BMI's Executive Summary

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In mid-2007 Brazil's air traffic control system was teetering on the brink of a systemic failure. On July 28 the main runway at Congonhas Airport in São Paulo, Brazil's busiest, reopened, 11 days after a TAM passenger jet skidded off its rain-slicked surface and crashed, killing 199 people. It is now clear that capacity at Congonhas, the country's busiest airport, had been stretched beyond safety margins. The runway's closing after the crash forced airlines to cancel hundreds of flights and caused a ripple effect of delays around the country. The accident triggered a political crisis for President Luiz Inacio Lula da Silva. Even before the crash, public confidence in flying was at an all-time low, with widespread frustration at delays and cancellations. Last September, a plane belonging to the carrier Gol Linhas Aereas Inteligentes (Gol) collided over the Amazon jungle with a US-registered executive plane and crashed, killing all 154 people aboard. The two crashes were the worst in Brazil's history. The weekend after the crash, an electrical failure closed down all air traffic control capacity over the Amazon, resulting in more cancellations and forcing numerous international flights on their way to Brazil either to turn back to the United States or land in Central American countries. The underlying problem is that scant investment has been made in infrastructure, including at airports and in-air traffic technology. That said, in this Freight Transport Report, BMI still projects annual average air freight growth rate of 9.1% over the 2007-2012 period.

Various factors support this prediction. Fundamentally, we believe Brazilian aviation is experiencing a crisis of unrestrained and unplanned growth. We now expect a correction, but the fundamentals will still point to expansion. Annual Brazilian GDP growth will average 4.5% in the 2007-2012 period (up from 3.2% in the preceding five-year period). While this will underpin general air-freight demand, aviation will benefit from even faster demand growth for high-value/low-bulk cargoes.

The overall freight picture will be encouraging. There continue to be no reliable statistics on Brazilian road-freight haulage. However, based on BMI estimates, we expect freight carried to be growing at an average of around 6.6% per annum, because investment to improve and repair the highway network is still lagging. The largely privatised rail-freight sector will do better, aided by Brazil's commodity export boom, particularly in mining. We now expect the growth figure in 2007-2012 to be an annual average of 10.2%. Total tonnage handled by Brazil's main seaports will rise by an average of 8.5% per annum in the forecast period, down on the 8.7% registered in the preceding five years. The main reason for this is that after the foreign trade and export boom peaked in 2004 and another strong year in 2007, we see both import and export growth moderating significantly in the next few years, when domestic consumption is likely to be the main engine of macroeconomic growth.

Brazil performs reasonably well in our freight transport industry business environment matrix, scoring significantly above the regional average. Freight growth, infrastructure growth, the regulatory and competitive environment all score well. Economic and political risk is comparable to the Latin American peer group. The transport intensity index is also above the regional average, although there is something of a question mark over the future dynamism of the country's foreign trade. Foreign trade still represents only around 25% of GDP, although on the other hand the sheer geographical size of the country means there will be healthy internal demand for freight transport.

According to our latest estimates, the total value of transport and communications GDP will rise to US$108.7bn in nominal terms by 2012, representing 5.5% of Brazil's GDP. The transport and communications sector employed 4.26mn people, or 4.7% of the labour force, in 2006. We see these figures rising to 5.47mn – and 5.2% – by 2011.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Brazil Road Haulage Industry SWOT

Brazil Economic SWOT

Chapter 3 - Business Environment Overview

Latin America Business Environment Ranking

Business Environment Ranking

Economics – Long-Term Risk

Politics – Long-Term Risk

Freight Transport Growth

Transport Infrastructure Growth

Regulatory Environment

Competitive Environment

Transport Intensity Index

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Legal Code/Corruption

Red Tape

Labour Force

Chapter 4 - Industry Trends And Developments

Rail

Air

Sea

Pipelines

Chapter 5 - Industry Forecast Scenario

Macroeconomic Overview

Table: Macroeconomic Activity

Transport Outlook

Freight Carried

Macroeconomic Indicators

Chapter 6 - Trade Environment

Overview

Trade Agreements

Tariffs

Value Of Imports By Category

Value Of Exports By Category

Table: Top Export Destinations

Table: Export Trade, % Y-o-Y

Table: Top Import Sources

Table: Import Trade, % Y-o-Y

Chapter 7 - Market Overview

Multimodal

Table: Key Players – Brazilian Freight Transport Sector

Competitive Landscape: Multimodal

Road

Infrastructure

Competitive Landscape: Road

Rail

Infrastructure

Competitive Landscape: Rail

Company Profiles

Air

Infrastructure

Competitive Landscape: Aviation

Company Profiles

Water

Infrastructure

Competitive Landscape: Maritime

Pipelines

Competitive Landscape: Pipelines

Chapter 8 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Transport Industry

Sources

Competitive Landscape for Latin America Freight Transport Reports: Sample of Companies Ranked

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Analysis of latest projects across the freight transport sector – road, rail, air, sea, logistics – including market overview which provides an outline of the key elements driving development. SWOT analysis of the state’s business environment, transport sector, politics and economics, which carefully evaluates the short- and medium-term issues facing the industry.

Network of Latin American Freight Transport Sources

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BMI's Latin American Freight Transport Reports are based on an extensive network of multilateral organisations, government departments, freight transport industry associations, chambers of commerce and company reports. Information sources include: