Bolsonaro Seeks Energy Tax Cuts as Inflation Hits Popularity
(Bloomberg) -- President Jair Bolsonaro is putting pressure on Brazil’s state governors and lawmakers to reduce taxes on diesel and cooking gas in a bid to rein in rising energy prices that are hurting his popularity.
“There is no reason for cooking gas to cost 50 reais ($9.21) at the refinery and then be sold to consumers for 130 reais,” he said on Wednesday in an event in Brazil’s northern state of Roraima.
Inflation, running at an annual rate of more than 10%, has become one of Bolsonaro’s biggest political headaches. Seven out of 10 Brazilians blame his government for their loss of purchasing power, according to a Datafolha poll carried out between Sept. 13-15. Another survey by Modalmais and Futura Inteligencia on Wednesday showed the president losing next year’s elections to leftist Luiz Inacio Lula da Silva by a growing margin.
While inflation is increasingly widespread across all sectors of the economy, fuel costs have soared more than 40% from a year earlier -- the single item with the largest jump over the past 12 months.
Cooking gas, in particular, has dealt a heavy blow to Bolsonaro’s popularity due to its outsized impact on the finances of poorer families, which in Brazil typically don’t have access to natural gas grids. It’s become nearly 38% more expensive at refineries this year, after six price increases by state-owned oil company Petroleo Brasileiro SA, or Petrobras.
The Brazilian government is hardly alone in trying to find solutions to accelerating energy prices that are hurting consumers’ purchasing power. In Mexico, President Andres Manuel Lopez Obrador recently imposed price caps on cooking gas, which has pushed inflation to double the central bank’s target, and also announced a new government-backed distributor for liquefied petroleum gas.
Bolsonaro has promised to not interfere in Petrobras’s pricing policy to avoid generating losses to the publicly-traded company. Instead, he’s putting pressure on lawmakers to approve a proposal that sets a fixed value for the so-called ICMS tax imposed by states on fuels.
“Gas prices would drop by half, for sure,” the president said in Roraima, also defending a mechanism of direct sales of cooking gas to the population.
Yet a meeting between lower house Speaker Arthur Lira and party leaders to discuss measures to curb fuel price increases ended without agreement.
“Discussions are in early stages,” Lira told journalists after the meeting, adding that one of the alternatives debated was the creation of a fund for the stabilization of prices. “Nobody is happy about the breakdown of fuel prices.”
The lower house late Wednesday approved a proposal that creates a federal program to subsidize cooking gas prices for poor families. The bill, which seeks to lower the price of gas canisters to at least half the previous year’s average, still needs the backing of senators.
Separately, Petrobras announced it was setting aside 300 million reais to also subsidize cooking gas prices for families in need.
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