BRAZIL: Shipment Delays Expected as Truck Drivers Strike in Protest of Rising Fuel Prices

Shipment Delays Expected as Truck Drivers Strike in Protest of Rising Fuel Prices in Brazil

Blockades have shut down roads across 23 states, impacting transportation, port operations, and exports of grain, animal protein, and automotive parts.

UPDATE 4 June 2018 – Brazilian Truck Driver Strike Ends but Shipment Delays Expected

Delays expected to persist for 10 days as the country recovers.

The weekend saw the clearing of a majority of protests across Brazil after Abcam, the main truck drivers union, issued a directive telling drivers to return to work.  The army and federal police worked to break up the remaining blockades. The strike, which lasted over 10 days, is estimated to have cost the Brazilian private sector more than R$34bn (US$9.1bn).  Industries hardest hit were agriculture and meat export markets, as the roadblocks prevented feedstuffs from getting to the farms and meat being carried in transit had spoiled.

The Temer administration agreed to concede to nearly all of the truckers’ demands, including reducing the price of diesel by 0.46 reais per liter (45 cents per gallon) for 60 days, the establishment of a minimum freight rate for truckers on government contracts, and a toll exemption for empty trucks on federal, state, and municipal highways, the JOC reported.   The strike also led to the resignation of Petrobras CEO Pedro Parente.

By Sunday, trucks carrying soybeans, escorted by the Federal Road Police, we able to make their way to major ports.  Major poultry plants and agribusinesses resumed operations across the country.

“As expected, the truck lines at terminals and ports are now huge, since everyone is trying to recover 2 weeks in 1 day,” said UWL Brazilian Sales & Operations Manager Barbara Echelmeier.

Even though the truckers have agreed to go back to work, the strike will have lasting impacts that reach the entire supply chain. Port congestion in the wake of the strike will cause delays, and it will take a long time for the ports across Brazil to return to business as usual.

“We will just need to be a little bit patient from now on, so we can have the bookings placed again and adjusted,” said Eschelmeier.  “Since carriers have rerouted many vessels, we are also waiting for them to release the updated schedules for Imports & Exports.”

UWL will work to mitigate any shipment disruptions for our customers, and we thank you for your business and continued support.

If you think your shipments may be affected by the strikes in Brazil, have any questions related to this announcement or need assistance with transportation, logistics, supply chain management or sourcing, please contact us today at 440-356-5353 or connect with an expert via our website.

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UPDATE 29 May 2018 – Debilitating Truck Driver Strike in Brazil Continues for a Ninth Day

Most major highways remain blocked and the impacts of the strike are being felt throughout the country.

Cities across Brazil have declared a State of Emergency as the truck driver strike continues.

“Imagine a country that is moved 100% via trucks and these trucks are not operating since May 21^st,” said UWL sales and operations manager Barbara Echelmeier, “Courier services, food, water, hospitals, schools, ALL levels are being impacted.”

Over 594 strategic points of interdiction blocked major highways and “It seems that a small group started leaving the strike, but the majority are still blocking the main roads. Yesterday, they were allowing a few trucks pass, the trucks transporting oxygen to the hospitals and those carrying live animal cargo – cows, horses, etc.,” said Echelmeier.

“All the terminals and port entrances are still blocked.”

Vessels are leaving the ports with just a few containers for exports, the ones that were already gated in before the strike. “Yesterday, a vessel left Santos port with 10 containers of Maersk only… crazy!” said Echelmeier.  Some Import voyages are being canceled because there is no space to discharge the containers. All the containers discharged through last Monday are still sitting at the port.

HSUD has a cabotage service and they announced that they are interrupting the operations of all the vessels for 7 days, as there is no condition of keeping them moving with a few (or zero) load/discharge.

With nearly all ground transportation halted, a ripple effect is being seen nationwide. Fresh food supplies in supermarkets have dwindled, leading to a spike in food prices. From Sao Paulo to Manaus, many petrol stations had run out of gas by the weekend.

