Pacheco says that freezing prices is not the way to stop inflation

Senator Rodrigo Pacheco (PSD-MG), acting president of the Republic, said this Friday (10) that he does not believe in the effectiveness of freezing prices to contain inflation and added that this is not the way to go.

The speech comes the day after President Jair Bolsonaro (PL) and Economy Minister Paulo Guedes asked supermarket businessmen to hold down the prices of items that make up the basic food basket.

Rodrigo Pacheco assumed the presidency of the Republic with the trip of President Jair Bolsonaro (PL) to the Summit of the Americas, in the United States. The next names in the line of succession, the deputy Hamilton Mourão and the mayor, Arthur Lira (PP-AL), are also out of the country.

The Minas Gerais senator sought to soften the statements of Bolsonaro and Guedes.

“We have a free market society. And I think that what Minister Paulo Guedes claimed and pleaded was really the social responsibility of all Brazilians, in their productive activity. That’s the way,” he said.

Companies, however, should “set prices that are fair” and not seek “abusive profits.” “[O Brasil tem] a double-digit problem: double-digit interest rates, double-digit inflation and, in some places, double-digit gasoline.”

Bolsonaro and Guedes had appealed to businessmen to hold down food prices. The government is being pressured by high inflation, less than four months before the presidential elections, in which the chief executive seeks re-election.

“The appeal I make to you, to the entire production chain, is for the products of the basic food basket to obtain the lowest possible profit, so that we can satisfy a considerable part of the population, especially the most humble,” he said. Bolsonaro.

The chief executive also said that “in difficult times, I understand that we all have to collaborate”.

“I know that the profit margin has been decreasing more and more. You have already collaborated in this sense, but collaborate a little more in the profit margin of the products of the basic basket”, he said. “If it’s answered, I’m very grateful; if it’s not, it’s because it’s not possible,” he said.

Guedes, on the other hand, reinforced the appeal by asking for a truce in values. “Now it’s time to put a stop to this rise in prices, it’s voluntary, it’s for the good of Brazil,” said the minister.

“In the same way that governors have to put their hands in their pockets and help Brazil, the Brazilian business community has to understand the following: slowly now a little, because we have to break this inflationary chain”, said Guedes.

During the event, Pacheco also defended the use of Petrobras dividends to finance a stabilization account, whose funds would be used to lower fuel prices. The measure, he argues, should be implemented even with the advance in the Senate of the proposal that limits state taxes on fuel, telecommunications and transport.

The acting president harshly criticized Petrobras’ profits and dividend payments at a time when the value of gasoline exceeds R$10 in some regions of the country.

“Does it make any sense for us to have gasoline at R$10 in some places in Brazil and for Petrobras to have a profit of R$44.5 billion in a quarter in 2022?

The Minas Gerais senator defended the proposal that makes fuel and other items as essential goods and thus limits the ICMS rate on them between 17% and 18% — the proposal should be voted on on Monday (13).

He also said that the proposal was a “reaction” by the Chamber of Deputies to the decision of governors to maintain a high tax rate, disregarding a bill passed by the National Congress. It was the Chamber that presented the so-called PLP 18

However, Pacheco signaled that the measure may not be fully efficient and defended the use of Petrobras dividends to contain the rise in prices.

“Now is that all? [estabelecer limite do ICMS]? Or it would not be possible to establish that these astronomical dividends from Petrobras are reverted to society in the equalization of fuel prices. In relation to this point, the Senate managed to create this equalization account in PL 1472”, he stated.

The senator from Minas refers to a bill approved by the Senate that provides for the creation of a stabilization account, with different possible sources of funds, which would be used to avoid high fluctuations in fuel prices. The proposal is shelved in the Chamber of Deputies.

“What the Senate believes is a 60-month moving average for a fair ICMS rate, with tax monophasia, in a price equalization account, and in essentiality, but with a compensation [aos estados] for losses,” he said.

Pacheco said that the proposal that limits the ICMS has “side effects”. He explained that there are consequences for biofuels, which may lose competitiveness in relation to fossil fuels – which will have reduced taxes – and there is also an impact on the finances of states and municipalities.

He then stated that the Senate has sought to create a form of compensation for state losses with revenue.

The Senate should vote next Monday (13) on the so-called PLP 18.

Rapporteur Fernando Bezerra (MDB-PE) kept in his text the main items of the proposal approved in the Chamber, in particular determining that the establishment of the ceiling for the tax rate will take effect immediately, without modulations.

On the other hand, it decided that the compensation to the states by the Union will be by means of abatement in the payment of the debt flow — with more immediate effect — instead of abatement of the debt stock. The text also established different rules to compensate states without debts to the Union.

The senator also confirmed the inclusion in his text of the measures that had been announced by President Jair Bolsonaro (PL) on Monday (6). The reduction to zero of the Cide-Combustíveis, PIS and Cofins rates levied on gasoline until December 31, 2022. These measures will represent a tax waiver by the federal government of R$ 17 billion.

A novelty in its report was to determine that the zero rate of federal taxes for hydrated alcohol fuel and on anhydrous alcohol added to gasoline will be in effect until June 30, 2027.

EXPENDITURE CEILING REVIEW

​Rodrigo Pacheco also said during the event that the rule that establishes the spending ceiling will need to be revised to allow for increased investments in Brazil. However, he said that this should be done in the future and not at the current moment in the country.

The Minas Gerais senator spoke about measures approved in the National Congress, which benefit the municipalities. He cited the amendment to the Constitution on the sharing of pre-salt resources that privileged municipalities, although there was a spending cap rule, in effect since 2016.

“By the way, the spending cap, which should be celebrated, in my view and I voted [a favor] as a federal deputy, it is something that will be discussed at some point, there is no doubt. Because, with the increase in expenses, naturally, the increase in revenue, at some point we will have to review this formula in order to have an increase in investments in Brazil”, he said.