Brazil Takes Stock of a Week-Long Strike and It's Not Pretty

(Bloomberg) -- A week-long truckers’ protest is leaving Brazil with a massive bill, lower growth projections and worse yet -- more strikes to come.

A diesel price cut for 60 days, the latest concession to truckers announced by President Michel Temer late on Sunday, will cost 9.5 billion reais ($2.6 billion), Finance Minister Eduardo Guardia told Bloomberg. A further four-billion reais shortfall in fuel taxes due to cuts announced last week may be off-set if Congress votes to end payroll tax breaks. At the same time economists cut their 2018 growth projections for the fourth consecutive week to 2.37 percent.

Financial markets tanked on Monday, reflecting just how much investor sentiment toward Brazil has soured. Brazil’s real led losses among 24 emerging market currencies tracked by Bloomberg, falling 2.3 percent to 3.7375 at close of trading. The Sao Paulo stock market index fell 4.49 percent, and is down over 9 percent since the strike began. State-run oil company Petrobras led losses, falling almost 15 percent in the day.

While many blockades have been lifted, truckers remain on strike. The supply of fuel and food improved in parts of the country, but many of Brazil’s businesses and public schools remained shut as commuters struggled to get to work on Monday. At least eight airports are without fuel. To make matters worse, the oil workers federation FUP called for a strike on Wednesday.

In an effort to get truckers to go home, the government on Monday issued decrees backing up pledges it had made to them. With that the government considers negotiations to have come to an end and expects protests to stop, according to Chief of Staff Eliseu Padilha.

"The negotiations with truckers are over, we did our part," Padilha told reporters. It’s not the first time the authorities have declared the end of the stand-off.

Several of the unions involved have said they favor ending the strike or have already decided to do so but that many truckers have not demobilized yet. Renato Antonio Borges, head of Brazil’s federal highway police, said in a press conference on Monday evening that the intelligence services were working to identify false leaders among the protesters preventing the truckers from going home.

Police escorts over the weekend helped tanker trucks reach key fuel depots and gas stations after some people chose to sleep in their cars, sometimes waiting more than 12 hours in line for fuel. While delivery of essential medical supplies is improving, supermarkets still face shortages of perishables such as fruit, vegetables and eggs.

Many business also remain shut due to lack of raw materials or difficulty in distributing their production. Dreyfus halted two sugar mills due to a lack of fuel for machinery. The meat producers association ABPA said poultry growers have lost 64 million chickens. Brazil is the world’s largest poultry exporter.

An additional one billion chickens and 20 million pigs continue to be at risk as animals are not being sufficiently fed, ABPA said in an email statement. An ABPA leader reportedly met with the Temer administration late Sunday, the president’s office said by text message.

Brazil Takes Stock of a Week-Long Strike and It's Not Pretty

With one strike not fully over yet, the government is now turning to negotiation to avoid the next, said Padilha. The FUP oil union federation demands Petrobras CEO Pedro Parente’s resignation in addition to lower fuel prices.

“Pedro Parente and Michel Temer are the ones to blame,” FUP said in a note on Saturday. “Parente out. Petrobras has imploded," it said.

Parente has no intention of resigning and Temer doesn’t plan to sack him, according to people with direct knowledge of his situation. Yet much of the damage is already done. The state-run oil giant fell 8 percent on Monday. Since the strike began it saw 126 billion reais ($33 billion), or more than a third of its market value, erased.

©2018 Bloomberg L.P.