Brazil Begins Rollback of Wartime Fuel Subsidies to Shore Up Public Finances

Overview

• The federal government ended the R$0.35 per liter diesel subvention on July 1, starting a broader, phased review of gasoline, GLP, biodiesel and jet-fuel supports to reduce extraordinary outlays.
• Officials say the emergency fuel package has already cost about R$16 billion and the rollback is meant to stop using temporary petroleum windfalls to fund subsidies that threaten the primary surplus goal for 2026.
• Petrobras lowered its refinery diesel price by R$0.35 but suspended the matching government discount, so retail pump prices are not expected to drop immediately and consumer relief is uncertain.
• Congress faces pressure over high-cost proposals with a scheduled meeting between the Chamber president, the Frente Parlamentar da Agropecuária and the economic team on July 7 to seek an alternative to a Senate rural-debt plan estimated to cost R$140 billion over ten years.
• Brazil is racing to negotiate with the USTR before the July 15 deadline, holding high-level talks while key domestic politicians, including Senator Flávio Bolsonaro, file comments and plan in-person participation in early-July USTR hearings.