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February 7, 2019

Freight Rates Top Priority of Ag Caucus in new Brazilian Congress

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

The new Brazilian Congress has a new leader of the Agricultural Caucus now that its former leader, Representative Tereza Cristina from the state of Mato Grosso do Sul, is Brazil's new Minister of Agriculture. The new leader of the caucus is expected to be Representative Alceu Moreia from the state of Rio Grande do Sul.

The expected new leader met earlier this week with the Speaker of the House and 60 other representatives and senators from the Agricultural Caucus to set their priorities for the legislative session.

Their number one priority for the new session is going to be revamping the mandatory higher freight rates that took effect last year. The higher mandatory rates were put in place in part to end a crippling nationwide truck driver strike last May. The strike brought the Brazilian economy to its knees within a few days and cost the economy billions of reals.

The then president, Michel Temer, quickly capitulated to all the demands from the truck drivers, but the higher freight rates was not their number one demand. Most of the efforts of the truck drivers was directed toward lower fuel prices and more stable fuel prices. Since then however, the higher freight rates have emerged as the number one consequence of the strike that has impacted the agricultural sector. Freight rates in Brazil are now up at least 30% compared to last year and in some cases they are up as much as 100%.

Representative Moreio has indicated that there is a widespread agreement in his caucus to resolve this issue that has impacted all of production agriculture in Brazil. How this issue gets resolved is another matter. For their part, leaders of the truck driver unions have indicated that they could call for a new strike if their member's livelihoods are threatened.

The constitutionally of these mandatory rates has been in the hands of the Brazilian Supreme Court since last October, but the court has not issued a decision and there is no indication when a decision may be forthcoming.