How the increase in fuel prices affects the Brazilian economy

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Attendant at Petrobras gas station – Google Image

The ICMS collection ceiling is an emergency and temporary way out to contain the constant increases in fuel

The price of gasoline at refineries went from R$3.86 to R$4.06 per liter, registering an increase of 5.18%. The liter of diesel increased from R$4.91 to R$5.61, which is equivalent to a readjustment of 14.26%. Data were announced by Petrobras last Friday (17).

The rise in fuel prices should further leverage inflation, which is already at 11.73% in the 12-month period. As the logistics of Brazilian commerce is strongly linked to road transport and practically everything that is consumed comes from truck freight, the rise in fuel prices will cause a chain reaction in the price of products.

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“Brazil is a country very dependent on road transport to supply the consumption chains, every fuel adjustment directly impacts the cost of freight, affecting the price of products”says Richard Clayton, entrepreneur and president of Thirty Percent.

For Richard, the constant increase in the prices of products reduces the income of Brazilians. “It makes it difficult to consume more products and for the merchants who sell the products as well”, he comments.

Pressure on Petrobras

In recent years, the state-owned company has come to suffer from harsh criticism from the President of the Republic, Jair Bolsonaro (PL). The president recently said that the company’s profit “is something that no one can understand” and suggested the installation of a Parliamentary Commission of Inquiry (CPI) to investigate directors and members of the board of directors.

Arthur Lira (PP-AL), president of the Chamber of Deputies, demanded the immediate resignation of the former president of the company, José Mauro Ferreira Coelho.

The deputy’s request was granted: the state-owned company announced the resignation of the then president, José Mauro, on the 20th. “The appointment of an interim president will be examined by the Petrobras Board of Directors from now on,” the company said in a statement. The former president is the third in command of the company in the “Bolsonaro Era”.

price increase

As pointed out by the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV Ibre), the increase in fuel prices will have an impact of 0.14 percentage points on the Broad National Consumer Price Index (IPCA), which will be diluted in June and July.

The IPCA is an index whose function is to measure the price variation of a basket of products and services consumed by the population of the country, indicating the variation from month to month.

“In this month’s IPCA, only half of this increase should be priced. Inflation this year, in my estimation, will be 9.2%, already considering the effects of this fuel adjustment”pointed out André Braz, coordinator of the institution’s price indices.

to consumers

According to Petrobras’ analysis, the consumer price of gasoline can rise, on average, from R$ 2.81 to R$ 2.96 for each liter sold at the pump – a variation of R$ 0.15 per liter. In the case of diesel, the state-owned company’s share can go from R$ 4.42 to R$ 5.05 for each liter sold at gas stations, the increase will be at least R$ 0.63 per liter.

Although the increase is imminent, the determination of the “ceiling of charges” of 17% in the ICMS on fuels, already approved in the Chamber of Deputies, could alleviate the values ​​by up to 9%, according to experts.

“The ICMS collection ceiling is an emergency and temporary solution to contain the constant increases in fuel prices. The government is looking for a way to guarantee stability in fuel prices and for that, it is determining the ICMS ceiling. However, this ceiling is not enough to cover State collections”analyzes Richard.

For the entrepreneur, the consecutive increases worry consumers more and more. Banks and institutions consulted in a survey by Projeções Broadcast analyze that the Central Bank should raise the Selic rate (the main interest rate in the country) to 13.75% per year at the end of the monetary tightening cycle. A week ago, the estimate was 13.25%.

“Depending on the form used, the government runs the risk of increasing its debts in general, bringing economic risks to Brazil, which, for investors, sounds bad and reduces interest in investing in the country” finishes Richard.

Source: Thirty Percent

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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