Apr 24, 2015

Truckers in Brazil Resume Strike over lack of Minimum Freight Rate

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

After failing to reach an agreement with the federal government concerning the establishment of a minimum freight rate, truck drivers in Brazil resumed their strike/blockade of Brazilian highways as of midnight, Wednesday, April 22. By Thursday morning highways were being blocked in the states of Mato Grosso, Parana, Rio Grande do Sul, Sao Paulo, and Santa Catarina and additional highways were impacted as the day progressed. At some locations all traffic was being blocked while in other locations only trucks were being blocked while passenger cars, busses, medical vehicles, trucks carrying live animals, and official vehicles were allowed through.

In the failed negotiations, the Chief Secretary of the Brazilian president, Miguel Rossetto, and the Brazilian Minister of Transportation, Antonio Carlos Rodrigues, informed representatives of the trucker organizations that establishing a minimum freight rate in Brazil would be unconstitutional and also unworkable. Instead of establishing a minimum freight rate by law, the government recommended minimum freight rates that the truckers could reference when negotiating contracts to haul freight.

Since the government had said that lowering the price of diesel fuel would not be possible, the truckers had been hoping that the establishment of a minimum freight rate would compensate for the recently increased price of diesel fuel. The truckers demanded a 30% increase in freight rates that they claimed was needed to just cover their operating expenses.

The truckers argued that the current freight rate is 25% below their cost of production and that the government sets minimum rates for a lot of things including taxies and the price of agricultural commodities, but not for the transportation industry. The trucker organizations found the government's alternative of just a recommended freight rates completely unacceptable and decided to resume their strike activities.

Local and state officials have indicated that they will be more aggressive in keeping the highways open during the current protest than they were during the previous strike/blockade in February. The strike in February ended after about two weeks when the government made some concessions on trucker demands and agreed to enter into negotiations concerning the minimum freight rates. Local and state officials also convinced local judges to start issuing hefty fines for organizations or individual truckers who continued blocking highways after being ordered to remove their trucks from the roadway.

Agricultural organizations such as the Mato Grosso Soybean and Corn Producers Association (Aprosoja) are against the establishment of a minimum freight rate as well as the current protest by truckers. They feel a minimum freight rate established by law would be unconstitutional and counter to the free flow of goods and freight based on supply and demand. They contend that increasing the freight rates would result in lower prices for producers, increased inflation, and a loss of competiveness for Brazilian exports.

Aprosoja contends that a better approach to help the truckers would be to: reduce the various taxes levied on diesel and biodiesel fuel, delay for 12 months the payments on loans taken out by truck owners from the National Development Bank for the purchase of the vehicle, reducing tolls that truckers must pay, improving the condition of the nation's highways, and the creation of a freight-market where transportation companies could lay off their risks of fluctuating freight rates.

The immediate impact of these protests could be on the commercialization of soybeans. The grain buyers need to know the freight costs before they can give a price quote to farmers for their grain. Without knowing the cost of freight or if any trucks would be available to haul the grain, they may hold off on the purchase of grain. If the strike persist for more than just a few days, grain elevators may not be able to move enough soybeans needed to free up space for the impending safrinha corn harvest.

During the first strike in February many gas stations in the interior of Brazil ran out of fuel due to a lack of deliveries. As a result, long lines started to form at gas stations early Thursday morning as motorists attempted to fill their tanks before the station's fuel supply was exhausted.