Cost of living in Brazil: Petrobras (PETR4) announces a reduction in gas price, but the measure does not reach consumers; Vale (VALE3) and Petrobras (PETR3) pull Brazilian GDP down

The National Union of Liquefied Petroleum Gas Distribution Companies (Sindigás) reported that Petrobras will reduce the price of gas by up to 12% for residential consumption and up to 17% for corporate consumption. Brazilian refineries will practice the reduction in prices from today, August 5.

In Brazil, cooking gas (LPG) is usually sold in 13 kg canisters for residential use and in packages over 13 kg for business use. However, it is still unclear how the measure can cheapen cooking gas. The fall in the price for the end consumer depends on a number of factors, such as an infrastructure that allows the effective reduction of the gas price and that does not exist in Brazil.

According to the Institute of Applied Economic Research (Ipea), Vale and Petrobras' performance in the first half of 2019 helped push Brazilian GDP down.

According to Ipea, the poor performance of the Brazilian extractive industry in the first half will decrease by 0.2 percentage point the Gross Domestic Product (GDP) expansion of 2019, despite the expected improvement until the end of the year.

Petrobras (PETR4) announces sale of control of subsidiary BR Distribuidora (BRDT3)

Petrobras, Brazil's largest state-owned company, has sold more than 30% of the shares and announced that it will reduce its stake in the subsidiary to 37.5%.

According to a statement issued by the state company, Petrobras' board of directors approved the sale of 349,500,000 shares, at R $ 24.50 per share. This corresponds to R $ 8.5 billion. Upon completion of this transaction, Petrobras will hold only 41.25% of BR Distribuidora, thus, Petrobras will reduce its stake in BR Distribuidora from 71% to 41%. This means that in practice BR was privatized.

In 2017, during Michel Temer's government, Petrobras had already sold 28.75% of BR shares, raising about R$ 5 billion.