Browse the complete Report on : Brazil Freight Transport Report Q4 2010
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In mid-2010, BMI discussed the uncertainty surrounding the costs and timetable for the high-speed rail tender in Brazil. Factors that could deter sponsors and that made BMI question the economics of the project included: an increase in the private funding requirement from 30% to 40%; the fares cap was set lower, creating a possible profit margin squeeze; demand risks were to be carried by the private operator; there were inconsistencies in estimated cost; and there were also numerous delays in launching the tender.We should quantify our view by noting that we anticipate that it will be mainly European and North American companies, which have shown interest so far, that are the most likely to be deterred when faced with uncertainty and risk surrounding the contract. Companies from South Korea and Japan, which are scouring the globe for new markets and contracts, are not expected to back down.
The tender was due to start on May 5 2010 but there have been no updates from the government about its status, adding further to the uncertainty to the project. In July, Reuters reported that the national auditing council, Tribunal de Contas da União (TCU), had proposed a 9.5% reduction in the project's estimated cost, from BRL36.6bn (US$20.0bn) to BRL33.1bn (US$18.3bn), noting the lack of precision in the government's original cost estimates. The revised bidding terms were due to be published in mid-July 2010 and the project will be awarded to the consortium that offers the lowest fares and the highest level of technology transfer. However, this latest development further skews the economics of the project. Though strategically the project does makes sense, as it provides competition for airlines, especially at these reduced rates, the lack of precedent means that the 7mn passenger estimate could be too bullish in the worst case scenario.
In general, the Brazilian market has appeared to be strongly supportive of the local freight transport sector. Data for Q110 showed that, driven by investment and private consumption, the country's GDP expanded at the fastest rate in 15 years, persuading BMI to raise our forecast for the calendar year to 6.0% (up from 5.0% in our previous quarterly report). The presidential election are due in October, and the candidate for the in-office Partido dos Trabalhadores (PT), Dilma Rouseff, is leading in the opinion polls ahead of José Serra from the opposition Partido da Social Democracia Brasileira (PSDB). However, we believe there will be a lot of continuity in economic policy whoever wins.
Recent reports have noted that Brazil's airport infrastructure is still lagging behind demand. In 2008 and 2009, the industry was shaken by capacity, air traffic control and safety problems. However, we believe a process of gradual improvement is underway and have marginally revised up our forecasts. We project that air cargo volume will grow by 4.3%, following a 7.9% slump in 2009.
Brazil's main ports are in recovery mode. For 2010, BMI forecasts that volume at Santos will grow by a strong 13.1%. For the rest of our five-year forecast period to 2014, the port will be at the centre of Brazil's dynamic trading activity. We predict annual average volume growth of 10.7% to 2014. At the southern Port of Itajaí growth will also be strong. Last year was an atypical year there, with volumes rising sharply following a fall caused by flooding damage at the Teconvi terminal in late 2008. However, for 2010 we project tonnage to increase by 18.6%.
The government is considering new rules to boost competition in the rail sector but it is that growth is already well entrenched as Brazil's commodity exports growth gather pace and investment pours into the rail transport sector. Total tonnes carried by rail, which fell by an estimated 3.6% in 2009, are forecast surge by 14.3% in 2010.
In real terms, Brazil's trade slumped by 10.9% during last year's global recession but it is set to bounce back very strongly in 2010 with 19.6% growth. As domestic demand powers ahead, imports should decisively lead the way with growth of 31%, while exports will grow by a relatively more modest 6.5% in 2010.
We have revised up our freight transport forecasts slightly, and we believe the risks are upside on the short term but downside in the medium term. The scenario we continue to have in mind is one in which the government becomes a little too enthusiastic about pump-priming the economy and domestic consumption ahead of October's general election. An overly strong consumer boom in H210 would increase demand for freight transport, but it is likely to be short-lived and be followed by slower growth in 2011.
