THE QUALITY OF THE LOGISTICS INFRASTRUCTURE IN THE PERCEPTION OF THE MAJOR BRAZILIAN EXPORTERS

The year 2004 seems to have been decisive for Brazilian foreign trade: exports reached a financial volume of US$ 94 billion and few times has the issue of the quality of export logistics infrastructure been debated with such intensity by different segments of society. Queues of up to 85 km of trucks in the Port of Paranaguá (Agência Brasil, 2004), confusion and congestion in the port of Santos (Trindade, 2004), ships waiting an average of 22 days to dock (Safatle and Ribamar, 2004), bumpy roads making it difficult to truck traffic (Gazeta Mercantil, 2004) and invasions and development of railway tracks are examples of some themes related to Brazilian foreign trade highlighted in the press in recent months.

However, it should be noted that, in most cases, the debate on the export logistics infrastructure, its deficiencies and its impacts in terms of operational inefficiencies is conducted in generic terms and disregards the eventual specificities of the different export segments. Do they all perceive the quality of the logistics infrastructure equally? What are the main criteria for segmenting exporters? What dimensions and variables make up the quality of the logistics infrastructure? The titles of some reports on the subject illustrate that this issue continues to be treated in an aggregated way:

• Logistics inefficiency affects Brazilian competitiveness (Torres, 2004a)• Logistics becomes a barrier to exports (Gazeta Mercantil, 2004)• Competitive Brazil passes through ports (Sales, 2001)• Ports are close to the limit (Souza, 2004)• Resources to overcome bottlenecks on railroads (Torres, 2004b)

  It is likely that the incipience of the discussion on the perception of the quality of the logistics infrastructure in light of the segmentation of exporters is caused by two main elements. The first would be related to a clearer understanding of the main logistical difficulties for export. For example, what factors really constitute barriers to export? What is its relative importance? Is access to ports more important than the movement of cargo in ports or vice versa? What is the relative importance of conjunctural factors in exports, such as the availability of ships and planes? And the infrastructure in the buying countries, to what extent is it also a barrier to exports? Once again, the titles of some reports suggest that, in the debate on the quality of the export infrastructure, it is clear what the main difficulties for exports would be. However, the understanding of which factors are priority and how they are related to the exporting segments is not clear:

• Inspection of cargo at ports will be streamlined (Rios, 2004a)• Crop failure causes rail freight to plummet in Paraná (Rios, 2004b)• Strike hampers unloading at Suape (Portos e Navios, 2004)• Drops the queue of trucks at the Port of Paranaguá (Nórcio and Pimentel, 2004)

The second element would be related to the lack of national and international academic articles on the subject.

A literature review conducted through the Google search website and the Proquest database throughout 2004 revealed that the vast majority of publications consist of statistical yearbooks, government reports and reports with descriptive statistics on the evolution of international trade, infrastructure physics and investments in different countries of the globe.

See for example UNCTAD (2003) and WTO (2004). More specifically, the search in the Proquest database returned few academic articles addressing topics on infrastructure quality and exporter segmentation. Worth mentioning are the articles by Clark, Dollar and Micco (2004) on the impact of general infrastructure conditions and product characteristics (and consequently the type of cargo) on the efficiency of port operations in the US, and by Walter and Poist (2004) on the preference of US shippers from Iowa for dry ports of the “one-stop-shopping” type, which offer various bureaucratic services and the sharing of facilities.

The objective of this research is to analyze the perception of different Brazilian export segments about the quality of the logistics infrastructure. Firstly, through the identification and validation of the main segmentation dimensions, based on the literature review and a better understanding of the main export difficulties. Second, by identifying, proposing and measuring the different component dimensions of the export logistics infrastructure. Below is a brief discussion of these two elements, starting with the issue of infrastructure.

Export infrastructure and main dimensions of analysis

The impact of infrastructure on export operations is widely recognized around the world (Limao and Venables, 2001). Of all logistical costs, transport costs are demonstrably affected by the level of infrastructure (Martinez-Zarzoso, Garcia-Menendez and Suares-Burguet, 2003). In addition to freight, export transport expenses also involve other items, such as ship demurrage, container detention, truck and train per diems, all associated with penalties resulting from the demurrage and idleness of these assets.

