This blog is designed to inform investors about business opportunities in Brazilian infrastructure projects. It covers energy, telecomm, mining, transportation, ports and airports greenfield and brownfield projects.
Its content is supported by official information and/or documentation gathered from news agencies, Brazilian regulatory agencies or other governmental entities.
This blog is updated upon new regulations on the areas covered by this blog are issued by Brazilian Agencies.
Ports: Santos Brasil is ready to invest in private ports
11:57 PM (GMT -03:00) – Apr 01 2013
Santos Brasil is ready to invest in private ports
By Fernanda Pires | Santos, São Paulo
Santos Brasil, the largest operator of port terminals in Brazil, is ready to invest. With a low debt burden, the holding company will bet also in private ports – which will not have to be licensed – a possibility opened by the new regulatory mark set by Executive Order (MP) 595, currently being debated in Congress.
Antonio Carlos Sepúlveda, Santos Brasil CEO
But Antonio Carlos Sepúlveda, Santos Brasil CEO, says that the only way for the country in the short run is to invest – heavily – in the so-called “organized port,” a joint ownership of public waterway areas handed over to the private sector through auctions. Currently the company runs three leased container terminals in organized ports, the largest being Tecon Santos in the coastal city of Santos, São Paulo.
In an interview with Valor PRO, the real-time news service from Valor, the executive repeated the thesis as a mantra. One of the main innovations of MP 595 was to create the private port figure, outside the organized port, and to lift restrictions regarding the need for its operator to handle only its own cargo, present on the former legal framework. With the possibility, called by some as the “new opening of the Brazilian ports,” a reference to the historic measure, taken in 1808 by the Portuguese court, allowing free navigation in Brazilian ports, the future investments will concentrate in private terminals, which have fewer restrictions.
But for those projects to succeed there is a timetable to be met. A private terminal is made from scratch, without any public infrastructure, Mr. Sepúlveda said. It takes up to seven years to receive the first ship.
“What does it mean? That it will take seven years until we have an upgrade of Brazilian logistics? This is not enough. The organized port must be competitive tomorrow, the day after the measure becomes a law. It is the way we have in the short run to have a better Brazil also in logistics,” he added.
Mr. Sepúlveda says the first step is to elaborate the MP in such a way to direct investments for big projects with plenty of infrastructure access. “There is no new container-terminal project in the world without adjacent logistics areas. Port is a public policy tool, which can attract industries, logistic centers, thus reducing costs. Ports cannot be dealt only from the port investor point of view, which can be interested only in negotiating the real estate, in entering the good business which is the container terminal.”
Along with Tecon Santos, the largest in the country, Santos Brasil also runs Tecon Imbituba, in Santa Catarina, and Tecon Vila do Conde, in Pará. It also operates a vehicle-export terminal (TEV) in Santos, and integrated logistics units.
The next step is Suape, in Pernambuco. The company already has a project, ready to compete in the tender of a two-berth terminal in the Northeastern port. The tender notice is expected to be published in the next few months. “It’s a case of development of a state through a port, an example to be followed. We want to be there,” he said.
According to the executive, Santos Brasil is on the “pole position to invest.” The company has been on the sector since 1997, and has a low indebtedness level. It closed the fourth quarter with R$136.4 million in cash, and a net debt of R$296.7 million, half its EBITDA over the last 12 months.
Mr. Sepúlveda said that nothing will come from filling the coast with terminals. What Brazil needs, he said, is large units, which don’t yet exits on the Brazilian coast. “What reduce the unitary operating cost are very large facilities and thus low unitary cost per cargo handling. The world today is facing this process that begins with an increase in the size of ships, to reduce the unitary cost of container moved between seaports.”
The magic is in gains of scale. A Chinese or European terminal has 8 million to 10 million TEUs capacity (twenty-foot equivalent unit, the unit of cargo capacity often used in the shipping industry). This is the new order of magnitude of infrastructure being offered in the markets with which Brazil is competing now. “Here in Brazil we are talking about projects of 800,000 TEUs, 1 million TEUs at the most,” he added. The largest in the country, Tecon Santos has capacity for 2 million TEUs, and is doing this year some 1.6 million TEUs. “It is too little. To fill Brazil with this kind of terminal will not improve Brazilian exports,” he said.