May 22, 2018 / 4:18 PM / 3 months ago

UPDATE 2-Brazil truckers pledge more fuel protests despite tax proposal

* Truckers not convinced by proposed CIDE tax cut

* Protests affect ports, threaten soy, meat deliveries

* Petrobras cuts diesel prices, shares fall

* Finance minister, Petrobras CEO deny interference (Recasts with proposal to cut fuel tax, truckers' reaction)

By Ana Mano and Alberto Alerigi

SAO PAULO, May 22 (Reuters) - Brazilian truck drivers on Tuesday vowed to extend their protest against high fuel prices into a third day despite a government compromise to cut a fuel tax, threatening to slow economic activity and interrupt exports of grains and other goods.

Thousands of trucks were parked to obstruct major roads as the protests interrupted traffic along a major soy shipping route in the grains state of Mato Grosso and impeded access to the country's two main export ports, Santos and Paranaguá.

Brazil is a key global supplier of grains, meat, coffee and sugar — most of which reach ports by road. Soy futures rose in Chicago on Tuesday for a second straight day as the protests threatened to halt shipments of Brazil's record soybean harvest.

In an effort to address truckers' demands, congressional leaders floated a plan on Tuesday afternoon to eliminate the CIDE fuel tax and put additional revenue from payroll taxes toward reducing fuel prices, which have surged nearly 50 percent in less than a year.

Diesel prices ended last week at 3.595 reais ($0.99) per liter, according to regulator ANP.

However, the trucking group organizing the protests, ABCAM, said demonstrations would continue on Wednesday, complaining that the CIDE accounted for only a fraction of the taxes on diesel fuel. According to Petrobras, state and federal taxes make up 29 percent of the final price paid by the consumer.

"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.

His comments added to pressure on the government to provide relief from fuel costs, giving it the choice of backsliding on efforts to close Brazil's fiscal deficit or interfering in the state-controlled oil company's pricing policy.

A small diesel price cut announced on Tuesday by Petroleo Brasileiro SA, or Petrobras, did nothing to reduce protests. But it did raise concerns about interference in a program of near-daily adjustments to track global markets since last July.

That new pricing policy, which has allowed the company to sell fuel at a profit after absorbing losses for years, has been key to the operational turnaround at Petrobras, lifting its share price to an eight-year high this month.

Petrobras Chief Executive Pedro Parente and Finance Minister Eduardo Guardia both denied that the government had asked the company to change its pricing policy on Tuesday.

Petrobras shares fell as much as 3.4 percent on concerns of political interference, but pared losses to 1 percent on news of the proposal to lower pump prices through tax policy.

BLOCKADES EXPAND

ABCAM said truckers protested in 23 states as participation rose from around 200,000 drivers on Monday, the first day of demonstrations, to an estimated 300,000 on Tuesday. That would represent around a tenth of Brazil's total truck fleet, according to data from transport lobby CNT.

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. (Reporting by Ana Mano and Alberto Alerigi Jr. Additional reporting by José Roberto Gomes, Gram Slattery and Marcelo Teixeira in São Paulo, Mateus Maia in Brasília; Editing by Paul Simao and Dan Grebler)

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