Brazil's lack of freight logistics competitiveness put into focus

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Tuesday, January 31, 2017

A lack of political will and the need for regulatory improvements are two of the main factors negatively affecting Brazil's freight logistics competitiveness, according to Mauro Schlüter, a logistics professor at the Mackenzie Presbyterian University in São Paulo state's Campinas city.

In this interview, Schlüter discusses these and other issues such as the exchange rate and the Lava Jato corruption investigation.

BNamericas: How would you describe transportation infrastructure in Brazil?

Schlüter: In terms of highways, railways, waterways and port infrastructure, Brazil is in bad shape overall.

There is some good infrastructure but it involves tariffs, and we're talking about high tariffs. Fees at our ports are approximately 75% higher than ports in other countries.

Meanwhile, there isn't enough government will to expand infrastructure. One solution could be the construction of logistics platforms but there seems to be no interest in that either.

BNamericas: Besides a lack of infrastructure, what else hinders logistics efficiency in Brazil?

Schlüter: Like I said, the largest problem is not having appropriate infrastructure to create an efficient system to handle the movement of cargo throughout the country. This is nothing new.

The second issue hindering logistics efficiency is the lack of regulation when it comes to the concession model for port terminals, railways and others.

We need regulation that is more focused on reducing costs for clients and improving Brazil's worldwide competitiveness. This is not the case right now.

BNamericas: Why do you think there's a lack of government will to expand infrastructure?

Schlüter: Well, Improvements are not occurring at the rate they should because today's public-private partnerships are more focused on serving monopolies and oligopolies than overall expansion.

For instance, instead of building more roads and airports, the government encourages current concession holders to expand their existing infrastructure, such as installing more lanes on highways or runways at airports.

Without building new infrastructure networks in other areas, Brazil as a whole will remain less competitive.

BNamericas: How do you see Brazil's Lava Jato corruption investigation affecting logistics infrastructure in the country?

Schlüter: I don't believe there will be any profound impact on services such as freight transport along highways and multi-modal operations. The investigations, however, will motivate companies to be more compliant and this usually improves efficiency.

BNamericas: Is there any drawback to improving logistics competitiveness?

Schlüter: Well, when you improve competitiveness through more efficient procedures, this involves cutting costs. However, it also affects economic performance in other areas.

The ones mostly affected are the providers of freight handling services along roads. With that said, independent truck drivers are usually the first to lose their job. This could also affect highway concessionaire revenue.

BNamericas: The dollar exchange rate has fluctuated a lot in the past year. How does that affect the industry?

Schlüter: For the transport of freight by roads, it primarily interferes with the variable costs of fuel, tires, and lubricating oil, in that order. It also affects brake pads and other such items but, for the most part, the dollar exchange rate mainly impacts oil derivatives.

Keep in mind that another factor affecting costs is the fact that state-run oil company Petrobras is publicly traded on the New York Stock Exchange as well as São Paulo's BM&FBovespa.

Perhaps there are some positive trade-offs to high oil prices but, in general, a jump in oil means increased costs for the freight logistics industry.