By Brazil Stock Guide – Brazil’s government unveiled a broad package of subsidies, tax cuts and financial support aimed at cushioning the impact of rising fuel prices triggered by geopolitical tensions in the Middle East.
The measures, signed by President Luiz Inácio Lula da Silva on Monday (April 6), include a mix of provisional legislation, executive decrees and a bill sent to Congress, targeting both fuel supply chains and the aviation sector.
A central component of the plan is a BRL 1.20-per-liter subsidy for imported diesel, with costs shared between the federal government and state administrations. The initiative is designed to secure supply and stabilize domestic prices. In parallel, a separate BRL 0.80-per-liter subsidy will be granted to domestically produced diesel, fully funded by the federal budget and initially set for two months.
The government also moved to eliminate federal taxes on biodiesel, a renewable component blended into diesel at a 15% ratio, aiming to reduce pump prices.
For liquefied petroleum gas (LPG), authorities introduced a subsidy of BRL 850 per ton for imports, aligning imported fuel prices with domestic production. The measure is expected to soften the impact on household cooking gas costs, particularly for lower-income consumers.
The aviation sector will receive targeted relief through credit lines that could reach BRL 9 billion. The funding includes support for financial restructuring and working capital, with operations to be handled by Brazil’s development bank BNDES. Additionally, federal taxes on jet fuel have been eliminated, lowering operating costs for airlines.
Air carriers will also benefit from deferred payments of air navigation fees, with obligations for April through June postponed to December, easing short-term cash flow pressures.
The package further introduces mechanisms to smooth international price volatility over time and strengthens regulatory oversight. Authorities signaled tougher penalties for price gouging or supply disruptions during periods of geopolitical stress.
A bill submitted under urgent procedures proposes criminal penalties for abusive pricing practices, with potential prison sentences ranging from two to five years.
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