INFRASTRUCTURE AND THE LOGISTICS CHALLENGES OF BRAZILIAN EXPORTS

One of the main effects of the globalization process that has been affecting the vast majority of nations is the increase in international trade, which in the last twenty years has been growing at a rate higher than that of world GDP. This phenomenon appears to be accelerating. Between 1995 and 2003, that is, in the most recent eight-year period, the average growth rate of international trade was twice the growth rate of world GDP. That is, while GDP grew at a rate of 2,7% per year, trade grew at a rate of 5,4%.

As expected, Brazil was not immune to this process of growth in international trade. In the same eight-year period, the volume of commercial transactions in the country (imports plus exports) jumped from a level of around US$ 80 billion to a new level of around US$ 120 billion, that is, a growth of 50 % in eight years. During this period, the country moved from a position of deficit to a situation of surplus in the trade balance. This reversal of positions is directly related to the change in exchange rate policy. Between 1995 and 1999, when the national currency appreciated, the country went through a phase of successive deficits. As of 1999, with the strong exchange rate devaluation, a phase of continuous surpluses began, due to the explosive growth of exports. Just to illustrate the impact caused by the currency devaluation, just remember that between 1995 and 1999, when the real appreciated, exports grew by only 3%, while in the period between 1999 and 2003, with the real devalued, growth was 52% , as shown in the following figure.

The explosive increase in exports between 1999 and 2003 had several positive impacts, while at the same time revealing a series of logistical weaknesses in the country. Among the positive aspects we can highlight the increase in Brazil's share in world exports, which jumped from 0,86% to 1,03%, the growth in the share of exports in the national GDP, which jumped from 7% to 13%, and the increase in the country's foreign exchange reserves. The weaknesses represented by the precarious conditions of the highways, the low efficiency and lack of capacity of the railways, the disorganization and excess of bureaucracy in the ports, resulted in an increase in the queues of trucks in the main ports, long waits for ships to berth, the non-compliance with deadlines for delivery abroad, all of this resulting in increased costs and reduced competitiveness of Brazilian products abroad.

With the aim of quantifying and better understanding the country's logistical fragilities, the Center for Studies in Logistics at Coppead carried out an extensive survey, involving the analysis of secondary data obtained from the main Brazilian and foreign institutions linked to foreign trade, as well as the survey of primary data on the largest exporting companies in the country. The analysis of secondary data aimed to know the profile of exports, as well as the main characteristics of the logistical infrastructure to support Brazilian foreign trade. The survey of primary data with the 250 largest Brazilian exporters, aimed to know their perceptions regarding the logistics infrastructure for Brazilian foreign trade. This article will deal with the analysis of secondary data, that is, the profile of exports, and the logistical infrastructure for exports. The analysis of the primary data, which deal with the perceptions of the largest exporting companies, will be presented in a later article.

Knowing the profile of Brazilian exports

With the objective of tracing a profile of exports, we sought to identify the main products, as well as the main destinations of Brazilian exports. To identify the main products, the values ​​exported in US dollars and the volumes in tons were considered. The two tables below list the top five products based on each of the two criteria used.

Export List:

Top Five Products in Value

Export List:

Top Five Products by Volume

An analysis of the first table indicates that in terms of values, the five main items in our export basket represent a combination of industrialized products, usually containerized and with high added value, and basic products, exported in bulk, with low added value. That is, transport material, machines / mechanical instruments, and electrical machines are industrialized products with high added value (averaging US$ 6610 per ton), while soy and iron ore are basic products with low added value (US$ 216 per ton) and very low added value (US$ 20 per ton). On the other hand, the second table shows that in terms of volume, measured in tons, there is a predominance of basic products, which have low and very low added value. It is worth mentioning the enormous volume of iron ore, with around 174,8 million tons exported (3,5 times greater than the sum of the other four main exported products), and whose aggregate value of US$ 20 per ton is about ten times smaller than the average of the other four.

An examination of Brazilian exports as a whole shows that industrialized products represent 70% of the value in dollars, but only 23% of the volume in tons. On the other hand, basic products represent only 30% of the value in dollars, but 77% of the volume in tons, as can be seen in the figure below.

The classification of products by volume and added value is of paramount importance when considering the adequacy of the logistics infrastructure to the country's needs. Products with low added value, transacted in large volumes (generally basic products in bulk), require logistical systems with high capacity and low unit cost, even if for this it is necessary to sacrifice certain dimensions of service, such as frequency and delivery times. delivery. On the other hand, high added value and low volume products (typically industrialized and containerized products) demand logistic systems that can offer high levels of service, in terms of frequency and deadlines, even if this means sacrificing logistic costs.

