Fernando Alcoforado *
The steady increases in diesel prices led truck owners drivers and transportation companies to schedule a nationwide standstill on 21/5 with a list of demands that were submitted to the federal government. The main demand of the truck owners drivers and also of the transport companies is the reduction of the tax burden on diesel, which demand that the PIS / Pasep and Cofins tax rate and the Cide tax exemption be reduced. Taxes account for almost half of the refinery’s fuel value. According to them, the lower tax burden would breathe the sector, since diesel represents 42% of freight cost. This standstill could cause serious losses to the Brazilian society since 61.1% of the cargo transported in Brazil is carried out with the use of trucks. The transportation of urban buses and aircraft, as well as the supply of food, fuel and general products, including those destined for exports, are already being affected. The shortage of food and fuel is already contributing to the rise of its prices.
Since altering its pricing policy in July 2017, Petrobras has started to promote near-daily fuel readjustments. The increase is the result of Petrobras’ new pricing policy, which transfers on fuel to the price change of the value of oil in the international market, up or down. Since then, the consumer has been faced with a growing increase in the pumps of the fuel stations due to the increase of the price of oil in the world market. Due to the daily diesel readjustments made by Petrobras, the truckers owners drivers are at the limit of their costs. In the last 12 months, the price of diesel in the pump has risen 15.9% which is well above the accumulated inflation in 12 months, at 2.76%, according to the Brazilian Institute of Geography and Statistics (IBGE).
Brazil is one of the countries with the most expensive fuels in the world. One of the reasons that make our country have fuels with such a high price is the high tax burden on them. In Brazil, the most traded fuels at the stations are gasoline, ethanol, S500 diesel and S10 diesel, and the direct tax burden is incumbent on the States and the Union. The taxes levied on gasoline are the Intervention Contribution in the Economic Domain (CIDE), PIS / Cofins and ICMS. The first 2 are from the federal sphere. The latter is the only state sphere, although it is also almost always the highest. The ICMS is the only state tax whose value varies greatly from state to state. Ethanol has only the incidence of ICMS. Diesel, regardless of type, receives the same tax incidence of gasoline.
The Union is responsible for CIDE in gasoline, which has an average percentage of 2% in all states. The PIS / Cofins values vary little, from 7% to 9% in all states. In the case of ethanol, there is no incidence of federal taxes. In the case of the S500 diesel, PIS / Cofins has an average incidence of 8% in almost all states, with only São Paulo with 9% and Acre, Mato Grosso do Sul, Rondônia and Roraima with 7%. For S10 diesel, almost all states have an incidence of 8%, with only 7% being Acre, Amapá, Mato Grosso, Mato Grosso do Sul, Pará, Rondônia and Roraima. The impact of taxes on final fuel prices is high, reaching 41% in gasoline, 27% in ethanol, 28% in S500 diesel and 27% in S10 diesel.
According to the president of Fecombustíveis, Paulo Miranda Soares, the sector will suggest to the government the reduction of taxes on fuels and also that Petrobras make the adjustment in larger intervals of time. The federal government’s attempt to mitigate the problem by not focusing Cide on the price of fuel is innocuous because it represents a reduction of 10 cents per liter of gasoline and 5 cents per liter of diesel. This is not the solution to the problem of rising fuel prices in Brazil. The real solution to the problem requires Petrobras to adopt oil refining policy and prices compatible with the needs of Brazil.
On the question of refining, it should be noted that there are basically two types of oil: light oil from which it is easier to extract gasoline and other noble derivatives, and the heavier oil, denser, good for making asphalt and machine fuel. Brazil produces about 1.8 million barrels a day that is exactly the country’s daily consumption. Brazil is self-sufficient in heavy oil. However, Brazil needs to import a fifth of the oil (light) going to our refineries because only 6% of our production falls within the light oil group. The light oil is more expensive because it yields more noble derivatives and is easier to refine. It can extract enough gasoline and other derivatives from heavy oil that is not made in Brazil because it is more expensive. It is absurd that most of our refineries are designed to process light oil rather than heavy oil. Petrobras has to mix Brazil’s heavy oil with light imported oil to refine it. To avoid this problem, it would compete on Petrobras to deploy refineries to produce derivatives with the use of heavy oil even if it is more expensive not to be dependent on imported light oil. Our refineries should be reconfigured to meet this condition. What is left over from our heavy oil goes to export. But the money that goes in is not enough to cover what we spend importing light oil. This has generated losses of billions of dollars in the trade balance.
