Petrobras readjustment on fuel increases pressure from the Policy and reopens discussion on alternatives

Petrobras’ announcement of a new adjustment in the sale prices of gasoline, from R$3.86 to R$4.06 per liter (increase of 5.18%), and of diesel, from R$4.91 to R$ $5.61 per liter (an increase of 14.26%), for the distributors, put more heat in the relationship between the state-owned company’s command and the political class less than four months before the general elections.

A few minutes after the news, President Jair Bolsonaro (PL) said he will propose a CPI [Comissão Parlamentar de Inquérito] to investigate Petrobras”.

“I just talked to Arthur Lira [presidente da Câmara dos Deputados]meeting with party leaders and our idea is to propose a CPI to investigate Petrobras, its directors and Council members”, he said in an interview with Rádio 96 FM, from Natal, Rio Grande do Norte.

The president of the Chamber of Deputies, Arthur Lira (PP-AL), returned to attack the state-owned company’s management, reverberating the discomfort of parliamentarians from the most different ideological fields with the rise in fuel prices.

On social media, he criticized the company’s “billion-dollar profits” and demanded, once again, the resignation of its president, José Mauro Ferreira Coelho.

“The president of Petrobras has to resign immediately. Not because of my personal will, but because he does not represent the majority shareholder of the company – Brazil – and, worse, works systematically against the Brazilian people in the worst crisis in the country,” he said on Twitter.

“He only represents himself and what he does will leave a legacy of destruction for the company, the country and the people. Get out!!! For its management is an act of corporate terrorism,” he continued.

Also on Twitter, Lira shared news about the drop in Petrobras shares in the trading session this Friday (17), and commented: “Petrobras shares collapse in New York on the day that its products increase (sic). Greater proof of the corporate inconsistency of acting against an entire country and the controlling shareholder? This is one of the numbers of the disaster caused by the current administration against Brazil, Brazilians and Petrobras itself. Get out of there, get out now! This place is not yours. It’s from Brazil”.

Yesterday (16), Lira had already referred to the company as the “Federative Republic of Petrobras, an independent country in a declared state of war against Brazil and the Brazilian people” and which, despite “having a social function”, “as friend of billionaire profits and enemy of Brazil”.

He has already promised a meeting with the leaders of the benches to discuss Petrobras’ pricing policy. The so-called International Parity Price (IPP) has long been criticized by political actors – often on the left and right.

In an interview with GloboNews, Lira said that there is “every possibility” that a possible change in the taxation of Petrobras’ profits will be faced by the National Congress.

“There is a proposal similar to this in the United States, made by President [Joe] Biden with a Democratic senator. Private oil companies there pay 21% tax on profits. They are discussing doubling to 42%,” he quoted.

“Here, Petrobras pays CSLL, for example, ‘xis %’ on profit. We are going, for example, to double this taxation and try to revert this directly to the population, so that it also enters the government’s coffers, does not go to the Treasury and is not subject to the spending ceiling law. And that we can reverse this to reduce the compensation of the difference in the cost of diesel abroad for us”, he continued.

Petrobras’ decision for a new round of readjustments comes after almost 100 days with the price of gasoline frozen in refineries – in the case of diesel, it was 38 days – and shortly after the National Congress concluded the vote on PLP 18/2022.

The approved text establishes a ceiling between 17% and 18% for the collection of Tax on the Circulation of Goods and Services (ICMS) on fuel, electricity and telecommunications and public transport services by state governments. The article also reduces to zero the rates of Cide-Combustíveis and PIS/Cofins levied on gasoline until the end of 2022 – a measure that had already been taken on diesel and cooking gas.

Parliamentarians are also discussing a Proposed Amendment to the Constitution (PEC 16/2022) to deepen tax relief on fuel, with the expectation of lowering prices for the final consumer at the pump.

