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Bolsonaro wants to spend R$ 29 billion to lower fuel without affecting Petrobras profits

The president Jair Bolsonaro (PL) intends to spend up to R$ 29.6 billion from the Union to try to lower fuel prices during the second half of the year, when he will run for reelection. The value was revealed this Wednesday (8) by Senator Fernando Bezerra (MDB-PE), rapporteur of the Proposed Amendment to the Constitution (PEC) of the fuels .

The idea of ​​the PEC is to authorize the federal government to pay the states the suspension of charging the Tax on the Circulation of Goods and Services (ICMS) on fuel from July 1st to December 31st. The tax is built into the price of gasoline and diesel. Its suspension, in theory, tends to reduce the price of these products.

However, it is through ICMS collection that states pay public servants and apply resources to health and education, for example. To try to secure those payments, the federal government has offered to reimburse states for losses if they agree to stop collecting their fuel taxes by the end of the year.

According to Bezerra, the R$ 29.6 billion would be direct transfers from the federal coffers to the states. So much so that, in order to make these payments, an exception to the so-called Federal Budget Expenditure Ceiling will have to be approved.

This government proposal has already been classified as “mambembe”, improvised and desperate by economists and members of popular movements. According to sources heard by the Brazil indeed it does not guarantee the reduction of fuel, since it does not address the cause of the increases in Brazil: the price policy practiced by Petrobras.

Defined in 2016 by leaders of the state-owned company appointed by the government itself – at the time, under Michel Temer (MDB) –, the policy links the value of gasoline and diesel sold in Brazil to the value of these products abroad, despite most of the national market to be supplied with oil derivatives extracted and refined here.

Because of this policy, Petrobras has obtained record profits, after all, it “produces in reais” and “sells in dollars”. In 2021, it was R$ 106 billion.

The government owns about 37% of all Petrobras shares. With that, it received about R$ 37 billion of the state-owned company’s profit last year in the form of dividends paid by the company.

If the Fuels PEC is approved and the states agree to zero ICMS, in six months of 2022 the Union would spend practically everything it made with Petrobras during the 12 months of 2021. The rest of the shareholders, mostly foreigners, would continue receive its high and intact dividends.

“Note the amount of adjustments and imitations in the Constitution for you to protect a small group of people, who are the minority shareholders of Petrobras”, criticized economist and professor at the Federal University of São Paulo (Unifesp), André Roncaglia. “Measures are accumulating to try to compensate for the increase in fuel prices because the government does not want to get to the root of the problem.”

“Petrobras can have profits, but not stratospheric ones”, said senator Zenaide Maia (Pros-RN), in a debate on the PEC. “Half of the Brazilian people [sofre] with food insecurity, when Petrobras shareholders are prioritizing resources for health and education.”

Family Scholarship

The amount that the government wants to spend to try to lower the fuel is equivalent to the budget of almost a year of Bolsa Família. In 2021, the year in which the program was terminated by Bolsonaro, the Budget had BRL 35.4 billion for the initiative, which served 14.6 million low-income families.

The Auxílio Brasil program, which replaced Bolsa Família, has a budget of R$89.1 billion this year. The equivalent of a third of that would be spent to contain the rise in gasoline and diesel.

Federal universities should receive around R$4.5 billion to fund their operations this year, considering a R$1 billion cut announced by the government in May. The expense to reduce fuel would be more than six times greater.

However, the impact on the federal coffers would not be just that. Bolsonaro, in addition to paying states to reduce ICMS, said he was willing to zero federal taxes on gasoline. This would reduce the Union’s collection by R$ 16.8 billion.

In addition, he also wants to compensate with debt relief the states that lose ICMS collection with the inclusion of fuels in the list of essential items. A bill to do so has already passed the House and is expected to be voted on in the Senate on Monday. In practice, it limits the state tax rate to 17% on gasoline, diesel and cooking gas. Today, states charge up to 30%.

There is no government estimate of the impact of this measure.

wanted by Brazil indeed , the Ministry of Economy has not commented on the matter. He did not even want to comment on the estimates presented by Bezerra in the Senate.

It will work?

Bezerra also said he is not sure whether the tax reduction will reduce fuel prices at gas stations. According to him, this depends on the supply chain passing on the tax cut.

If that happens, the price of gasoline could drop by R$ 1.65 per liter – today, it costs R$ 7.21 on average in the country. The price of diesel would drop by R$ 0.76 – today it costs 6.88.

All this, of course, if Petrobras doesn’t raise its prices even more.

On Wednesday (8), the state company reiterated its commitment to the practice of prices established by the supply and demand of the international market. He said that the pricing policy is necessary to guarantee the supply of the Brazilian market.

Today, a fraction of the fuel consumed in Brazil is imported. This means that if Petrobras lowers prices, importers may stop bringing gasoline and diesel to Brazil. There would be a risk of running out of fuel.

According to Petrobras, due to the war between Russia and Ukraine, the diesel production and distribution chain was compromised. World inventories have dropped.

This indicates that the international price of fuel should rise. Petrobras, in turn, should follow the increase. The price at the stations, therefore, should increase even more. The state-owned company did not say when or how much.

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