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Brazil Freight Transport Report Q3 2007Product Type: Market Research ReportPublished by: Business Monitor International Published: September 2007 Product Code: R302-1487 Description At the beginning of this year, Brazilian President Luiz Inácio Lula da Silva proposed setting aside anotherBRL1.34bn (US$638.2mn) for the North-South Railway in his Growth Acceleration Package, or PAC. The package should help develop infrastructure over the coming years. The North-South railway already runs from the northern Tocantins state city of Araguaina to Porto Franco in Maranhão state, where its tracks connect with the Carajas rail line run by Brazilian iron-ore giant Companhia Vale do Rio Doce (CVRD). The Carajas line links Porto Franco to Maranhão's deep-water Port of Itaqui - a port that is likely to surpass the country's deeply congested principal ports of Santos and Paranaguá in future years to become Brazil's number-one port, if the right funds are invested, said the National Confederation of Agriculture and Livestock (CNA). If Lula's proposal to allot an extra BRL1.34bn in government funds goes ahead, the railway will extend another 358km from Araguaina to the Tocantins state capital of Palmas by 2009, said Andre Oliveira, the head of construction of VALEC, which is the government's partner in the North-South railway. After that, more funds will be needed to connect the North-South Railway to its expected destination of Anapolis in Goias state, he added. The completed Goias-Maranhão rail line, which will span more than 1,500km, is expected to carry 15mn tonnes of cargo annually. In our latest Brazil Freight Transport Report, BMI concludes that, thanks to the performance of MRS Logística and other private sector freight rail operators, total freight carried by rail can be expected to grow at an annual average rate of 9.9% over the 2007-2011 period. Various factors support this prediction. We now expect annual Brazilian GDP growth to average 4.4% in the 2007-2011 period (up from 3.2% in the preceding five-year period). While this will underpin general freight demand, as a result of continuing commodity and mining growth, rail should enjoy a particularly favourable combination of strong demand and expanding capacity, as new investment goes into the operations of the privatised operators. 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 somewhat more slowly than rail, at an average of around 6.4% per annum, because investment to improve and repair the highway network will take longer to have an effect. Despite the collapse of Varig and a slower year in 2006, we also see airfreight continuing to perform vigorously. We now expect the growth figure in 2007-2011 to be an annual average of 9.2%, compared to 3.9% in 2002-2006. Total tonnage handled by Brazil’s main seaports will rise by an average of 7.2% 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$121.5bn in nominal terms by 2011, representing 6.4% 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 5.56mn, or 5.2% of the labour force by 2011. Table of Contents
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