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Brazil Freight Transportataion Report Q2 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: April 2008 Product Code: R302-3165 Description In October 2007 the government finally imposed long-discussed restrictions on flights at Congonhasairport in Sao Paulo, the country’s busiest domestic flight terminal. The Defence Ministry confirmed thatthe number of take-offs and landings was being limited to 33 per hour, down from 48, and that only directflights would be permitted, preventing airlines from using the airport for connecting services. In addition,flights from Congonhas could not be to destinations at distances of more than 1,000km. This requirementeffectively stops the airport being used for flights to the northeast and centre-west of Brazil, and preventsairlines such as Gol and TAM using it as their main domestic travel hub. The restrictions came inresponse to the major accident on July 17, when a TAM aeroplane crashed on landing killing 199 people.The crash highlighted the safety risks at Congonhas, which sits in the middle of a highly built-up districtand has one of the world’s shortest runways in heavy commercial use. By mid-2007 Brazil’s air trafficcontrol system was seen to be teetering on the brink of a systemic failure. Even before the JulyCongonhas crash, public confidence in flying was at an all-time low, with widespread frustration at delaysand cancellations. In September 2006, a plane belonging to the carrier Gol collided over the Amazonjungle with a US-registered executive plane and crashed, killing all 154 people aboard. The two crasheswere the worst in Brazil's history. The underlying problem is that scant investment has been made ininfrastructure, including at airports and in-air traffic technology. In our latest Brazil Freight TransportReport, BMI has reduced its forecast for annual average air freight growth over the 2007-2011 periodto 7.5%. Various factors support this prediction. Fundamentally, we believe Brazilian aviation is experiencing acrisis of unrestrained and unplanned growth. We now expect a correction, but the fundamentals will stillpoint to expansion. Annual Brazilian GDP growth will average 4.5% in the 2008-2012 period (up from3.2% in the preceding five-year period). While this will underpin general airfreight demand, aviation willbenefit 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 Brazilianroad freight haulage. However, based on BMI estimates, we expect freight carried to be growing at anaverage of around 6.6% per annum, because investment to improve and repair the highway network isstill lagging. The largely privatised rail freight sector will do better, aided by Brazil’s commodity exportboom, particularly in mining. We now expect the growth figure in 2007-2011 to be an annual average of10.2%. Total tonnage handled by Brazil’s main seaports will rise by an average of 5.0% per annum in theforecast period, down on the 8.7% registered in the preceding five years. The main reason for this is thatafter the foreign trade and export boom peaked in 2004 and another strong year in 2007, we see bothimport and export growth moderating significantly in the next few years, when domestic consumption islikely to be the main engine of macroeconomic growth. Brazil performs reasonably well in our freight transport industry business environment matrix, scoringsignificantly above the regional average. Freight growth, infrastructure growth, the regulatory andcompetitive environment all score well. Economic and political risk is comparable to the Latin Americanpeer group. The transport intensity index is also above the regional average, although there is somethingof a question mark over the future dynamism of the country’s foreign trade. Foreign trade still representsonly around 25% of GDP, although on the other hand the sheer geographical size of the country meansthere will be healthy internal demand for freight transport. According to our latest estimates, the total value of transport and communications GDP will rise toUS$108.9bn in nominal terms by 2011, representing 5.5% of Brazil’s GDP. The transport andcommunications sector employed 4.26mn people, or 4.7% of the labour force, in 2006. We see thesefigures rising to 5.47mn - and 5.2% - by 2011. Table of Contents
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