Brazil Country Market
Insights and Opportunities
Overview: With a coastline of 8,500 km (5,600 miles), Brazil has a port sector that handles around 700 million tons of goods annually and is responsible for more than 85% of exports. The maritime modal has one of the lowest costs for the transportation of cargoes in Brazil.
The Brazilian port system is made up of 37 public sea and river ports. Of this total, 18 have operations authorized by the state and municipal governments. There are 42 terminals for private use and three port complexes that operate under concession to private enterprise.
The importance of ports efficiency becomes even more relevant with export growth, which has been gaining volume every year until recently.
The private sector is increasingly involved in developing the major ports including investment in equipment necessary for terminal operation. The public sector is responsible for construction and maintenance of port infrastructure, including dredging, land access, environmental and safety infrastructure projects, in addition to supervising the port activities.
Opportunities: According to a report from the Department of Transportation and Logistics of the Brazilian National Economic and Social Development Bank (BNDES), expected investment in the sector is US$ 1.7 billion covering a set of 25 port projects - 11 of which are in progress and 14 are under evaluation. The disbursements forecasted by BNDES, by the year 2010, reach more than US$ 1.0 billion, and consider an average participation of the Bank in 60% of the required investment.
A) Projects in Progress: US$ 456 million. The projects considered "in progress" are those that were officially presented to BNDES by May 2006 and are undergoing approval process, contracted, or are subject to some kind of evaluation or analysis.
B) Projects under evaluation: US$ 1.2 billion. This classification comes from unofficial data from information collected in the press, seminars, and conferences, and also from estimates obtained through information in public domain, and informal consultations.
Public Investments: The latest budget forecast by the Federal Government included a request for public investment in ports of US$ 706 million, with the Federal Government allocating most of the resources over a four-year period. It is also worth noting that in the beginning of 2005, the Federal Government launched a program called The Ports Agenda that provides investment amounting to US$ 328 million in projects to be executed in the 11 largest Brazilian ports. Experts estimate that it would take more than twice that amount just to take care of the more urgent problems. In 2005, the government invested US$ 112 million.
Ports: Investment forecast for ports between 2008 and 2011 reaches R$ 6.8 billion (US$ 3 billion), with an average growth rate of 18.7% per year. The PAC - Growth Acceleration Plan - accounts for more than a third of that amount, which is designed primarily for dredging projects, currently considered the main challenge for increasing port efficiency. Second in priority among the projects is the installation of a new container terminal at the Santos port.
Projects Planned and Under Construction: In the state of Ceará, the port of Pecém is planning on building new terminals to accommodate the construction of an oil refinery and a steel mill. In addition, the port of Mucuripe is developing a project to prepare the port to become a port of entry for tourism. Part of the resources for these projects is already guaranteed.
The two ports are complementary to each other said Minister Pedro Brito and the Federal Government has shown high interest in investing in the State of Ceara port complex. The bidding process for the Mucuripe project was released last September with funding secured by the PAC - Program of Accelerated Growth, amounting to US$ 22 million.
The project includes deepening of the access canal and development of the basin areas, where ships dock and maneuver. The depth of the canal should increase from 10 meters to 14 meters, allowing the traffic of larger vessels and reducing operational costs. The work also includes increasing the port capacity to handle grain.
As for the port of Pecém, the expansion project should consolidate its position as a bonafide industrial port. The mega-investments made in this region including construction of a refinery and a steel mill, and the creation of an Export Processing Zone, led to large-scale expansion of the port and the construction of new terminals.
Additionally, the railroad Transnordestina will need the port of Pecém’s extended infrastructure to load grain from the Brazilian mid-west to ship abroad. Project costs for these ports are estimated at US$ 1 billion and should take approximately five years to complete.
According to the President of Brazil Ports Erasmo Pitombeira, with the construction of a new natural gas terminal, Pier 1 for bulk cargoes and Pier 3 for containers, the Port of Pecém should expand its present capacity considerably. Most of the investment would be directed towards doubling the number of weighing scales, the construction of additional access gates, purchase of container inspection equipment, expansion of refrigerated warehouses, and construction of new service areas to house activities directly linked to the port.