“There is not a single gas station in our area with fuel,” said Echelmeier, “in Sao Paulo, the federal police were able to drive some trucks to the gas stations, but the supply didn’t last long. Our colleague there, Arthur, he stayed in the line for 2 hours this morning but the gas stations ran out of fuel.”

Fuel shortages have also reached the airlines, with dozens of flights being canceled after 10 of Brazil’s airports’ fuel supplies have run dry.

Most major industries have been affected too. Pork and poultry producers have stopped their operations and sadly, millions of chickens and pigs are expected to be culled due to a lack of feed, according to the Brazilian Animal Protein Association.

Secretary of Government Carlos Marun said on Saturday that hospitals throughout Brazil are operating with limited inventory. As of Saturday morning, six hospitals only had enough supplies to ensure healthcare for four days. In states such as Rio de Janeiro, Federal District, Goiás, Maranhão and Rio Grande do Sul, there are serious risks of shortages. Hospitals in southern Brazil were suspending nonessential surgeries.

Mail delivery, public transport, and trash collection have been reduced or halted across the country. Thousands of public schools and universities also canceled classes.

“In the city where I live, they stopped the water supply because they are out of the product that they use to treat the water,” Echemeier said, “I mean, things are being impacted in ALL levels. I was talking to my parents [about the strike] and they don’t remember a day that such thing happened in Brazil, having the whole country stopped like this.”

Brazil Trucker Strike Impacts Shipments

According to the JOC, the net impact for shippers is this:

“Import cargo has been delayed 10 to 22 days and export cargo from five to eight days (or more) by the customs officers’ strike in Santos. Add at least another day or two, depending on the port and the number of containers a shipper is having transported, for the impact of the truckers’ job action.

Among the ports most affected are: Paranagua (Brazil’s second biggest for containers with more than 1.2 million TEU handled in 2017), where about 2,000 trucks per day are being blocked or are blocking the main highway to the port; Rio de Janeiro (where 16 major highways are blocked or partially blocked); Santos, Rio Grande, and Itajai (where at least six state roads are blocked); and inland roads in Minas Gerais — a key, land-locked state for coffee, minerals, and soya exports — where another six highways are blockaded, preventing this cargo from reaching the ports of Rio de Janeiro, Vitoria, Sepetiba (Itaguai), and Santos.

“We will keep up the blockades until the majority of the taxes are removed and the price comes down,” an Abcam spokesperson told the JOC, who spoke on condition that he not be identified by name. “Our truckers cannot make a living and support their families once fuel costs and expensive highway toll charges are taken away from their monthly income.”

The spokesperson said that of the 30,000 reais ($8,188) average monthly income of Abcam truckers, about 42 percent, or 13,000 reais is spent on diesel and another 5,000 reais on road tolls. Add vehicle maintenance and insurance expenses, and the net is about 3,000 to 4,000 reais for the driver and his/her family.”

Battle Between Brazil Government and Truckers Rages On

Brazil’s government jumped the gun last Thursday, announcing that it had reached a deal with truckers to end the strike.  However, drivers remained in their positions and continued to protest.  They demanded that Brazil’s congress write tax cuts into law or else they would not move.

On Friday, President Michel Temer authorized the military to disband the protests and unblock the roads, using force if necessary. Police officers and soldiers began escorting fuel tankers to restock key infrastructure, including hospitals and some gas stations. Undeterred by this effort, drivers continued their demonstrations and stayed blocking major roadways.

By Sunday, it appeared as though Temer had conceded.

According to CNN, Temer said in a televised speech Sunday that the Brazilian government would subsidize the cost of diesel for the next 60 days, exempt empty trucks from tolls and introduce a minimum freight fare for truckers. Diesel prices would be cut by 0.46 reals per liter (roughly $0.13) for the next two months, and prices would increase just once a month after that. Prices had risen to 3.6 reals ($0.98) per liter before the strike, with five increases in the week before truckers took action.

Despite the president’s concession, truckers have yet to return to work.  While five of the union groups accepted the terms and urged drivers to end the protest, many others believe the deal is not enough.

