Brazil launches $26 billion port investment drive

Brazil’s government said it was counting on an “explosion” of private investment to help modernize the country’s clogged sea ports whose high costs and notorious delays are shredding its competitive edge as a major commodities exporter.

President Dilma Rousseff launched a $26 billion (16 billion pounds) programme to overhaul and expand the ports as part of efforts to upgrade Brazil’s decrepit infrastructure that is strangling growth in the once-booming emerging market.

Rousseff said her government was seeking to improve the ports through partnership with private companies, as Brazil looks increasingly to private enterprise to step in and improve public services where the state has failed to do so.

The bidding process that will open next year will favour tenders that offer the lowest tariffs for handling the greatest volume of cargo, moving away from a prior model of granting concessions to the highest bidder.

“We want to increase the efficiency of Brazilian ports with this partnership, which will make our exports more competitive and increase production,” she said. “We want an explosion of investment through this partnership with the private sector.”

The bulk of the investment would be made between 2014 and 2017, Ports Minister Leonidas Cristino said and both public and private enterprises will be involved to stimulate competition in the management of the country’s ports, he said.

The ports slated for modernization include Santos, which is Latin America’s largest port by value of goods moved, Rio de Janeiro, Paranagua, Porto Alegre, Itaqui, Pecem and Suape.

Cristino said a new port would be built to handle cargo in Manaus in the Amazon and a new deep-water port is also planned for Espirito Santo, an oil-producing state on the Atlantic.

He said new concessions will be granted to dredge ports, starting with the port of Santos, and the number of pilots to guide ships in and out of ports will be increased. Ship up to 5,000 tonnes displacement will be allowed to dock without pilots to speed up traffic.

Rousseff said Brazil’s ports handle 95 percent of Brazil’s foreign trade. The country is the world’s top exporter of coffee sugar and citrus and a major grains exporter. It is also one of the world’s biggest exporters of iron ore used to make steel.

The port investment plan follows a 133 billion reais investment package the government announced earlier this year to improve its road network and expand a woefully-inadequate rail system in the continent-sized country.

Three major airports have also been handed over to private management and more airport concessions are expected before the end of the year.

Businessmen and economists say years of under-investment in infrastructure is restricting Brazil’s economic potential after rapid growth in the last decade that has strained logistics.

The ports upgrade plan aims to ensure their capacity expands in tandem with the rail network whose capacity to deliver cargo will expand immensely with the investments announced in August.

Brazil is about to become the world’s top soy producer, but its competitive advantage as a world agricultural powerhouse has largely been eroded by high transport costs, logistical hurdles and excessive red tape.

The government hopes to reduce Brazil’s transport costs by 20 percent through its investments in infrastructure, according to the transport ministry.

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