In the southern part of the country, in the state of Rio Grande do Sul, the Port of Rio Grande should receive investments of approximately US$ 600 million for the construction of at least 10 terminals. The projects are for building and operating terminals for forestry products, fertilizers, general cargo, and containers with estimated cost of US$ 150 million. Preliminary studies indicate that five years from now, the Port of Rio Grande should handle 1.5 million containers per year - the current terminal, a little smaller than the one in the tender, moves 600 thousand units.
In 2007, the movement of general cargo in the Rio Grande port was 27 million tons. By 2014, this movement should reach 50 million. The State Deputy Secretary for Infrastructure, Adalberto Silveira Neto confirmed the investment program.
The Minister of Ports of the Presidency, Jose Roberto Sierra, announced that the Federal Government will launch an international tender for drafting the National Strategic Plan for Ports. The study is intended to define the national policy for the sector in coming years. The work, which will cost around US$ 13 million, should point out solutions for port development and will involve long term analysis of related legislation, including tariffs and the sector’s requirements.
The federal government intends to complete the work on deepening the draft of the Port of Rio Grande from 14 to 20 meters and the extension of its piers. The work is included in the Program of Accelerated Growth (PAC) and should cost around US$ 440 million. Companies that will build new terminals or expand: Bunge (new); Bianchini (doubling); Transpetro (doubling); Copesul (doubling); and Aracruz (new in North San Jose). New terminal tenders: Forestry products (this year); Fertilizer (this year); Containers (this year); and General cargo (in North San Jose).
As of June 2008, the port of Santos, Latin America's largest port, moved 37.3 million tons of cargo – a 10% increase in container movement.
The work financed by PAC should further increase traffic in the Port of Santos, which is still far from having exhausted its installed capacity. Dredging is a central issue in expanding the port’s capacity; it would allow larger vessels to be routed to South America.
In addition to dredging, the port is increasing the number of berths using the services of the operator Santos Brazil. The major operators in the port of Santos are also investing heavily in equipment to increase the number containers handled per hour. Seven years from now the port of Santos alone would be equipped to handle the equivalent to the sum of all cargo handled today in all container terminals in the country.
The Brazil Port Terminal, a company controlled by the operator of Terminal Europe, has announced an investment of US$ 700 million for the port of Santos. This will be the largest private investment in the port to date. The project includes building a 300-square-meter area located at the entrance of the port where Brazil Port Terminal will build a container terminal with capacity to handle up to 1.1 million of TEUs plus a liquid bulk terminal with capacity to handle 1.2 million tons annually. Brazil Port Terminal plans to start commercial operation by 2012.
The GOB has not opened tenders for concession of new terminals of public ports since 2001. The last container terminal tender was the Tecon Suape in the State of Pernambuco, purchased by the Philippine group ICTSI. The Government is striving to change this situation.
Among the new mixed use private terminals for private and third party cargo handling that are currently beyond the planning stage, are projects that have more land to store cargo and construct facilities to produce and export finished products. For example, Superporto Brazil in Peruíbe (SP), headed by businessman Eike Batista, is investing US$ 900 million. The Superporto Brazil will be built in a place where dredging is unnecessary; draft is a major problem for increasing productivity in most Brazilian ports.
A similar model, which avoids dredging, is a container terminal being developed in Santa Catarina by a company headed by the Hamburg Süd group and Battistella, which will require an investment of US$ 350 million. Also in Santa Catarina, the company Portonave has another container terminal project with expected investment of approximately US$ 423 million. In Rio de Janeiro, two terminals are under construction: a mixed-use terminal in northern Rio de Janeiro, with investments of US$ 300 million, and another private terminal owned by ThyssenKrupp CSA, on the western side of Rio, with investments of about US$ 100 million.