19.11 - Fitch Solutions - Freight Transport & Shipping

Q1 2020
www.fitchsolutions.com
Br
Brazil
azil
Fr
Freight
eight T
Trransport & Shipping
Report
Includes 5-year forecasts to 2023
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Brazil Freight Transport & Shipping Report | Q1 2020
Contents
Key View............................................................................................................................................................................................ 4
SWOT .................................................................................................................................................................................................. 6
Freight Transport & Shipping SWOT...................................................................................................................................................................................... 6
Industry Forecast........................................................................................................................................................................... 7
Trade Forecast................................................................................................................................................................................................................................ 7
Road Freight Forecast...............................................................................................................................................................................................................15
Rail Freight Forecast ..................................................................................................................................................................................................................20
Air Freight Forecast....................................................................................................................................................................................................................25
Shipping Forecast.......................................................................................................................................................................................................................30
Market Overview..........................................................................................................................................................................36
Company Profile...........................................................................................................................................................................42
EcoRodovias .................................................................................................................................................................................................................................42
LATAM Cargo.................................................................................................................................................................................................................................45
Santos Brasil Participações.....................................................................................................................................................................................................48
Vale (Logistics) .............................................................................................................................................................................................................................50
Brazil Demographic Outlook....................................................................................................................................................53
Freight Transport & Shipping Methodology........................................................................................................................56
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Key View
Key View: Brazil’s freight industry will receive a significant boost due to strong investment contracted under recent concessions
with transit times set to reduce in terms of roads, and a smoother transportation of goods expected to result from improved
infrastructure. However, we do caution that a weak external environment will continue to weigh on export demand and investment
over the coming quarters, likely feeding through to relatively sluggish consumption growth, which will negatively affect the more
consumer-serving freight modes, such as road and shipping.
Key Updates And Forecasts
• The Brazilian road company, EcoRodovias, was awarded a major motorway concession package in October 2019, in a move
that should provide a boost to the road freight sector in the country going forward. The concession will last for a 30-years period
for the 437km route using the BR-364 and BR-365 roads, which connect Jatai in Goias State with Uberlandia in Minas Gerais
State. The concession involves road widening work, while additional lanes will be added, with maintenance work costing
USD658.1mn and the addition of extra lanes will cost approximately USD520.5mn.
• As of November 2019, Brazil was busy seeking further permissions to export more beef to China, after official statistics showed
that exports from Brazil were currently soaring on the back of robust demand from China. With shippers well placed to benefit
from healthy growth in such exports, developments will be being watched keenly by the industry. In September, approvals were
awarded for 17 facilities in Brazil to export their goods to China, according to Antonio Camardelli, head of exporter group Abiec. A
total of 65,827 tonnes of beef were shipped to China in October from the world’s largest exporter of beef.
• A USD3mn grant agreement has been signed in October 2019 by Latin American development bank CAF relating to the funding
of pre-investment studies for part of the Bolivian section of the proposed Bioceanic Railway Integration Corridor, aimed at
connecting Ilo in Peru with Santos in Brazil. Signed with the Bolivian government in the country’s capital city, La Paz, the
agreement covers engineering design studies for the Bulo Bulo–Ivirgarzama–Villa Tunari sub-sections of the corridor, as well as
technical and regulatory analysis to ensure future interoperability between Bolivia, Brazil and Peru.
• In October 2019, global mining giant Vale announced that it had temporarily suspended the disposal of tailings at the Itabiruçu
dam; part of the Itabira Complex. As a result, the firm reaffirms guidance of 302-337mnt of iron ore and pellet sales for 2019 but
acknowledges that sales are expected to be in the lower to midpoint of that range. In November 2019, Brazilian iron ore exports
were still lagging behind 2018’s levels as the big exporter and miner, Vale continues to struggle to recover from the January 25
2019 mine dam wall collapse, which will weigh on output from the country’s ports into 2020.
• We envisage positive albeit fairly muted growth across Brazil's freight mix in 2020. Leading the way in y-o-y growth terms will be
air freight with annual gains of 1.7% pencilled in, ahead of rail (1.4%), road (1.3%) and inland waterways (1.0%). Total trade in real
terms will come in at 4.1% y-o-y, with imports outperforming exports (4.8% compared to 3.4% respectively). Brazil’s largest port,
Santos, will see container and tonnage throughput increase by 3.6% and 3.3% respectively in 2020.
