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(5 minutes read)
Hi.
As noticed before, Petrobras (“PBR”) was operating with a significant discount to international prices. Well, on Thursday (10), PBR announced a new price increase — 18.8% for gasoline and 24.9% for diesel in refineries, and 16% for cooking gas (“LPG”).
One of the prominent leaders of the 2018 truck drivers’ strike says that Brazil has to stop in protest against the fuel increase announced.
The president of the Lower House, Arthur Lira, criticized the decision of Petrobras to readjust prices of gasoline and diesel. He highlighted the company’s “insensitivity” with Brazilians and called the increase a “slap in the face” for the country.
Former president Lula also commented, blaming the privatizations for higher fuel prices, which is hilarious, of course.
Comment: The gasoline price increase came slightly below the sell-side assumption, but it’ll have an earlier impact on inflation.
Economists will have to bring forward the impact of fuel raising from April to March and higher than expected LPG increase; the market should be behind the curve (again).🙄
Also, food inflation is running above expected, putting even more pressure on market consensus inflation for 2022. 💀
No surprise if Feb/22 inflation comes above 10% y/y (~or 0,9% m/m). For 2022, the sell-side should put the number under review. The consensus is wrong. 👎👎👎
Also, the Senate approved two law projects aimed at reducing fuel price volatility and the impacts of higher Brent prices in the fuel market domestically.
However, such law projects still need to be approved by the lower house. The law projects approved in Senate were:
Law project 1.472, which:
Creates a fuel stabilization fund in Brazil (“Conta de Estabilizacao de Precos de Combustiveis - CEP Combustiveis”) aimed at lowering the volatility of fuel prices in the domestic market;
Comment: Well, Colombia and Chile have a stabilization fund, but the federal government funded it. I’d guess they’d use PBR’s dividends to fund it. 😓
Proposes the destination, extraordinarily, of PBR’s net profit (being observed legal and governance competencies) to mitigate the volatility impacts of fuel prices in Brazil.
Comment: honestly, it’s hard to quantify what they meant. I read the document and watched the discussion, but those folks have no idea what they’re discussing. My educated guess would be that PBR will not pay as many dividends as expected. 🤔
Complementary law project 11/2020, which:
Changes the calculation of ICMS tax to a fixed value per liter for 12 months rather than a percentage of fuel prices (as is the case currently) for gasoline, diesel, biodiesel, LPG, and jet fuel;
Comment: Uncertain this will prevail, but it would be a BRL9bn hit to states. 😳
Establishes a cap on the ICMS tax/liter that can be charged, which will be a function of historical amounts charged;
Zero federal taxes (PIS/COFINS) until Dec/2022 on diesel, biodiesel, jet fuel, and LPG.
Comment: this one will happen, knocking BRL17bn off 22e from federal government revenues. 🔥Inflation🔥
Finally, I was partially wrong about Rodolfo Landin’s role in his nomination as Chairman at PBR. I thought he’d be there to change PBR’s price policy, but the Senate has done it first, meaning that the government agenda is different than I thought. 🤔