“After 60 days, it will go back to how it is, with higher prices,” Edmundo de Souza, 36, a truck driver parked up with other strikers on a São Paulo highway, told the Guardian.

“Most people here realize that there was a victory, but the decision whether to continue will be up to a vote,” said José Rodrigues, leader of a group of strikers blocking Brazil’s biggest port in Santos.

More Groups Join Striking Truckers

The truckers’ strike hit home for many Brazilians, who have been struggling with inequality in the aftermath of a deep recession and political instability before the next presidential election.

Uber drivers and school-bus and van drivers have joined the movement, and Oil refinery workers announced they, too, would go on strike starting Wednesday. Oil workers have called for the firing of Pedro Parente, CEO of Petrobras.

“What’s taken many by surprise is just how quickly a country as well developed as Brazil – the seventh largest economy in the world – can be brought to its knees,” said Al Jazeera’s Daniel Schweimler reporting from Sao Paulo.

“This used to be a strike,” Maximilio Viana, a protesting truck driver said. “Now it’s more than a strike.”

“Brazil has realized that we can’t keep going with these politicians who over the years we have seen involved in corruption, bribery and scandals.”

But for many of the protesters, the strike is not just about the rising fuel prices.

“We are not only here for the truck drivers, but for all Brazilians who are suffering with the rises in electricity, water, gas, everything,” Evaldeir Andrade, truck driver, told Al Jazeera.

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UPDATE 25 May 2018 – Brazilian Truck Driver Strike Enters Fifth Day

Despite reports of a government agreement to suspend the strike for 15 days, truck drivers continue to protest and the strike continues.

According to AP, “Eliseu Padilha, chief of staff for President Michel Temer, told reporters in Brasilia that several unions that represent truckers agreed to suspend the strike for 15 days to give all parties time to negotiate a solution to rising fuel prices that drivers say has cut deeply into their earnings.”

However,  we have learned that no formal agreement has been reached.

UWL sales and operations manager Barbara Echelmeier said, “The official representative of the union was not in this meeting and didn’t sign anything, so we are now on the fifth day of the strike.”

According to ABCAM President José da Fonseca Lopes, nearly a million truck drivers are participating in the demonstrations, creating over 330 blockades in 23 of 26 Brazilian states.

“Here in Itajai, the university canceled the classes until Monday because most of the students come from other cities,” said Echelmeier.  Hundreds of other public schools across the country have canceled their Friday classes

The effects of the strike are being felt throughout Brazil. From meat processing and agribusiness to automaking and aviation, businesses have been unable to deliver or receive goods. Production lines of many businesses have been halted as a result.  The strike has also lead to a nationwide fuel shortage, as fuel deliveries have been stopped and protesters have blocked entrances to gasoline terminals.

ABCAM said it could take as many as 12 days to normalize cargo deliveries in Brazil once demonstrations end.

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ITAJAI – 24 May 2018 – Starting on Monday, truck drivers began to protest after feeling the impact of Brazil’s increasingly expensive diesel prices, which have risen upwards of 30% since March 1. Rising operational costs have pushed many professional truck drivers to the limit, some being forced out of business with no other option but to strike.

Brazilian truck drivers have formed blockades obstructing major roadways across the country and blocking all traffic from passing.  Over 300,000 trucks have joined the now four-day-long protest. Truck drivers who have not adhered to the strike are stranded and unable to move.

“The government has made a proposal to the truck drivers to decrease the price of the diesel by 10% for a period of 15 days, but the truck drivers have declined,”  said UWL sales and operations manager Barbara Echelmeier.  “They are requiring the exemption of 2 types of taxes (PIS/Cofins) and they will only finish the strike once the government agrees with this.”

The striking truckers will not let vehicles pass, leaving many drivers stuck on the roads or unable to reach terminals and warehouses to deliver freight.  “UWL’s Brazilian office currently has drivers who have been stuck at the same place since Monday – in the middle of the road,” said Echelmeier.

