Brazil’s private sector urges government action over war-driven logistics crisis

The escalation of the war in the Middle East has led some of Brazil’s main industries to call for emergency government measures to contain the economic and logistics impacts already disrupting multiple supply chains.

Finance Minister Fernando Haddad was approached this week by CNA, the Brazilian Confederation of Agriculture and Livestock, and ABPA, the Brazilian Animal Protein Association, to review the effects on their sectors and present a list of requests. The demands range from lower taxes on ocean freight to the creation of credit lines to support exports and prevent rising food production costs.

Last week, airlines had already approached the government to discuss the tax impact on jet fuel, known in Brazil as QAV. The signal is that QAV could be targeted by measures similar to those adopted for diesel, such as cuts to PIS and Cofins taxes, in addition to possible subsidies.

CNA’s main request is for the government to grant a 100% reduction in the rates of a levy charged on waterborne cargo transport, known as AFRMM, the Additional Freight Charge for the Renewal of the Merchant Marine.

That levy currently reaches 8% in most operations, but can climb to as much as 40% in specific cases. In practice, the AFRMM represents an additional cost embedded in ocean freight, making imports more expensive, especially agricultural inputs.

“The proposed measure is emergency and strategic in nature and is essential to mitigate the effects of external shocks on the Brazilian economy, particularly in a sector responsible for a significant share of GDP, exports, jobs and income generation,” CNA President Joao Martins da Silva Junior said in a letter sent directly to Haddad.

The AFRMM has a direct impact on fertilizer imports, an essential input for agricultural production and one for which Brazil depends heavily on overseas supply, with about 85% imported.

With the war, prices for those products have already started to rise. Urea, one of the main nitrogen fertilizers, has risen by about 35% since the conflict began, according to CNA. That increase raises agricultural production costs, which tend to be passed on to food prices.

ABPA, meanwhile, has outlined a set of proposals for financial support to exporting companies. The association said instability in the region has affected strategic shipping routes, particularly the Strait of Hormuz and the Suez Canal, two of the most important logistics corridors for the global food trade.

As a result, international shipping lines have adopted preventive security measures, including route reorganizations and operational adjustments. That means higher freight, insurance and logistics costs.

“These changes are estimated to increase voyage times by between 10 and 15 days, while also raising operating costs related to freight, insurance, risk surcharges and refrigerated container management,” Ricardo Santin, president of ABPA, said in a letter sent to Haddad.

The association is calling for the creation or expansion of emergency working-capital credit lines, as well as longer maturities and more flexible financing terms.

ABPA said the problem is temporary and stems from external geopolitical factors, arguing that an emergency government response is needed to sustain the sector’s operations.

Abear, the Brazilian airline association, said it is “watching with great concern” the volatility in oil prices caused by international conflicts. “With fuel accounting for about 30% of airline costs, aviation fuel plays a central role in the economics of the sector. As a result, swings in oil prices tend to pressure operating costs, reducing service supply and harming public access to air transport,” it said.

The jet fuel situation is less severe than for regular diesel, however, because 80% of kerosene is produced domestically. “Brazil has the conditions to cushion the impact of external shocks on the aviation sector. In this regard, Abear has maintained dialogue with the federal government on the effects of rising oil prices on airline investments, the democratization of air transport and the country’s connectivity.”

Asked for comment, the Finance Ministry said it is “permanently monitoring developments in the international scenario, including the unfolding conflict in the Middle East and its potential impacts” on the Brazilian economy.

“The ministry is continuously monitoring relevant variables in order to assess any potential effects on Brazil. Accordingly, it stresses that any measures will be analyzed responsibly, in light of the evidence and always in compliance with current fiscal rules,” it said.

The Middle East accounts for more than 25% of Brazilian exports of chicken meat, eggs and other poultry products, categories in which Brazil is one of the world’s leading suppliers.

The following is a historical data compilation of monthly containerized poultry exports from Brazil to Saudi Arabia, recorded between January 2023 and January 2026. This information is sourced from Datamar statistics:

Poultry Exports to Saudi Arabia | Brazil | Jan 2022 – Jan 2026 | TEUs

Source: DataLiner (click here to request a demo)

Transport delays mean longer gaps between producing, shipping, delivering and receiving payment for exports. That in turn requires more financial resources to sustain operations, a problem that hits small and medium-sized companies especially hard because they have less access to credit and a lower ability to absorb external shocks.

The Finance Ministry proposed that Brazil’s states exempt diesel imports from ICMS, the state value-added tax, with federal compensation covering 50% of the impact of the measure. The cost is estimated at 3 billion reais for the federal government and the same amount for the states, assuming the measure lasts for two months.

The exemption would run through May 31, with the aim of reducing barriers and ensuring supply to the domestic market, amid reports from some states of diesel shortages at filling stations. For that reason, the measure would apply only to fuel importers.

The proposal was presented by Executive Secretary Dario Durigan to state finance secretaries during a virtual meeting on Wednesday morning (March 18), after the federal government called the meeting, Folha first reported.

Oil prices surged on Thursday (March 19), with Brent crude, the global benchmark, hitting its highest level in more than a week and rising above $119 a barrel after Iran attacked energy facilities across the Middle East in response to Israel’s offensive against the South Pars gas field.

Prices for LNG, or liquefied natural gas, also surged on Thursday, with contracts traded in Europe jumping 35%.

Text by Andre Borges and Ricardo Della Coletta for Folha de S. Paulo

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