Brazil’s Minister of Ports, Antônio Henrique Pinheiro Silveira stopped in Washington, D.C. last week on his hemispheric road-show to present the details of Brazil’s latest port modernization efforts. In June of 2013, the Brazilian government passed new regulatory reform laws for ports, in hopes of modernizing current infrastructure, increasing efficiencies and driving competition.
Since 2005, Brazil has experienced a boom in commodity exports such as soy, sugar, meat, coffee, tobacco, orange juice, and minerals. Much of this demand stems from China, who became Brazil’s largest trading partner in 2012. But the outdated ports and other trade infrastructure in Brazil has become a hindrance to economic growth.
The private sector is concerned about the bottlenecks in Brazil’s trade infrastructure as well as the costs in getting products to the global markets. One of the biggest problems facing exporters in Brazil is the country’s reliance on trucks and poor highway systems to connect goods to ports. In 2013, a truck gridlock stretched for 31 miles outside of Santos, a major port in São Paulo that accounts for 25 percent of all agricultural exports. A lack of railway and waterway infrastructure forces companies to rely on a limited number of roads to transport goods from farms and mines to the ships at port.
Another obstacle for the private sector is port capacity. There is rising demand for additional ports and terminal capacity in states like Pará, home of the Amazon River basin. As the Panama Canal upgrades are completed, Pará is will be a key port for increased trade in the north.
A third important bottleneck is Brazil’s lack of a “single window” system, which forces companies to file paperwork in various regulatory agencies weighed down by bureaucratic red-tape instead of utilizing one location. The government has been working diligently to consolidate this process and Minister Silveira noted that an introductory “single window” system will be launched in June and fully operational by December of this year.
The new port modernization efforts are aimed at reducing these bottlenecks. The government plans to auction four groups of public ports to private buyers, starting in Santos and Pará, the country’s most utilized ports. Though the Banco Nacional do Desenvolvimento (Brazilian Development Bank—BNDES) will continue to play a large role in financing infrastructure, the Brazilian government hopes to gain $7.2 billion in private investment in concessions over the next five years.
Private terminals, of which there are currently 146, will now be permitted to move third party cargo, allowing them to compete with public ports.
Another aspect of the new port laws is the centralization of intermodal infrastructure planning. The laws have created more defined responsibilities between the ministries, regulatory agencies and port authorities in hopes of streamlining the intermodal transportation network.
The Ministry of Ports has also initiated its second National Dredging Program (the first began in 2007), which should increase port depths by an average of 26 percent and allow a greater number of large capacity cargo ships, such as the Post Panamax Plus and New Panamax, to enter more ports along the 4,600 mile coast. The dredging auctions should begin in 2014, with 20 ports and 10 year contracts. The demand for deeper and wider trading lanes reflects hemispheric preparation for the opening of the broader Panama Canal.
Following on the successful public auctions of airports and roads in 2013, 2014 could be the year of ports in Brazil. The new modernization laws have addressed many of the current infrastructure bottlenecks and laid the groundwork for much needed improvements. If Brazil gets this right, their ports will become more competitive, more efficient and less costly, benefiting both the Brazilian economy and those who rely on its bountiful resources.
