Senator Prates, picked by President Lula to run state-owned oil company, said prices will be aligned with international market
01/05/2023
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Jean Paul Prates — Foto: Edilson Rodrigues/Agência Senado
Senator Jean Paul Prates, picked by President Luiz Inácio Lula da Silva to head Petrobras, said Wednesday that the promised change in the fuel price policy will not include a direct intervention in the market.
Mr. Prates also made it clear that the calculation for price rises will continue in line with what is practiced internationally – but will no longer follow the so-called import parity price, a policy put in place in 2016, during the Temer administration, in which the variation of Brazilian fuel prices occurs according to the prices of oil and oil products in the main markets. “It will not unlink from the international price, it will unlink from the import parity, without imposing a tariff, with no direct intervention in the market, just using the competitive advantage,” he said.
Mr. Prates’s statements brought some relief to local assets in the trading session and allowed Brazil’s benchmark stock index Ibovespa to rise for the first time in 2023 driven by the appreciation of Petrobras shares. The stocks ended the day up 1.67% (common shares) and 3.18% (preferred shares).
He also guaranteed that the measures will be taken in a predictable way. “Saying that the IPP will end doesn’t mean the price will be disassociated from international swings. Only that we will use the fact that it is produced domestically in favor of the Brazilian economy. We will discuss it with all interested parties,” he said.
Mr. Prates spoke to reporters after the inauguration ceremony of Vice President Geraldo Alckmin as Minister of Development, Industry, Commerce, and Services (MDIC). Among other measures under study, Petrobras’s future CEO advocated that a stabilization account for fuel prices must be followed by other measures such as an “ad rem” rate – in currency, instead of percentage – and the return of the federal tax Cide “to recover the collection of the states.”
He also said that the measure is implemented quickly, comparing its absence to being in a car without wearing a seatbelt. “I think it is important to have [the stabilization account soon]. You’re always at risk. You’re riding without a seatbelt,” he said. “I think having a cushion like that, and then suddenly using Cide again, getting some of the revenue back for the states somehow, using a flat, ad rem tariff. Putting currency instead of percentage, because when the price goes up, the tax does not go up in the same proportion. But at least the price is not inflated from the inside,” he said. “If you use ad rem, single-phase tariff, single rate, and the states are comfortable, it’s good, it works. The problem is that cutting taxes from the states abruptly was an emergency solution,” he added.
President Jair Bolsonaro eliminated the collection of federal taxes (Cide and social taxes PIS and Cofins) on fuels last year, amid the rise caused by the war in Ukraine. He also sponsored a bill that transformed fuels into essential products, limiting the collection of the sale tax ICMS to the minimum rate of each state, between 17% and 18%.
The measure reduced prices, but also affected revenue collection by state governments. “No structural solution was put in place. The solution was to take money from states,” he said. “It’s not a smart solution. It is even a somewhat punitive palliative. You are not fighting volatility. If another country goes to war with an oil-producing country, you won’t have anywhere else to cut. There was not a solution.”
Mr. Prates reiterated that the price policy will not “revoke the market,” but will take into account “the actions of the National Petroleum Agency, the ministry, and the market practice.”
The senator also said that the pricing policy is the country’s, not the oil company’s. “Petrobras follows the context. The instance of Petrobras’s decision concerns Petrobras’s customers. And the national context instance concerns the Ministry of Finance and the Ministry of Mines and Energy,” he said.
*By Vandson Lima, Cristiane Agostine, Fabio Murakawa — Brasília
Source: Valor International