Business and Finance

Brazil Will Build Two New Ports and Expand 21 Existing Ports

A plan announced by Brazilian President Dilma Rousseff to invest $26 billion into modernizing Brazil’s ports could create an explosion of activity for dredging companies in the fast-developing nation.

The plan would use some government money but is banking mostly on private enterprises funding the much-needed investment. Many of Brazil’s 34 major ports are already at capacity – the rest are expected to be saturated within five years. None are prepared to handle the quadrupled port traffic expected by 2030.

“We want to inaugurate a new era with the modernization of infrastructure and port management” President Rousseff said in her December announcement.

The government’s announcement highlighted 21 ports in four regions of the country that would receive investments mostly between 2014 and 2017. The government also plans to build two entirely new large ports including a new seaport in Manaus on the Amazon River and a deep-water port for the oil-rich Espirito Santo.

According to the announcement the ports to receive investments are in four different regions of Brazil: the Southeast including ports in Espírito Santo Rio de Janeiro Itaguaí and Santos; the Northeast including Cabedelo Itaqui Pecém Suape Aratu and Porto Sul/Ilhéus; the North including Porto Velho Santana Manaus/Itacoatiara Santarém Vila do Conde and Belém/Miramar/Outeiro; and the South comprising Porto Alegre Paranaguá/Antonina São Francisco do Sul Itajaí/Imbituba and Rio Grande.

The announcement comes at a time when the dredging industry is already flourishing in Brazil which has been racing to deepen its ports in advance of the Panama Canal expansion. Several international dredging companies have opened up offices in Brazil in recent years.

Rafael Diaz-Balart the Latin American coordinator for the American Association of Port Authorities said the infrastructure improvement is direly needed in Brazil – previous presidents have made similar efforts to invest in ports though the country’s politics have sometimes stymied those efforts.

Ports handle about 95 percent of Brazil’s trade according to Rousseff and that trade is massive. Brazil is the world’s largest producer of coffee sugar beef orange juice and ethanol and its offshore oil industry could make the country one of the four top oil-producing nations in the world within a decade. The nation is also preparing to host both the World Cup and the 2016 Summer Olympics.

Despite all these strengths Brazil’s insufficient ports its overcrowded roads and its under-maintained railway system costs the nation’s economy dearly because it raises prices on every import and export said Diaz-Balart.

“It’s referred to in Portuguese as the ‘costo Brasil’ which translated to English is the “Brazilian Cost” he said. “Ultimately what that means is there’s an inherent tax that the whole country is suffering as a result of the inefficient infrastructure.”

But he noted that there shouldn’t be any problem coming up with the private investments to improve the ports and other infrastructure.

“Direct foreign investment in Brazil has been growing by leaps and bounds in recent years and this is another area to invest in” he said.

Rousseff has also proposed making changes to how ports are operated. As it stands port licenses are granted to the company willing to compensate the government most for port rights but Rousseff wants to change the rules to offer the licenses to the group that will charge the lowest handling cost for the greatest volume of cargo – a change she said should increase efficiency. Both public and private entities will compete for the port rights.

Dredging will likely be a big player in that game said Diaz-Balart not only because many of the seaports need to be dredged deeper and wider but also because many of Brazil’s biggest ports are river ports which typically need continual dredging.

Paulo Rodriguez director of Brazillian dredging company Terpasa Service Dragagem said that he is one of several people who have been invited to the Ministry of Ports to discuss further the port expansion plans. He anticipates that the boom in investment will be huge for both his company and the international dredging market.

Robert de Bruin communication and markets chief for Dutch dredging giant Van Oord Dredging and Marine Contractors said that his company is already doing big business in Brazil including deepening the access channel for the port of Suape to allow access for larger vessels to the Petrobras terminal. He said that Brazil’s commodities and energy markets are “major business drivers” for the company in Brazil and said the company is carefully watching Brazil’s economy and government investment programs.

“Market developments and government investment plans are important signs for further activities in our industry” de Bruin said in an email.

Joshua Rodriggs a consultant with Strategic International Solutions for Business (SIS4Biz) and an expert on Brazil’s economy said that because Brazil has become one of the world’s leading commodities producers there is both internal and external pressures to fix these infrastructure problems. He said there shouldn’t be any problem coming up with private investors to fund the port modernizations but that it may take longer than everybody would like.

“The infrastructure is one of the main things that’s holding Brazil back and they know that – it’s obvious” he said. “So they’ll get it done. Things don’t happen as quickly there as we hope but it will happen sooner or later. There’s just no way to stop a machine that’s that big – you can hold it back a little bit but there’s no stopping it.”