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December 9, 2019

Minimum Freight Rates Reduces Chance of Trucker Strike in Brazil

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

The sometimes contentious relationship between Brazilian truck drivers and the federal government appears to be improving. What is leading to the improvement are the ongoing discussions between the transportation sector and the federal government similar to what occurred at the recent 35th Forum on Highway Cargo Transportation (TRC Forum). The TRC Forum represents 2.6 million truck drivers, 37,386 companies, 1,584 syndicates, and 75 federations. In addition to representatives from the transportation sector, the TRC Forum was attended by the Brazilian Minister of Transportation and company representatives.

The purpose of the form is to bring together all the stake holders in an open discussion of issues facing the industry especially the newly established minimum freight rates in Brazil. After a devastating nationwide truck driver strike in early 2018 that brought the Brazilian economy to its knees within a few days, a mandatory minimum freight rate was established for all highway cargos in Brazil.

The purchasers of freight cried foul saying that the mandatory minimum interfered with the free market and it forced companies to purchase something they did not want such as helping to pay for a truck backhaul even if the truck returned empty. The truckers of course liked the minimum freight rate, but they have also complained that the rate was not high enough. This rate is readjusted every six months depending on a number of criteria, which was also discussed at the TRC Forum.

All this is very important for Brazilian farmers because about 60% of the grain in Brazil moves by truck and the cost of the minimum freight rate is passed on to the farmers in the form of lower prices paid for their grain.

When the minimum freight rate was first established, it was very confusing. The original mandatory minimum freight rate included 5 different categories of cargo with different minimums. That has now been expanded to 10 different categories depending on such things as the type of cargo, the size of the truck, and the distance traveled.

One of the most contentious items in determining the minimum freight rate was the fact that it must provide a "livable just wage" for the truck driver. The purchasers of the freight contend that the freight rate and the driver's wage should be determined by the supply and demand of trucks in the marketplace and not set at some predetermined level.

Every six months the National Land Transportation Agency (ANTT) analyses the minimum freight rate and makes adjustments when appropriate based on a number of criteria including: driver profit, types of cargos, number of axles, distance traveled, expenses such as fuel, tolls, tires, lodging, food, taxes, and availably of rest areas on the route traveled.

ANTT conducted a series of public hearings that ended on December 8th and they will issue a new minimum freight rate on January 20th that will be valid for six months.

Even though the truck drivers would like to see a higher minimum freight rate, they have generally been pleased with the process used to determine the rate and the chances of another nationwide truck driver strike in the near future has been diminished.

The group that is not been happy with this new process are the people who much purchase the freight. They contend that the free market for freight has been taken over by the government and as a result, several grain companies and agricultural cooperatives in Brazil have indicated that they will purchase their own fleet of trucks to haul their products instead of having to adhere to the demands of the independent truck drivers.