Brazil Commodities Slammed As Nationwide Strike Intensifies, GDP Estimate Down 38%
- Brazil’s nationwide truck driver strike has entered its 10th day
- Key exports have been severely affected, from beef and soybeans to coffee and cars
- Bloomberg cuts GDP growth estimate from 3.2% to 2%, a decline of 37.5%
- Concessions made to truckers will cost the Brazilian government 14.4b Real (US$3.85 Billion) throughout the remainder of 2018
- Lower GDP may reduce revenue by additional 20b-25b reais, or 0.25% of GDP, could force govt to cut expenditures further by 3b-10b reais to meet 159b-real fiscal deficit target (Bloomberg)
- Brazilian oil workers began a 72-hour strike on Wednesday, and have demanded that Petrobras fire CEOP Petro Parente while permanently lowering fuel prices
- Millions of chickens have been prematurely slaughtered as feed failed to reach farmers
The situation in Brazil has gone from bad to worse, as the nationwide trucker strike has expanded into a strike by oil workers, who began a 72-hour strike on Wednesday – affecting several rigs, plants, refineries and ports in the latest challenge for state-owned oil firm Petroleo Brasileiro SA, whose shares have fallen roughly 30% in two weeks. Brazil produces approximately 2.1 million barrels of oil per day, making it Latin America’s largest producer of crude.
The oil worker strike is yet another blow to conservative President Michel Temer, as Brazil’s political climate is fiercely polarized.
Late on Tuesday, Reuters reported that Temer was considering an overhaul of a market-based fuel pricing policy at Petrobras, which could provoke even more investor flight. Temer’s office said in a Wednesday morning statement that he would preserve the policy.
The oil sector strike included workers on at least 20 oil rigs in the lucrative Campos basin of 46 operated by Petrobras, as the company is known, according to FUP, Brazil’s largest oil workers union. Petrobras said any disruption would not have an immediate major impact on its production or overall operations. –Reuters
The strike has crippled virtually every major industry countrywide, while key commodities such as soybeans, beef, coffee and cars have been severely affected.
Most export terminals ran out of soybeans for shipments scheduled for Tuesday and Wednesday, Lucas Trindade de Brito, manager at export group Anec, said in a telephone interview.
Among Brazil’s 109 beef plants, 107 suspended operations and two are running below 50% of capacity, exporter group Abiec said in an email.
Exports of 40,000 tons of beef haven’t been shipped as planned, and thousands of trucks loaded with perishable products, including boned meat, are halted on roads. –Bloomberg
Alas, the strike has also triggered the premature slaughter of millions of chickens after vital feed failed to reach farmers.
The government announced Sunday that it will cut taxes on diesel fuel, while freezing the price for 60 days followed by a monthly adjustment going forward. The measures will reportedly cost around 9.5 billion reais (US$2.6 billion) through the end of the year, which led Bloomberg to cut GDP growth estimates from 3.2% to 2%.
The measures will cost about 9.5 billion reais ($2.6 billion) through the end of the year, Finance Minister Eduardo Guardia said Monday at a news conference. Part of that bill will be covered by using a government contingency fund and by erasing payroll-tax cuts enjoyed by some industries, but other, as-yet undisclosed, measures will also be required, Mr. Guardia said.
“The loss of tax revenue will need to be compensated,” he said. –WSJ
Meanwhile, as hundreds of demonstrations rage across the country, many are calling for the country to return to a dictatorship that ran for two decades until 1985.
“We need help from the military to resolve our problems in Brasília, to remove the bandits from there and to put the house in order,” said one driver, Gabriel Berestov, 44.
José Lopes, leader of the Brazilian Truck Drivers’ Association, warned on Monday that the strike movement had been hijacked. “There is a very strong group of interventionists,” he told reporters. “They are people who want to bring down the government.”
The subject ricocheted around Brazil. On Tuesday, Temer told foreign journalists he saw “zero risk” of a military intervention. His minister of institutional security, Gen Sergio Etchegoyen, said the armed forces had no intention of intervening and that the idea was a “subject from the last century”.
The theme is deeply controversial in Brazil, which lived under a military dictatorship for 21 years, during which hundreds of regime opponents were executed and thousands more tortured. –The Guardian
Around 15-20% of Brazilians support military intervention, according to Marcus Melo, professor of political science at the Federal University of Pernambuco.
“Those who are still mobilizing are militants and outliers,” he said. “We are in a situation of social convulsion.”