Apr 23, 2019

Brazilian Truck Drivers again threatening a Nationwide Strike

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

Independent truck drivers in Brazil are once again threatening another nationwide strike as soon as Monday, April 29th. They had originally scheduled a strike for May 21st, which is the one-year anniversary of their strike last year that crippled the Brazilian economy within a few days. The leader of the group said that the strike date was moved forward due to the increase in diesel prices announced last week by Petrobras.

Two weeks ago, the Bolsonaro administration intervened with Petrobras to postpone a proposed 5.7% increase in diesel prices due to worries about a new nationwide strike by truck drivers. The intervention did not last long because Petrobras announced last Wednesday an increase of 4.8% in diesel prices.

In an interview last week, the CEO of Petrobras, Roberto Castello Branco, stated that the company will continue to operate independently when it comes to pricing and they will respond to international prices at a minimum of every 15 days. He also stated that he felt the chances of another truck driver strike were low due to measures announced by the government in an attempt to help the drivers.

Leaders of the truck drivers contend that the recent increase of R$ 0.10 per liter of diesel (approximately $0.10 per gallon) could potentially wipe out R$ 1,000 of profit per month for drivers (approximately $265). They also feel that there will probably be another increase in diesel prices within 15 days, so they felt that they could not wait any longer to express their displeasure. They also expressed their frustration that increases in the freight rates have not kept pace with the increase in diesel prices and that not everyone is paying the mandatory minimum freight rate.

Even as the Brazilian government announced measures earlier last week to help the truckers, the truckers contend that they do not address the underlying problem of freight rates being too low to make a suitable living according to the president of National Confederation of Independent Transporters (CNTA). CNTA is said to represent 140 syndicates and 9 federations of drivers representing 900,000 independent truck drivers in Brazil.

Not all of the truck driver's organizations support another nationwide strike because of the potential backlash from business and the general public. The Brazilian Association of Truck Drivers (Abcam) issued a statement late last week that they preferred to wait for the results of a meeting with the Brazilian Minister of Infrastructure scheduled for Monday, April 22nd before they decided to support a strike or not.

One of the measures recently announced by the Bolsonaro administration included a R$ 30,000 line of credit per driver from the National Development Bank (BNDES) for drivers to purchase tires and conduct maintenance on their vehicles. Another measure announced by the government was R$ 2 billion directed toward the maintenance and upgrades of some of the principal highways in Brazil including BR-163 that connects the grain producing areas of Mato Grosso with ports on the Amazon River.

The organizations representing the drivers indicated that they appreciate the efforts of the government, but they do not address the underlying problem which is that the freight rates are not high enough to make a suitable living and that there is not a robust mechanism to enforce the minimum freight rates.

Additional measures demanded by the truckers include: additional rest areas for truckers, additional pay for dangerous cargos, enforcement of the minimum rates, high tolls, improvement and expansion of existing highways, the establishment of cooperatives of independent drivers, and additional security on the highways.

Last Wednesday, the Minister of Agriculture and the Minister of Infrastructure met with leaders of the independent truckers to discuss measures they could take to help the truckers. The two ministers presented alternatives that are being discussed to help the sector and that they would be scheduling more meeting to discuss measures proposed by the drivers.

One measure the ministers announced was the construction of rest areas along highway BR-050 in the state of Goias, which is a major highway connecting Sao Paulo and Parana with the center-west region of Brazil. They indicated that other rest areas will be constructed as soon as contracts can be completed. The truck drivers have long demanded the construction of more secure rest areas.

Approximately 70% of the goods in Brazil move by truck and the nationwide strike in May of 2018 quickly resulted in shortages of gasoline, food, and medicines. The prior administration basically agreed to all the trucker's demands in order to end the 11-day strike. The truckers fault the past administration for not establishing a robust mechanism for enforcing the higher minimum freight rates.