even regional importers and distributors that decided to join the subsidy may end up without accessing the subsidy. This is because the current gap is above R$3 per liter in relation to the value charged by Petrobras. In other words, the amount subsidized by the government would not even cover the costs of importing. Therefore, under reservation, businesspeople said that it is necessary for the government to re-evaluate the maximum price list.
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In the government’s view, adjustments to price limits can be made, especially to take into account the different values of imported diesel; on the other hand, the gap in relation to the outside world will tend to decrease with the second subsidy, shared with the states. With the new measure, the total subsidy will amount to R$1.52 per liter.
The government is also evaluating additional actions to reduce the impact of rising oil prices on other sectors, such as cooking gas (LPG) and aviation kerosene.
