The impacts of the Covid-19 pandemic to the Brazilian cabotage sector - Maritime and Transport Law Committee, July 2020

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Carolina do Rego Lopes Fonseca
Kincaid,Rio de Janeiro


The Covid-19 outbreak has been affecting the daily life, the health care, the strategic sectors and, consequently, the economy of many countries. After expanding in the past few years and with an expectation of higher growth, the Brazilian cabotage sector is also suffering the impacts of the pandemic.

Due to the decline in the demand for oil products, the possibility of a fast recovering Chinese economy, and the postponing of expected investments in the segment, the future of cabotage navigation in Brazil is uncertain and will depend on the measures to be adopted by the Federal Government and Parliament in the aftermath of the Covid-19 pandemic.

For the last few years, the Brazilian cabotage sector has been expanding significantly, according to data provided by the National Waterways Transportation Agency (Agência Nacional de Transportes Aquaviários, hereinafter ‘ANTAQ’) in its annual report.[1] The totality of cargo transported by cabotage navigation in Brazil increased from 156.899.815 tonnes in 2017 to 163.462.865 tonnes in 2018, reaching 172.319.880 tonnes in 2019.

Besides being more expensive and less effective, especially due to the long distance voyages within the Brazilian territory, the Brazilian logistical chain still depends substantially on trucks and the road transportation. However, since the truck drivers’ strike in May 2018, many relevant industries expressed their intention to increase the use of alternative modals, diversifying the modal used historically. In addition, the Brazilian government started to articulate the revision of the Brazilian legal and regulatory framework for cabotage navigation, by the so-called BR do Mar.

BR do Maris a programme launched by the Brazilian Ministry of Infrastructure in 2019, dedicated to stimulate cabotage and focused on the transportation of containers, due to the necessity in reallocating cargo from road transportation, to maritime transport of containers along the Brazilian coast. Although Brazil has a protectionist policy and priority to the Brazilian flag with regard to the cabotage trade, the intention would be to reduce operating costs, facilitating the charter and importation of foreign vessels and creating the conditions for greater competitiveness between the global players. 

Therefore, with the effects of the truck drivers’ strike and the possibility of publishing BR do Mar in 2020, there were favorable expectations in the short term for positive changes in the cabotage sector.

Unfortunately, the whole word was surprised by the Covid-19 outbreak, which has been affecting the daily life, the health care and the economy of many countries. Consequently, the supply chains worldwide are also being impacted by the effects of the pandemic, including in Brazil.

According to  research conducted by the National Transport Confederation,[2] between 1-3 April (approximately two weeks after the restrictive measures started to be imposed in Brazil), the main expected impacts of the Covid-19 pandemic to  transport companies would be the decrease of revenues and even the suspension of activities in some cases.

Bearing in mind shipping and port operations were considered essential activities by the Federal Government and State authorities, in order to avoid any disruption in the sector, shipping companies had to make efforts to implement sanitary measures onboard of the vessels, which they were not used to, impacting their usual operations and routine.

In this sense, ANTAQ Resolution 7.653, published on 2 April, imposed on shipping companies, among other measures, the obligation to implement sanitising preventive measures and provide personal protective equipment to the crewmembers; guarantee the proper safe distance between its personnel onboard; and adapt the change and interval of shifts, in order to reduce the number of crewmembers simultaneously in closed places..

Shipping companies also had to face some issues in relation to foreign crewmembers, as some restrictions were imposed on the disembarking of foreigners in Brazil.

In the Brazilian cabotage sector, however, the main impact expected is due to the types of cargo that are predominantly carried by this transport model. Currently, about 70 per cent of the cargo transported by cabotage is composed of liquid and gaseous bulk, coming from the oil and gas industry, one of the most affected sectors, due to the worldwide decline of O&G production.

With the purpose of avoiding the spread of the coronavirus and, consequently, the collapse of the health care system, governments adopted different restrictive measures, such as quarantine, the lockdown and even the closure of airports, roads, industry and commerce. This situation resulted in lower economic and industrial activity and, therefore, the decline in the demand for oil by-products, mainly fuels for transport of cargo and passengers and for energy generation. Consequently, the demand for oil production has also decreased.

As an example, according to the data provided by the National Petroleum, Natural Gas and Biofuels Agency[3] (Agência Nacional de Petróleo, Gás e Biocombustíveis, hereinafter ‘ANP’), the oil production in Brazil reduced in the first trimester of 2020 by about 200.000 bbl/d from January to March.

The decline of demand for oil and derivate products in several countries has also impacted Brazilian cabotage. According to ANTAQ’s annual report, while in January, 2020, liquid and gaseous bulk cargo represented 70.7 per cent of the totality of transported cargo, in March this number reduced to 70.1 per cent. On the other hand, solid bulk cargo, container cargo and general cargo, increased from 17.9 per cent, 8.2 per cent and 3.2 per cent to 18.1 per cent, 8.3 per cent and 3.5 per cent, respectively.

Despite the above, in the first trimester of 2020, there was still an increase in transported cargo by cabotage corresponding to approximately 16 per cent in relation to the same period of the previous year.

On one hand, if the transportation of liquid and gaseous bulk cargo is expected to be the most affected, on the other hand, from January to March, the exportation of solid bulk has already started to increase after a period of severe decline. The explanation for such increase is probably related to the fast recovery of the Chinese economy.

The vast majority of solid bulk cargo produced in Brazil is exported to Asia. Therefore, with the outbreak of coronavirus in China in December 2019, the exportation of solid bulk cargo from Brazil to the Asian continent started the year of 2020 with a significant decrease in relation to the previous year. In the first trimester a decline in the transportation of solid bulk cargo by overseas navigation of approximately 11 per cent was confirmed, compared to the same period of 2019.

Considering that the coronavirus pandemic started in China and the country could properly control the spread of the disease, the giant Chinese economy has already started to recover. In this sense, ANTAQ’s annual report demonstrates an increase of about ten million tonnes in the transportation of solid bulk cargo by overseas navigation, from January to March.

The related impact in the cabotage sector was also confirmed. After a decrease, from January to February, the transportation of solid bulk cargo by cabotage increased between February and March. The transportation of solid bulk cargo is accordingly becoming even more important for the cabotage sector.

So far, waterway transportation of goods in Brazil is still resisting the impacts of Covid-19, although it is not possible to precisely assess the extent of the effect to the Brazilian economy in general, or to the transport and, specially, to the cabotage sector.

Notwithstanding, the Ministry of Infrastructure is still planning to release the package of improvements for the transport segment, called ‘Pro-Brasil’. The package, which consists of huge investments and subsidies to ports, airports, highways and railways, and in the improvement of the regulatory and legal framework, was expected to be enacted in January 2020. Due to the Covid-19 pandemic it was postponed, but it is now even more important.

The cabotage players are hoping that BR do Mar is included among the measures to be implemented by Pro-Brasil.

With the main purpose being to increase the volume of goods transported by cabotage, the number of cabotage vessels, the competitiveness of Brazilian shipping companies, and to develop the Brazilian shipbuilding industry, BR do Mar is envisaged as an alternative for the expansion of cabotage transportation of container cargo, which is still not very representative.

Unfortunately, the uncertainties involving BR do Mar, not only in relation to when it will be released, but in relation to its content and main provisions, make any predictions regarding the Brazilian cabotage sector even more difficult. It seems that an effective and rapid reaction by the Federal Government and the Parliament is essential to the fast recovery of the maritime industry in Brazil, having the benefit of well-structured and already debated new regulations to boost cabotage in the aftermath of Covid-19 pandemic crisis.


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