PORT DEVELOPMENTS INAN EMERGING COUNTRY

THE CASE STUDY OFBRAZIL

São Paulo, May 2014

ANDRE DE FAZIO, MSc

ANDRE DE FAZIO, MSC

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Academic Record:MSc - Maritime Economics and Logistics (MEL)– Erasmus Univ. Rotterdam (EUR)– HollandPost Graduate in Business Administration – Getulio Vargas Foundation - FGV/SP – BrazilB.S. in Civil Engineer – Catholic University– PUC Campinas

Professional:Current: EcoRodovias Group – Logistics Planning Manager – Brazil.UFSC - National Plan of Port Logistics - PNLP - Technical Head - BrazilCMA CGM GROUP / Terminal Link - Manager for Terminal Investments – BrazilCSN/ Sepetiba Tecon - Commercial Manager – BrazilP&O Nedlloyd - Engineer – The NetherlandsODEBRECHT GROUP - Civil Engineer – Brazil

Others:Speaker - PIANC / SMART RIVERS CONFERENCE– Maastricht – Holland- 2013Speaker - TOC AMERICAS - Panama – 2012Speaker - TOC AMERICAS - Panama – 2011Speaker - Maritime Economics and Logistics Decennial Conference – EUR - Rotterdam, 2010Speaker - 15th Brazilian Congress of Civil Engineers – Brazil – 2009Speaker - XXI COPINAVAL - Pan-American Congress of Naval, Maritime Transportation and Ports, 2007

Director of the Infrastructure Department of FIESP (Industry Federation of SP State)- BrazilCo-Founder and Director of the Committee of Young Entrepreneurs - CJE - FIESPMember of the Advisory Board of the Regional Council of Engineers and Architects- CREA-SP

AGENDA

- Introduction

- The Brazilian Paradox:- powerful emerging economy x lack of infrastructure

- Trade opportunity and challenges

- Brazilian Case Study

- Conclusion

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INTERNATIONAL TRADE (X7 BTW 1993-2013)Brazilian trade balance (Exports +Imports) – 1993-2013* US$ bilion FOB

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BRAZILIAN INTERNATIONALRANKING ON LOGISTICS (1/2)

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The average of 7 evaluations, with results that vary between 1 and 5Logistic Performance Index – World Bank

TARGETby 2012

LPI

SOURCE: World Bank, 2012

2010

5

4

3

2

1

Singapore LPI = 4.09Second Place

Brazil LPI = 3.2041st. place

Somalia LPI = 1.34Last Place

BrazilLPI = +/- 3.45Approx. 30th. position

In 2022 among the 10BestLPI = +/- 3.90

2007

Singapore LPI = 4.19First Place

Brazil LPI = 2.7561st. place

Afghanistan LPI = 1.21Last place

2012BrazilLPI = 3,1345st.place

Performance IndexLOGISTICS LPI

BRAZILIAN INTERNATIONAL RANKING ONLOGISTICS (2/2)

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35 3,28If all items graded at same level, Brazil

would be better ranked

BRAZILIAN PORT SYSTEM- 34 Public Ports- 129 Private Terminals

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AMAZONAS PARÁ

AMAPÁRORAIMA

RODÔNIA

MATO GROSSO

TOCANTINS

GOIÁS

MATO GROSSODO SUL

MARANHÃO

PIAUÍ

CEARÁRIO GRANDEDO NORTE

PERNAMBUCO

BAHIA

MINAS GERAIS

SÃO PAULO

PARANÁ

SANTACATARINA

RIO GRANDEDO SUL

SERGIPE

ACRE

Port of MANAUSPort of SANTARÉM

Port of BELÉMPort of VILA DO CONDE

Port of ITAQUI

Port of FORTALEZAPort of AREIA BRANCA

Port of NATALPort of CABEDELO

Port of SUAPEPort of MACEIÓ

Port of SALVADORPort of ARATU

Port of ILHÉUSPort of BARRA DO RIACHOPort of VITÓRIA

Port of RIO DE JANEIROPort of ITAGUAÍ

Port of SÃO SEBASTIÃOPort of SANTOS

Porto de PARANAGUÁPort of SÃO FRANCISCO DO SULPort of ITAJAÍ

Port of IMBITUBAPort of PORTO ALEGRE

Port of RIO GRANDE

Port of MACAPÁ

Port of RECIFE

Port of NITERÓIPort of FORNO

Port of ANTONINA

Port of ANGRA DOS REIS

Port of PELOTAS

Port of PECÉM

VOLUME HANDLED AT BRAZILIAN PORTS(X 3 IN 20 YEARS)

Million tons

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BRAZILIAN PORTS SYSTEM - CONTAINER

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North6.5%

Northeast12%

Southeast50.5%

South30.9%

1 IBGE2 Casa Civil (Office of the Chief of Staff)3 ANTAQ - National Water Transport Agency4 MDIC - Ministry of Developmente, Industry and Foreign Trade

Geographicaldistributionof ContainermovesBrazil

- GDP: R$ 4,1 trillion1

- Navigable coastline of 8.5thousand km2

- Investments envisaged in PAC 2(2011-2014): R$ 958,9 billion4

Port in Brazil- Responsible for more than 80% of

current trade2

- 5,0 million containers handled3 (organized publicports and private use terminals).

