Brazil trucker's strike: F&B losses 'incalculable' with fresh concerns over tariff and tax adjustments

By Kacey Culliney

- Last updated on GMT

Brazilian truckers announced strikes and road blockages to protest rising fuel costs on May 21. Major roads in nearly all the 27 states saw some level of blockades, the Federal Highway Police said in a statement. Image © Getty Images / Ranimiro Lotufo Neto
Brazilian truckers announced strikes and road blockages to protest rising fuel costs on May 21. Major roads in nearly all the 27 states saw some level of blockades, the Federal Highway Police said in a statement. Image © Getty Images / Ranimiro Lotufo Neto
Brazil's trucker strike in May created nationwide chaos, hitting food and beverage hard. But one month on, industry is facing fresh hurdles – up against altered freight tariffs, reduced fiscal benefits and a lack of dialogue with government, sector leaders say.

On May 21, self-employed truck drivers launched a 10-day strike and protest over rising diesel prices set by state-controlled oil company Petrobras. Brazil subsequently ground to a halt with thousands of road blockades sparking food, medicine and fuel shortages and shutting down many schools and universities. A number of cities and states, including São Paulo and Rio de Janeiro, declared a ‘state of emergency’.

The strike eventually came to an end on May 31, resolved with government fuel subsidies to drop fuel prices and a pricing deal to freeze diesel costs for 60 days. Other provisional measures including toll exemptions and tax cuts were also imposed and Petrobras CEO Pedro Parente was forced to resign after oil workers joined the strikes and protests.

The food and beverage industry suffered significant economic losses. Brazil's dairy sector alone lost R$1.3bn and threw away more than 360m liters of milk, according to the Brazilian Dairy Products Association Viva Lácteos. The dairy association said it took an entire month to return to normal distribution activities. Nestlé acknowledged that, like many in the sector, it had “faced difficulties” ​during the trucker strike with some units forced to temporarily close. The food major said milk sourcing had been the “most impacted chain” ​during the strike.

The Brazilian Association of Food Industries (ABIA) described losses from the strike as “incalculable”, ​with tons of food lost that could “never be recovered”​.

But with operations back to normal almost one month on, food and beverage companies across Brazil have new concerns around imposed tax adjustments and changes to freight tariffs.

Freight tariff adjustments to drive up F&B costs

On May 30 in light of the strike, the National Land Transportation Agency (ANTT) published an updated freight tariff table​, in accordance with Provisional Measure No. 832, that maintained the same cost per kilometer but implemented a minimum freight charge and altered pricing according to vehicle type.

The ABIA said this post-strike tariff adjustment had a “negative impact”​ on the food industry's production and distribution across Brazil.

“This has led to an increase in costs and final prices for the consumer,” ​the association told FoodNavigator-LATAM in a statement.

ABIA said adjusted freight tariffs would increase the average cost of food supply and distribution by 3.5% and could drive food prices up as much as 7.1%.

“The absorption of these costs can lead to an estimated loss of R$23 billion per year in the food industry, which may lead to reductions in jobs and exports, as operates with essential commodities cannot absorb such impact,” ​it said, hence the inevitable price hikes.

Brazil's Association for Soft Drinks and Non-Alcoholic Beverages (ABIR) predicted a similar cost impact on its category, forecasting price hikes of around 9%.

ABIA suggested government should instead establish a minimum cost reference table that was non-compulsory, with room for negotiation. It said the association, along with other representatives in Brazil's food and beverage sector, wanted to “actively participate” ​in negotiations for a “fast and consistent”​ outcome that benefits the consumer.

'Nothing justifies the absence of dialogue with the sector'

As well as freight tariff adjustments, the Brazilian government also made various tax and fiscal benefit adjustments to balance costs associated with ending the strike, including a reduction of tax compensation credits or IPIs (Tax on Industrialized Products) for soft drinks concentrates produced in the Northern Brazil Free Economic Zone of Manaus (MFTZ) from 20% to 4%.

Altered via presidential decree on May 30​, previous legislation meant companies could accumulate IPI credits for products manufactured in the MFTZ region that could be used to pay other taxes.

ABIR president Alexandre K. Jobim said the change was “abrupt”, ​had a “profound impact”​ on industry and threatened future investments and operations in MFTZ.

Over the past 30 years, Jobim said the soft drinks and non-alcoholic beverage sector had invested heavily in the MFTZ region – employing more than 1.6 million Brazilians directly and indirectly and generating R$10bn in federal, state and municipal taxes – as well as investing in production, sustainability and social programs.

“ABIR understands the severe national economic moment, the deep fiscal crisis through which the Federal Government passes, but believes nothing justifies the absence of dialogue with the sector,” ​he said in a statement.

Jobim said ABIR wanted to re-establish dialogue with the government in order to avoid further damage to its sector and consequent, inevitable reduction of federal revenues.

Government and industry were now in negotiations but industry onlookers suggested change was unlikely this year and even if IPIs were restored, Brazil's government would have to offset losses from the strike with other tax measures.

What can industry learn from the strike impact?

As food and beverage makers recover from the immediate and subsequent impact of the strike, Graciana Méndez, trends analyst for Latin America at Mintel, said there were several learnings to take on board.

The majority of companies and consumers had been “lost and confused” ​during the strikes, partly because of misinformation on social media and messaging apps, Méndez said, showing a need to become more agile and able to find substitutes on certain products, transport and sourcing.

“Some brands did show rapid response, but not many. ...During critical times, you need to prioritize,” ​she told FoodNavigator-LATAM.

“Food and beverage companies would do well to assess their logistics and come up with plans to be more locally-sourced – that involves products and staff too​. ...I think there's scope to educate consumers about how to replace certain foods and how to be more flexible. After all, we know that we are facing a reality where our natural resources are becoming scarcer and flexibility and adaptability will be skills that will become increasingly important.”

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