According to research by Limao and Venables (2001), “deterioration of infrastructure from the median to the 75th percentile increases transport spending by twelve percentage points and reduces trade volume by 28%”. In the Brazilian debate on export logistics infrastructure, these expenditure items are often referred to as the Brazil Cost (see, for example, Figueiredo, Fleury, and Wanke, 2003).

The accumulation of infrastructure, however, is limited by a certain technological frontier and includes fixed and variable components (Bougheas, Demetriades and Morgenroth, 2004). The first involve the physical infrastructure, that is, in a broad sense, the modes of transport through which shipments are shipped. Export is a multimodal operation by nature, with shipments being made by road, rail and waterway to the exit points, that is, ports and airports.

The variable components involve the bureaucratic infrastructure, that is, legislation, taxes, fees, customs procedures for dispatching shipments and any facilities. In Brazil, the EADIs deserve increasing attention (see, for example, Guia de Logística, 2004), that is, the Inland Customs Stations. The EADIs are customs facilities for public use, located in a secondary zone, in which, under concession, the operations of movement, storage and customs clearance of goods are carried out. The provision of these customs services in a dry port close to the domicile of exporters greatly simplifies procedures (Receita Federal, 2004).

Segmentation of exporters

As indicated, the discussion about the segmentation of exporters is incipient in the literature. Some dimensions such as the type of cargo (container or bulk) and the exporter's perception of the criticality of the port operation seem to be relevant. For example, Clark, Dollar and Micco (2004) investigated the determinant variables of export efficiency (transport spending) given a certain level of infrastructure. Distances, volumes, product characteristics and type of cargo are the main variables that affect this relationship. Exporters of different types of cargo experience different transport costs and may also perceive infrastructure quality differently. Walter and Poist (2004) point out that, for exporters from internal (non-coastal) states, such as Iowa (USA), there is a clear preference for dry ports of the “one-stop-shopping” type, compared to traditional ports. In some cases, it seems that the port operation is an important variable for decision making.

In any case, even though the type of cargo seems to be a dimension of universal segmentation, port operations seem to be affected by the difficulties or particularities of US internal states, such as Iowa. It is not possible to state, a priori, that other characteristics of exporters, in other circumstances, would lead to a greater weight of port operations. The most that can be said is that difficulties or barriers to export, in general, seem to be related to this dimension.

Main questions and research methodology

Based on the previous discussion, the research questions were formulated. The first is related to the identification, based on empirical data, of the main factors associated with logistical difficulties for export. The question is formalized as follows: “Is it possible to identify the different factors associated with logistical difficulties for export: physical infrastructure, bureaucracy, Brazil Cost, availability and frequency of maritime routes and areas abroad, storage conditions, etc?”

The second question is related to the validation of the type of cargo (container/bulk) as a segmentation dimension for Brazilian exporters, based on the factors identified in the first question: “Which factors are considered most critical by bulk cargo exporters? And for containerized cargo exporters, what factors reflect the main logistical difficulties for export?”

The third question is related to the sectors of the economy associated with the groups formed based on similarities in the logistical difficulties for export: “What are your perceptions on different aspects related to operational efficiency in export: Brazil cost, time to release shipments, hiring operators logistics and estimated percentage of lost products?”

Finally, the last question is related to the determination of relations between the variables of the different dimensions of perception of the quality of the infrastructure with the main criteria of segmentation of the exporters identified in the previous questions. It seeks to determine whether exporters of different types of cargo and/or different groups of exporters have different perceptions about the quality of the logistics infrastructure, considering physical infrastructure, bureaucratic infrastructure, Brazil Cost and use of EADIs.

Based on the ranking of the Association of Brazilian Exporters (AEB), the 250 largest exporters in terms of financial volume were selected. During the second half of 2004, logistics managers from these companies were contacted, with 101 recipients returning the questionnaires. This makes a response rate of 40,4%. Twenty-six variables possibly related to logistical difficulties for export were investigated, that is, related to the importance of different aspects such as infrastructure, bureaucracy, Brazil Cost, availability and frequency of sea routes and areas abroad, storage conditions, etc.

These variables, their operationalization and their scales are presented in Table 1. 14 variables related to the perception of operational efficiency and the quality of the logistics infrastructure and the characterization of exporters were also investigated (Table 2).

