Rousseff Wins Congress’s Support for Brazil Port Investment Plan
Brazilian President Dilma Rousseff yesterday won congressional support for a plan to attract private capital and boost investment in ports by $27 billion.
The two houses of Congress approved government legislation that eliminates concession fees and allows private ports to handle shipments from outside companies. Brazil’s Senate approved the bill in a 53-7 vote following lower house approval earlier in the day.
The legislation is part of a government push to drum up private investment for infrastructure, Claudio Goncalves Couto, a political scientist at the Getulio Vargas Foundation, said by phone from Sao Paulo yesterday before voting finished. Rousseff’s administration is seeking to pull Brazil’s economy out of its slowest two years of growth in more than a decade.
“The measure opens ports up to private businesses and increased flexibility in the sector,” said Couto. “In a lot of sectors, the government has a reputation for being state-centric and interventionist. In reality, you cannot simply say that.”
Brazil’s port infrastructure is ranked 135th of 144 countries, lower than all other members of the BRICS group that includes Russia, India, China and South Africa, according to the World Economic Forum’s Global Competitiveness Report.
‘Not Worth Exporting’
Ships are known to wait as long as 56 hours to dock at Brazilian ports, according to the national industry confederation, known as CNI. At one point last month, there was a 21-mile line of trucks trying to access Santos, the country’s biggest port.
“There are places in Brazil in the interior that are globally competitive in terms of producing sugar or pulp, but by the time you get it to port it’s not worth exporting,” Philip Guarco, JPMorgan Chase’s chief investment strategist for Latin America, said in an interview on Bloomberg Television May 13. “What that does is raises the costs of everything you produce.”
The legislation is positive for Santos Brasil Participacoes SA (STBP11) because it allows the Brazilian port operator to renew its concession contract, JPMorgan analyst Fernando Abdalla wrote in a report yesterday before Senate voting finished.
Rousseff, speaking in Sao Paulo on May 13, called the vote on her reform proposal as “a very important moment” for the country, and said its passage would increase competition and efficiency. Congress’s lower house earlier yesterday approved the measure, which would have expired without the Senate’s approval.
Brazil’s economy grew 0.9 percent in 2012 and 2.7 percent in 2011, slower than all other nations in the BRICS group. Exports, which account for 12.5 percent of gross domestic product, last year dropped 5.3 percent from 2011.
Inflation in the meantime has accelerated, speeding up to 6.49 percent in April from 5.84 percent in December. That gives Brazil the fastest inflation among major Latin American countries behind Venezuela and Argentina.
Infrastructure bottlenecks will limit Brazil’s ability to capitalize on this year’s crop harvest, which may be a record, said Raul Velloso, director of research company ARD Consultores Associados.
Brazil is already the largest exporter of coffee, orange juice and sugar, and the 2013 soybean harvest will surpass that of the U.S., according to U.S. Department of Agriculture’s forecast.
While the ports measure will facilitate trade and allow Brazil’s economy to grow faster, officials also must be willing to tackle other infrastructure bottlenecks, according to David Fleischer, a professor of political science at the Federal University of Brasilia.
“Port infrastructure is one thing,” Fleischer said in a telephone interview from Brasilia yesterday before voting finished. “There are also railroads, highways and airports.”
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