Lessons Learned from Brazil's Experience with Fossil-Fuel Subsidies and their Reform

Brazil's attempts to reform fuel subsidies have often been frustrated by interest groups trying to maintain the use of certain consumer subsides. The paper examines the rationale used by governments to justify these subsidies and the interest groups which benefitted from them. Government policy during the 1980s, prior to the eventual liberalization of energy markets, involved complex cross subsidization between energy sectors. Due to high inflation during this period, the precise quantitative evaluation of the fossil fuel subsidies was difficult.