In addition to adopting a new refining policy in Brazil, Petrobras needs to be placed at the service of national interests. Petrobras emerged from one of the largest mass mobilizations in the history of Brazil, the “oil is ours!” campaign. Law no. 2004, dated 1953, created Petrobras, owned and controlled by 100% of Brazilians and most of the Union. It was granted to Petrobras a monopoly on the exploration, production, transportation and refining of oil and oil products. The distribution was outside the monopoly. The neoliberal economic model of economic opening, privatization, denationalization, deregulation and precarization of labor relations was implemented in Brazil in the early 1990s with the Collor government and advanced during the governments of Fernando Henrique Cardoso (FHC), Lula, Dilma Rousseff, and Michel Temer.
The oil sector and Petrobras have also undergone significant changes within this new reality. Petrobras, a state-owned, national and strategic company, aimed at guaranteeing domestic supply, began to have as its project to become a multinational company, managed with private company criteria and having as fundamental objective the greatest profitability for shareholders. The first steps in this direction, still in the Collor government, were the privatization or extinction of a series of companies of the Petrobras system. The most affected sector was the petrochemical, almost all privatized. The work was completed by the FHC government which, in a few years, ended the monopoly exercised by Petrobras and reduced the governmental shareholding in the company.
The new model of the oil sector in Brazil was as follows: the monopoly would no longer be exercised by Petrobras and would be owned by the Union, which would exercise it through the National Petroleum Agency (ANP). The ANP would act as a regulatory agency, responsible, among other duties, for concessions to companies interested in operating in the oil, gas and biofuels sector. Petrobras would be subject to competition at all links in the oil chain. According to the new conception, the company, in order to survive the competition, should diversify its activities abroad and open its capital in foreign capital markets. Since the change in regulation, there has been not only a great penetration of foreign capital in the oil sector, especially in the exploration and production segment, with the development of numerous productive partnerships among Petrobras and the multinationals.
With the “promotion of competition” in the oil sector, occurred the “liberation” of oil and oil products prices, which, from 2002 onwards, should be sold in the domestic market, following the international prices of these products. This has two meanings: on the one hand, it allows Petrobras (and its shareholders) the greatest profit and, on the other hand, it makes possible the inflow of private capital into the domestic oil and derivatives market. In Law No. 9,478, which created the new regulation of the oil sector, the federal government no longer has the majority of the company’s capital under its control, but only a majority of its voting capital. With this, the government was able to dispose of most of Petrobras’ shares, holding, today, 32.3% of the total capital and 55.7% of the voting capital. It kept control of the company, but not most of its capital.
One important observation is that more than 60% of Petrobras’ capital is private and almost 50% of the shares are in foreign hands. This means that of the distribution of dividends (share of the profit that is distributed to the shareholders), most will be in private hands and almost half is sent abroad. In addition, the issuance of debt securities of Petrobras and of subsidiaries in the capital markets of the United States is increasing. Petrobras, in order to have the right to launch stocks and bonds in the US capital market, must comply with a number of conditions and United States law. Petrobras must become completely transparent to investors in the US capital market and demonstrate that it seeks to defend the rights of its shareholders and creditors, that is, its remuneration. Your accounting should also be done according to standards accepted in the United States. As it seeks to increase its funding in the foreign capital markets and seek lower interest rates, the company must achieve lower risk indices and demonstrate that its top priority is shareholder and creditor remuneration. This explains Petrobras’ current policy of acting as a private company.
Petrobras, by practicing international prices for oil and oil products in the domestic market, well above the cost of production, is achieving exorbitant profits, penalizing the population to fatten the pockets of shareholders, especially foreigners. A state enterprise aimed at the economic and social development of the nation should keep prices low so as to ensure a rate of profit compatible with the necessary investments while benefiting population and domestic production. This is not the case with Petrobras. Therefore, to solve the issue of fuel prices in Brazil, it is not enough to reduce taxes. It is necessary that Petrobras implant refineries to process the heavy oil produced in the country and not imported light petroleum and that the company be placed in the service of Brazil and its people and not of foreign shareholders as it happens today.
* Fernando Alcoforado, 78, member of the Bahia Academy of Education, engineer and doctor in Territorial Planning and Regional Development by the University of Barcelona, university professor and consultant in the areas of strategic planning, business planning, regional planning and planning of energy systems, is the author of 13 books addressing issues such as Globalization and Development, Brazilian Economy, Global Warming and Climate Change, The Factors that Condition Economic and Social Development, Energy in the world and The Great Scientific, Economic, and Social Revolutions that Changed the World.
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