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July 23, 2018

Freight Rates in Brazil will not be finalized until later in August

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

The impasse over higher freight rates in Brazil probably will not be resolved any time soon. The National Land Transportation Agency (ANTT) was originally scheduled to release permanent freight rates last Friday, July 20th, but last Thursday, they announced that no decision on rates will be made until after they have conducted public hearing on the matter.

Last Thursday, ANTT met with agribusiness representatives to discuss the freight rates, but no conclusion was reached. Public hearing will be held over the next two weeks to solicit input from those impacted by the new rates, which is virtually everyone in Brazil. Since Brazil is so heavily dependent on truck transportation, higher rates will be passed on to consumers in the form of higher prices, which will increases inflationary pressures and possibly depress economic activity.

On the ANTT web site, they indicated that they will be accepting comments from the general public concerning the freight rates until August 3rd. ANTT did not indicate how long it would take to issue new freight rates after the public comment period ended. Until ANTT announces new freight rates sometime in August, the higher rates agreed to between the government and the independent truckers as a condition to end the 11-day truck driver strike at the end of May, will remain in place.

Any freight contracts agreed to prior to the end of the truck driver strike are supposed to be null and void as of last Friday, but the key word is "supposed" to be. There have been reports that companies and independent truckers have been conducting business "under the radar" using the old freight rates. The companies want to save money of course and the truckers need the income. There were reports last week that as much as 40% of the cargo on Brazil's highways was moving under the old freight rates, which was more than I had suspected.

Even after ANTT announces the new freight rates sometime in August, that may not be the end of the story. Virtually all the stake holders, with the exception of the truckers of course, view these imposed freight rates as unconstitutional and they have already had two hearing in front of the Brazilian Supreme Court to plead their case. Both times, the judge refused to rule on the case. The Supreme Court has said that they will not rule on the case until after the next public hearing scheduled for August 27th.

In the event that after the public comment period ANTT does not change the rates, the rates agreed to at the end of May will remain in place until January 20, 2019. The agreement between the striking truckers and the government authorized ANTT to establish new freight rates twice a year, on January 20th and on July 20th.