Brazil poised to accommodate increased trade

When it comes to shipping goods in and out of Brazil, one word generally applies: delays. Even when multiple cities in Brazil celebrate Carnival – the largest celebration in the world with millions of people dancing and singing in the streets daily– there are delayed inbound and outbound shipments. Adding to the resulting port congestion are strikes. The most recent strike came in January when customs workers at 10 Brazilian ports walked off for six hours over increasing privatization of Brazil’s seaports. The strike was organized by the National Port Federation (FNP), a group of workers responsible for granting permission for docking and undocking of vessels as well as controlling dock access. Workers at the country’s main shipping port, Santos, did not participate. Concern has also centered on the number of terminal operator leases that are expiring, including 52 in the Northeastern state of Pará, and near Santos—the country’s largest port. Last July, Brazil President Dilma Rousseff revealed that the first 50 port terminals would be tendered to the private sector under the country’s new port reform law that was passed on June 5. Leases are also expiring at another 107 ports along Brazil’s 5,590+ miles of coastline. These began to be auctioned off in January 2014. According to Brazilian special secretariat of ports (SEP), Singapore-based container terminal operator PSA International has indicated interest in these auctions for ports and terminal concessions. To strengthened their alliance, a technical assistance agreement has been signed between SEP and Singapore’s infocom development authority (IDA). The agreement is aimed at developing an integrated system to support the Brazilian port sector by giving SEP access to PSA port operating technology. Another development is the June 7, 2013 signing of new regulations by President Rousseff allowing private terminals to handle cargo for third parties – something that was not permitted before. Previously the rights were sold to the company willing to pay the government the most for port righ Seaport Strategy Despite worker concerns, several facts remain: Brazil is the world’s sixth largest economy and its seaports are incapable of handling the amount of cargo necessary going forward. In fact, government sources claim that Brazil’s 34 major ports are unprepared to deal with a potential quadrupling of port traffic to nearly a billion tonnes a year by 2030. Ports in Brazil’s industrially developed southeast are working at near 100% capacity and those in the rest of the country are expected to be saturated by 2016. On top of that, the International Monetary Fund (IMF) forecasts that Brazil will become the world’s fifth largest economy by next year with a gross domestic product (GDP) of $3.1 trillion. To deal with the problem, Brazil’s government has earmarked $26 billion to help modernize Brazil’s ports. The government is also banking on private funding for much of the investment needed. Of that, some $1.23 billion will be allocated to investment in access routes to Brazil’s 18 leading public ports. “We want to increase the efficiency of Brazilian ports with this partnership, which will make our exports more competitive and increase production,” President Rousseff said during a ceremony in late 2012. “We want an explosion of investment through this partnership with the private sector.” The government’s announcement highlighted 21 ports in four regions that would receive investments, mostly between 2014 and 2017. The Southeast region includes ports in Espírito Santo, Rio de Janeiro, Itaguaí and Santos; the Northeast, Cabedelo, Itaqui, Pecém, Suape, Aratu and Porto Sul/Ilhéus; the North, Porto Velho, Santana, Manaus/Itacoatiara, Santarém, Vila do Conde and Belém/Miramar/Outeiro; and the South, Porto Alegre, Paranaguá/Antonina, São Francisco do Sul, Itajaí/Imbituba and Rio Grande. Industry experts contend these investments will result in an explosion of activity, particularly for dredging companies. Already Brazil has attracted some $12 billion in investments from the private sector overall, most of which is going to green field sites near seaports. “The dredging industry is already flourishing in Brazil, which has been racing to deepen its ports in advance of the Panama Canal expansion,” International Dredging Review reports. “Several international dredging companies have opened up offices in Brazil in recent years.” Dredging is critical since many of Brazil’s 34 major ports are already at capacity and the rest are expected to be saturated within five years. “None are prepared to handle the quadrupled port traffic expected by 2030,” the publication says. In addition, the Brazilian government also plans to build two new ports: one in Manaus on the Amazon River, and a deep-water port near Vitoria in the oil-rich State of Espirito Santo. Dubbed Porto Central, the new deep-sea port is planned to have five container berths capable of handling ships with a capacity over 6,500 TEUs. Its depth will be 18 meters deep; draft, 16 meters. Its operational capacity is planned for 2 million TEUs per year. Officials stress that the port will have the ability to berth high capacity ships, and offer a short access canal, deep water with little dredging needs, logistics integration with southern markets and reasonable proximity to markets in the northern hemisphere. The port will be developed in three phases. Its overall master plan covers over 5,000 acres and will allow the world’s largest vessels to use the port. The port is expected to provide a major boost to the economy of the State of Espirito Santo and the people of Brazil by providing an efficient and economic regional hub and by increasing the overall port capacity within Brazil. The port will be leased to tenants involved in commodities including dry bulk, wet bulk, general cargo and container terminal operators. According to Royal