Brazil's Lula government cuts gasoline taxes, extends fuel subsidies before Oct. 25 runoff
In short
Brazilian President Luiz Inácio Lula da Silva's government on Friday announced new fuel tax cuts and extended existing subsidies aimed at lowering fuel prices. A new decree eliminates federal taxes on the import and sale of gasoline for 30 days, and diesel importers will get an additional subsidy of 1.40 reais ($0.28) per liter for 30 days. The measures come just over two weeks before the Oct. 25 presidential runoff between Lula and Sen. Flávio Bolsonaro.
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Brazilian President Luiz Inácio Lula da Silva's government on Friday announced new fuel tax cuts and extended existing subsidies aimed at lowering fuel prices, just over two weeks before the presidential runoff, the Associated Press reported. Reuters also reported that Brazil extended fuel-price relief and cut gasoline taxes ahead of the runoff vote. [ 1 , 2 , 3 ]
A new decree eliminates federal taxes on the import and sale of gasoline for 30 days, with the possibility of an extension. According to the AP, the measure is effective from Friday, the same day previous measures that lowered taxes expired. The decree also extends a tax exemption and increases a subsidy for ethanol. [ 2 , 3 ]
The government also said it would provide an additional subsidy to importers of diesel, who will receive 1.40 reais ($0.28) per liter for 30 days. This is in addition to the 2.12 reais ($0.42) 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 the government has followed since the start of the Iran war. It said the fiscal impact will be offset by revenues from the federal government's oil assets. [ 2 , 3 ]
"The international situation has deteriorated since the measures announced in September," the government said, adding that international diesel and gasoline refining margins had risen to more than double their pre-war levels. The AP reported that crude oil prices rose shortly after Israel and the U.S. began their war with Iran in late February, largely because the fighting halted most shipping through the Strait of Hormuz, through which roughly a fifth of the world's oil supply passed before the conflict. [ 2 , 3 ]
Fuel prices are a particularly sensitive issue for voters, the AP reported. On Oct. 25 voters will decide whether to elect Sen. Flávio Bolsonaro, a son of former President Jair Bolsonaro, or grant Lula a fourth, nonconsecutive term. Bolsonaro received about 2 million more votes than Lula in Sunday's first round. [ 2 , 3 ]
Why it matters
The Associated Press reported that fuel prices are a particularly sensitive issue for voters ahead of a runoff in which Bolsonaro led Lula by about 2 million votes in the first round. The government links the measures to fuel supply and prices since the start of the Iran war, which halted most shipping through the Strait of Hormuz, according to the AP.
Key facts
- Lula's government announced new fuel tax cuts and extended existing subsidies aimed at lowering fuel prices on Friday. [ 2 , 3 ]
- A new decree eliminates federal taxes on the import and sale of gasoline for 30 days, with the possibility of an extension. [ 2 , 3 ]
- The decree extends a tax exemption and increases a subsidy for ethanol. [ 2 , 3 ]
- Diesel importers will receive an additional subsidy of 1.40 reais ($0.28) per liter for 30 days, on top of the 2.12 reais ($0.42) per liter subsidy already in effect. [ 2 , 3 ]
- The government said the fiscal impact will be offset by revenues from the federal government's oil assets. [ 2 , 3 ]
- The presidential runoff between Lula and Sen. Flávio Bolsonaro is on Oct. 25. [ 2 , 3 ]
Confirmed by several sources
Still unclear
- Whether the 30-day gasoline tax elimination will be extended. The AP report says only that there is the possibility of an extension.
- The size of the increased ethanol subsidy and the cost of the measures. The documents do not give these figures.
- Federal taxes on the import and sale of gasoline are eliminated for 30 days under a new decree, effective Friday. Reported by a single source so far
- Diesel importers get an additional 1.40 reais per liter subsidy for 30 days, on top of the existing 2.12 reais per liter. Reported by a single source so far
- Bolsonaro received about 2 million more votes than Lula in the first round. Reported by a single source so far