Brazil's Finance Minister Dario Durigan announced Thursday the government would postpone its decision on removing a gasoline subsidy, citing "Iran war uncertainties" that have driven oil prices upward. This delay directly benefits the state as a net oil exporter, allowing it to continue accumulating rising oil revenues, while leaving working-class consumers vulnerable to market volatility.
Durigan, speaking on a local radio station, stated the government had initially planned to move forward with the subsidy removal this week. This followed a partial withdrawal of diesel-related tax benefits announced just last week. He emphasized the ongoing conflict in the Middle East as highly uncertain, necessitating caution to "shield consumers from price shocks."
Capital's Gains
The economics team's guidance to President Luiz Inacio Lula da Silva reflects an administration that, despite its leftist label, operates within the confines of global capital accumulation. Brazil, as Latin America's largest economy and a net oil exporter, sees its state coffers swell with increased oil revenues. The proposed increase of ethanol blend in gasoline to 32% from 30% in the coming days, and a supported increase in the biodiesel blend, are presented as technical adjustments rather than fundamental shifts in energy policy.
The State's Hand in Crisis Management
Beyond energy, the state is preparing to intervene in the agricultural sector. After more than a year of discussions, an executive order is expected in the coming days to allow the restructuring of rural debt. This measure, according to Durigan, offers an alternative to a congressional bill the government considers "overly broad." The program is projected to cost the treasury between 2 billion and 3 billion reais, or $389 million to $583 million, annually, not including implicit subsidies. The total stock of renegotiated debt could exceed 100 billion reais.
Debt and Dispossession in the Countryside
To qualify for these easier repayment terms, borrowers must demonstrate severe losses. These losses must stem from successive harvests impacted by adverse weather conditions like droughts and floods. Farmers who suffered more than 30% losses due to price volatility will also be eligible. For climate-related cases, producers can renegotiate debts over 10 years, with a two-year grace period and no down payment required. This restructuring, while offering temporary relief, doesn't challenge the underlying system of agricultural production that leaves farmers in debt bondage, subject to the whims of weather and market prices. It's a mechanism to manage the contradictions of an exploitative system, transferring the cost from private capital to the public treasury, rather than addressing the systemic vulnerabilities of rural labor.