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Browse All Business Monitor International Market Research Reports
In mid-2010, BMI discussed the uncertainty surrounding the costs and timetable for the high-speed rail tender in Brazil. Factors that could deter sponsors and that made BMI question the economics of the project included: an increase in the private funding requirement from 30% to 40%; the fares cap was set lower, creating a possible profit margin squeeze; demand risks were to be carried by the private operator; there were inconsistencies in estimated cost; and there were also numerous delays in launching the tender.We should quantify our view by noting that we anticipate that it will be mainly European and North American companies, which have shown interest so far, that are the most likely to be deterred when faced with uncertainty and risk surrounding the contract. Companies from South Korea and Japan, which are scouring the globe for new markets and contracts, are not expected to back down.
The tender was due to start on May 5 2010 but there have been no updates from the government about its status, adding further to the uncertainty to the project. In July, Reuters reported that the national auditing council, Tribunal de Contas da União (TCU), had proposed a 9.5% reduction in the project's estimated cost, from BRL36.6bn (US$20.0bn) to BRL33.1bn (US$18.3bn), noting the lack of precision in the government's original cost estimates. The revised bidding terms were due to be published in mid-July 2010 and the project will be awarded to the consortium that offers the lowest fares and the highest level of technology transfer. However, this latest development further skews the economics of the project. Though strategically the project does makes sense, as it provides competition for airlines, especially at these reduced rates, the lack of precedent means that the 7mn passenger estimate could be too bullish in the worst case scenario.
In general, the Brazilian market has appeared to be strongly supportive of the local freight transport sector. Data for Q110 showed that, driven by investment and private consumption, the country's GDP expanded at the fastest rate in 15 years, persuading BMI to raise our forecast for the calendar year to 6.0% (up from 5.0% in our previous quarterly report). The presidential election are due in October, and the candidate for the in-office Partido dos Trabalhadores (PT), Dilma Rouseff, is leading in the opinion polls ahead of José Serra from the opposition Partido da Social Democracia Brasileira (PSDB). However, we believe there will be a lot of continuity in economic policy whoever wins.
Recent reports have noted that Brazil's airport infrastructure is still lagging behind demand. In 2008 and 2009, the industry was shaken by capacity, air traffic control and safety problems. However, we believe a process of gradual improvement is underway and have marginally revised up our forecasts. We project that air cargo volume will grow by 4.3%, following a 7.9% slump in 2009.
Brazil's main ports are in recovery mode. For 2010, BMI forecasts that volume at Santos will grow by a strong 13.1%. For the rest of our five-year forecast period to 2014, the port will be at the centre of Brazil's dynamic trading activity. We predict annual average volume growth of 10.7% to 2014. At the southern Port of Itajaí growth will also be strong. Last year was an atypical year there, with volumes rising sharply following a fall caused by flooding damage at the Teconvi terminal in late 2008. However, for 2010 we project tonnage to increase by 18.6%.
The government is considering new rules to boost competition in the rail sector but it is that growth is already well entrenched as Brazil's commodity exports growth gather pace and investment pours into the rail transport sector. Total tonnes carried by rail, which fell by an estimated 3.6% in 2009, are forecast surge by 14.3% in 2010.
In real terms, Brazil's trade slumped by 10.9% during last year's global recession but it is set to bounce back very strongly in 2010 with 19.6% growth. As domestic demand powers ahead, imports should decisively lead the way with growth of 31%, while exports will grow by a relatively more modest 6.5% in 2010.
We have revised up our freight transport forecasts slightly, and we believe the risks are upside on the short term but downside in the medium term. The scenario we continue to have in mind is one in which the government becomes a little too enthusiastic about pump-priming the economy and domestic consumption ahead of October's general election. An overly strong consumer boom in H210 would increase demand for freight transport, but it is likely to be short-lived and be followed by slower growth in 2011.
About Us
ReportsandReports comprises an online library of 10,000 reports, in-depth market research studies of over 5000 micro markets, and 25 industry specific websites. Our client list boasts almost all well-known publishers of such reports across the globe. We as a third-party reseller of market research reports employ a number of marketing tools, such as press releases, email-marketing and effective search-engine optimization techniques to drive revenues for our clients. We also provide 24/7 online and offline support service to our customers.
Contact:
Ms. Sunita
7557 Rambler road,
Suite 727, Dallas, TX 75231
Tel: +1-888-989-8004
http://reportsandreports.blogspot.com/
http://reportsandreports.proarticles.co.uk/
http://reportsnreports.wordpress.com/
