May 21, 2013

Brazilian Congress Passes Port Modernization Legislation

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The big news in Brazil last week was the short-lived strikes at several Brazilian ports while the Brazilian Congress debated the port modernization/privatization legislation. After a very contentious debate, the legislation passed over the objections of the labor unions operating at the ports. President Rousseff considered this legislation as one of her top priorities and she telephoned the Senate leadership to congratulate them for passage of the bill. She is expected to sign the bill as soon as it gets to her desk.

This legislation is not expected to have any immediate impact on Brazilian logistics, but it could lead to improved logistics years down the road. The legislation calls for the operation of public ports and grain terminals to be turned over to private companies. The government will probably still own the land/facility, but the operations would be handled by private individuals through long-term leases. There are still a lot of details to be worked out even before the bidding process can begin.

I do not expect a quick turnaround of port operations in Brazil. The infrastructure at the main Brazilian ports will not be any different twelve months from now than it is today. I think there are about 170 individual facilities to be privatized and it will probably take several years to work through all the paperwork and bureaucracy. After that is complete, it would then take several more years to actually construct any new facilities, so this is definitely a long-term process. Eventually, it should lead to improved logistics and more efficient operations, which are desperately needed in Brazil.