The following figure shows the five main destinations for Brazilian exports. A quick analysis of the figure indicates that, from this point of view, our exports are quite diversified, as they include North America, South America, Europe and Asia. Such diversification increases the logistical complexity and creates a great challenge in terms of availability and frequency of means of transport, as well as in terms of bureaucracy, norms and culture of each country or region. The complexity becomes even greater if we consider the strong dynamics of our exports, both in terms of volume and in terms of destinations. Just as an example we can mention the cases of Argentina and China. In the case of Argentina, the value exported, which was around US$ 6,0 billion in 1999, dropped to US$ 4,6 billion in 2003. In the case of China, the opposite occurred. From an export volume of less than US$ 1,0 billion in 1999, it jumped to US$ 4,5 billion in 2003.

Main characteristics of the logistics infrastructure for export.

The first aspect to be considered in the analysis of the export infrastructure is the participation of the different modes in international transport of the total exported.

A retrospective analysis shows that the maritime modal is not only the most used, but also the one that has grown the most in recent years, indicating a tendency towards an increase in its share in the export transport matrix. This increases the importance, for the Brazilian economy, of having efficient ports, well located, and with sufficient capacity to meet our needs.

Brazil currently has 35 ports that handle foreign trade cargo, the so-called long-haul cargo. About half of these ports (18) are located in the South and Southeast regions, and are responsible for around 75% of cargo movement. The state with the largest number of ports operating long haul is Espírito Santo, with a total of six, followed by the states of Rio de Janeiro with four, and Santa Catarina with three. With regard to the volume handled in ports, the 3 main states are Espírito Santo, São Paulo, and Maranhão, in that order. With the exception of the State of Rio Grande do Sul, all states, which have long-haul ports, mostly handle export cargo.

The following table lists the 11 largest Brazilian ports, in terms of cargo handling, measured in tons.

An analysis of the table above shows that the eleven largest Brazilian ports can be divided into specialized, basically focused on the movement of bulk, and diversified, which move both bulk and containers and general cargo. The ports listed in green are the specialized ones, while those listed in black are the diversified ones. Of the eleven largest, six are specialized and five are diversified. Tubarão, the largest Brazilian port, is heavily involved in the movement of iron ore, while Santos, the second largest, handles a very diversified range of products, involving containers, general cargo, and liquid and solid bulk.

The biggest consumers of the logistics infrastructure for export are bulk products, among which iron ore, oil and its derivatives, and soy stand out, which, due to their low added value and because they are handled in large volumes, require a large infrastructure and low costs. In the case of iron ore, this structure is available thanks to investments made by Vale do Rio Doce in an integrated system involving modern and efficient railroads, ports and ships. Among the ports operated by Vale do Rio Doce, there are two of the three largest in movement, that is, Tubarão in Espírito Santos, and Itaqui in Maranhão. The same situation is repeated in the case of Petroleum and its derivatives, where Petrobras operates efficient terminals in São Sebastião / São Paulo, and Rio de Janeiro, in addition to having its own pipelines and ships. In the case of soybeans, the infrastructure leaves much to be desired, resulting in huge queues of ships, trucks, and trains, which, as they remain idle in queues for a large part of the time, have their costs increased, heavily burdening the exporter, affecting its profitability margin, and threatening our international competitiveness.

In general, it can be said that the specialized ports have performed well, both in terms of capacity and productivity, while the diversified ports have been presenting a series of problems. This has occurred despite the great advances that have occurred since the privatization process of port terminals. A good example of the progress made can be seen in container terminals in the post-privatization period, as shown in the figures below.

The charts show substantial productivity gains in container handling (a 249% improvement) and vessel utilization (an 83% reduction in time to dock). However, the advances observed in container terminals were obscured by the problems of lack of empty containers and available ships, a consequence of the enormous growth of international trade, mainly in the Far East, and more specifically in China.

Having to allocate ships around the world, international shipowners give preference to routes with larger volumes, which harms Brazil, which still moves a relatively small amount of containers. Just as an example, it is worth remembering that the port of Santos, by far the largest in container handling in Brazil, occupies position 58 in the world ranking. The volume of containers handled there was 15,6 times smaller than the port of Hong Kong, and 13,7 times smaller than the port of Singapore, the two largest in the world in container movement.

Given the stage of economic development and its territorial characteristics, Brazil is still a major exporter of basic products, and a small exporter of industrial products. Just remember that we are the biggest exporter of iron ore and soybeans in the world. Despite the exported volumes, we have not had major problems with iron ore, which is not true in the case of soybeans, which move much smaller volumes, but have encountered major bottlenecks in their export flow. This could perhaps be explained by the fact that ore is basically exported through specialized ports, while soy depends on diversified ports. It is necessary to investigate this phenomenon in greater depth, so that we can learn from examples that have been successful.

A very important issue that was not discussed here refers to the port access infrastructure, that is, the transport and storage infrastructure that makes it possible to move products from production centers to export terminals. This issue will be discussed in the next article that will be published soon.

BIBLIOGRAPHY

1) 2004 Logistics and International Trade Survey – CEL / Coppead (in press)
2) The Challenge of Exports – BNDES 2001
3) MDIC – Siscomex and Secex
4) Foreign trade statistics - World Bank