HaskoningDHV, Porto Central’s consultant, initial discussions with several operators interested in using the port are already at an advanced stage. A Royal HaskoningDHV statement adds that Porto Central is a strategic alliance between several private sector Brazilian industrial companies and the Port of Rotterdam. “This team combines proven success in Brazil with world class port development and operation skills,” it says. The first Phase of the Porto Central project is planned to be operational beginning 2016. Key Seaports Santos is the main port for São Paulo, South America’s industrial heartland, and a leading sugar and coffee port. It is also Latin America’s largest port by value of goods moved. Some 90 percent of the São Paulo state’s industrial base is located in a radius of around 124 miles from the port. The port also is responsible for 28 percent of Brazil’s foreign trade. Among the key commodities handled are sugar, soy, containerized cargo, coffee, corn, wheat, salt, citrus pulp, orange juice, paper, automobiles, and alcohol. Although Santos is Brazil’s most important port, it is also the one with the biggest problems. Strikes are frequent, and cargos move slowly off port grounds. The Port of Suape is considered Brazil’s crown jewel of that nation’s northeastern seaports. The deep water port offers a strategic geographic position relative to main shipping routes and proximity to major consumer centers. Many see Suape as transforming itself into a driver of economic and technological development for the region. Already the region is attracting domestic and foreign direct investment. Predominate industry include the processing industry and automotive industry. A hub port, Suape has links to over 160 ports around the world. During the first six months of 2013, cargo volumes there rose 3.3 percent to 5.5 million tons over the same period in 2012. Among the bulk cargoes handled by the port of steel plates for Estaleiro Promar, a shipyard, and bulk liquids such as ethanol, diesel, gasoline, kerosene-type aviation fuel, soybean oil, and acids. A naturally deep port, Suape already receives large sea-going vessels. Dredging, however, will make it possible for large ships, including the Suezmax, to make port calls. Other infrastructure improvements around the port area include highways, railways and port back-up areas. The Porto de Rio Grande has consolidated its position as the port of the Southern Cone of South America. Located in the predominately agricultural state of Rio Grande do Sul, major commodities exported are soybeans, soybean meal, and wheat and rice. Main export destinations are China, Spain, Holland, Japan and France. Main imported goods include urea, granular potash, natural calcium phosphate and sulfuric acid. The main sources of these imports are Argentina, Morocco, Lithuania, China and the United States. Rio Grande is one of the most developed ports in Brazil with good logistics and projects for expansion. For that reason, shippers prefer to use this port instead of Paranaguá. Flourishing Industries While a widening host of high tech industries are flourishing in Rio Grande do Sul, the cycle of high commodity prices and strong capital inflows does not help in the export of manufactured goods. Government initiatives are trying to counter this by attracting investments and making the state more competitive. Among the companies operating there are Electronic Manufacturing Services (EMS), a logistics and supply chain company, and mobile phone manufacturers Teikon and Venko. Teikon makes handsets for Motorola, now owned by Google, and is the first Brazilian supplier to the giant US multinational. An IT hub in Rio Grande do Sul is quickly becoming one of the biggest tech centers in the region. Operating there are SAP, HCL, Dell, Hewlett Packard, Accenture and Microsoft. Rio Grande Do Sul is also the epicenter of Brazil’s shoe industry, ranking third in the world for footwear exports, behind China (No. 1) and India (No. 2). Shoes are Brazil’s second most important export, generating almost $2 billion in annual revenues in 2010. One of the leading shoe producers in the region is Paquetá Calçados Ltda. It partners with world brands such as Camuto Group, Clarks, Tory Burch, Adidas, Dillard’s Schwarts & Benjamin, and Timberland. Making Rio Grande Do Sul such a powerhouse for shoe manufacturing are its industrial parks, leather tanning processors, mould producers, show production machinery manufacturers and other sector enterprises. Brazil is well known for its forestry industry. Making Brazil a leading forest products country is the fact forests can mature within seven years, compared to the 60 to 80 years it takes in Nordic countries. Among Brazil’s leading exporters are those involved in wood, paper and related forest products. Tanac hails from Rio Grande Do Sul and is that region’s leading forest products exporter. It operates one of the most modern wood chip producing facilities in the world. Among its products are wood chips, and wood adhesives. Its Woodchip Unit is equipped to produce 700 thousand ton of chips per year and has 90 thousand ton storage capacity at any one time. Over 90 percent of Tanac’s turnover comes from exports with its main markets being Europe, China, India and Mexico. Japan represents 50 percent of the company’s export volume. CMPC Celulose Riograndese is another Rio Grande do Sul forestry products company. A part of Chile’s CMPC group, one of the largest and most important pulp producers and exporters in the world, CMPS’s mill is located in the City of Guaíba. There it produces an annual 450 thousand metric tons of hardwood pulp and 60 thousand metric tons of printing and writing paper. The Brazilian pulp and paper industry exports to the major markets worldwide, with Europe, China and the United States as the most important destinations for pulp, and Latin America countries, the largest buyers for Brazilian papers.