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All Modes To Decrease Slightly In 2021 (Except GDP)

Brazil - Selected Growth Indicators, % (2020f & 2021f)
f = Fitch Solutions forecast. Sources: National sources, Fitch Solutions
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SWOT
Freight Transport & Shipping SWOT
SWOT Analysis
Strengths • Brazil's location on the Atlantic coast of South America allows it to meet its trading needs with important
markets in Europe and the Americas.
• Proximity to the Panama Canal enables access to China and other Asian markets.
• The government's growth acceleration programme is facilitating major expansion projects across most
freight transport modes.
• Trade with other major emerging economies of the BRIC (Brazil, Russia, India and China) group is rising
sharply, particularly with China, which is developing strong demand for Brazilian mining and agricultural
commodities.
• Brazil is one of the largest commodity producers in the world, with high demand for dry bulk shipping.
• Brazil is one of the largest commodity producers in the world, with demand for dry bulk shipping heightened
as a result.
Weaknesses • A cumulative lack of transport infrastructure investment, meaning that the state of Brazil's roads, airports
and ports is often inadequate for demand.
• The country's port sector struggles with regular work stoppages due to labour disputes.
• Global rebalancing pressures will continue to weigh on Brazil's external accounts in the coming years.
Brazilian real GDP growth will remain anaemic in the coming years.
• Mining giant Vale will struggle in 2020 as the resulting effects of the Brumadinho tailings dam collapse
weighs on the miner's profitability through higher costs related to the damage and lower production from
suspended operations.
• Brazil's ports are poorly developed by international standards.
Opportunities • Chinese companies are expected to becoming increasingly active in Brazil's transport sector, following an
increase in investment in the power sector over recent years. Companies have already expressed interest in
rail and airport concessions.
• Ecorodovias, a Brazilian firm, has won a 30-year concession of the BR-364/365 highway project in Brazil. The
concessionaire offered a toll rate of around BRL4.694 (USD1.128) against the maximum rate determined by
the National Land Transportation Agency of BRL7.02 (USD1.729). Ecorodoviashas been tasked with building
a 437km highway, linking Uberlândia with Jataí, as well as access points, lanes and hard shoulder.
• Brazil's agriculture minister Blairo Maggi has outlined his country's desire to secure a trade deal between the
EU and Mercosur, the trading bloc of which Brazil is a member.
• Elevated US-China trade tensions will support demand for Latin American soybean, incentivising Latin
American farmers to favour the oilseed over corn. The trade spat will further encourage US farmers to switch
from soybean to corn, intensifying global competition for the commodity.
• The strong response to the March 15 2019 auction of three groups of airports in Brazil illustrates the
attractiveness of airport assets in the country and reflects strengthening sentiment toward the country’s
infrastructure sector under the presidency of Jair Bolsonaro.
Threats • A drop-off in Chinese demand could have a significant impact on freight demand in Brazil.
• A port privatisation plan has led to strikes at the country's major port facilities.
• Brazil's economic rebound will be driven by private consumption growth and buoyant investor sentiment.
However, the October elections will likely undermine confidence in the latter months of the year, posing
headwinds to investment growth.
• The deteriorating political situation in the country weigh on the country's ability to turn itself around.
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Industry Forecast
Trade Forecast
Key View: Brazil’s economic recovery will pick up steam over the course of 2020, bolstered by positive sentiment surrounding
President Jair Bolsonaro’s new administration. Over the short term, the Brazilian currency and financial markets will likely gain
following the election, due primarily to the fact that Bolsonaro has appointed business-friendly advisors and pledged support for
pension reform and privatisations in Brazil.Export growth in Brazil will likely be relatively modest over the short term and
concentrated in the primary sector, given weaker demand from regional trading partners who are larger customers of Brazil's
manufactured goods, although beef exports are an outperformer at present on the back of increased demand from China.
Latest Updates
• The Brazilian government is seeking to reach a conclusion to free trade agreements between South American free trade bloc
Mercosur and Singapore and South Korea by the end of 2020, according to Reinaldo José de Almeida Salgado, the Foreign
Ministry’s secretary for bilateral negotiations with Asia, in October 2019. Salgado also explained that the bloc is seeking to secure
other deals with several other Asian countries, including Vietnam and Indonesia. Mercosur may also pursue an expansion of its
existing trade deal with India.
• In October 2019, Chinese vice premier Hu Chunhua explained that China is willing to increase its imports of agricultural and
industrial goods from Brazil, in a development that would provide a boost to bilateral trade. Infrastructure cooperation was one
area highlighted as a key area where both sides can strengthen cooperation. In 2018, bilateral trade between the two nations
rose to a record USD100bn.
