Federal government pushed bill through Congress to try and fight high inflation

06/15/2022

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Arthur Lira — Foto: Paulo Sergio/Câmara dos Deputados

Chamber of Deputies passed Tuesday by 308 votes in favor and none against a complementary bill that cuts state tax ICMS on fuel, electricity, communications and public transport. Yet, technical problems in the lower house’s voting system meant that the conclusion will have to occur on Wednesday because two amendments from opposition parties were still pending. After this, the bill must be sent for President Jair Bolsonaro to sign it into law.

The problem with the conclusion is the lack of quorum. Most deputies had travel plans and the session on Wednesday, the day before a holiday in Brazil, would be empty. Chamber Speaker Arthur Lira (Progressive Party, PP, of Alagoas) apologized for the failure but determined that the absentees will lose part of their salaries to try and raise the number of voters.

Before the voting system failed, the lower house approved the Senate’s innovation of reducing to zero federal taxes PIS/Cofins and Cide on gasoline, ethanol and natural gas vehicle until December 31, without the need for the government to compensate for the revenue waiver. The exemption is already in force for diesel and cooking gas but has had little effect on final prices.

The bill that reduces the ICMS tax on fuel and energy is another attempt by the government to contain inflation.

Earlier on Tuesday, the federal government had requested Petrobras to wait a little longer before increasing diesel and gasoline prices, sources say. The administration wanted the oil company to hold the hikes until the bill to limit the sales tax ICMS to 17% on fuels, power, telecommunication services and public transportation was voted in Congress.

Estimates from sources close to Petrobras indicate that diesel is being sold at the state-owned company’s refineries 18% below the import parity price, while gasoline prices are 20% lower. The Brazilian Association of Fuel Importers (Abicom) estimates that gasoline and diesel sold by Petrobras were 16% below the foreign market on Tuesday. The consultancy StoneX calculated the need for a 23.1% hike in diesel and 10.4% in gasoline based on Tuesday prices.

Holding prices has become strategic for the government, given the high inflation and the elections calendar.

Valor found out that there was a meeting on Tuesday, between Petrobras CEO José Mauro Coelho and Minister of Mines and Energy Adolfo Sachsida in Brasília. The meeting was also attended by Petrobras chair Marcio Weber. Fuel price hikes were discussed in the meeting, but the issue was not solved, sources say.

Petrobras would be ready since Tuesday to increase the prices that would partially offset the diesel and gasoline disparity in the refineries. After the request of the government, however, it decided to wait, Valor has learned.

Some people believe that Petrobras is unlikely to hold a hike in the very short term, although political pressure may postpone it for a few days.

According to a survey by the National Petroleum Agency (ANP), the price of regular gasoline at gas stations in the Southeast region averaged R$7.160 per liter during the week of June 5-11. For diesel, the average price in the region was R$6.794 per liter in the same period.

At the same time, the delay to choose the new nominees for the Petrobras board continues.

The documents of the nominees have not yet all been sent for analysis by the Eligibility Committee (Celeg), linked to the Personnel Committee (Cope), which is in charge of evaluating the candidates’ compliance with the company’s internal rules and the state-owned company’s law.

The change in senior management at Petrobras is part of the government’s strategy to try and control fuel prices.

*By Raphael Di Cunto, Luísa Martins, Francisco Góes, Gabriela Ruddy — Brasília, Rio de Janeiro

Source: Valor International

https://valorinternational.globo.com/