An ageing infrastructure and the need for long-term planning in the automotive sector are chief among the hurdles facing logistics providers in Brazil.
Fuelled by Brazil's rising middle class and consumer credit, sales of passenger cars have surged. The country is forecast to produce 3.5m vehicles this year against approximately 3m last year. But while the country saw millions of people buying cars, the infrastructure has failed to keep pace.
In an electronic survey carried out at the Automotive Logistics South America conference held in Sao Paolo last week, 53% of delegates identified infrastructure as the biggest problem for logistics in Brazil. The country’s roads and ports were viewed as the two core barriers despite a breathing space provided by the economic slowdown that has allowed road and bridge building projects to be completed.
Paulo Roberto Guedes of São Paulo-based Veloce Logistica, said that Brazil’s roads are in bad condition. But it’s not fair to treat the roads as the villain as they keep Brazil’s logistics running. “The big issue is that Brazil needs more investment in other forms of infrastructure as well,” he said.
Edson Foltran, a partner at M&T Consulting, said that the government’s investment in infrastructure is under 1% of GDP, while in other developing countries such as China it is between 4-6%. “More needs to be done,” Foltran told delegates.
To tackle this underdevelopment, Brazil’s government has earmarked almost BRL300 billion ($162 billion) for its infrastructure programme, Programa de Aceleração do Crescimento known as PAC, through to 2023. This includes around BRL150 billion for rail, BRL70 billion for roads and BRL39 billion for ports.
But according to Richard Schües, CEO of Dachser Brasil Logistica, planning needs to be independent of politics. The PAC programme is linked to the political party and can be altered with a change of government he said, adding that better public long-term planning–independent of political parties–is needed.
Overall, however, delegates at the conference were confident in its future. Jack Servera, general manager for Wallenius Wilhelmsen Logistics, said that demand has returned to Brazil’s automotive sector as a result of the strong Brazilian economy and the automotive sector in 2009. “Brazil isn’t an emerging market with potential, it’s a real market nowadays,” he said. At the start of last year the challenge was how get growth and this year it’s how to deal with growth,” he said.
A full report from Automotive Logistics South America will be published in the next edition of Automotive Logistics magazine.