Brazil lowers fuel prices ahead of runoff election

Brazilian President Luiz Inacio Lula da Silva’s government on Friday announced new fuel tax cuts and extended subsidies aimed at lowering fuel prices, just over two weeks before a closely contested presidential runoff.

Fuel prices are a particularly sensitive issue for voters, who on Oct. 25 are to decide whether to elect Brazilian Senator Flavio Bolsonaro, a son of former Brazilian president Jair Bolsonaro, or grant Lula a fourth term.

Flavio Bolsonaro received about 2 million more votes than Lula in the first round on Sunday last week.

Brazilian Senator and presidential candidate Flavio Bolsonaro attends a campaign meeting in Rio de Janeiro on Friday.

Photo: AFP

A new decree eliminates federal taxes on the import and sale of gasoline for 30 days, with the possibility of an extension. The measure was effective from Friday, the same day previous measures that lowered taxes expired. It extends a tax exemption and increases a subsidy for ethanol.

The government also said it would provide an additional subsidy to importers of diesel, who will receive 1.40 reais (US$0.28) per liter for 30 days.

That amount is in addition to the 2.12 reais per liter subsidy already in effect.

“The aim is to ensure that imports remain economically viable at a critical time for fuel supply,” the government’s secretariat for social communication said, adding that the measures were in line with the strategy adopted by the government since the start of the Iran war.

The fiscal impact of the measures would be offset by the revenues from the federal government’s oil assets, it added.

Crude oil prices shot up shortly after Israel and the US began their war with Iran in late February, largely because the fighting halted most shipping through the Strait of Hormuz, a narrow waterway where roughly one-fifth of the world’s oil supply passed before the conflict.

“The international situation has deteriorated since the measures announced in September,” the Brazilian government said, adding that international diesel and gasoline refining margins had risen to more than double their pre-war levels.