Tuesday , 26 March 2019
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At the UK Trade and Investment “Business Opportunities in the Latin American Port Sector" event in London on Monday May 13, a number of speakers including those from Panama, Mexico and Brazil urged British companies to become more involved in the region as soon as possible.

Opportunity knocks in Latin America

Examples were cited of Spain, Holland, German, China, and Finland being heavily involved in the region unlike the UK whose companies were generally poorly represented. This was a shame because surveys showed that that the British were considered to be trustworthy and reliable with good quality products, although prices were generally higher than the competition

The forecast for Latin American growth is 3.4% for this year and 3.9% for next year compared to almost zero UK growth. Furthermore, the UK exports more to Switzerland than it does to the whole of the Latin American region.

Panama

In a background briefing of Panama the main emphasis was on the development of the Panama Canal where once again the UK was not listed among the project contributors. The country was considered to be safe for investors with a favourable tax regime, although one drawback is the energy problem which is now reaching crisis levels.

It was also noted that whilst around 5% of world trade goes though the Canal and is expected to rise to around 8% when the expansion is completed it will be unable to accommodate some of today’s largest vessels. Why did they not plan it to be larger in the first place asked one speaker?

Brazil

In addition to being the world’s leading exporter of iron, coffee, soy beans, orange juice, beef, chickens, sugar & ethanol, Brazil comprises 43% of Latin America’s GDP.

Ports move 95% of the country’s exports but it lacks an hinterland transport infrastructure. With rail virtually non-existent, the country has to rely on an inadequate road network with most hinterland deliveries made by truck, many of which are around 20 years old, single owner-operated and heavily unionised.

Attention was given to Provisional Measure 595 (MP 595) which was announced by President Dilma Rousseff in December 2012 and which comprises a package of measures to solve many of the current problems including infrastructure, bureaucracy, access, dredging and the lack of an integrated logistics chain.

The intention of MP 595 is to attract new investment to the ports sector and it is predicted to produce some of the most significant changes in the regulatory framework of the national ports industry for the past 20 years.

While still requiring the approval of Congress, the main change that will be brought in by these measures will be almost total deregulation of privately owned terminal, with an anticipated investment of R$54.2bn (US$27.6bn) to foster infrastructure modernisation and port management and the expansion of private investment and cost reduction in the sector.

In the period 2014/15, R$31bn will be invested in leases and terminals of private use (TPUs), and between 2016/17 more than R$23.2bn has been earmarked. Investment funds of R$2.6bn are also expected for waterway, road and rail access in 18 of the country’s main public ports, and over R$3.8bn for the implementation of the second stage of the National Programme of Port and Waterway Dredging.

The main challenges for investors include a complex tax system, visa problems, government liaison and environmental licences. However, it was pointed that whilst not mandatory as in some countries, partnership with a local company is strongly recommended to overcome these and other problems such as language. Furthermore, companies with sustainable strategies will also have an advantage.

Mexico

Said to be the largest trading nation in Latin America it comprises 33% of the region’s trade – more than Brazil & Argentina combined and has 12 Free Trade agreements covering 44 countries

The country has 16 deep water ports; nine on the Pacific and seven on the Gulf Coast. In 2014 the country plans to break through the 5% barrier of GDP for port investment for the first time.

In the last 15 years container movements have grown by an annual average of 12% and annual growth of the port system as a whole over the next six years is expected to be 4.8%, which means that Mexico needs to expand its port infrastructure to fulfil future demand.

Container terminal infrastructure is a key element in the country’s port development strategy, and planned new container terminals in the ports of Manzanillo and Lázaro Cárdenas are national priorities.

In the Port of Veracruz a massive 782ha expansion is planned to build 45 new berths and two new container terminals in two phases. The development is expected between 2013-2025 following the resolution of a current legal challenge to the expansion.