|
 Latin American exports' growth depends more on lower transport costs than on reduction of tariffs. This warning is in research "Unclogging the Arteries: A Report on the Impact of Transport Costs on Latin American and Caribbean Trade."
Produced by the Inter-American Development Bank (IDB), the study includes figures for nine countries: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Peru, Paraguay and Uruguay.
The study should be presented on Wednesday, October 1st, in Brazilian capital Brasília, during seminar "Transport for Trade and Regional Integration", promoted by the National Confederation of Industries (CNI) in partnership with the IDB. The participants should discuss relations between transport costs and foreign trade in Latin America and propose solutions to the logistics bottlenecks that affect Brazilian exports.
According to the study, a 10% reduction in the value of tariffs would increase exports by these countries by less than 2%. On the other hand, if the same reduction were made in transport costs, foreign sales to the United States would grow 39%. This calculation considers stability of other factors, like exchange rates and economic growth.
To IDB economist Mauricio Mesquita Moreira, one of the authors of the research, the governments of the countries in Latin America are more concerned with tariff and non-tariff barriers and forget other greater obstacles, like transport. "The trade policy in the region is out of focus," criticizes Moreira.
The report also shows that if the countries in Latin America reduced freight costs by 10%, there would be trade growth of over 20% in the region. In case the reduction was in tariffs, the growth would be just 10%. The reduction of transport costs would benefit products made in Brazil, Chile, Ecuador, Peru and Uruguay and ore and metal exports by Argentina, Colombia and Paraguay.
Latin America spends 7% of export value on freight, almost double the 3.7% spent by the United States. In the case of Brazil, this cost is equivalent to 5.5% of the product price.
"Despite being lower than the Latin American average, the country has been spending much more with transport than the United States," stated Moreira. "Customs costs are not the main obstacles to foreign trade, with a few exceptions, as is the case with alcohol, cotton and orange. In most products, transport cost may be as much as 50% higher than tariffs."
The researcher points out that there is space for reduction in transport costs. However, he recognizes that the products exported by the countries in Latin America require greater freight allocation, which ends up increasing costs.
"The comparison between exports of one dollar of chips and one dollar of soy is very different, as the latter is significantly larger. If we divide the weight of the product by its value, transport cost is much higher for primary products than for electronic products," he explained.
Transport costs in Latin American are almost double that of the United States. According to the study, Argentina spends 22% more than the North Americans, Chile twice, and Paraguay, over four times. Latin American and Caribbean exports to the United States pay ocean freight almost 70% higher than those paid by Dutch products.
The report also shows that around 30% of the transport costs in Latin America are due to port inefficiency. To Moreira, this is the most important figure for the establishment of sector public policies.
"One of the main causes for inefficiency is port competition, which is smaller in Latin America than in the United States and the Netherlands," he pointed out. "In this area, it is possible to reduce government interference, like the agreements that restrict coastwise navigation."
Another obstacle is in air imports. According to the research, airfreight costs have grown faster in Latin America than in China and the rest of the world. Freight costs in the Caribbean in 2006, for example, were 36% higher than in 1995. In the same period, China kept the cost below the 1995 figure, despite higher oil prices.
Moreira adds that, in Brazil, airfreight is almost three times more expensive than in the United States. Another problem is that consumers and producers are not informed of these costs.
"If freight is 3% of the product value and the tariff 100%, freight will represent 1.5% of the price paid for import," he exemplifies. "Due to this apparently reduced value, people do not generally pay attention to freight costs."
Among the suggestions made by the IDB is incorporation of a transport agenda in trade talks. "This does not involve just infrastructure works, but also sector regulation. It is necessary to create a regulatory environment to stimulate competition and explore economy of scale," pointed out Mesquita.
CNI
 |
Subscribe to this comment's feed
The only good thing to say about the visit to Brazil of Iran's president, Mahmoud Ahmadinejad, on Monday November 23, is that it was mercifully short and lasted less than 24 hours. Ahmadinejad had his picture taken being hugged by president Luiz Inácio Lula da Silva who gave him a warm welcome and said Iran had every right to develop nuclear energy for peaceful purposes. 
The small, coastal town of Condé is located just a twenty minute's drive from João Pessoa, the capital of Paraíba. The Northeast of Brazil has historically been a place of encounter and mixing between peoples. For millenia groups of indigenous people fished, farmed, migrated and sometimes fought along this large, fertile area. 
