MercoPress. South Atlantic News Agency

Fuel prices hiked in Brazil; first time since 2005

Brazilian Finance Minister Guido Mantega this week announced a 10% hike in the price of gasoline and 15% for diesel fuel, the first such increase since 2005. The increases refer to products from Petrobras, the country's government owned oil corporation which sets the pace for the rest of the industry.

However, according to the government the new prices should not have a major effect on consumers' pockets since they will be compensated by a tax reduction ranging between 0.28 Real (17 US cents) to 0.18 Real (11 cents) per liter of gasoline. For diesel fuel the same tax will drop from 0.07 Real (four US cents) to 0.03 Real (two US cents) per liter. Nevertheless at the end of the day diesel fuel price will rise 8.8%, which will have an impact of 0.015 percentage points on the inflation rate, according to Minister Mantega. A liter of gasoline currently costs in Brazil at the pump approximately 2.60 Real (1.56 US dollar), and diesel, 1.90 Real (1.14 dollar). The price hike announcement was anticipated on Wednesday during a press conference on the investment grade granted to Brazil by the risk rating firm Standard & Poor's. The Brazilian government had postponed price rises several times, fearing their impact on the country's inflation. When Petrobras implemented the previous rise on its gasoline prices, the international oil price was 65 US dollars a barrel.