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The Agribusiness Sector May Be Affected in Ethanol Production and the Devaluation of the Real, with General Silva e Luna at the Helm of Petrobras
President Jair Bolsonaro, after criticizing Petrobras for adopting “excessive and escalating” prices, referring only to the fifth fuel price increase in 2021, announced on 02/19 that General Joaquim Silva would be the new CEO of Petrobras. As a result, a series of factors have emerged that may affect various markets, including the agribusiness sector, in ethanol production and the devaluation of the real.
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Consequences for Agribusiness:
One of the sectors most affected by this measure is ethanol production, as the capping of diesel prices may extend to gasoline, resulting in reduced competitiveness of fuel derived from sugarcane.
Another factor is the anticipated devaluation of the real. Economists pointed out that Bolsonaro’s decision will result in a reduction of 5 billion reais in government revenue, but there are no indications that the value related to the tax freeze will be compensated.
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Brazilian producers are leaving Roraima to plant in Guyana, where the government offers land on concession and does not charge taxes, while in Brazil the harvest faces high interest rates and a bureaucracy that hinders even the use of the rivers.
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A Brazilian municipality relies on 97% federal money, has 14 secretariats, 11 councilors, and a budget of R$ 131 million, but only 915 people are formally employed, and no one knows how the other 25,000 live.
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Argentina steps on the accelerator to become a power with a $20 billion agreement, immediate release of $1 billion, reserves above $5.5 billion, and a decrease in poverty to 28.2%.
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Hong Kong leads the ranking of the most expensive fuel in the world and is suffering from a global crisis.
Change in the Presidency of the State-Owned Company:
President Bolsonaro felt dissatisfied with the direction of Castello Branco’s management. The main criticism was regarding the successive price increases of fuels at the refinery, which rose for the fourth time in 2020.
The company uses the so-called International Price Parity (IPP) to guide its pricing policy based on the price of crude oil, which is traded in dollars.
“It is essential to ensure that the Brazilian market continues to be supplied without risks of shortages by the different actors responsible for serving the various regions of Brazil,” says the state-owned company.
In one day, Petrobras’ stock price fell nearly 8%, losing 28.2 billion reais. More than that, on the last Monday (22), it devalued by over 16%.
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