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Following recent discussions in Brazil about potentially creating a stabilization fund��to smooth out fuel prices across the country, we estimate such a mechanism would��have created a deficit of US$42bn between 2015-21. Looking only at 2022, we��estimate the deficit would have been US$44bn, compared with US$9.1bn est. in��Colombia, our benchmark in this analysis. For the 2023-2027 period, total amount��could be between US$46-175bn. Such amounts would be quite significant compared with the annual US$26-35bn expected to be received by the Federal Administration from the upstream��business, implying that the government would most likely need to raise additional��resources, further deteriorating its fiscal balance.

All our assumptions are based on the Fondo de Estabilización de Precios de los��Combustibles (FEPC) in Colombia, which was initially meant to be a self-sustaining��mechanism in the medium term, with no success, reflected in the: 1) constant��deficit accrued since its establishment; and 2) several changes and new laws/ decrees in trying to match theory with practice. Since 2009, the FEPC has not��reported a surplus in any year, highlighting that Brent was below or at cUS$50/bbl��during some of that period, indicating the difficulty of balancing the FEPC.

In Brazil, there are independent refineries and other importers,��which, along with the large geographic area and logistical issues (causing pricing��differentials), may increase the complexity of a fund's operating mechanism. In��Colombia, the challenging social situation, increased inflation and the need to��preserve the process of economic reactivation have created a significant challenge��for the government, hindering implementation of several measures promoted by��the National Development Plan (PND). If implemented in Brazil, such a mechanism��may increase the difficulty for the government to promote its expected investments��and social agenda.