Haddad wins gasoline battle and maintains fiscal plan, but takes bad shots – 02/28/2023 – Vinicius Torres Freire

Fernando Haddad managed to keep the money he expected to raise with the return of the federal tax on gasoline and ethanol. Part of these resources, however, must come from a provisional tax (hum) on oil exports, which is nonsense.

The minister won, but with little tricks, some patches to satisfy the so-called “political wing” of the government. In fact, it is the President of the Republic who fears, with some reason, that his popularity will be chipped with fuel readjustments. It is a critical issue especially after the 2018 truckload.

The so-called re-encumbrance was BRL 0.47 for gasoline, less than the BRL 0.69 that Jair Bolsonaro had stolen, with the aim of winning votes in the election. In order to make up for the hole in the partial reencumbrance, the Lula government invented an export tax on crude oil. Both the full collection of the tax on gasoline and this export tax will be discussed again in four months’ time.

In short, the finance minister won the battle. He took some shots and other disputes will come. It became evident how difficult it will be to carry out the idea of ​​putting order in the public accounts and how many people in the Lula 3 government, practically almost everyone, want to get their hands on Petrobras.

PT supporters almost in general, economists “linked” to the party or fellow travelers want to sabotage Haddad’s plan to at least limit the government deficit to 1% of GDP in 2023. The target is insufficient, but it will still be difficult to meet .

The economy slows down, although not as fast as imagined. Revenue starts to drop. The expense will increase.

In the quarter from November 2022 to January 2023, federal revenue was 1.4% lower than in November 2021 to January 2022 (in real terms: after discounting inflation). Tax collections have been flat for the time being, but income from other sources has declined. This is the case with money that comes precisely from the exploitation of natural resources, dividends from state-owned companies, etc., as the rise in commodity prices has passed. Furthermore, Petrobras’ new management wants to distribute fewer dividends, which also affects government revenue, the company’s largest shareholder.

Export tax in general is nonsense: see the failures of Argentina. It is inefficient and clumsy intervention: there are better ways to collect taxes. Among other problems, appearing suddenly with a bad tax, for political convenience, scares those who intend to invest in oil production.

It’s tentative, just four months, they say. But some damage has already been done, and in the end, the idea might stick.

People from the government say that the tax on the export of crude oil will encourage refining (production of derivatives, such as diesel, gasoline). To put it mildly: it’s unlikely.

The deadline is short (four months). Furthermore, it is not just a matter of deciding between selling more oil or making more fuel (for the companies that have that option, in short Petrobras). When you decide to produce more than one derivative, you increase the production of another, by table, which may not be economical. By the way, even selling relatively more fuel may not be economical.

Suppose, however, that more fuels can be produced if less crude oil is exported, without any further problems. In theory, the diesel and gasoline produced would still be sold at the international quotation price. Or not?

It may be that many people in the government really want to fix fuel prices, harming Petrobras, its investments, its growth and, by extension, government revenue and economic efficiency in general.

PRESENT LINK: Did you like this text? Subscriber can release five free hits of any link per day. Just click the blue F below.