Apr 20, 2015

Brazilian Truck Drivers Threaten new Strike/Blockades this Week

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

It is possible that the highways of Brazil could be blocked once again by protesting truck drivers as early as this week. The truck drivers in Brazil have announced their plans for a new nationwide strike/blockade if the federal government does not release an acceptable minimal freight rate and reductions in diesel fuel prices by Wednesday, April 22. They are demanding a combination of a minimal freight rates and reduced fuel prices that will at least cover their costs, which they contend is not possible with the current rate structure.

These are the same two demands that led to a crippling strike/blockade at the end of February. The 10-14 day strike only ended when the government made some concessions concerning the new truck driver law and toll payments as well as entering into discussions concerning the price of diesel fuel and freight rates. Many drivers wanted to resume their strike/blockade several weeks ago, but relented to the government's request for more time to consider their demands. In exchange for not resuming their protest, the drivers set a deadline for April 22 for a final resolution of these issues.

The president of the National Federation of Truck Drivers and Transporters (Fenacat) Luiz Carlos Neves, stated that if the government does not propose an acceptable solution to the problem by the 22nd, they will once again blockade the major highways of Brazil. The director of the Cargo Transporters in the State of Parana (Seicepar) Luiz Carlos Neves, agrees there will be new blockades nationwide if the government does not meet their demands.

As you would expect, the truckers and the shippers are at opposite sides of this discussion. The truckers want a guaranteed minimum rate and the shippers say the freight rate should be based on supply and demand. For example, the truckers contend that to cover their cost from the city of Sarandi in Rio Grande do Sul to the Port of Rio Grande, which is a distance of 606 kilometers, they need a rate of R$ 103.83 per ton. For a cargo of 31 tons, the charge would be R$ 3,218. The truckers want these type of minimum rates established for the different regions of the country.

Ironically, concessions made by the government concerning the truck driver law, which took effect last week, will actually increase the number of trucks on the road with the potential to drive down freight rates even more. The modified law allows drivers to be behind the wheel for longer periods of time with fewer mandatory breaks which effectively increases the time the truck is on the road.

During the first work stoppage in February, numerous industries were immediately impacted. Auto assembly plants closed down for lack of parts, dairy farmers dumped their milk because there were no trucks to transport it to the local dairy, gas stations ran out of fuel due to lack of deliveries, meat packing companies closed because they ran out of cold storage space, even elective surgeries were canceled because of a lack of supplies.

The first strike/blockade started in Mato Grosso and spread to the rest of the country in a matter of days taking the country by surprise. By the announcement of a potential strike weeks in advance, this should allow for local authorities and businesses to be better prepared if a work stoppage does occur.