Brazil expands fuel subsidies before presidential vote

Brazil's government announced fuel tax cuts and extended subsidies ahead of a presidential runoff on October 25, as fuel prices remain a contentious issue for voters. The decision comes just two weeks after the first round of the election, where incumbent President Luiz Inácio Lula da Silva faced off against Sen. Flávio Bolsonaro.

The new decree eliminates federal taxes on gasoline imports and sales for 30 days, with the option to extend. This move builds upon previous measures that lowered taxes, which recently expired. The government also increased a subsidy for ethanol and provided an additional subsidy to diesel importers, who will receive 1.40 reais ($0.28) per liter for 30 days, in addition to the existing 2.12 reais ($0.42) per liter subsidy.

The government claims these measures aim to maintain economically viable fuel imports during a critical period for supply. They assert the actions align with their strategy since the onset of the Iran war, which began in late February and led to crude oil prices soaring due to halted shipping through the Strait of Hormuz. The conflict disrupted oil transportation, affecting oil-rich nations like Brazil.

The international situation has worsened since September, with refining margins for international diesel and gasoline rising more than double their pre-war levels. Brazil is a significant crude oil producer and exporter, benefiting from the rise in international prices this year. However, the nation still imports refined fuels to meet domestic demand, making stable diesel prices vital to avoid truck driver strikes and keep food inflation under control.

In 2018, a truckers' strike resulted in skyrocketing food prices, depleted grocery shelves, and gas station shortages, causing billions in losses and highlighting the influence of organized truckers.