Ministers defend immediate diesel subsidy program, contradicting Guedes

Ministers of the Jair Bolsonaro (PL) government defend the adoption of a quick solution to prevent the mega-increase in fuel prices announced by Petrobras this Thursday (10) from being passed on to the consumer.

The solution, assess members of the Executive, is to develop a diesel subsidy program with immediate effect, to allow the government to pay for part of the amounts charged at the pumps.

The measure contradicts the position of Minister Paulo Guedes (Economy), who wants to wait for the unfolding of the conflict between Russia and Ukraine over oil prices.

The perception of at least three ministers and also at the summit of the National Congress is that the approval of the bill that reduces taxes on diesel softens the blow in the pockets of Brazilians, but does not solve the problem.

Bolsonaro said the tax reduction should offset R$0.60 of the R$0.90 increase in diesel announced by Petrobras. Government estimates indicate that the other R$0.30 could be compensated with a subsidy of R$2 billion per month.

For a three-month program, the cost would be around R$6 billion.

The strategy is also electoral. The assessment in the political wing of the government is that the increase in fuels will generate a chain reaction in other products, including food, keeping inflation high after 2021 has registered a high of 10.06% – the highest since the Dilma Rousseff government ( PT).

If the increase in fuel alone already undermines the government’s image, high inflation would be lethal for Bolsonaro’s re-election, say the president’s allies. Therefore, the assessment is that the cost of R$ 6 billion compensates for the benefits of containing wear and tear.

Even before the latest readjustments, the president was already in second place in the polls, behind former president Luiz Inácio Lula da Silva (PT), despite the government’s efforts to establish a social brand with Auxílio Brasil – a program transfer system that succeeded Bolsa Família.

The announcement of the increases by the state-owned company on the same day that the project would be voted had a political effect: it increased the sense of urgency among parliamentarians of the need to approve PLP 11, which changes the way of charging ICMS (Tax on Circulation of Goods and Services) on fuels and zero PIS/Cofins rates on diesel and gas.

The approval of this project was defended by Guedes and palace ministers, but opposed by governors, who complained about the risk of lost revenue.

Even so, one wing of the government believes that approval of the proposal will not be enough to stop prices from escalating, not only at gas stations, but also in other areas.

For this reason, a group of ministers still believes that the best solution to the problem is to issue a public calamity decree that allows Bolsonaro to open coffers and create a subsidy program to hold down the price of diesel.

On Thursday, shortly after the Senate’s vote on the bill, Guedes admitted for the first time the possibility of a subsidy program. But he conditioned this possibility to the scenario in which the war between Russia and Ukraine lasts longer.

“If that [guerra] resolved in 30 or 60 days, the crisis would be more or less addressed. Now, is this going to rush and turn into an escalation? Then you start thinking about subsidy for diesel”, said the minister.

Palace assistants reinforce Guedes’ thesis that it is possible to wait to assess the consequences of the conflict and the effect it will have on international oil prices. If the price of the commodity goes back up to US$ 130 or US$ 140, then the government would trigger plan B.

Technicians in the economic area admit that, if the conflict persists, the subsidy would even be a “natural path”. There is an assessment that, in this situation, it would not be necessary to declare a calamity, as long as there is legal comfort for issuing an extraordinary credit — which is beyond the reach of tax rules such as the spending ceiling.

The concern is the electoral law, which prevents the creation of new benefits in the year of the elections. The issue still needs to be analyzed internally by the government.

Members of the political nucleus defend the elaboration of a program for now and assess that the solution would be precisely to declare a state of calamity.

For now, the order within the Economy is to fight to hold back the pressure for any complementary measures, especially the subsidy, until the scenario about the conflict is clearer.

If, on the one hand, the increase in Petrobras was used by parliamentarians and the government to speed up the vote on the project, on the other hand, the governors saw the adjustment as an argument in favor of the ineffectiveness of the change in ICMS to solve the problem.

The president of Comsefaz (National Committee of Secretaries of the Treasury), Décio Padilha, claims that the ICMS of the states has been frozen since November and that this did not prevent a new increase in fuel.

He says that the approval of the PLP will not hold new adjustments. Padilha defends the approval of PL 1472, which creates a national fuel price policy, whose objective is to avoid the frequent transfer to consumers of fluctuations in international oil prices.

“This increase [no combustível] there is a nuclear button, which is the increase in diesel, as it affects 81% of cargo transport in Brazil that is by road through trucks”, says the president of Comsefaz.

At Petrobras and the government, the justification for the state-owned company to grant the hefty increase was the risk of fuel shortages in the country.