Brazil’s government cuts fuel taxes and extends subsidies ahead of the October 25 runoff between President Luiz Inácio Lula da Silva and Flávio Bolsonaro.
Brazil’s government has announced new fuel tax cuts and extended existing subsidies to lower prices, just over two weeks before President Luiz Inácio Lula da Silva faces Senator Flávio Bolsonaro in a closely contested presidential runoff.
Fuel prices remain a sensitive issue for voters ahead of the October 25 election, which will determine whether Lula secures a fourth, non-consecutive term or Bolsonaro, the son of former president Jair Bolsonaro, wins the presidency.
Bolsonaro received about two million more votes than Lula in Sunday’s first round.
Under a new decree announced on Friday, the government has eliminated federal taxes on the import and sale of gasoline for 30 days, with the possibility of an extension. The measure took effect as previous tax relief measures expired.
The government also extended a tax exemption and increased subsidies for ethanol.
Diesel importers will receive an additional subsidy of 1.40 reais ($0.28) per litre for 30 days, on top of the existing 2.12 reais ($0.42) per litre subsidy.
The government’s Secretariat for Social Communication said the additional support was intended to keep fuel imports viable amid disruptions to global supply.
“The aim is to ensure that imports remain economically viable at a critical time for fuel supply,” the secretariat said, adding that the measures followed the government’s strategy since the start of the war in Iran.
The government said revenue from its oil assets would offset the cost of the measures.
Crude oil prices rose sharply after Israel and the United States began their war with Iran in late February. The conflict disrupted most shipping through the Strait of Hormuz, a key waterway through which about a fifth of the world’s oil supply passed before the war.
The Brazilian government said international conditions had worsened since it announced earlier measures in September. It added that international refining margins for diesel and gasoline had risen to more than twice their pre-war levels.
Brazil is a major crude oil producer and exporter, and higher global prices have increased its oil revenues this year. The country still depends on imports to meet domestic demand for refined fuels.
Keeping diesel prices stable is also important to preventing truck drivers from striking and limiting food inflation.
A truckers’ strike in 2018 disrupted supplies, emptied grocery shelves and petrol stations, drove up food prices and caused billions of reais in losses.
The episode highlighted the influence of organised truck drivers and the risks that rising fuel costs pose to Brazil’s economy ahead of the presidential runoff.