BRAZIL: Senate Speaker Flies Away From Brasilia, Worsens Fuel-price Crisis

(RTTNews) - Brazilian Senate speaker Eunicio Oliveira, traveled to Ceara state Thursday, moving away from the country's capital and virtually eliminating any chance of a floor vote that removes a payroll tax break and ends a truck drivers strike that led to fuel and food shortages in major cities.

Truck drivers stopped working and are refusing to deliver cargoes until the Brazilian government adopts measures that help them deal with high diesel oil prices - among them a reduction in federal taxes on the fuel. Diesel oil prices increased by more than 10% in May alone until last week and were 23% above the level seen at the end of last year.

Truck drivers see the Brazilian state-owned oil company Petrobras as partially responsible for those increases. The firm holds the most significant share of fuel markets in Brazil and since last year started to adjust gasoline and diesel prices on a nearly daily basis.

Petrobras policy dictates that those fuels become more expensive in the local markets when there is an increase in oil prices abroad and/or when the local currency, the real, loses strength compared to the U.S. dollar. Last week, both conditions were met, and prices jumped.

Drivers also blame the government for the current high cost of fuels, since almost half of the prices at the pump are a result of federal and state taxes.

After two days of protests, the federal government decided that it would bring down one of the federal taxes on diesel oil as long as Congress moved forward with a bill that eliminates a payroll tax relief.

According to the Brazilian Finance Minister, Eduardo Guardia, the federal government would zero the Cide-Combust?veis tax, which is equivalent to R$ 50 per cubic meter of diesel oil sold - ou R$ 0.05 per liter.

Truck drivers, however, are asking for cuts to the PIS/Cofins tax on fuels, which represent 10% of the price of diesel oil to consumers - versus 1% of Cide-Combustiveis. The Brazilian government said that it could not do that because there is no budget room to compensate for the revenue loss.

However, the House of Representatives has passed a bill that ends the payroll tax relief and zeroes the Cide-Combustiveis and the PIS/Cofins taxes for the diesel oil.

The government will try to solve the matter in the Senate, but the absence of Oliveira is a significant obstacle to advance with the legislation. According to his aides, Oliveira should return by Friday, which is traditionally a day when there are not enough lawmakers are in Brasilia to start any vote.