UPDATE 1-Brazil port modernization bill clears Congress

Thu May 16, 2013 8:01pm EDT

* Legislation opens ports to more private capital

* Lifts restrictions on private ports

* Stevedore strike ends at biggest port, Santos

By Anthony Boadle

BRASILIA, May 16 (Reuters) - Brazil's Congress approved legislation on Thursday that opens up state-owned ports to private investment and lifts restrictions on the building of private ports in a bid to eliminate serious bottlenecks strangling the country's export growth.

The reform bill, which may yet change if President Dilma Rousseff decides to veto parts of it, is an effort to make Brazil's clogged, costly and badly managed ports more efficient. That, backers believe, can help restore robust growth to Brazil's once-booming economy.

However, negotiations over the bill set off a pitched battle between supporters and those who benefit from the status quo. While labor unions opposed the bill because it would loosen their grip on work contracts, port contractors, suppliers and other interest groups resisted changes to existing port business.

The bill's passage was a hard-won victory for Rousseff, who negotiated with coalition partners and opposition parties to clinch approval just hours before a midnight deadline that would have killed the proposal.

Her 18-party coalition split over the controversial bill and so modified her original proposal that Rousseff is expected to veto at least parts of it. One change, for instance, eliminated an important provision that would have centralized control of ports with the federal government, wresting management authority from powerful state administrations.

"This is not the final version, but it's an advance," said Nelson Carlini, chairman of Logistica Brasil, a company that runs several port terminals and plans to build new ones. Like other businesspeople with their eye on the sector, Carlini is pleased the bill revokes restrictions on private investments.

The legislation eliminates a rule that restricted the operations of private companies at terminals in public ports to the handling of their own cargo and did not allow them to move third-party goods. The restrictions, private operators say, discouraged new investments.

ESSENTIAL OVERHAUL

The government in recent years has increasingly turned to private investors for money and technology to upgrade Brazil's crowded highways, decaying bridges, rickety electric grid and other over-stretched infrastructure.

But outside investment in ports has been more difficult until now because of legal barriers.

For Rousseff, an overhaul of 20-year-old port regulations is an essential step to move ahead with a $26 billion public-private investment drive to modernize gateways for Brazil's crucial commodity exports.

Ports convey 95 percent of Brazil's foreign commerce and as such are vital for a country that in recent decades became the world's biggest exporter of coffee, sugar, beef, orange juice and ethanol.

Brazil's 34 major ports, the government says, are unprepared to handle a potential quadrupling of traffic to nearly a billion tonnes a year by 2030. Ports in Brazil's industrially developed southeast are working at near 100 percent capacity and those in the rest of the country are expected to be saturated by 2016.

PORT STRIKE OVER

Union opposition complicated the ruling Workers' Party's support for the ports bill that sparked a two-day protest strike. But stevedores returned to work on Wednesday at Brazil's largest port of Santos, ending a walkout that had limited impact on cargo movement.

The strike began unexpectedly at midday on Tuesday at the southeastern ports of Santos, Paranagua and Rio de Janeiro. By Wednesday afternoon, workers at Santos were the only ones still reported to be striking.

Dock workers wanted to defend union control over hiring in the bill, which allows new terminal investors to contract non-union labor. Some unions agreed to let operators hire outside of a centralized hiring agency, known as OGMO.

The legislation is an attempt to attract billions of dollars in new investments by allowing private investors to manage some of the ports as well as to increase efficiency and cut costs.

Brazilian port terminals charge some of the world's highest prices to move goods. Some of the high cost stems from labor agreements, but red tape, taxes and lack of competition between terminals are also to blame.

Rousseff has made the bill a top priority in a push to improve Brazil's dilapidated infrastructure, which has become a drag on economic growth, with ships lining up for weeks to enter a port to load up agricultural and other exports.

Brazil is in the midst of exporting a record soy harvest, while coffee and sugar crops are due to hit the overburdened ports within weeks.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.