The government of President Luiz Inácio Lula da Silva (PT) began with an impasse to solve a problem inherited from the government of Jair Bolsonaro (PL): the price of fuel.
In search of re-election that did not happen, Bolsonaro acted to cut state and federal taxes levied on gasoline, diesel and cooking gas. Exemptions are now needed by the government’s cash to carry out investments. State governors and the finance minister himself, Fernando Haddad, are negotiating a solution.
Reviewing the tax cut is an option. It turns out that this would raise fuel prices almost automatically, causing inflation.
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Fuel-related inflation, by the way, has already been registered in Brazil at the end of 2021 and in the first half of 2022 – the year of the election. Economists and oil workers demanded that Bolsonaro take action at Petrobras for the company to review its pricing policy in favor of consumers.
Months before the election, even Bolsonaro –responsible for choosing the entire direction of Petrobras– came to complain about the state-owned company’s prices. His management, however, did not act to change the values practiced by the company, supplier of almost 80% of the fuel consumed in the country.
“Bolsonaro was committed to those who benefited from Petrobras’ pricing policy,” said economist Eric Gil Dantas, from the Social Observatory of Petroleum (OSP).
This policy generated record profits for the state-owned company, which were distributed to shareholders – most of them foreigners.
Electoral exemption
Without touching price policy, Bolsonaro focused on tax cuts to try to contain the rise in fuel prices. Part of these exemptions have effects that last until today and have returned to the discussion.
During the election year, Bolsonaro zeroed federal taxes on gasoline, diesel and cooking gas. The measures, however, were valid until December 31 of last year, the last day of his government. As soon as he took office, Lula renewed the exemptions knowing that their end would mean more expensive fuel. In the case of diesel and gas, they were maintained until the end of 2023. In the case of gasoline, until the end of February.
Minister Haddad complained about these tax cuts because, according to him, they were made irresponsibly and compromised the ability of the federal government to pay, among other things, the BRL 600 Bolsa Família to the poorest.
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Haddad has already stated that R$ 25 billion would be raised by the Union by the end of this year if the exemption for gasoline ends in February. He, however, knows that this debate is sensitive, mainly because the increase in the product has a generalized impact on prices. Therefore, neither he nor anyone from the government has confirmed whether the exemption will actually be extinguished.
If the federal exemption for gasoline ends, the liter of fuel should rise by R$ 0.69. This would correspond to an increase of around 13% in price.
No one from the government has announced an official position on the reduction of the Tax on Circulation of Goods and Services (ICMS) levied by states on fuel. The Bolsonaro government worked to pass a law to limit the tax. Sanctioned by Bolsonaro in June, this law lowered gasoline and diesel. On the other hand, it reduced state revenues.
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Governors appealed to the Federal Supreme Court (STF) against the measure. A conciliation was opened but not completed.
On Friday (27), in a meeting in Brasília, the governors expressed their dissatisfaction to President Lula, who stated that the issue tends to be discussed again. “The ICMS issue is something that has been on your mind since it was approved by the National Congress. And it is something that we will have to discuss”, said the president.
In the case of ICMS, the reversal of the tax cut would cause an increase of up to 10% in the price of gasoline, depending on the state.
“Lula was politically squeezed by these policies that Bolsonaro created with electoral objectives,” said Mahatma dos Santos, a researcher at the Institute for Strategic Studies on Petroleum, Natural Gas and Biofuels (INEEP). “Bolsonaro created all these exemptions so as not to face the real problem of fuel prices in the country, which is Petrobras’ pricing policy.”
PPI na mira
Petrobras’ current pricing policy was established in 2016, during the government of former President Michel Temer (MDB), shortly after the impeachment of President Dilma Rousseff (PT). It is based on the so-called Import Parity Price (PPI).
According to her, Petrobras sells the fuel it produces in Brazil at prices similar to those on the international market. When gasoline goes up around the world, the state-owned company also readjusts its prices.
President Lula also promised to change that in his campaign. To the Superior Electoral Court (TSE), he declared that “it is necessary to make fuel prices Brazilian”.
According to Dantas, from the OSP, this is one of the most urgent tasks for the new president of Petrobras, former senator Jean Paul Prates.
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Prates took office on Thursday (26). He still hasn’t been able to name directors or count on the support of new Petrobras directors who will be appointed by the government. For dos Santos, from Ineep, these changes are essential for the PPI to be revised.
In the meantime, Petrobras’ Bolsonarist board continues to pressure the Lula government with its management. On Wednesday (25), the day before Prates takes office, the current management of the state-owned company increased the price of gasoline sold by the company to fuel distributors by 7.5%.
The Single Federation of Petroleum Workers (FUP) protested: “just as the Bolsonarist management of the company continues with negotiations for the privatization of more company assets, it also continues to define fuel prices in Brazil”, declared the entity, in a note.
Editing: Rodrigo Durão Coelho
