Boycott Truckers

The irrationality that has taken hold of the country has only hidden to who really will be the account of the agreement between truckers and government. In reality, what we are seeing in this episode is what is known in the economic literature as a rent-seeking effect, in which organized groups (of interest) of society seize state decisions for their own benefit and to the detriment of others. To better understand the size of the problem, we can segment the terms of the negotiated agreement into three parts: those that have an impact on public accounts; those that reach the pricing policy of Petrobrás and of Highway Concessionaires; and those who clearly face the Federal Constitution, free enterprise and the country's antitrust legislation.

In the sphere of government accounts, it is a fact that the country is experiencing a moment of growing deficits, with the substantial increase of our public debt. Leaving taxes at this moment will only aggravate the situation, with future impact on inflation, interest rates and economic growth. In such circumstances, the reduction of taxes on diesel will imply a loss of revenue, which should be offset by raising (or reonerating) taxes in other areas. It should be noted that the measure proposed by the Ministry of Finance was the reoneration of the payroll of several sectors, with few exceptions, among them, the road freight transport. But this decision will result in a mix of three effects: layoffs (or a reduction in the supply of jobs); partial pass-through to final prices; and consequently a reduction in the sale of products on the markets concerned.

The government also signaled the cut in public spending. But given the Brazilian public budget, the effect of this measure will lead to a fall in the already poor quality of the service provided by the State. The reasonable thing would be to revise the tax structure of the sector within a broader context of state reforms, especially in a social security and tax reform environment.

In any case, any discussion of tax reduction in the industry should also consider the fact that diesel is a highly polluting product, and as such, reducing its price will imply a stimulus to its consumption and inhibition of investment in alternative energy sources , contrary to what has been done in first world countries.

With regard to the chapter on price policy, we must remember that Petrobras is a mixed capital company, inserted in a capitalist environment and, as such, should also follow the market logic. Thus, it is reasonable that its shareholders expect the company to seek to maximize the economic profit and dividends to be distributed. In this context, there are two aspects to be understood.

The first is related to the fact that oil price increases in the international market and currency devaluations have a direct impact on the company's accounting costs structure. This is because, given the characteristics of the oil extracted here, the process of producing fuels in Brazil also requires the import of finer and better quality oil. In this way, it is natural that increases in the costs of the company derived from the international market be passed on for price.

The second aspect concerns the economic concept of opportunity cost. More precisely, it represents the cost incurred by making a decision, leaving aside gains related to alternative decisions. In the case in question, the opportunity cost of selling oil in Brazil is equivalent to what is earned by selling it in the foreign market. Thus, whenever the international price of oil rises, also increases the cost of opportunity of Petrobras to sell the product in the national market. Therefore, in the view of the shareholder, it is reasonable to expect that prices will also be high in the domestic market and, consequently, increase Petrobras' profitability; otherwise, it would be preferable to shift their investments to oil companies abroad.

It should be noted that this is not merely a vision focused solely on the private interests of this investor. This is because Petrobrás is a company that, like any one in the industry, relies heavily on third party capital to invest and raise its production. Thus, to counter the economic logic of the market implies raising its perceived risk and, consequently, its cost of capital, in addition to its indebtedness.

At this point we should remember that some of the suggested high prices we pay today for fuels are the result of past government policies that involved inefficient resource allocation decisions and even the corruption process we witnessed in the Lava Jato. The fact is that in order to pay for the astronomical debt constituted over the years, a result of government interference with company prices and money to invest, there is no way to work with low prices in the short and medium term.

For this reason, with the reduction of diesel prices for Petrobrás, the government also proposed to compensate it by transferring public money. But again here is a state choice problem that involves the concept of opportunity cost, so ignored by the rulers on duty. More precisely, the question is what would be better: allocate resources to subsidize diesel, and groups that use this product, or invest in health, education and public safety? It seems to me that the answer is obvious and dispenses comments.

Alternatively, it is still possible to hypothesize that this transfer of public money is not done, or is insufficient to solve the problem of the company. If this occurs, it will be for Petrobrás to compensate for the diesel loss by raising prices on other products, such as gas, gasoline or Aviation fuel, transferring the burden of this decision back to the rest of society.

If the government really wanted to improve the final price for the consumer (and not just for a part of society), it should propose a broad and unrestricted privatization process in the sector that would incorporate a competitive and unbundled model that would facilitate the entry of new players in the sector . Accepting control of Petrobrás prices or, even worse, regulating the final price on the fuel pump will only inhibit investments, reduce supply in the medium and long term and cause future price rises.

Still on the chapter on undue interference on prices, the requirement of a tariff exemption (or non-levy levy on trucks) will also impact the rest of society. To understand this, it is worth remembering that all modeling of concessions involves a forecast of future demand and of the amounts paid by each class of users, which are certainly specified in the respective bidding documents. By changing the initial conditions proposed for the transportation of trucks, the Concessionaires will certainly have the right to an economic rebalancing of the contract agreed with the respective Concessionaires, which will certainly occur through the increase of toll for other users (cars and buses) .

It must also be understood that defining a freight reference table for transportation services or quotas for the contracting of certain groups by CONAB, including waiver of bidding, violate basic principles of free initiative and free competition. As already understood by CADE so many times, reference tables serve, in most cases, as parameters to define anti-competitive prices among competitors. Likewise, the establishment of quotas has a similar effect in that it creates a parallel and restricted market niche, guaranteeing an extra income for the group that participates in it. These objectives were clearly sought after by a coordinated action of boycotts by truckers and transport companies, with the effect of distorting competition and raising prices throughout the entire distribution chain.

In this sense, subsection I (a) of paragraph 3 of article 36 of Law 12,529 / 2011 is exhaustive in considering the violation of the economic order "to agree, combine, manipulate or adjust with competitor, in any form the prices of goods or services offered individually". In addition, subsections III, V and XIII of the same article also define as an infraction: "limit or prevent access of new companies to the market; prevent competitors from accessing sources of input, raw materials, equipment or technology, as well as distribution channels; and destroy, disable or hoard raw materials, intermediate or finished products, as well as destroy, render useless or impede the operation of equipment intended to produce, distribute or transport them. " As can be seen, the set of conducts of these professionals fits perfectly into Law 12,529, being open to an administrative process by CADE.

Similarly, this same law also lays down administrative sanctions for those who encourage such an agreement, which has as its objective the restriction of competition in the road transport market. In this group they can be included from unions to public agents. This is because in section II paragraph 3 of article 36 of the law it is clear that it is also an infraction of the economic order to promote, obtain or influence the adoption of uniform or concerted commercial conduct among competitors.

It should also be noted that such conduct may also be included in sections I and II of article 4 of the law that define crimes against the economic order (Law 8.137 / 1990), whose penalties are clearly defined in the Penal Code. In other words, we are witnessing an attack on the principle of free initiative and competition recommended in Article 170 of the Federal Constitution, with the connivance and even participation of the Brazilian State.

Finally, it is necessary to consider the medium and long-term incentives generated after the extinction of possessory lawsuits and the terms of the agreement hitherto accepted by the government. By not imposing the necessary penalties on those who participated in the boycott of the truck drivers and accepting clearly illegal terms that will be borne by society, the current government indicates to other possible interest groups that this strategy is acceptable and effective, a fact that will stimulate other future boycotts . Incidentally, there are already reports of a possible oil tanker strike scheduled for this week.

Ultimately, the current government is allowing and stimulating a real attack on legal and economic laws, inducing the country to a real anarchic regime.