• Weak global trade will remain a key headwind to growth in Brazil over the coming quarters. Our Commodities team expects most
commodities prices to average lower in 2020 on a y-o-y basis, as softening sentiment due to trade tensions is feeding through to
less physical demand and excess supplies for many goods. Among Brazil's major exports, we see only modest upside for prices of
soybean, while we expect lower prices for oil, iron, coffee, sugar and wheat, among others. While the agricultural sector is
benefiting from increasing Chinese demand, as China attempts to diversify its imports away from the US, we expect Chinese
growth will also slow amid weakening government support. Overall, we expect export growth will moderate, limiting investment
into production and hurting the incomes of households reliant on the primary sectors.
Short Term
Total trade in real terms in Brazil will grow by 4.1% in 2020, with imports performing slightly better than exports (4.8% and 3.4% y-o-
y growth, respectively). Total trade in nominal terms will come in at USD517.3bn in 2020, representing a 7.7% annual increase,
before coming in at 3.1% in 2021 to reach USD533.2bn. Exports will be worth USD265.4bn, while imports will reach USD251.9bn in
2020 and USD270.1bn and USD263.0bn in 2021 respectively.
The wider Brazilian economy is set to bounce back over the course of 2020, with economic growth forecast at 2.0% y-o-y,
compared to the estimated 0.8% growth in 2019. The election of Jair Bolsonaro as president will provide some alleviation to the
political uncertainty following the second round of the general election and has already boosted the confidence of investors and
businesses. Uncertainty over reforms will keep investment subdued over the coming quarters, weighing on growth. That said,
interest rates are at multi-year lows and the currency has stabilised in recent months, supporting an improvement in Brazil's
economic risk profile.
Growth in consumer spending in Brazil has underperformed over 2019, but we foresee this picking up over 2020, in line with a
cyclical upswing, presenting opportunities for growth in imports as consumers have greater spending power. There are numerous
positive trends pointing to this, including steady consumer confidence, lower unemployment, falling inflation, low interest rates and
positive sentiment from the election of Jair Bolsonaro as president. This presents welcome news for the more consumer-serving
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freight modes, such as road, shipping and air, the latter of which will see a return to positive annual growth in 2020, following the
forecast contraction in 2019.
Industrial production in Brazil contracted by an average 1.5% y-o-y through July 2019, as manufactured goods exports are down
10.1% y-o-y in the year through August. Argentina, the US and Mexico are among the key export markets for Brazil's manufactured
goods, and we forecast growth slowdowns in all three. In particular, we expect a deepening recession in Argentina to be a major
drag on cross-border trade of industrial goods. Further, with capacity utilisation averaging 77.7% in the year through August, the
output gap in the sector suggests that firms have little incentive to invest in expanding capacity.
Persistent US-China trade tensions have steadily raised the odds of a global recession, a risk we have been flagging over recent
quarters. Brazil would be particularly exposed to a global recession, given its commodity-heavy export basket. Moreover, its twin
fiscal and current account deficits would limit its ability to use government policy to stimulate activity. A sharp deterioration of the
external environment would in turn increase the risk that Brazil, among other emerging markets, gets caught in a 'middle-income
trap' in which productivity growth stagnates and value-added industries struggle to become established.
The Brazilian government is seeking to expand its trade ties with the US, putting the focus on securing greater market access in the
country, as well as enhancing access to American goods in Brazil, according to Brazil's agriculture minister Tereza Cristina Dias in
October 2019. Brazil has increased the size of its tariff-free quota for ethanol, which has been held up as a development that would
benefit the US going forward. Dias also noted that the increase in exports of oilseeds from Brazil to China had been temporarily
driven by the aftershocks of the US-China trade war, before adding that Brazil was keen to find other buyers aside from China for
products like soybeans.
Investors in the UAE are reportedly interested in transport infrastructure projects in Brazil, president Jair Bolsonaro explained during
the Brazil-UAE business seminar in Abu Dhabi in October 2019. Investors are interested in such projects due to the fact that Brazil is
a major supplier of agricultural commodities to the UAE and Arab countries in general, meaning these stakeholders are keen to
ensure a steady and timely supply of food items.
The prospects for a broader opening of Brazil's trade relationships via an EU-Mercosur trade agreement are weakening at present.