The Brazilian diplo-MÁ-cia (bad diplomacy) carries on its accelerated course towards the non-acknowledgment of human rights, although sometimes it takes pleasure in saying that it does precisely the opposite. The visit of Iran's president, Mahmoud Ahmadinejad, is another example of a diplomatic omission that verges on hypocrisy. 
On July 4, 2006, representatives of Argentina, Brazil, Paraguay and Uruguay met in Caracas to sign the protocol for the entrance of Venezuela into the Southern Common Market (Mercosur). After two and a half years, the protocol was approved by the legislative bodies of Argentina and Uruguay, and as of now it may be only days away from being ratified by the continent's economic megalith, Brazil. 
Some sectors of the fight against AIDS have suggested that Thabo Mbeki, the former president of South Africa, committed genocide through his absence from the fight against the illness in his country throughout his two terms. 
One hundred and eleven years after Brazil abolished slavery, the number of workers deprived of their freedom is still huge. They raise cattle, produce charcoal, sugar cane or timber. Some of them, most undocumented Bolivians, work in basements of small apparel factories in São Paulo and other metropolis. 
On November 7, 2009 a few friends and I had an opportunity to take a look inside a Brazilian jail outside the city of Rio de Janeiro. We were able to take some amateur footage of our experience on video (see link below). It's no surprise, of course, that the typical Brazilian jail lacks some of the functionality of those in North America or Europe, but our experience that day was quite shocking. 
Depletion of the Amazon Rainforest is not a new concern facing environmentalists, biologists, ecologists, and a growing number of the Amazonian indigenous peoples. For decades they have feared for the fate of the world's most biologically diverse and species-rich hothouse. 
Geisy Arruda made history this week in Brazil, but for all the wrong reasons. What began as a poorly planned fashion statement has become a worldwide tale. Geisy decided to wear a pink mini-dress to her private college in São Paulo state, and after that, all hell broke loose. 
The push of vigilante groups in Rio de Janeiro's favelas (shantytowns) in the last three years is the most important and alarming information of the just-released study by the Rio de Janeiro University's Violence Research Center (Nupev-Uerj).
Of course, I was the one WRONG.....as per empty Brazilians brains junkies.
But high oil prices were good.....apparently......for Brazilians ! smiles
Is that NOT what empty brains said here...many many times ?
Funny that your North Eastern chicken farmers get a much lower price for corn from Argentina, than corn from Brazil South or Goias, Tocantins which are only a few hundreds kilometers away from the North Eastern chicken farms !
On top of that Brazilian corn must be paid CASH, but Argentina corn can be paid within 400 days at 6 % interests rate.
And raising chickens dont need 400 days per "harvest" !!!!!
And it is as true for your grains in Mato Grosso ! Your Parana farmers are doing relatively well, being closer to ports. But your Mato Grosso farmers are well over 1000 kms away from ports. And most grains are transported by trucks in mostly unpaved road
the BR 163.
Does anyone of you know the transportation costs from Mato Grosso ONLY to ports ? US$ 130.- per TON...for fully loaded trucks PLUS large trailer !!!!! But only $ 60.- from Parana !
On top of that your Mato Grosso farmers needs to put 2 TIMES as much fertilizers per hectare than in Parana. Which again makes a $ 60.- per ton in production costs difference.
End results ? at US$ 450.- per ton soaybeans FOB, your Parana farmers make a profit of $ 290.- per hectare BUT a loss of $ 48.- per hectare in Mato Grosso !!!! Or said otherwise a profit of $ 97.- per ton in Parana and a loss of $ 16.- per ton in Mato Grosso.
And then the foreign buyer will bear the costs from your ports, since most grains are sold FOB not CIF !!!!!
But these costs are much higher than most local productions, when NEW productions will come on stream !!!!!
But the funniest thing of all is this :
Including an EXPORT TAX of 35 % which Brazil doesnt have , Argentina farmers profit is $ 372.- per hectare against your most profitable state (Parana) OF $ 290.- !!!!!
Stupid question to all Brazilian junkies :
ARE YOU STILL SO SURE THAT BRAZIL IS THE MOST COMPETITIVE AND CHEAPEST.....SOYABEANS PRODUCER...ON EARTH ???????
laugh.....laugh....laugh....laugh....laugh.....laugh !!!!!!!!!!!!!!!