The Brazilian economy has been thrust into crisis by a strike of truck drivers.
From Monday an estimated 200,000 drivers belonging to the ‘ABCAM’ trade union not only refused to carry goods but attempted to block major highways across the country. Although so far they appear not to have been able to halt port and airport operations, the situation has been getting worse. By Thursday, major food processing companies had begun to report difficulties in inbound supply as had some car manufacturers. There are also reports of fuel shortages, including aviation fuel.
The strikes are by self-employed ‘owner-drivers’ protesting at increases in the price of diesel, which has risen by 12% over the past month. On Thursday, the government of President Michel Temer asked the national oil and gas monopoly, Petrobras, to cut fuel prices by 10%. Petrobras described the change as a temporary one.
The underlying problem is that Brazil has subsidised the price of both gasoline and diesel for many years. This was specific government policy reflecting the importance of oil production in both the Brazilian economy and its politics. However, the problems of the Brazilian economy and the government’s budgets have demanded that these subsidies should end. Petrobras is now officially free to set the price of fuel on an economic basis. The issue has been accentuated over the short-term by falls in the Brazilian Real against the US Dollar and a rising price of oil on world markets. The result is higher fuel prices and lots of unhappy drivers.
Road freight is fundamental to the Brazilian economy. It is often the only option in a country short of railways, airports and ports. Although in the past capital has been available for investment with the previous government of Dilma Rousseff launching an ambitious project of infrastructure building and privatisation, the pace of development has been slow, obstructed both by economic problems and vested interests. This is a particular problem in an economy characterised by heavy reliance on bulk agricultural products which demand cost-effective transport.
The changing position of Petrobras in the Brazilian economy will also have implications for the price of transport. For years, Brazil’s huge oil sector subsidised the economy generally and the transport sector in particular. That is probably no longer viable. The implications for transport and thus the wider logistics sector in Brazil will be significant. The present strikes are just the beginning of that process.
Source: Transport Intelligence, May 24, 2018
Author: Thomas Cullen
