May 31, 2013

Truck Manufacturing a Bright Spot in Brazilian Economy

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

Truck manufactures in Brazil are ramping up production in order to meet the ever increasing demand for trucks to transport Brazil's record large grain crops. Truck production increased 39% during the most recent trimester and it was the star performer in an otherwise mediocre economic performance. Two thirds of Brazil's capital investments during the most recent trimester were for increased truck production.

The increased truck production is being driven by several factors including the lack of railroads and barges to move Brazil's increasing grain production to export markets and new regulations limiting the number of hours a truck driver may be behind the wheel.

President Rousseff is attempting to address the inadequate infrastructure by announcing the government's intensions to invest R$ 240 billion to improve the country's infrastructure after decades of neglect. Plans include upgrading the nation's highways, railroads, ports, and airports. It's a huge task and it remains to be seen if the government will follow through with all their intensions.

One of the most current reasons why Brazil needs more trucks is the new Truck Driver Law that requires additional hours of rest for big rig drivers. The new regulations require drivers to rest 11 hours per day and 30 minutes of rest for each four hours behind the wheel. The regulations passed by the Brazilian Congress last year essentially removed an estimated 30% of the trucks from the highways of Brazil. The goal of the legislation was to reduce the number of accidents caused by fatigued drivers, but there has been no evidence thus far that it is meeting its goal.

Instead, there are antidotal reports of truckers driving faster and more reckless in an effort to make up for time lost during the mandated rest periods. In a recent effort to enforce the new regulations, the state highway police in Parana set up a series of checkpoints to see if drivers are adhering to the new regulations. Each truck has a paper recording device that tracks if the truck is moving and the speed of the truck and drivers are required to keep the information for thirty days. If they are stopped by the police and they request the information, the drivers are obliged to have it available.

During the operation 115 trucks were stopped and 28 were found to have violated the regulations. Each violator received a fine of R$ 127 (US$ 63) and four points removed from their driver license. A person's license is suspended if they lose twelve points.