Fishermen have also joined the protest near Itajai/Navegantes, lining up in the entrance of the port. “The fishermen here in Itajai decided to not really block/stop for now the entrance of ships, but they will remain in their positions in the entrance of Itajai/Navegantes Port,” said Echelmeier. “They are placed in the entrance as a ‘support act’ to the drivers.” The fishermen, too, have begun to feel the impact of the rising fuel prices.

Dependent on road transport, Brazil’s economy reels from the strike

Brazil does not have a robust rail system like the USA does, making it almost entirely dependent on trucks to move goods from place to place.

“When the trucking stops, everything stops,” Echelemeier said.  With almost all ground transportation being blocked, it is impossible to move any product, and the country has erupted into chaos.

The strike is affecting food and fuel supply nationwide.

“Huge lines are forming at gas stations but there is no repositioning and no fuel being delivered,” said Echelmeier.  “Supermarkets and hospitals also cannot get the supplies they need due to the blockades.”

Even Brazilian airlines are feeling the effect, as of Wednesday night, the airport in Sao Paulo has run out of fuel, leaving many airplanes stranded or diverted.

“Only aircraft capable of taking off without needing to refuel will (be allowed to) land at Brasilia Airport,” Brasília International Airport (BSB) officials said. Other airports could follow suit if the strikes continue.

Reuters covered the expansion of the blockades, which have impeded the flow of traffic through many key points and heavily impacted businesses across multiple sectors:

“A toll road operator in Mato Grosso said blockades had expanded overnight to four points along the key BR-163 highway, which carries grains to northern and southern ports for export.

An official with road operator Rota do Oeste said protesters would let only passenger vehicles, ambulances and live or perishable cargo get through.

At the port in Santos, Latin America’s largest, truck drivers blocked traffic near the terminals, said Codesp, the state-run firm that administers the area.

Pork and poultry processor group ABPA said the protests are affecting transportation of feed and animals, adding that blockades had stopped work at eight plants on Tuesday and 30 more would stop on Wednesday.

Aurora, Brazil’s third-largest chicken and pork producer, said it would halt work at fifteen plants in four states on Thursday and Friday due to the lack of storage space or transportation options.

Automakers General Motors Co and Ford Motor Co said the strike was disrupting car production, while Fiat Chrysler Automobiles NV said parts deliveries were affected. Vehicle assembly relies on “just in time” delivery of components, which keeps stockpiles low to reduce costs.”

Truckers demand to be heard, reject temporary 10% fuel price cut

Since March 1, diesel and petrol prices have risen nearly 30% due to the rising cost of crude to over $80 a barrel, while the value of Brazilian currency, the real, fell 15%.

Petrobrás, an oil company owned by the Brazilian state, announced yesterday that would cut the price of diesel by 10% for a fortnight, however, The Brazilian Truck Drivers Association (ABCAM), who has organized the strikes, considers the cuts to be insufficient.

“That doesn’t solve the problem. We want to be heard. We want diesel taxes to be eliminated,” ABCAM President José da Fonseca Lopes told Reuters.

The ABCAM argues that 42 percent of their transport costs are fuel and want the government to subsidize taxes placed on diesel fuel for the sector.

“The constant price increase at refineries and the taxes on diesel oil have made the situation impossible for transport carriers. In addition to the almost daily correction of fuel prices made by Petrobrás, which makes it difficult for transporters to forecast the costs, the PIS/Cofins taxes are major obstacles in maintaining the freight value at satisfactory levels,” said ABCAM.

When announcing the protest, the ABCAM said that the protests reflect the despair and dissatisfaction of the trucking sector, which have not had their demands heard by the government.

Shippers moving goods between the USA and Brazil are advised to transfer their bookings to following weeks to avoid the strikes

UWL will keep following the events occurring in Brazil, so be sure to check back on our blog and follow us on social media for more updates!  We will work to mitigate any shipment disruptions for our customers, and we thank you for your business and continued support.

If you think your shipments may be affected by the strikes in Brazil, have any questions related to this announcement or need assistance with transportation, logistics, supply chain management or sourcing, please contact us today at 440-356-5353 or connect with an expert via our website.