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REGIONAL SURVEY East Coast South America

18 www.portstrategy.com November 2011

KEY PORTS ALONG South Americas east coast arebalancing the boon of record cargo growth with

aging infrastructure thats limiting their ability to

handle larger vessels. From Buenos Aires to

Salvador, expansion plans arent moving fast

enough for forecasted demand, and more

bureaucratic hurdles seem to appear at every turn.

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, Brazils state-owned energy company

Beating the bureaucracy

Red tape and ageinginfrastructure are holdingback development atports up and down SouthAmericas east coast.Bob Moser reports

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 nations ports. The

country is behind on expansion and simply wont

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 cant get past the governments evaluation

process for project approval. ABTP says theres 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 onmeritocracy, Mr Manteli says. We have to expunge

the political interference thats slowing us down here.

Federal officials counter that theyve approved

construction of new private terminals for

companies that have proven theyre truly

interested in the space for their own cargo. Brazils

new Special Secretary of Ports has a problem,

however, with what it considers too many

companies using private ports as rented spacefor 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

For containers, in someareas were now moving

more than 70 per hourcompared to 10 just a

few years ago c

Renato BarcoSantos Port

PIONEER: Rio Grande is setting the tone with its top off container agreement with partner ports

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East Coast South America REGIONAL SURVEY

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capacity of 2,500 teu, but are now being asked to

handle 300 metre-long ships with up to 6,500 teu.

Argentinas 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 upto the advanced standards of the markets 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 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 were 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.

Brazils largest port, Santos, handles 25% of the

countrys 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 its 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 Brazils 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 wont 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 Brazils 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

BRAZILS FEDERAL GOVERNMENTwill renegotiate contracts with ports

that have administration delegated

to states, municipalities and the

private sector, in order to secure

more influence over management

and investment plans deemed key

to national interest.

The power play should include

16 ports that received nearly 93m

tonnes of goods last year, about

32% of the countrys total port

traffic. Three ports above all are

said to be key growth targets the

government wants to see done

right: Paranagu in Parana state,

Rio Grande in Rio Grande do Sul

state, and Itaqui in Maranho state.

Renegotiating will begin in the

first half of 2012, once the

Secretary of Ports has been able to

review a final version of theNational Plan for Port Logistics,

which offers investment and

expansion needs for Brazils

terminals over the next 20 years.

The conclusion appears to be that

only the federal level can steer an

overall plan for the nations ports,

and identify risks like neighbouring

ports that may overlap investment

and cannabalise one another.

The governments goal is to

appoint its own representatives to

have a more active role in each

ports management and

development. Top officials at the

Ministry of Ports got a green light

from President Dilma Rousseff

herself this year to tackle port

development, which they felt was

lagging in part because state and

municipal authorities in charge of

ports werent reinvesting enough

profits into terminal development.

In the most extreme cases oflocal managements misuse of

funds, the federal government

could take over a port indefinitely.

The initiative could cause friction

with local officials, but its unfair for

federal authorities to have such a

hands-off relationship with key

undeveloped ports when theres so

much at stake econmically, said

Leonidas Cristino, chief minister at

the Secretary of Ports.For example, at the Port of Rio

Grande in Rio Grande do Sul state,

Brazils federal authorities flex their musclesBRL462m ($245m) in federal funds

were transferred to the state to

extend jetties. Deepening of

channels at Itajai Port in Santa

Catarina, though managed by the

city, is being funded federally.

And while Itaja Port is managed

by the state, BRL73m ($39m) in

federal funds saved an otherwise

lost channel dredging project this

year, and the Feds have assumed

most of the investment to repair

one berth and build another.

Though it wants more power in

the process, federal government

knows it cant fund these projects

alone. A recent study from Brazils

Institute of Applied Economic

Research noted that BRL42.8bn

($22.7bn) in investment would be

needed to complete 265 port

improvement projects currently inthe pipeline, and federal funds

could only cover 23% of that.

Credit:RooseweltPinheiro/AgnciaBrasil

GO-AHEAD: Brazilian presidentDilma Rousseff gave the green light for aport development rethink this year

STACKED UP: congestion remains an issue at Uruguayan ports, particularly Montevideo

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expecting, roughly BRL132m ($70m). Projects will

be prioritised though, with dredging plans for the

nations 18 major ports ranking no. 1.

All of Brazils 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 its absolutely inconceivable

that the Port of Santos has received just BRL323m

BRAZIL WILL INVEST millions ofdollars to build four new passenger

terminals and reform two key

existing ones for cruise tourism

before the 2014 FIFA World Cup,

but the industry is concerned over

the choice of ports, and timetable

for construction.

Ports in the northeastern cities of

Salvador, Recife, Fortaleza and Natal

will all have new terminals built,

kicking off a rush for cruise traffic to

an entire region of the country that

has never had a proper structure to

receive leisure ships. In Santos,

docks will be realigned, and in Rio

de Janeiro a Y-shaped pier will be

built with six berths reserved

exclusively for passenger ships.Aside for those six sites, the

federal government still plans to

invest BRL89m ($47m) on a river

terminal in Manaus. Construction

should start in each of the six cities

within the next five months,

wrapping up in late 2013 in time

for cruise ships to offer 45,000

extra beds during the June-July

explosion of tourists in 2014.

The growth potential for

maritime tourism in Brazil will be

tremendous if the projects come

through. The Port of Santos had

1.1m passengers pass through

during the 2010/11 tourist season,

up 30% from the year prior. By late

2013 if its expansion is seen

through, the port could receive

2.5m per season.

Despite the governmentsoptimism itll have new terminals

ready in less than two years,

complications have already arisen.

In September, an audits court froze

bidding for the Rio de Janeiro pier

project on hints of irregularities and

overpricing in bid guidlines.

