Mar 03, 2015

Trucker Strike in Brazil Improved, not Completely Resolved

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

The big news last week in Brazil of course was the trucker strike that impeded the movement of grain and cargos all across the country. The strike is now waning with most drivers returning to work and the number of blockades have diminished, but it is not yet over. Last Friday there were 57 blockades and that dropped to 38 on Sunday and as of Monday morning, there were just 12 partial blockades in two states - Santa Catarina (10) and Mato Grosso (2). The number of blockades picked up during the day on Monday, but it is nothing like it was late last week. As of Monday afternoon, there were 23 roadblocks in Parana, Santa Catarina, and Rio Grande do Sul.

The truckers made their point loud and clear, but the pressure to end the strike grew tremendously at the end of last week as every sector of the Brazilian economy was feeling the impact of the work stoppage (see later article). Local, state, and the federal officials also started to take a much harder line toward the protestors at the end of last week in order to get the highways reopened. The government also made some concessions (see next article) and agreed to open discussions on the list of complaints of the truckers.

This has probably been the biggest labor movement in Brazil in maybe 15 years and the strike has had more "legs" than anyone anticipated. I think the reason why this labor action was more unified and successful was because it had a concrete focus that everyone could relate to - higher fuel prices and higher taxes on fuel at a time when freight rates were falling. All of these economic factors came together in a "perfect storm" so to speak and it caught everyone by surprise. Problems in the transportation sector had been simmering under the surface for a long time and they finally came to the surface and blew the lid off!

If you remember, there were a lot of demonstrations in Brazil last year before the World Cup, but those demonstrations were more about a general dissatisfaction with government spending. People were demonstrating against excessive spending on sports stadiums and not enough spending on education, health care, social services, etc. The demonstrators were also upset about corruption and the ineptitude of government officials. It is good to be upset about all those things, but you can demonstrate all you want, those issues are not going to be resolved by protesting in the streets.

The difference this time was that the truckers had a focus - lower fuel prices and higher freight rates. The transportation sector in Brazil has a lot of problems and below I have listed some of the main concerns of the truckers. I will be the first to admit that I don't completely understand all the issues and I am sure there are more than what I have listed, but below is sort of a primer on the subject.

Even though the strike may be ebbing, tensions are still running very high. In the state of Rio Grande do Sul, a truck driver was killed on Saturday by a truck trying to evade the blockade.

The strike is ebbing, but there are many problems in Brazil besides dissatisfied truck drivers including: a faltering economy that will probably go into recession, a devaluated currency, rising unemployment, rising interest rates, rising inflation, a gigantic corruption scandal at Petrobras, overspending and corruption surrounding the building of sports stadiums for the World Cup, and now Brazil will host the Olympics in a little more than a year. Not a good time to be a politician in Brazil.