Chamber of Deputies Approves Tax Cuts on Fuels and Ethanol

The Chamber of Deputies approved Complementary Bill 114/2026, establishing a reduction in federal taxes on fuels and biofuels in response to strong international geopolitical pressures. With 318 votes in favor and 113 against, the measure attempts to shield the domestic economy from extreme fluctuations generated by conflicts in the Middle East, which have driven up oil costs. The rapporteur highlighted an extraordinary expansion in federal tax collection, which jumped from R$ 9 billion in the first months of 2025 to R$ 28 billion in the same period of 2026, representing a real growth of over 200% sustained by government participation. In the current macroeconomic scenario, this movement occurs alongside a sensitive exchange rate level, with the commercial dollar quoted at R$ 5.1639, accumulating a 1.81% rise over a seven-day window compared to R$ 5.072 observed at the beginning of the month. The Selic rate, set at 14.00% per year, dropped marginally by 1.75% compared to the previous 14.25%, while the 12-month accumulated IPCA remains anchored at 4.44%, reflecting an inflationary dynamic still closely monitored by the monetary authority. This combination of pressured exchange rates and high interest rates demands redoubled caution in fiscal management and in passing on the subsidies provided in the approved text. This fiscal debate adds to a recent history of intense pressure on public accounts and the country's budgetary priorities. This is the fifth analysis by the economic policy desk to discuss fiscal and budgetary pressures in the recent period, aligning with previous discussions on international humanitarian aid and institutional costs. From the perspective of the tradition of value and margin of safety, the allocation of public resources and the granting of subsidies require a rigorous analysis of price versus value delivered to society, preventing short-term cyclical relief from compromising the long-term patrimonial and fiscal integrity of the State. The tax relief is not restricted to fossil fuels, also encompassing ethanol, fertilizers, and critical minerals, in addition to providing a subsidy of R$ 1.2 billion to hydrated ethanol producers and the possibility of offsetting up to R$ 750 million in debts with the Federal Revenue Service. The main risk lies in the effectiveness of this tax engineering: should the compensation via oil royalties fluctuate negatively due to a reversal in the international commodity price, the National Treasury may face an unforeseen deficit. The rigidity of public spending and the restrictive level of the 14.00% Selic rate limit the room to maneuver for prolonged deficits. For the 30-day horizon, the expectation is accelerated passage in the Federal Senate with a high probability of approval, keeping the dollar fluctuating in the R$ 5.16 range and pressuring official inflation to orbit around the 4.44% IPCA. In a 90-day horizon, the practical effects of the tax relief will begin to appear at the pump and in logistics costs, provided that international oil prices do not suffer new severe disruptions. In the 180-day horizon, the market will assess whether the R$ 750 million offset in tax debts for ethanol producers was sufficient to maintain the competitiveness of biofuels against subsidized gasoline. For the investor and family budget manager, the practical recommendation is to keep liquidity protected and avoid indebtedness in assets indexed to rates.