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February 11, 2019

Brazil Judge Reinstates Fines for not Paying Minimum Freight Rates

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

The confusion over the mandatory minimum freight rates in Brazil continues. Ten days ago, the Brazilian Supreme Court judge handling the freight rate controversy, Judge Luiz Fux, issued a ruling that that National Land Transportation Agency (ANTT) can once again start levying fines for anyone who does not pay the minimum freight rate. The judge indicated that the fines will remain in place until the Supreme Court issues its ruling on the constitutionally of the law and there is no indication when the ruling will be forthcoming.

Prior to Judge Fux's ruling, a federal Judge in Brasilia had recently suspended the fines after an appeal from the Sao Paulo Federation of Industries (Fiesp). These on-off fines are now back on, at least until the Supreme Court make a final ruling on the constitutionally of these rates.

Organizations opposed to these mandatory rates contend that the freight rate table as it is called, interferes with the free market and forces individuals to purchase services they do not want. One example cited by opponents of the law is that a company that contracts freight to haul grain to the port could be forced to pay the truck driver for his back-haul even if the truck returns empty. Representatives from industry and the agricultural sector are universally opposed to the mandatory freight rates which have increased freight costs by 30% to 100% depending on the situation.

The truckers for their part, contend that the market has been distorted and that without the higher freight rates, they cannot cover their costs and make enough for a proper livelihood.

Many encomiasts have pointed out that prior to the new law, the freight rates were lower than what truckers wanted because there were too many trucks on the highways of Brazil chasing too few loads. They contend that the market was not distorted, there were simply too many trucks vying for the same business - in other words a free market.