Beating the bureaucracy

Brazilian port development is being held back by a cumbersome approval process that industry players say has stripped them of the ability to make decisions on direct investment. A survey by consultancy RAmaral & Associados found that over the past decade, BRL1.2bn of the BRL4.2bn ($637m of $2.2bn) in federal funds earmarked for improving Brazilian port infrastructure had been tapped, or roughly 28% of the money available.

In contrast, Brazil's state-owned energy company Petrobras, which follows bidding guidelines similar to ports, saw 90% of its promised investment come through during the same decade.

In 2010, Brazilian ports moved 834m tonnes of cargo. Of this, more than 70% passed through 109 private ports in the country, says the Brazilian Association of Port Terminals, or ABTP.

The organisation forecasts that by 2015, more than 1 billion tonnes will hit the nation's ports. The country is behind on expansion and simply won't be able to meet that projected demand, says Wilen Manteli, ABTP president.

Private companies have BRL25bn ($13.3bn) ready to invest in building new ports for their own cargo shipments or modernising existing terminals, but can't get past the government's evaluation process for project approval. ABTP says there's at least 30 private terminal projects that have been on hold for government approval for more than a year.

“In Brazil we need to decentralise port management, provide more autonomy to professional managers, and keep them based only on meritocracy,” Mr Manteli says. “We have to expunge the political interference that's slowing us down here.”

Federal officials counter that they've approved construction of new private terminals for companies that have proven they're truly interested in the space for their own cargo. Brazil's new Special Secretary of Ports has a problem, however, with what it considers too many companies using private ports as “rented space” for third-parties.

The necessity of upgrades at the Port of Buenos Aires has also become clear. Its terminals were built to receive 180 metre-long ships with a capacity of 2,500 teu, but are now being asked to handle 300 metre-long ships with up to 6,500 teu.

Argentina's General Ports Administration and operators at Buenos Aires have been working towards dredging and expansion projects this year, but it will be a long-term effort to bring this port up to the advanced standards of the market's future, says Eric Sisco, chief executive of APM Terminals' Americas region, which services key accounts at T4 terminal in Buenos Aires. APM also operates two terminals in Brazil, and is building a third with partner TIL which will be the largest terminal at Santos.

“There are some navigational challenges for all port operators (in Buenos Aires) with depth, and as vessels get larger,” he says. “One of the key issues is the location of the breakwater in relation to city channels, which is being widened significantly.”

Congestion remains an issue at Uruguayan ports as well, particularly Montevideo. The National Ports Authority (ANP) wants to move containers outside the port of Montevideo to avoid overload at the terminal, but operators say they already do this, and that the port needs infrastructure investment to avoid operational collapse. ANP will hike tariffs by 20% in 2012 to raise an extra $15m for the $120m in investment it plans for national ports next year.

“The challenges we're seeing in Argentina, Uruguay and Brazil are true in all of Latin America,” Mr Sisco says. “Vessels are getting bigger, and main ports there are often river ports with varying restrictions on navigation that must be addressed. New multi-class vessels are much larger than the vessels currently calling those markets. Terminal equipment and the navigational situations there must be addressed.”

Brazil's largest port, Santos, handles 25% of the country's total foreign trade balance through its terminals. In 2010, Santos moved 96m tonnes of cargo; this year it should pass 100m tonnes, and by 2022 it's expected to top 230m tonnes. Private and public infrastructure investment is a must to meet those expectations, says Renato Barco, director of strategic planning at Santos.

For 2011, Santos port authority Codesp was slated to receive BRL189m ($100.3m) for improvement projects. But through the end of July, BRL9.4m (US$5m) of that funding had been released, about 5% of the total.

Codesp chairman Jose Roberto Sierra has called for Brazil's bidding laws for the port system to be relaxed. Otherwise, the sea of red tape port managers have to wade through for approval on expansion plans won't let them meet demand in the coming years, he says. In all, 17 agencies have a hand in supervising or directly approving the growth management of Brazil's ports.

Follow-through on funding has improved since 2007, when a Special Secretary of Ports position was created at the federal level. Last year, Codesp at Santos secured 49% of the funding it had been expecting, roughly BRL132m ($70m). Projects will be prioritised though, with dredging plans for the nation's 18 major ports ranking no. 1.

All of Brazil's ports, including Santos, need to drastically alter the balance of how they move cargo, Mr Barco says, which today consists of little rail and too much trucking.

“We need to at least double our movement by rail, and here at Santos we need to exploit green, undeveloped areas near the port that are served by (smaller) rivers,” he says. “We need remote terminals outside the port area to shift cargo from barges to these terminals, and take trucks out of the congested cities.”

Rodolfo Amaral, director of RAmaral & Associados, says it's “absolutely inconceivable” that the Port of Santos has received just BRL323m ($171.4m) in investment over the past 10 years, while arguably far less important rural power plants have received millions of dollars in public funding for improvements.

With large-scale infrastructure plans still years from offering a positive impact, terminals are improving turnaround now by embracing new automation options. Operators at the Brazilian ports of Santos, Rio Grande, Rio de Janeiro and Itajaí have reported efficiency gains in container, dry and liquid movement via conveyers and automated twin-spreader cranes that weren't available here just a few years ago. 

“For containers, in some areas we're now moving more than 70 per hour compared to 10 just a few years ago. Conveyers have allowed Santos to become the biggest port in the world for sugar,” Mr Barco says. “In the coming years, paper export will all be automated on the wharf, as well as liquids like juice.”

And smaller ports could follow the lead of Rio Grande, which earlier this year agreed with the ports of Montevideo and Buenos Aires to encourage shippers to “top off” their container loads whenever possible at the partner ports. Together they'll draw more major international routes to the region by simply prioritising a full vessel for the client, says Dirceu Lopes, superintendent of the Port of Rio Grande.