Discussion of results

The survey results represent theoretical advances in understanding the main logistical difficulties for exports and the different perceptions of the quality of this infrastructure in Brazil. Contrary to what common sense indicates, these elements are not homogeneous for all exporters and are significantly influenced by the type of cargo exported (container or bulk) and by the difficulties of the port-to-port operation. It should be noted, however, that some common perceptions about the export issue are corroborated in this study: logistical difficulties are in fact present at all stages of the export chain and they tend to be greater in ports than in airports and highways.

From a practical point of view, these results related to the segmentation of exporters can be used by the public and private sectors, respectively, in the formulation of specific public policies by segment and in making managerial decisions with a view to greater operational efficiency.

For example, regarding the type of cargo (container or bulk), the exporter's competitive priorities become evident. Exporters of cargo in containers consider the low availability of sea and air transport as the main difficulties for exporting. Its main concern is with the frequency of ships and planes which, ultimately, will be reflected in the response time of the port-to-port or airport-to-airport operation.

Probably, a greater use of EADIs by this exporting segment should cushion the impact of the difficulty of flow and access to ports/airports of containerized shipments. The EADIs are establishing themselves as an important means to speed up the flow and access of cargo in ports and airports, while they constitute a palliative to the bottlenecks resulting from reduced investments in this stage of the chain.

On the other hand, bulk cargo exporters (basically ores and grains) consider the flow and access to ports to be the main logistical difficulty for exports. In addition to reduced investments in physical infrastructure in recent years, these exporters also notice a significant deterioration in export bureaucracy. This is perhaps a reflection of the lack of mechanisms similar to the EADIs, which “compensate” for the long queues and waiting times in the flow and access of cargo to the ports, resulting from deficiencies in the physical infrastructure.

A clear reflection of these long waiting times in accessing ports is the inability to coordinate the transhipment of truck loads directly to ships, implying substantial average expenses per exporter in ship demurrage and truck per diems. In 2003, bulk cargo exporters spent, on average, US$1,710 million more than containerized cargo exporters on ship demurrage and US$286 more on truck per diems. Considering that bulk cargoes are fundamentally commodities and have low added value, these extra expenses, resulting from deficiencies in infrastructure, imply a loss of international competitiveness, which is relatively greater in the case of bulk cargoes than in containerized cargoes.

With regard to the port-to-port operation, it is clear that there may be more complex situations in which (1) part of the problem is also in foreign ports and (2) specific conditions in certain sectors of the economy have led to a worsening in the perception of infrastructure and logistics outsourcing. Industries in the industrial inputs/intermediate products sector, such as Chemicals and Petrochemicals, Pulp and Paper, Steel and Mining and Metal Mechanics tend to have limitations in production capacity and to be strongly affected in profit margins by inefficiencies in handling and transportation , mainly reflected in the percentage of product loss and the long lead times for clearance at ports.

This scenario probably contributed to the perception of the worsening quality of the physical infrastructure of the maritime modal and the bureaucratic infrastructure of import and export in the last five years. As a response to structural deficiencies in maritime transport, exporters in these industries are increasingly hiring international logistics operators and intend to use EADIs more intensively in the future.

Probably, the perception of worsening on the part of exporters of these industries is due to limitations in production capacity, which generally inflicts limitations on the flexibility of operational response, especially with regard to delivery times. In this way, and due to the fact that these industries are capital-intensive and demand large investments to expand production capacity, the short-term solution to ensure minimum levels of flexibility in operational response involves outsourcing logistics and not production. In any case, it is impossible to say until when actions such as outsourcing and use of EADIs will be able to produce a compensatory effect in the deficiencies of the Brazilian infrastructure.

CONCLUSION

This research sought to assess the perceptions of Brazilian exporters about the quality of the logistics infrastructure in the light of different dimensions of segmentation. Its results revealed that, contrary to common sense, perceptions about the physical and bureaucratic infrastructure, the Brazil Cost and the use of EADIs depend on the export segment in question. Two priority dimensions for segmentation were validated: the type of cargo (bulk or container) and the criticality of the port-to-port operation.

