Brazil Announces $26 Billion Port Investment Program

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December 7, 2012

(Bloomberg) — Brazil announced measures to increase private investment in its port system in a bid to boost capacity and reduce transport costs that have choked growth in the world’s second-largest emerging economy.

The plan entails a new regulatory framework and investment of 54.2 billion reais ($26 billion) through 2017, Ports Secretary Leonidas Cristino said at an event in Brasilia. Of the total, 31 billion reais will be spent during 2014 and 2015. Twenty Brazilian ports will be affected by the package, including Santos, Rio de Janeiro, and Suape. Cristino didn’t say how much of the investment would come from private industry.

“Our goal isn’t the lowest price,” said President Dilma Rousseff, also speaking at the event. “We want to move the greatest amount of cargo with the lowest possible price.”

With Brazil’s economy struggling to emerge from a slowdown that will cut growth this year to an estimated 1.27 percent, Rousseff’s government has enacted a series of measures to spur investment and improve infrastructure. In August, Rousseff announced a program to draw private capital into building and operating roads and railways over the next 30 years, and today she said the government will announce before Christmas an auction for licenses to operate major airports.

Parallel Frameworks

Brazil will have parallel regulatory frameworks for its ports, Rousseff said, one for publicly run installations and another for those under concession to private operators.

The ports of Manaus, Porto Sul, Espirito Santo, Ilheus and Imbituba will be offered for private concession, Cristino said. The auctions for Manaus and Imbituba will occur in 2013, he added.

Shares of Santos Brasil Participacoes SA, the country’s largest shipping container operator, gained 5.3 percent as of 1:26 p.m., as the benchmark Bovespa stock exchange fell 0.3 percent.

Brazil ranks 123 among 185 economies when it comes to ease of trading across borders, below the Latin America and Caribbean regional average, according to the Doing Business 2013 report from the World Bank. Mexico, the region’s second-largest economy, ranks number 61 on the list.

The cost of exporting a container from Sao Paulo has more than tripled from 2007 to 2012 and the costs of importing a container more than doubled, the report said, even as the time to process a container for export fell to 13 days from 18 days in the same period.

Freight costs in Brazil could fall 20 percent over the next five years as more roads and railroads are built and access to ports improves, Transport Minister Paulo Sergio Passos said to reporters in Brasilia.

The port package will include a line of financing for port investments at the long-term lending rate, known as TJLP, plus up to 2.5 percent with a three-year grace period. Yesterday, Finance Minister Guido Mantega announced a 100 billion reais extension of the state development’s lending program for capital goods.

-By Carla Simoes and David Biller. Copyright 2012 Bloomberg.
Cover photo via Shutterstock


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