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Brazil Freight Transport Report Q3 2008Product Type: Market Research ReportPublished by: Business Monitor International Published: August 2008 Product Code: R302-3748 Description Speaking at a conference in March, Eike Batista, chief executive of mining company MMX Mineração,identified congested ports and expensive energy as key problems for the country’s mining and metalsindustry. His company was investing in the development of two ports and other infrastructure projects.‘Ports here in Brazil are the same as telephones were in the time of dial phones, only the world is wayahead, working on broadband’, Batista told Reuters news agency. ‘We’re talking dinosaur age. Most portsare too shallow for jumbo ore carriers, we are going to give tem 18-metres-plus berths, multipurpose portswith their own industry base’, he added. MMX Mineração is developing a new port at Acu in Rio deJaneiro state; Batista said he was talking with Italian-Argentine steel maker Techint on the possibility ofbuilding a steel smelter at Acu. He was also planning another super-port between São Paulo and Rio deJaneiro. In our latest Brazil Freight Transport Report, BMI has set its forecast for annual average growthin port tonnage over the 2008-2012 period at 8.2%.Various factors support this prediction. Fundamentally, we believe Brazilian ports and shipping are goingthrough a period of strong growth. Because of global economic conditions we now expect some moderationin the pace of growth, but the fundamentals will still point to expansion. Annual Brazilian GDP growth willaverage 4.5% in the 2008-2012 period (up from 3.8% in the preceding five-year period). This will underpingeneral shipping demand. The overall freight picture will be encouraging. There continue to be no reliable statistics on Brazilian roadfreight haulage. However, based on BMI estimates, we expect freight carried to be growing at an averageof 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 2008-2012 to be an annual average of 10.3%.As mentioned, total tonnage handled by Brazil’s main seaports will rise by an average of 8.2% per annumin the forecast period, down on the 8.9% registered in the preceding five years. The main reason for this isthat after the foreign trade and export boom peaked in 2004 and another strong year in 2007, we see bothimport and export growth moderating in the next few years, when domestic consumption is likely to be themain 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. Foreign trade still represents only around 25% of GDP, although on the other hand the sheergeographical 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 toUS$133.4bn in nominal terms by 2012, representing 5.5% of Brazil’s GDP. The transport andcommunications sector employed 4.479mn people, or 5.0% of the labour force, in 2007. We see thesefigures rising to 5.821mn - and 5.3% - by 2012. Table of Contents
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