The Brazilian government has revised the law governing new terminal investment at the country’s ports this month following the announcement last December that it was introducing a $26m incentive programme to solve endemic problems of congestion. The previous law (8630/93) applying to terminal development stated that the port authority needed to safeguard the competitiveness and productivity of full container and ro-ro modes (Article 30, section 2). However, in the most recent revision (12.815) there is no mention of cargo or vessel type. That omission is causing concern amongst ro-ro operators worried that concessions will be awarded to bulk commodities and containers at the expense of vehicles.

The incentive package consists of public investment in new port infrastructure projects, including dredging work and improvements to landside access. It also includes reforms to the current legal and regulatory structure of the port industry as the government brings in more public-private partnerships. Government investment through the customs and ports authority is limited to dredging, lighting and marking, and IT. All other investments will be from those companies winning contracts to operate at private ports or winning public terminal concessions.

Under the investment programme the government is favouring tenders from the private sector that offer to move the highest volumes of cargo at the lowest rates to users. However, because container and bulk offer better returns and greater storage capacity over a given surface area compared to vehicle and high and heavy cargo the fear is that tenders will favour the former.

“The reason this is worrying is that without such it is pretty much open for only the more profitable type of terminals to be demanded for tender,” said Miguel Malaguerra, operations director of Grimaldi in Brazil. “We may find that all areas will become either full container or bulk terminals, both of which offer better remuneration to investors than ro-ro terminals, especially since the latter require large surface area and no vertical gains.”

Malaguerra, who is also responsible commercially for the ro-ro sector at Grimaldi, said that without government safeguards or guidelines that ensure an area is set aside within the tender process for the sector market forces could end up excluding ro-ro.

The concern is understandable given the relatively small size of terminals across the nine ports that handle finished vehicle shipments in Brazil. Vitoria is the largest at 250,000 square metres, while Santos TEV is 164,000 square metres and Santos Deicmar 74,000 square metres. Suape has just 56,700 square metres to offer.

The government has announced that the first port to be tendered will be Santos in October this year, one of the ports that Grimaldi uses. The TEV vehicle terminal able to handle 290,000 vehicles a year but congestion is still an issue. Speaking at last year’s Automotive Logistics South America conference in Sao Paulo, Francisco Costa, commercial manager of TEV at the port of Santos, said that the terminal tried to increase productivity by working 24 hours a day, though that did not always make up for time lost as a result of strikes and bottlenecks.

According to Malaguerra, if market forces do favour bulk and container cargo, ro-ro operators could be excluded from the right bank of the port.

“Can you imagine Sao Paulo state being served by only one terminal with only one berth and 164,000 square metres of area?” he asked.

Ro-ro operators are arguing for a zoning and development plan at Santos similar to that promised at the port of Paranagua which will help double vehicle storage capacity because it is allocated for general cargo, under which vehicle traffic is classified.

This would complement the TEV terminal at Santos both for imports and to support future export potential from Brazil’s growing automotive base.

The government has launched an automotive incentive programme for technical innovation and production expansion, which will run to the end of December 2017. It involves lower taxes on locally produced and imported vehicles (read more here).

Read more about the potential impact of the recent ports bill on the ro-ro sector in the next edition of Finished Vehicle Logistics magazine (July-September).