The subsidies are in addition to other measures already announced by the government of President Luiz Inácio Lula da Silva and are specifically aimed at reducing the price of diesel, a fuel of which Brazil imports about 30% of its consumption and which is the most widely used for freight transport and agricultural machinery.
The administration hopes the measures will stabilize fuel prices, particularly for diesel, which has risen more than 20% since the start of the war in Iran, and mitigate the impact on inflation, just six months before the presidential election in which Lula da Silva is seeking a new term.
At a press conference at the Planalto Palace, the new Finance Minister, Dario Durigan, stated that the government will issue a decree granting a subsidy of 80 cents per liter of diesel refined in Brazil, so that producers can pass this price reduction on to consumers.
Durigan added that another decree provides for an agreement whereby regional governments will exempt imported diesel from taxes, thereby also granting a subsidy of 1.20 reais (about 20 euro cents) per liter of fuel entering the country. Twenty-five of Brazil’s 27 states have announced their adherence to the regulation, according to the minister.
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To directly benefit families, the government also announced a subsidy of 850 reais for every ton of imported liquefied petroleum gas (LPG) – commonly known as cooking gas or bottled gas – used by people without access to the natural gas pipeline network.
This subsidy ensures that imported LPG is priced the same as that produced in Brazil, thereby mitigating the impact of rising international prices.
A week after the state-owned oil company Petrobras announced a 55% increase in the price of aviation kerosene – which could force airlines to raise ticket prices by about 20% – the government also announced measures for the sector.
In addition to exempting so-called aviation fuel from federal taxes, the government announced two subsidized credit lines totaling 3.5 billion reais (about 589 million euros) to support airlines.
These low-interest loans are intended to help airlines finance their financial restructuring and prevent them from raising ticket prices.
Despite rising fuel prices in Brazil last week, energy sector experts interviewed by Lusa noted that the country’s robust agribusiness sector and public policies promoting biofuels have acted as a buffer against the fuel price hikes caused by conflicts in the Middle East.
Decades of technological innovation, combined with Brazil’s agricultural strength – as one of the world’s “breadbaskets” – have allowed the country to create a partial “shield” against external fossil fuel shocks – in addition to the internal strength of the state-owned oil company Petrobras – which places Brazil in a unique position in the energy transition. While consumers around the world face sharp increases, gasoline prices in Brazil rose by only 5.5% in March.
