Brazil's federal government released R$ 6.6 billion (about US$ 1.3 billion) on Wednesday to keep fuel prices from rising, according to CNN Brasil. The money was unlocked through a provisional measure, an act that takes effect immediately but must later be approved by Congress, and was published in the official gazette. In practice, it pays fuel producers and importers so that oil, back at US$ 100 a barrel, does not reach the pump.
Of the total, R$ 5.6 billion goes to road diesel, with a subsidy of R$ 1.12 per liter sold, and R$ 998 million covers other oil derivatives. On a truck's 200-liter tank, the subsidy adds up to R$ 224. The package is more than four times the R$ 1.6 billion the same government has set aside for 2027 to raise the revenue cap for micro-entrepreneurs under the MEI regime, according to O Globo.
How it works: the "subvenção econômica" is a payment the government makes to producers and importers so they pass less of the cost increase on to consumers. The "extraordinary credit" authorizes this spending outside the regular budget. The provisional measure, known in Brazil as medida provisória, has the force of law from day one but expires unless Congress approves it.
Why now
Brent, the global oil benchmark, rose 2.3% on Wednesday morning and briefly touched US$ 100 a barrel for the first time since July. Oil is up more than 60% this year. A barrel that cost US$ 72 in June, when the United States and Iran were talking about a deal, now costs about 40% more.
The cause is the war between the United States and Iran. On Tuesday, US forces struck four Iranian tankers in the Gulf of Oman and one near Kharg Island, and the Houthis, Tehran's allies, hit oil installations in Saudi Arabia, leaving dozens of civilians wounded, according to CNN Brasil. The surge has already raised prices of derivatives from gasoline to diesel and put inflation back on central banks' radar. "The combination of expensive diesel, jet fuel, marine fuel and natural gas is particularly uncomfortable for consumers around the world, who see their disposable income shrink," said Ole Hansen, head of commodity strategy at Saxo Bank.
Gasoline and the public accounts
The response goes beyond diesel. According to O Globo, President Luiz Inácio Lula da Silva was set to sign a decree on Wednesday cutting taxes on gasoline, to stop the oil surge from reaching pump prices, with the presidential election weeks away.
On the fiscal side, the R$ 6.6 billion does not count toward the spending limit of the fiscal framework, the rule that caps the growth of public expenses, and stays out of the primary result target, the surplus the government needs to service debt interest. For 2026, the target is a primary surplus of 0.25% of GDP. In short, the subsidy is paid, but it stays off the books used to measure this year's fiscal goal.