Explaining Brazil #189: Gas prices put Bolsonaro in a bind

Brazilian giant oil and gas company Petrobras went for over 50 days without altering its rates for fuel sold in refineries, despite a rapid surge in international prices. But when it did eventually hike its prices, it came as a sucker-punch for Brazilian citizens. The change means Brazil’s stubbornly high inflation won’t ease up in March.

Higher fuel prices will have ripple effects across the board — in a country where inflation has already been quite widespread as it is.

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Guest:

• Luciano Sobral is the chief economist at the São Paulo-based Neo Investimentos firm and is a monthly columnist at The Brazilian Report. He holds a BA in economics from the University of São Paulo and a masters in Public Administration from the Harvard Kennedy School.

This episode used music from Uppbeat. License codes: 680JB0PWMT9CI7ID, OVSABIO2RUAQGV2Q, W5QT6POOGADVF1N7.

Background reading:

• In our Brazil Daily newsletter (March 11 issue), we explained the effects of the massive fuel price hikes promoted by Petrobras. One of them is to keep inflation high. In February, the IPCA consumer price index reached 1.01 percent and kept 12-month inflation above the 10-percent mark for six straight months.
• After Brazil’s oil and gas major Petrobras announced a 24.9-percent increase in the price of diesel, senators moved quickly to approve a bill establishing a ‘price stabilization fund’ for fuels.
• Reporter Constance Malleret explains that Brazil’s logistics sector is braced for higher costs amid soaring fuel prices. Any hope of a post-Covid respite for logistics firms was destroyed when Russia invaded Ukraine, she writes, setting off a chain reaction of volatility and price increases.
• Listen to episode #184, “Brazil’s risk of imported inflation.” We talked to risk analyst Mário Braga of consultancy Control Risks about the implications of a war between Russia and Ukraine. Our analysis has been confirmed — with oil, corn, and wheat prices reaching their highest point in a decade.

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