Our earlier post compares gas prices in Brazil and around the world. Although Brazil is not the most expensive country in the world when it comes to gas prices, it is still about 80% higher than the US. And that is extremely high considering the country is self sufficient in oil production. The question is: why?

Our quick answer is: because Petrobras is a state-owned company and the government uses it as a “cash cow” to pay for its own large expenditures. 
But economist Paulo Rabello de Castro (from Movimento Brasil Eficiente) explains it all below, in a more professional way:

This huge discrepancy in fuel prices between Brazil and US is mainly due to the government’s tax burden on the product. While the sum of taxes, levies and charges in Brazil represent approximately 55% of the fuel price, in the US they represent a mere 13%.
The main enemies of the Brazilian gasoline price are the ICMS (32%) and CIDE (Contribution for Intervention in Economic Domain), which is a combination of the following tax items: PIS, COFINS and the PPE. These last three “line items” alone are responsible for another 21% of the overall price paid by Brazilian consumers. But what does all this mean? 
Well, this means that when there is a price appreciation of oil around the world, as it has been the case for the last year, the disposable income of Brazilian families are doubly penalized, as they are compressed not only by the actual increase of oil price, but also by the significant increase of taxes in absolute terms. Not to mention the harmful effects on inflation.

Deciding what to do and where to invest in a country where the cost of gasoline and other fuels are so expensive distorts investment decisions. The outrageous costs cited above have severe (negative) impacts on the decisions made by the productive sector in Brazil. It means that a farmer, for instance, gets his profit margins “squeezed” unfairly just because of these embedded costs posed by the Brazilian government.

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