“We’ve already left hell [da inflação]”, said Paulo Guedes this Thursday (19). The famine is really bad in Holland and England, said the Minister of Economy.
It seems that Jair Bolsonaro and his accomplices in Congress do not think so. In desperation, every day they come up with crazy ideas of getting their hands on prices, companies or state revenue in order to avoid increases in electricity and fuel, at least until the election.
It won’t work, the economic turmoil will increase, with general losses, and the readjustments may be even greater after the election. It is a mixture of electoral fraud, stupidity and incompetence even in demagoguery.
On Wednesday, Arthur Lira (PP-AL), president of the Chamber, said that Congress will suspend the readjustment of the electricity bill if the government does not find a solution for the increases, which in the national average should be around 19%. This Thursday, Lira said that next week he will put to a vote a project that defines telecommunications, energy, fuel and transport as “essences”. Thus, the ICMS rate for these services could not exceed 17% or 18%, depending on the state.
The government went to the Supreme Court to change the rate that states intend to charge on diesel starting in July. This Thursday, he tried to convince governors to charge less ICMS on diesel, following a transition rule (which lasts until the end of the year) of the recently approved law that unifies this tax in the country.
Even if he manages to double the governors, he will get a cent reduction in the diesel tax, from R$0.10 to R$0.20, if that, taking into account a simple average of state taxes (if the tax reduction reach the consumer, which is uncertain, and if it does not cause a tax increase, given the foolishness that led to the STF). A liter of diesel costs R$ 6.78, on the national average.
Lowering the price of diesel by 10% (67 cents), by decree, would cost around R$42 billion in a year. This is equivalent to 40% of Petrobras’ profit in 2021 or 5% of tax revenue for all states in one year.
Obviously none of this will help.
Government and market people say that the states made a lot of money from the high fuel, almost 41% of extra revenue (compared to the first quarter of this year with that of 2021). But, discounting inflation, the real gain was 27%. Furthermore, consumption of gasoline (12.5%) and diesel (3.6%) also increased, despite the price bump. Total ICMS revenue in the quarter grew by only 3% in real terms; total tax revenue, 1.6%. It’s not really a money spree.
Opera summary, they want to throw the bill in the lap of the states with exaggerated numbers, so to speak.
Reduce ICMS on energy, communication, etc. may result in some price drop. Last year, the STF decided that it is not possible to charge an ICMS rate (beyond the basic one) on these services. As states claimed they would lose tens of billions, the decision would only go into effect in 2024.
In practice, Congress wants to anticipate the decision of the STF. But there will be a hole in the states’ account. Several of them deserve no pity, as they are broken by irresponsibility and incompetence. Even so, in the short term, there will be a hole, which Bolsonaro and Congress do not want to know (they have approved an increase in state spending at hand, as usual).
Bolsonaro and government officials loitered and barbarized for almost four years. Now they want to throw the bill of energy inflation in someone’s lap in order to save themselves in the election, even if they cause even more explosive turmoil in the economic order.
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