Bulk cargo exporters tend to consider flow and access to ports a more critical logistical difficulty than containerized cargo exporters. The difficulty of coordinating the transshipment of cargo from trucks to ships means that exporters in the first group spend substantially more on demurrage of ships and per diems for trucks and perceive a substantial deterioration in the bureaucratic infrastructure of exports in the last five years, compared to the second group. .

With regard to the port-to-port operation, exporters in the industrial inputs/intermediate products sector perceive the deterioration in the quality of the physical infrastructure of the maritime modal and the bureaucracy for exports and imports as a reflection of limitations in production capacity. For this segment, hiring international logistics operators is economically more advantageous in the short term than expanding production capacity.

BIBLIOGRAPHY

Brazil Agency. Trucks in the port of Paranaguá form queues of 85 kilometers. Available in: http://www.ceol.com.br. Accessed on: April 16, 2004.

BOUGHEAS, S.; DEMETRIADES, PO; MORGENROTH, ELW Journal of International Economics, Amsterdam, v. 47, no. 1, pg. 169, 1999.

CIGANA, C. International committee seeks funds to restore BR-290. Gazeta Mercantil, Rio de Janeiro, July 22, 2004.

CLARK, X.; DOLLAR, D.; MICCO, A. Port efficiency, maritime transport costs, and bilateral trade. Journal of Development Economics, Amsterdam, v. 75, no. 2, pg. 417, 2004.

FIGUEIREDO, KF; FLEURY, PF; WANKE, P. Logistics and Supply Chain Management: Product Flow and Resource Planning. São Paulo: Editora Atlas, 2003. 483 p.

Logistics Guide. EADI – Interior Customs Station. Available in: http://www.guiadelogistica.com.br. Accessed on: March 1, 2004.

LIMAO, N.; VENABLES, AJ Infrastructure, geographical disadvantage, transport costs and trade. The World Bank Economic Review, Washington, v. 15, no. 3, pp. 451-479, 2001.

Logistics becomes a barrier to exports. Gazeta Mercantil, Rio de Janeiro, May 20, 2004. Agribusiness Report – Challenges.

MENTZER, JT; FLINT, DJ Validity in logistics research. Journal of Business Logistics, Oak Brooks, v. 18, no. 1, pp. 199-216, 1997.

NORCIO, L.; PIMENTEL, C. The queue of trucks at the port of Paranaguá falls. Gazeta Mercantil, Rio de Janeiro, April 15, 2004.

Ports and Ships. Strike hampers landing in Suape. Available in: http://www.portosenavios.com.br. Accessed on: April 15, 2004.

IRS. Dry ports. Available in: http://www.receita.fazenda.gov.br. Accessed on: January 28, 2004.

RIOS, C. Inspection of cargo in ports will be streamlined. Gazeta Mercantil, Rio de Janeiro, March 9, 2004a.

RIOS, C. Crop failure causes rail freight to plummet in Paraná. Gazeta Mercantil, Rio de Janeiro, March 11, 2004b.

SAFATLE, C; RIBAMAR, O. Companies pay for port shortages. Valor Econômico, Rio de Janeiro, May 14, 2004.

SALES, A. Competitive Brazil passes through ports. Tecnologística Magazine, São Paulo, n. 69, 2001.

SOUZA, L. Ports are close to the limit. Folha de Sao Paulo, Sao Paulo, June 7, 2004.

TABACHNICK, BG; FIDELL, LS Using multivariate statistics. Boston: Allyn and Bacon, 2001. 966 p.

TORRES, CL Logistic inefficiency affects Brazilian competitiveness. Valor Econômico, Rio de Janeiro, July 16, 2004a.

TORRES, CL Resources to overcome bottlenecks in railroads. Valor Econômico, Rio de Janeiro, July 16, 2004b.

TRINDADE, R. Porto de Santos will be open 24 hours a day. Valor Econômico, Rio de Janeiro, May 5, 2004.

UNCTAD. Review of maritime transport. Technical Report. Geneva, 2003. 162 p.

WATER, CK; POIST, RF North American inland port development: international vs. domestic shippers preferences. International Journal of Physical Distribution & Logistics Management, Bradford, v. 34, no. 7/8, pg. 579, 2004.

WTO. World trade 2003 prospects for 2004. Technical Report. Geneva, 2004. 12 p.