A keen focus on Brazilian development
As one of the fastest growing economies, Brazil is doing its best to improve its ports and road infrastructure to cope with huge shipment volumes. Insurance carriers regionally and globally meanwhile have to pick up the pieces when breakdowns, theft and port congestion add to shipping and cargo costs.
This has been going on for the past decade, but there are hopeful signs as risk management procedures tackle the problems, according to one of the underwriters with a keen understanding of the market, Douglas Sakamoto of Liberty Syndicates.
Mr Sakamoto works as marine class underwriter for the Lloyd’s insurer in São Paulo. His job is to strengthen the position of the Brazil office of Liberty Syndicates across all lines including marine, a speciality too in his previous job as underwriter for a major reinsurance company in Brazil at a time of reinsurance market liberalisation. Liberty Syndicates opened its São Paulo and Rio de Janeiro offices in 2009, to extend its reach into Latin America.
Insurers are keeping a close eye on the national programme started in 2007 to ease bottlenecks by increasing depths at the ports to receive more modern ships such as post-panamaxes. A report by UK Trade & Investment noted at one stage: “The expansion of Brazil’s overseas trade is being hampered by insufficient ports and terminals, operational constraints and poor infrastructure for access to many ports. Prior to the PAC (growth acceleration) programme, there had been a serious underinvestment in the sector.”
Salvador, Itaguai, Recife and Angra dos Reis have completed their dredging programmes, and the huge port of Santos is forecast by mid-2012 to have increased draught to 15 metres from 13 metres. This will push ship capacity to 16,000 teu from the current 9,000 teu, although clearly this is still a step behind many European ports.
Just as serious a problem as port congestion, according to Mr Sakamoto, are tailbacks on the roads which give access to the ports. Trucks are often lined up for kilometres trying to get into Santos port in particular. This increases the exposure to theft from trucks carrying high value items such as electronic goods, notably around São Paulo and Rio.
Sub-standard roads are being blamed for vehicle accidents including overturning; equally there are big pressures on the drivers to deliver to tight schedules. Risk management procedures have led to somewhat more safety for inland cargo, and other measures can be taken including the use of electronic devices to monitor drivers and transportation routes for theft exposure, although not everyone is willing to invest money on resources such as safe driving courses for truck drivers which could mitigate the number of accidents.
Vessels find their own schedules disrupted when they have to line up to get to into port or have to discharge elsewhere, which means additional cost for the insurers and the receiver of the goods.
Most problems arise in the southeast of the country because of the concentration of industry there: the zone handles eight out of every 10 of Brazil’s container movements. The condition of the southern stretch of the 4,800km north-south federal highway BR101, is of special concern.
Take-up of insurance by terminal operators has improved, following the wake-up call represented by a big fire in 2008 in Vitoria Port, in the state of Espirito Santo, which caused some $50m worth of damage. The same year, the container port of Itajaí in the state of Santa Catarina had two berths washed away by flooding of the Itaja-Acu River. A fire at a container terminal in 2009 led to a wider investigation that resulted in a fine of $200,000 for breaching agreed terms of operation.
With Brazil having last year leapt in front of the UK to the position of the world’s sixth largest economy – behind the US, China, Japan, Germany and France – the scale of its output and demand for imports can only impose added strain on its ports capability.
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