In mid-2007 Brazil’s air traffic control system was teetering on the brink of a systemic failure. On July 28
the main runway at Congonhas Airport in São Paulo, Brazil's busiest, reopened, 11 days after a TAM
passenger jet skidded off its rain-slicked surface and crashed, killing 199 people. It is now clear that
capacity at Congonhas, the country’s busiest airport, had been stretched beyond safety margins. The
runway's closing after the crash forced airlines to cancel hundreds of flights and caused a ripple effect of
delays around the country. The accident triggered a political crisis for President Luiz Inacio Lula da Silva.
Even before the crash, public confidence in flying was at an all-time low, with widespread frustration at
delays and cancellations. Last September, a plane belonging to the carrier Gol Linhas Aereas Inteligentes
(Gol) collided over the Amazon jungle with a US-registered executive plane and crashed, killing all 154
people aboard. The two crashes were the worst in Brazil's history. The weekend after the crash, an
electrical failure closed down all air traffic control capacity over the Amazon, resulting in more
cancellations and forcing numerous international flights on their way to Brazil either to turn back to the
United States or land in Central American countries. The underlying problem is that scant investment has
been made in infrastructure, including at airports and in-air traffic technology. That said, in this Freight
Transport Report, BMI still projects annual average air freight growth rate of 9.1% over the 2007-2012
period.
Various factors support this prediction. Fundamentally, we believe Brazilian aviation is experiencing a
crisis of unrestrained and unplanned growth. We now expect a correction, but the fundamentals will still
point to expansion. Annual Brazilian GDP growth will average 4.5% in the 2007-2012 period (up from
3.2% in the preceding five-year period). While this will underpin general air-freight demand, aviation will
benefit from even faster demand growth for high-value/low-bulk cargoes.
The overall freight picture will be encouraging. There continue to be no reliable statistics on Brazilian
road-freight haulage. However, based on BMI estimates, we expect freight carried to be growing at an
average of around 6.6% per annum, because investment to improve and repair the highway network is
still lagging. The largely privatised rail-freight sector will do better, aided by Brazil’s commodity export
boom, particularly in mining. We now expect the growth figure in 2007-2012 to be an annual average of
10.2%. Total tonnage handled by Brazil’s main seaports will rise by an average of 8.5% per annum in the
forecast period, down on the 8.7% registered in the preceding five years. The main reason for this is that
after the foreign trade and export boom peaked in 2004 and another strong year in 2007, we see both
import and export growth moderating significantly in the next few years, when domestic consumption is
likely to be the main engine of macroeconomic growth.
Brazil performs reasonably well in our freight transport industry business environment matrix, scoring
significantly above the regional average. Freight growth, infrastructure growth, the regulatory and
competitive environment all score well. Economic and political risk is comparable to the Latin American
peer group. The transport intensity index is also above the regional average, although there is something
of a question mark over the future dynamism of the country’s foreign trade. Foreign trade still represents
only around 25% of GDP, although on the other hand the sheer geographical size of the country means
there will be healthy internal demand for freight transport.
According to our latest estimates, the total value of transport and communications GDP will rise to
US$108.7bn in nominal terms by 2012, representing 5.5% of Brazil’s GDP. The transport and
communications sector employed 4.26mn people, or 4.7% of the labour force, in 2006. We see these
figures rising to 5.47mn - and 5.2% - by 2011.
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