Milestone on Sugar Loaf Mountain
The ports reform law has now been passed by Brazil’s congress and the state president, Dilma Rousseff. Shipping companies will be able to bid for concessions from now on. In the meantime, port congestion in Brazil is reaching an all time high.
Several things are in a state of flux in Brazil at the moment. The population of the South American country demonstrated for better infrastructure for local transport last month, but another urgent problem – modernisation of the country’s ports – has been on top of the agenda of president Dilma Rouseff (see the Special in ITJ 13-14 2013, page 10) for a much longer time. The background is clear: Brazil’s domestic inland product sank to a mere 0.9% in 2012, compared to 2.7% in 2011 and 7.5% in 2010. The rating agency Standard & Poor’s likewise expects a growth rate of only 2.5% for the current year, so it recently downgraded the country’s outlook from stable to negative.
Port reform will help export industry
Rouseff wants to use the port package to crank up the country’s exports and improve the efficiency of the port industry. In mid-May the Brazilian congress passed the port reform law, but the president used her veto right to modify some contents once again before signing took place in June. However, the law’s two most essential principals were not amended: private terminals are allowed to handle cargo from third parties and, in addition, the provider who offers the cheapest user rates will receive a concession to operate a terminal. Prior to that, operators who made the highest payments to the government were awarded the contract.
In future, the 25-year extension of private terminal operators’ concessions will not be automatic, but is not necessarily to be ruled out. Thanks to the new law, more than 150 concessions and leasing contracts could be put out to tender.
The decision that shipping companies will have an unrestricted right to bid for port projects in future is a particularly important innovation. The government wants to open up the country’s port industry to new players and ensure that there is more competition. According to the British analyst Drewry, the Brazilian authority that grants concessions has already received more than 100 new applications.
The Brazilian government is taking the first step to implement its reform in Santos, the largest port. In addition to that, 52 concessions will become available in the federal state of Para in northern Brazil. This region includes Belem and Santarem, among others. This part of the country could be used to create alternative routes for the export of soybeans and would thereby relieve the situation in the logistics bottleneck around Rio de Janeiro, Paranagua and Santos on the eastern seaboard.
Brazil’s government wants to grant the first new concessions before next October. While this target is rather optimistic, the country’s ports are standing on the brink of a new era.
Additional port capacity needed
The shipping of soybeans, which normally takes place in May, is an example that shows just how congested Brazilian ports are. This year the soybean season lasted until this month (July), as a record harvest totally swamped existing infrastructure. The waiting time for ships in the port of Santos amounted to a new high of 39 days on average, and even rose to as many as 55 in Paranagua, compared to ten to 15 days in 2012. In May the price for soybeans rose by nearly 8% vis-a-vis the preceding month – this was an incentive for Brazilian farmers to bank on growing even more of that commodity in future. After the harvest in the USA was impaired by a severe drought, an assessment of the USA’s ministry of agriculture indicated that Brazil, with a harvest of 83.5 million t, will establish itself as the world’s biggest exporter of oilseed this year. However, the most important handling ports on Brazil’s east coast will not be able to cope with this volume properly.