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August 30, 2018

Decision Concerning Freight Rates in Brazil may not come until Nov.

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

Brazilian farmers had hoped for a quick decision by the Brazilian Supreme Court concerning the constitutionally of the new mandatory freight rates in Brazil, but it appears that will not happen.

On Monday, there was a hearing in front of Brazilian Supreme Court Judge Luiz Fux concerning the constitutionally of the minimum freight rate legislation, which was passed by the Brazilian Congress and signed into law by the Brazilian President a few weeks ago. This was the third such hearing on this issue and the newspaper O Estado de S. Paulo is reporting that judicial sources indicated that a decision by the judge will not come until after the presidential elections are decided in October/November.

Judge Fux indicated that he will convene a panel of supreme court judges to review the information and come to a decision on the constitutionally of the new freight rates as quickly as possible, although he did not indicate when that decision might be forthcoming.

In the four-hour hearing were representatives of the Syndicate of Independent Cargo Transporters (Sindtac) on one side and on the other side were representatives from the National Confederation of Industries (CNI), the National Confederation of Transporters (CNT), the Agriculture and Livestock Confederation of Brazil (CNA), and the Brazilian Association of Highway Transporters (ATR Brasil), which brought the original lawsuit.

The representatives from the industrial and agricultural sectors argued that the new law impeded the free flow of material in the marketplace and it forced them to pay for services they did not purchase such as paying for the back-haul of the trucks. They contend that the law will increase transportation costs by at least 12% or R$ 53 billion annually. Representatives from the agricultural sector contend the increase will be higher for their sector due to the long distances between producers and export facilities and that their transportation costs will increase 20-40% and in some cases 100%.

They also emphasized that the higher cost will be felt the most by Brazilian at the lowest end of the economic spectrum in the form of higher food costs and increased costs in general.

For their part, the representative of the independent trucker organization augured that the higher freight rates were needed in order for the drivers to cover their costs. They argued that going hungry should be unconstitutional, that it should be unconstitutional for one group to take advantage of another group, and that not having human dignity should be unconstitutional.

The plaintiffs asked for a quick decision so future freight contracts could be negotiated and not to wait for a new Brazilian president or a new government. In fact, they said don't wait for another week! It does not look like they will get their wish.