Brazil raises freight rates: Update

: Biofuels, Fertilizers, Oil products
18/09/05

Adds senate passage of diesel subsidy.

Brazilian highways regulator ANTT raised minimum freight rates for the first time by an average of 3pc to keep pace with rising diesel prices.

The increases in the controversial minimum rates range from 1.7pc to 6.2pc, depending on distances and cargoes, resulting in an average weighted increase of 3pc.

The adjustment comes after Brazilian state-controlled Petrobras raised wholesale diesel prices by 13pc on 31 August, reflecting higher international oil prices and the weakening of the Brazilian real against the US dollar.

The diesel price is subject to a new government subsidy that was implemented as part of a concession package to striking truckers at the end of May.

The ANTT said it is still hashing out how it plans to monitor whether companies are honoring the minimum freight rates. Business groups, including Brazil's powerful agroindustry sector, say the rates are eroding their profits.

Brazil's senate today approved legislation sanctioning the diesel subsidy that the government is currently paying to Petrobras and fuel importers.

The R0.30/liter ($0.27/USG) subsidy will apply until 31 December 2018, with a total limit on the subsidy of R9.5bn set by the government. The bill was issued by decree by president Michel Temer in May, and he is expected to sign the new legislation shortly.

The timing of the subsidy is politically sensitive. Brazil celebrates general elections next month, and a new government takes office on 1 January 2019.

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