Brazil cuts fuel taxes two weeks before presidential runoff

12:45

By: Azzat Manal

Brazil cuts fuel taxes two weeks before presidential runoff

Brazil's government has announced new tax exemptions on fuel and an expansion of existing subsidies in an effort to contain prices, just under two weeks before a closely contested presidential runoff. The measures come as the cost of fuel remains a major concern for voters preparing to choose between incumbent President Luiz Inácio Lula da Silva and senator Flávio Bolsonaro, the son of former president Jair Bolsonaro.

The runoff is scheduled for October 25, with the two candidates competing for the presidency amid heightened political attention to household expenses and energy costs. Fuel prices are particularly sensitive because changes in gasoline and diesel costs can affect transportation, food distribution and the wider cost of living.

Under a new decree, federal taxes on gasoline imports and sales will be suspended for 30 days, with the possibility of an extension. The measure took effect on the same Friday that previous tax-relief arrangements expired, allowing the government to continue its efforts to limit pressure on fuel prices.

The decree also broadens tax exemptions and increases support for ethanol, a widely used alternative fuel in Brazil. The policy is intended to help ease costs across different parts of the fuel market while maintaining supplies for consumers and businesses.

The government has also announced additional financial assistance for diesel importers amounting to 1.40 reais, or approximately $0.28, per litre for 30 days. This support will be added to an existing subsidy of 2.12 reais, equivalent to around $0.42 per litre, bringing the combined assistance to 3.52 reais per litre during the period covered by the measures.

According to the government's Social Communication Secretariat, the objective is to ensure that fuel imports remain economically viable at a critical time for supplies. Officials said the policy is consistent with the government's broader approach to managing fuel-market pressures since the outbreak of the war involving Iran.

The administration has indicated that the financial impact of the new measures will be offset by revenues generated from the federal government's oil assets. This approach is intended to fund the relief without leaving the full cost uncovered, although the ultimate effect on public finances will depend on the value of those revenues and the duration of the support.

The announcement places energy policy at the centre of the final stretch of the election campaign. While lower fuel costs may offer relief to consumers and transport operators, the extent to which the tax cuts and subsidies translate into lower prices at the pump will depend on market conditions, import costs and how suppliers pass on the benefits.

The measures also illustrate the connection between economic policy and electoral debate in Brazil, where inflation and everyday expenses can shape public perceptions of the government. With the runoff approaching, fuel prices are likely to remain a prominent issue as voters assess the candidates' economic records and proposals.