- 84% of containers handled by public ports3

EXPECTED INVESTMENT IN LOGISTICS

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USD 150Billions in 30 years

Source: EPL - Empresa de Planejamento Logístico

ROADS

• Expansion of the mainroads (and logisticscorridors) in Brazil.

• Privatization processes ofmain roads.

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ROADS – CONCESSION OF 9AREAS (7.500 KM)

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RAIL

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• New Legal Framework.

• End of Monopoly on RailTransportation.

• Expansion, Integration andModernization of rails.

RAIL

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WATERWAYS

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Waterways:

• Madeira• Tapajós – Teles Pires• Tocantins – Araguaia• Parnaíba• São Francisco• Tietê – Paraná• Paraguai – Paraná• Sul (Mercosul)• Amazonas - Solimões

PRIORITY– CONSTRUCTION OF27 LOCKS

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River Locks Status

Source: Ministry of Transports

EXPECTED INVESTMENT TOCONSTRUCT 27 LOCKS

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R$ 11,6 billions 1

AVG: USD 250 millionsPer lock

Source: Ministry of Transports

PORTS

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• Expand Port System Capacity.

• Clearly define the institutionalframework.

• Improve the management efficiency(performance) of Brazilian Ports.

• Improve Port acesses(road/rail/waterways).

CHALLENGES

BRAZILIAN CASE STUDY

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BANANA CHAIN

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BRAZILIAN CASE STUDYBANANA CHAIN

The most consumption fruit in the world (+2,37% a.a. in the last 8years).

Main Global Players:• Dole Food Company, Del Monte Foods, Chiquita Brands

International

Consumption ´Per capta´ (kg/hab./year):• Philipinnes 42, Brazil 30.

Productivity (ton./hectare):• Costa Rica: 53,95 (#1), Brazil: 13,55 (#9)

Freight rates (+ local taxes), for a 40´´ reefer cntr (13°C- 14°C):• Ecuador to R´dam: USD 4.500 per Cntr.• Brazil to R´dam: USD 3.400 per Cntr.

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CASE STUDYBANANA CHAIN

CASE STUDY

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BANANA CHAIN

Despite been one of world largest producer, Brazilianproduction is mainly for Internal Market.

For internal market, plantations are in SC, PR, MG andSP states. For exports, mainly Mercosul and Europe,production are in RN and SC states.

In 2013, Brazil exported +8% than previous year,reaching ~100 millions tons (1% of Global Market-share).

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CASE STUDYBANANA CHAIN

40% Farm: production, working force60% Logistics: transport, storage, handling

BRAZIL – CURRENT CHALLENGESON LOGISTICS

• Physical:

- Insufficient infrastructure capacity- Inadequate hinterland connections- Limited port draft- City-locked ports generating congestion

• Management:

- High logistics cost- Bureaucratic system- Environmental issues- High waiting time at Ports

• Reduce Logistics Costs.

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CONCLUSION

• Expand capacity of the port system

• Promote Hub and Spoke concept, linking Ports to LogisticPlatforms

• Balance Modal Split (road, rail, waterways, cabotage,pipeline)

• Improve the management efficiency (performance) ofPorts

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CLOSING REMARKS

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“Brazil is the 21st-centurypower to watch.”Finacial Times, 19 Oct. 2009

“Brasil is South America’s mostiinfluential country, an economicgiant and onde of the world’sbiggest democracies.”BBC News 5 oct. 2010

Brazil has always been considered “thecountry of the future”but that futurenever became reality...now the time ishere, a world economix power with abooming internal market as well as amajor player in the world trade market.

This is the right time to be in Brazil!

“Brazil is likely to becomethe worl’s fifith-largesteconomy, overtakingBritain and France.”The economist, 14 Nov. 2009

CLOSING REMARKS

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“Has Brazil blown it?”The economist, Sept. 2013

EUROPE – HUB N´ SPOKEDEEP SEA TERMINAL <-> LOGISTICPLATFORMS

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ECT/Rotterdam para MOERDIJK CONTAINERTERMINALS

www.europeangatewayservices.com

THANKS FOR YOUR ATTENTION

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André de Fazio, MScandre.fazio@ecorodovias.com.br

+ 55 11 3787.2667