On 21st May, hundreds of thousands of Brazilian truck drivers went on strike for 11 days in response to the rapidly rising cost of fuel, which was itself compounded by a weakening Brazilian Real against the US Dollar. Roads were blocked, the economy was stifled, and the CEO of the state-controlled Oil company – Petrobras– resigned.
Brazil’s soybean crush association – ABIOVE – announced that 63% of Brazil’s soy crushing facilities came to a halt during the strike due to a lack of supplies and the Mato Grosso Institute for Agricultural Economics (IMEA) revealed that the corn harvest stalled due to fuel supplies running low. Overall the strike caused estimated losses of $1.75 billion to Brazil’s agricultural sector according to Fertecon’s sister company IEG Vu.
Outside the agricultural sector, effects have been wide ranging: the company Unilever, for example, reported sales growth 6% lower than anticipated and cited the Brazilian truck strike as a reason for the slowdown. The estimated cost to the country’s economy stands at USD25-30 billion. For instance, more than a month after the end of the strike the country is still battling delayed shipments of commodities as well as bottlenecks in supply chains and more disagreements over transportation prices and policies.
Commentators have cited the ease with which the freight network was brought to a standstill as something that may need to be addressed in the coming decades. However, more worryingly for the government, a poll conducted by the Folha de S Paulo newspaper found that one third of Brazilians wanted a military takeover during the strike. This highlights a considerable lack of trust in a government which has been plagued by scandals and corruption in recent years.
Freight costs Santos to Rondonópolis (1500 km) BRL/ton
|Before the strike||After the strike||% Change|
In a move aimed at meeting the requests of truck drivers, the government imposed a minimum freight rate which came into effect on 30th May. This government-led initiative was imposed to support the truckers and ensure they have a margin in the face of rising fuel costs. A public hearing is expected to be held in late August when it is understood the Supreme Court will prepare to deliver a ruling following lawsuits filed by agribusiness and other industry producers surrounding these minimum freight rates.
The Supreme Court will decide if such an agreement is compliant with the country’s constitution, therefore confirming (or not) whether these freight rates will be confirmed or whether they will be rescinded at a later date. The consensus for the moment seems that even if these are deemed incongruent with Brazilian law, the imposed freight rates will stay in place for the remainder of 2018…