With more than 4,000 kilometers of coastline and thousands of kilometers of navigable rivers, the expansion of the Brazilian cabotage market presents opportunities which are as vast as the country itself. To stimulate competition in this sector and benefit the entire supply chain, the Brazilian Federal Government has proposed the creation of a new regulatory framework: the BR do Mar, which in English is similar to Sea Road – making an analogy with a road that is always open to the economy.
In general, the BR do Mar proposal is focused on cost reduction and reduction of bureaucracy in ports that will increase Brazil’s competitiveness.
To get an idea of the current operational costs and inefficiencies, Paulo Guedes, current Minister of Economy, recently quoted an example: The price of iron ore transformed into steel in the south of the country is increased by 40 per cent when it arrives in the north-east region of the country. In terms of costs, it is as if the same product had gone to China and then back to Brazil.
The new bill reduces protections and would allow, among other highlights, the chartering of foreign-flagged vessels, provided that the vessels have Brazilian crew on board, thus removing the requirement to have a fleet linked to Brazil. This move will allow more players to enter the market which will increase competition and benefit industries which depend on maritime logistics – ultimately reducing prices for their customers.
However, some critics of the proposal point out that even without the changes provided for in the new law, the cabotage sector was growing. The sector registered an increase of 11.3 per cent in cargo handling between January and April 2020 – if compared with the same period of the year before, according to data recorded by ANTAQ (Agência Nacional de Transportes Aquaviários). Between 2010 and 2018, according to the agency, container cabotage grew by an average of 12.8 per cent per year and represents 11 per cent of the country’s transportation matrix.
The government’s proposed changes also include a fuel tax reduction for cabotage trade vessels, helping to reduce the costs of this kind of operation. In addition to this, under BR do Mar, companies will be able to enlarge their tonnage chartered abroad by either time or travel. This will happen in agreement with the Federal Government or supported by the construction of ships by the company not only in Brazil, but also in shipyards outside the country. If a Brazilian shipping company builds a ship inside the country, it can charter abroad the equivalent of 200 per cent of the tonnage of the ship under construction in Brazil. In cases where the ship is built in a shipyard abroad this proportion drops to 100 per cent.
Companies able to participate in BR do Mar (which will be controlled by rules of the Ministry of Infrastructure), will also be allowed to time charter vessels while making repairs on their vessels or taking on special projects, where the foreign ship will be dedicated to a single product and segment.
The Brazilian government intends that new contracts will require that the charter of foreign vessels (by time or voyage) be undertaken by subsidiaries of Brazilian companies outside the country. Today the charter of a foreign ship is undertaken only by the Brazilian shipping company (EBN – Empresa Brasileira de Navegação) from Brazil.
However, there are those who disagree with this new regulation. Some associations, such as Logística Brasil, which brings together small shipowners and logistics customers, claim that BR do Mar only favours large groups with larger and regular fleets. Since small businesses do not have all that is necessary to benefit from the new arrangements, they are against the regulatory text.
These entities have been promoting online campaigns with the hashtag #BRdoMARnao.
The new regulation will soon be passed to the National Congress – the house that will endorse the final approval of the text – but it already shows signs of possibilities for foreign investments in Brazil.
With the advancement of this new regulation, the anchors on Brazil’s maritime potential will be removed, and an economic frontier will be opened to the world.
