Brazil will eliminate its federal, VAT-like PIS/Cofins tax levy on diesel imports and sales to mitigate the Iran war's effect on oil prices, the government said on Thursday
The measure will cut prices by R0.32/liter (20.9¢/USG), the government said.
The government will also offer a subsidy of the same amount to producers and importers, thus generating a relief of R0.64/liter to customers at the pumps, it said.
"We are performing economic engineering to prevent the effects of the irresponsibility of the war from reaching the Brazilian population," Brazil's president Luiz Inacio da Lula said when announcing the measure, adding that the country will do "everything within its means" to make sure that the war "does not reach the pockets of drivers and truckers".
The war in Iran, started following US and Israeli attacks on the country on 28 February, has spiked global oil prices, with Ice Brent futures surging above $100/bl early on Thursday.
Lula also said he hopes to "count on the goodwill of state governors" to reduce state taxes for diesel as well.
The federal government will also create an export tax on oil to increase domestic refining and guarantee domestic supply, as well as increase hydrocarbon regulator ANP's overseeing of the fuel market in order to curb "abusive price increases" and the "speculative retention of stocks with the aim of causing scarcity or selling the product at higher prices".
Members of the government such as vice-president Geraldo Alckmin and chief of staff Rui Costa will meet with representatives of Brazil's largest private fuel distributors to demand that the measures are effectively passed onto final consumers, the government said.
It is unclear whether the government will extend the measure to other products, such as base oils.
