Economy

Who will pay for Brazil’s subsidies to diesel?

diesel diesel prices biden
To please truckers, Brazil will slash diesel prices. Photo: ABr
diesel prices
To please truckers, Brazil will slash diesel prices.

After Brazilian truckers staged a 10-day strike and drove the country into chaos, the federal administration has agreed to lower diesel prices through subsidies, as Petrobras’s pricing policy will remain – at least for now. President Michel Temer announced a BRL 0.46/liter reduction, which will cost at least BRL 9.6 billion in this year’s budget.

According to the federal spending cap approved in 2016, the federal administration cannot create new expenses without slashing costs to compensate. So, how is the government paying for that reduction in fuel prices?

Part of it has already been announced: Congress approved a project to implement taxes on the payroll...

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