Brazil: Free gas program weakened by soaring energy prices ahead of presidential election

Brazil's free cooking gas distribution program, a cornerstone of President Luiz Inácio Lula da Silva's social agenda, is threatened by soaring energy prices just months before a crucial presidential election. Distributors and analysts are warning of the growing difficulties in maintaining this program, which benefits nearly 50 million people.

Launched in November under the name "People's Gas," this program is a flagship measure of the Lula government in preparation for the October elections. The number of beneficiaries has rapidly tripled, illustrating its social importance in a country where energy costs weigh heavily on low-income households.

But the surge in liquefied petroleum gas (LPG) prices, linked in particular to international tensions, is putting this system under severe strain. The recent war in the Middle East has led to a significant increase in costs, exacerbated by auctions organized by Petrobras, where bids have reached up to double the reference prices.

In response to this situation, the government announced a new subsidy of 330 million reais to support LPG imports and limit the impact on prices. President Lula also stated his willingness to cancel certain auctions deemed too costly.

However, distributors find themselves caught in a bind: although they bear the brunt of the price increases, they cannot pass them on to retailers due to the rules governing the program. This constraint undermines the economic balance of the scheme and raises concerns about its long-term viability.

As the election approaches, the future of "People's Gas" has become a major political issue. The government will have to find a balance between social support and economic viability, in an uncertain international context that continues to weigh on energy markets.