Buenos Aires Times

economy TRUCKERS' DISPUTE IN BRAZIL

Petrobras shares plunge 10% after it bends and offers fuel price cut

On Wednesday Petrobras yielded to pressure and temporarily reduced fuel prices after striking truckers threatened to paralyze airports and nationwide commerce.

Thursday 24 May, 2018
Brazilian truck drivers block the Regis Bittencourt road, 30 kilometres from São Paulo, during a strike to protest rising fuel costs in Brazil.
Brazilian truck drivers block the Regis Bittencourt road, 30 kilometres from São Paulo, during a strike to protest rising fuel costs in Brazil. Foto:AFP

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Shares in Brazil's state-owned oil company Petrobras tumbled 10 percent on Thursday, a day after it temporarily reduced fuel prices in response to a truckers' strike.

At 10:53 am local time, the price of preferred shares had plummeted 11.26 percent and of ordinary shares 10.61 percent on the São Paulo stock exchange, while the Bovespa index was down just 1.29 percent.

On Wednesday Petrobras yielded to pressure and temporarily reduced fuel prices after striking truckers threatened to paralyze airports and nationwide commerce.

The 10-percent price reduction will only last two weeks and was offered as a way of defusing an increasingly out-of-control situation.

"It is a one-off measure. It doesn't represent a change in pricing policy," Petrobras chief Pedro Parente told journalists. "These are 15 days for the government to reach a deal with the truckers."

The truck drivers have attempted to put a stranglehold on movement of goods in Brazil – using their rigs to block roads – to protest fuel price rises, which saw refinery diesel before tax up 12 percent this month and petrol 14 percent higher.

The increases are the result of a politically sensitive decision made in late 2016 to allow Petrobras autonomy over its pricing.

But the determination of the truckers has caught President Michel Temer's government flat-footed.

Days of strikes

On Wednesday, the third day of strikes saw road blocks erected in at least 17 of the 27 states, the Federal Highway Police said.

The blockages provoked huge tailbacks on highways, disrupting national freight deliveries, with local media reporting increases in fruit and vegetable prices in Rio de Janeiro and São Paulo.

Brasilia's international airport said that the drying up of fuel deliveries meant it could not resupply aircraft.

"Only aircraft capable of taking off without needing to refuel will (be allowed to) land at Brasilia Airport," it said in a statement.

The G1 news site reported that five other airports, including the Congonhas airport in São Paulo and the airport in Recife, had only enough fuel for Wednesday.

Although five tankers did get through to Brasilia late Wednesday, the "alert situation and contingency measures at the terminal remain in place," the airport said.

Gas stations in Rio de Janeiro were also running short.

"There is a shortage in practically all the stations that we have checked. In some they'll run out today and others have only enough until Friday," said a spokesman for the Rio fuel trade union.

In another knock-on effect, the national post office said it had to suspend express deliveries because they could no longer be guaranteed.

Negotiations ongoing

The drivers' discontent adds to pressure on Temer's lame-duck government ahead of October general elections. Market reforms are the central plank of his unpopular leadership and there would be heavy investor resistance to the idea of stripping Petrobras of its pricing freedoms.

Temer told journalists he wanted strikers to accept "a kind of truce so that in two or three days at most we can manage to find a satisfactory solution."

But the truckers were standing firm.

"As long as the government doesn't take effective measures, we firmly demand demonstrations in every region of the country," union president José da Fonseca Lopes said.

For one trucker, Paulo Sergio Ribeiro Ramos, snarling up the roads is the only way to get his voice heard.

"Gas has gone up, diesel has gone up. Road tolls have gone up, and bills have gone up," the 43-year-old driver told AFP on a highway outside Rio de Janeiro. "If we don't demonstrate, we will end up unemployed."

- AFP

 

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