Brazils Maritime Cruise

Association, or Abremar, calls

todays ports system chaotic and

a basis for improvisation for

passenger reception. At

Northeastern ports, tourists

literally disembark amid

containers, says Marcia Leite,

Abremars infrastructure

coordinator. The organisation says

that aside from Salvador, it wasnt

consulted by the government on

any of the projects.

Over the past decade, Brazilscruise tourism sector grew 22% per

year, on average. In 2010, growth

Industry questions Brazilian cruise choiceswas 2%, a drop only attributable to

limited port space, and the fact

that 40 Brazilian ports are

registered to receive cruise ships

but less than 20 have the

infrastructure for it.

After the sports tourism of 2014

and the Rio Olympics in 2016,

operators are worried that port

fees already limiting the industrys

growth in Brazil will be higher, and

more of a deterrent.

A recent study by Abremar

found that embarkation and

disembarkation fees for

passengers at Santos were

398% higher than those charged

at the Port of Civitavecchia (Italy),

266% higher than in Tunis(Tunisia), and 190% higher than

the Port of Barcelona.

Want More?Michael Mackey wrote

Keep shiningfor the April 2010 editionRead the full article at:www.portstrategy.com/features

We have to expungethe political interference

thats slowing usdown here c

Wilen ManteliBrazilian

Association ofPort Terminals

($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

Itaja have reported efficiency gains in container,

dry and liquid movement via conveyers and

automated twin-spreader cranes that werent

available here just a few years ago.

For containers, in some areas were nowmoving 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.

TOP GEAR: Santos, Brazils largest port, handles 25% of the countrys total foreign trade balance through its terminals

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Itaja PORT PROFILE

November 2011 www.portstrategy.com 23

THE PORT OF ITAJA has ranked as Brazils no. 2 forcontainer traffic nearly every year since 2005,

despite facing major flooding emergencies twice

in that span. With a firm grasp on local

commodities and expansion in the works,

management is now eyeing Itajas first railway

connection, and promoting its turnaround speed to

new clients dissatisfied with more congested ports.

Itaja closed August with a turnover of 91,750

teu, a 14% growth rate compared with the same

month a year ago and the second best month all-

time for the port. Itaja hit a record 957,000-plus

teu in 2010, and management expects the port to

pass 1m by the end of this year.

Land access is a common challenge for most

ports, but Brazils chaotic and severely dilapadated

highways inflame growth limitations for ports like

Itaja, which doesnt have a rail line connection.

Two railroad research projects currently underway

could offer fantastic development for Itaja if

implemented, says Robert Grantham, commercial

director.

A new federal railway being studied would runfrom the Port of Itaja through western Santa

Catarina the heart of the states agro-industrial

region and on into Argentina. Another public

railway being studied, and currently open to bids

from developers, would link all three ports along

the states coast. With two major highways already

branching out from Itaja, wed make a fantastic

hub here, Mr Grantham says.

Santa Catarina is Brazils top state for poultry and

pork production. An insatiable export demand for

those products has made Itaja Brazils top port for

frozen poultry exports, and no. 2 for pork. They

make up half of Itajas exports, and the resale value

of those meats is attracting shipping lines along the

Brazilian coast to stop in Itaja over other ports.

Ships are coming in full and going out full, its

a good balance, Mr Grantham says. Six to eight

years ago, our imports represented no more than

20% of our total movement. But with devaluation of

the US dollar, weve seen imports grow considerably,

now up to 45% of our total movement.

Whats being unloaded at Itaja isnt fair-weather

stock or goods that ebb and flow with seasonal

demand. Its mainly machinery for Santa Catarinas

agroindustry, a consistent class of imports.

Mr Grantham wants to see Itaja now grab a

larger share of beef exports. Brazil is the worldstop producer and exporter of beef, and while most

of it moves through the nations busiest port in

Santos, congestion there offers an opportunity to

lure producers and shippers south.

Jump the queue

Itajai is positioningitself as an alternativedestination tomore congestedBrazilian ports, asBob Moser finds out

A main selling point used to separate Itaja from

other ports is its two container terminals on the

river, and six overall berthing facilities. When

compared with three berthing spaces at the Port

of Rio Grande, or two at Paranagua, Itaja can

guarantee vessels a berthing window even if

theyre delayed, with terminal gates opening as

much as seven days in advance of arrival.

This has helped Itaja boast a splendid record of

non-cancellation, compared to other ports in Brazil

that are full, Mr Grantham says.

The port faces some natural constraints that

have always been its biggest challenge. Its located

on what can be a powerful Itaja-Au River and

about 3.2 km from a waterfall, which can close the

port at times when the current is too strong from

heavy rains.

Itaja was hit by flooding in early September

that shut down operations for seven days.

Dredging planned to take the port from 11 to 14

metres is on track to finish by years end, and the

dredger, already in port when the storm hit, should

aid in the overall storm recovery.

One of Itajas other goals for 2012 and beyond

is widening the mouth of the river and providingample space for larger ships to turn once inside.

The ports current turning circle is 400 metres wide,

but on both sides of the circle are wharfs that take

up valuable space.

Port management is studying construction costs

for a new 450 metre-wide turning circle to

accommodate larger ships.

The post-Panamax ships are arriving, container

ships on Brazils coast are growing and were

definitely a container port now, Mr Grantham

says. This is the market of the future, and thats

what we have to focus on.

Ships are coming infull and going out full,

its a good balance c

RobertGrantham

Port of Itaja

SILVER MEDAL: Itaja has consistantly ranked as Brazils no. 2 for container traffic

Want More?Michael Mackey wroteCounting on the economyfor the April 2010 editionRead the full article at:www.portstrategy.com/features

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