The PEC, created at Palácio do Planalto and signed by Senator Carlos Portinho (PL-RJ), the new government leader in the Federal Senate, provides for financial assistance of up to R$29 billion by the Union to states and the Federal District that accept :1) zero the ICMS levied on diesel and liquefied petroleum gas, petroleum derivatives and natural gas; and 2) establish a rate of 12% for the ICMS levied on hydrated ethanol sold in its territory. The new rates will be effective from July 1, 2022 to December 31, 2022.

But the perception in the political world is that fuel price readjustments promoted by Petrobras could undermine the efforts of the National Congress with the approval of PLP 18/2022 and even with the possible advance of the Fuels PEC.

Rapporteur of PLP 18/2022 in the Federal Senate, Fernando Bezerra Coelho (MDB-PE) estimated that the measure could cause a drop of R$ 1.65 in the price of a liter of gasoline and of R$ 0.76 in a liter of diesel.

Other calculations, however, show a less favorable scenario for the government. Consultant Dietmar Schupp, for example, estimates that the ICMS ceiling could reduce the average price of gasoline by R$ 0.675 per liter, as reported by the newspaper. Folha de S.Paulo.

The assessment of parliamentarians is that the readjustments can harm electoral projects, such as the candidacy of President Jair Bolsonaro (PL), who declared war on fuel prices to try to contain inflation and improve his approval ratings.

A few hours before the announcement of the adjustment by Petrobras, Bolsonaro had already taken to social media to express his repudiation of increases in fuel prices practiced by the state-owned company, and said that the company “may plunge Brazil into chaos”.

“The Federal Government as a shareholder is against any readjustment in fuels, not only because of the exaggerated profit of Petrobras in the midst of the global crisis, as well as for the public interest provided for in the Law of State-owned Companies”, he said on Twitter.

“Petrobras could plunge Brazil into chaos. Its president, directors and advisers are well aware of what happened with the truck drivers’ strike in 2018, and the harmful consequences for Brazil’s economy and the lives of our people,” he criticized.

The tone was similar to that adopted earlier by Ciro Nogueira (PP), Chief Minister of the Civil House, who, on the same social network, said: “Enough! The time has come. Petrobras is not one of its directors. It’s from Brazil. And it cannot, therefore, continue with such insensitivity, ignore its social function and abandon Brazilians in the biggest crisis of the last century”.

“The government, Congress and everyone with responsibility have to put an end to this abuse of billionaire profits at a time when the company cannot turn its back on Brazil and Brazilians. Responsibility, yes. Never lack of country vision and solidarity with the nation”, he continued.

Possible consequences

With the shortening of the electoral calendar and the increasing pressure of fuel on inflation, political analysts see an increase in the desire of parliamentarians and government members to pressure Petrobras.

As the discomfort can unite government and opponents, the possibility grows that more measures will be taken, even after the approval of the matters in the parliament.

“The will to interfere in the pricing policy exists, but there is still no defined path”, observe political analysts at XP Investimentos in a note to clients.

“The most likely option seems to be the option of making social policy with Petrobras, through the allocation of part of the company’s profits to the area, but before that it would be necessary to implement the change in the board that is underway”, they evaluate.

In the opinion of the experts, despite the rising tone against the state-owned company, members of the federal government remain concerned about the impacts that “bolder measures” taken in the National Congress may have on the market.

In this sense, one of the proposals that could gain strength would be to create a compensation from the Union for the company to fulfill its social function, through the allocation of part of the profits and dividends. Members of the “centrão” believe that this alternative can be adopted with a board more willing to discuss beyond fuel prices.

For XP analysts, a change in the PPI or some new legislation is not yet the main scenario. The same goes for yet another change in command of the Ministry of Mines and Energy, despite resistance to adopting unorthodox measures to tackle the problem. But alternatives can gain strength if the assessment persists that the war is being lost.

About Abhishek Pratap

Food maven. Unapologetic travel fanatic. MCU's fan. Infuriatingly humble creator. Award-winning pop culture ninja.

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