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Brazil fourth day truckers strike reaches a pact, but big union rejects it

Sebastiao Moreira/EPA-EFE

Walkout over diesel-fuel prices disrupts weak economic recovery; Petrobras shares take a hit- Play video - Exports threatened by truck strike

By Jeffrey T. Lewis and Luciana Magalhães

Petroleumworld 05 25 2018

Brazil's government said Thursday evening it had reached an agreement with several truckers unions to suspend a four-day strike that has disrupted the economy and left many businesses without vital supplies, but one of the country's biggest drivers groups said it would continue the work stoppage.

It wasn't immediately clear how many truckers would return to work Friday. The Brazilian Association of Truckers, which says it represents about 700,000 of Brazil's approximately 1 million independent drivers, walked out of the talks and rejected the agreement.

Representatives of Brazilian President Michel Temer and truckers unions met for hours Thursday, and the government agreed with most of the remaining unions represented to cut a fuel tax and take other measures to help drivers.

The government also promised to extend a 15-day diesel price cut announced Wednesday by state-controlled oil company Petróleo Brasileiro SA, or Petrobras to 30 days, and said it would compensate the company for the cost.

Eliseu Padilha, President Temer's chief of staff, said it was time to think about Brazilians hurt by the strike, adding that people are worried about their jobs, their farms, or whether they would be able to get necessary medicines.

“Brazil is a country of road transport, the Brazilian family is a family that depends on roads,” he said.

The strike began Monday morning, with the truckers association demanding the government cut the tax on diesel fuel in the face of a recent price spike the union called “unsustainable.” Depending on how many members heed the call by union President José da Fonseca Lopes to remain on strike, it could stretch into a fifth day even as many of the country's businesses run low on vital supplies.

“It's a big question mark,” said political consultant André Cesar. “Dismantling the movement is a very complex task, and a key union refused the deal,” he said.

Filling stations in the state of São Paulo, which normally get resupplied two to three times a week, haven't received deliveries since Monday afternoon and are close to running out of fuel, said José Alberto Paiva Gouveia, president of the union representing gas stations in the state of São Paulo.

Brazil lacks a big railroad network, making its economy highly dependent on road transportation. The strike has caused logistics problems around the country, leading McDonald's Corp. to release a statement that a small number of its restaurants might run out of certain menu items.

Brazil is an agricultural powerhouse, and most of its farm produce is moved to market by trucks. Because of the strike, some dairies have had to dump milk as storage has overflowed, according to dairy union Sindileite, while cattle ranchers and chicken and pig farmers say they aren't receiving enough feed for their livestock, potentially threatening the country's food supply.

“When truckers go on strike, the economy grinds to a halt,” said Carlos Melo, a professor at São Paulo's Insper business school.

The strike has also put Brazil's tenuous recovery, following a two-year recession, at risk as supply disruptions ripple through the economy. The work stoppage had spread to at least 20 of Brazil's 26 states and the Federal District by Thursday.

In response to the strike, Petrobras, cut the price of diesel fuel by 10% starting Thursday, calling the move an “exceptional measure” that doesn't signify a change to the company's two-year-old policy of setting fuel prices based on market conditions.

The company welcomed Thursday's agreement, calling it “highly positive” and saying the compensation promised by the government for the price cut would maintain Petrobras's independent price policy.

Petrobras's decision to cut the price had rekindled investor concern about government interference in the state-controlled oil company just two years after President Temer ended the previous administration's policy of forcing Petrobras to maintain low fuel prices to help keep inflation under control.

The company's preferred shares closed 13.7% lower on Thursday, before the agreement was announced.


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Story by Jeffrey T. Lewis and Luciana Magalhães; With contribuition of Paulo Trevisani and Samantha Pearson from The Wall Street Journal. 05 24 2018

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