Some EU member-states have expressed reluctance to move forward with the framework agreement due to concerns over
Brazilian President Jair Bolsonaro's environmental policies. At the same time, it is far from clear how an anticipated power change in
Argentina will affect Argentina's approach to trade policy. The Bolsonaro administration recently threatened to exit Mercosur if
Argentina were to pursue protectionist policies. As a result, our forecasts currently do not factor in any anticipated opening of
Brazil's trade under the potential deal.
The Brazilian government is seeking to grow bilateral relationships across the globe, with a particular onus being placed on ties with
China, which is currently Brazil’s largest trade partner. During an audience with the Chinese ambassador Yang Wanming in Brasilia in
January 2019, Guedes underlined his intention to stimulate the sale of higher value-added products to the Chinese market, which
would be welcome news for the freight industry in Brazil. Brazilian exports to China accounted for 26.8% of the total in 2018,
amounting to USD64.2bn, with the main products sold being soybeans, crude oil and iron ore.
Brazilian President Jair Bolsonaro’s foreign policy decisions will likely be personalised and oriented toward domestic political goals.
While foreign policy played a negligible role in the presidential campaign, over recent weeks Bolsonaro and his advisers have begun
to outline their intentions, most of which are meant to appeal to his core supporters. This is because maintaining the fervent
support of his conservative base is central to Bolsonaro’s governing strategy, and because it will be relatively easy for Bolsonaro to
leverage the presidency’s discretion over foreign policy to score domestic ‘wins’.
A free trade agreement (FTA) was signed between Brazil and Chile in November 2018 in a move that eliminates red tape and tariffs
between the two countries. The new FTA, which has been cited as being critical in reinforcing integration in the Latin America
region, will complement the existing one between Mercosur and Chile and includes 17 new sections, including bilateral trade in
services and electronics, telecommunications and intellectual property. Bilateral trade between the two countries reached
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USD7.2bn between January and September 2018, representing a y-o-y increase of 13%.
The governments of both Brazil and Argentina have signalled an intention to reform Mercosur, the South American trade bloc that
promotes free trade and the fluid movement of goods, people and currency between countries in the region. Bolsonaro has
signalled his desire to ensure that Mercosur becomes more flexible while enabling member states to negotiate bilateral free trade
agreements.
Brazil is also seeking to enhance bilateral trade ties with Iran. A joint economic committee meeting is to be held between
representatives of both governments in March 2019 to focus on improved cooperation between Brazil and Iran. Dejpasand stressed
the need for boosting the level of trade between the two countries, in order to boost economic relations. The head of Iran-Brazil
parliamentary friendship group explained that Brazil exported over USD2bn-worth of goods to Iran during 2017, before suggesting
that this could raise to USD5bn in the coming years.
Exports To Remain Ahead

Imports & Exports Value (2018-2023)
f = Fitch Solutions forecast. Source: IBGE, IMF, Fitch Solutions
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Medium Term
In terms of total trade growth in real terms in Brazil between 2020 and 2023, we this will grow by an average of 2.9% per annum.
Import growth will be overtaken by that of exports as of 2022, a trend that will continue to the end of 2023. Total trade in nominal
terms will grow by an average of 4.5% between 2020 and 2023, reaching USD570.7bn by the end of 2023.
Over the medium term, we expect to see economic growth moderate, as Bolsonaro will likely be badly positioned to deliver on the
markets' expectations for key structural reforms. Major efforts like a structural overhaul of the pension system will be difficult to
achieve amid intense public opposition, and maintaining coalition support will require extensive compromise which will not come
easily to Bolsonaro, who has a poor track record of maintaining alliances. As sentiment weakens, capital inflows will likely slow and
growth would remain capped in light of lingering structural headwinds.
Between 2020 and 2023, Brazil is set to post average GDP growth of 2.4%, with incremental gains pencilled in for each year over the
forecast period. However,while fiscal consolidation will continue over the coming quarters, we believe a lack of progress on
structural reforms will raise risks to long-term fiscal sustainability. Brazilian President Jair Bolsonaro’s administration will continue to
be undermined his weak coalition, infighting and public opposition. Bolsonaro’s policymaking will become increasingly reactive, as
core constituencies use threats of withdrawing support to advance their priorities.
The transport infrastructure sector will remain a significant source of growth in Brazil's infrastructure market due to strong
investment contracted under recent concessions. As a result of improving investor sentiment, including substantial foreign
investment, the project pipeline is expanding and while in the short term most sectors will continue to see a contraction in value
terms, from 2020 through to the end of the forecast period in 2028 we anticipate consistent growth.
The most likely avenue through which more integrated Latin American trade could be achieved is an agreement between the
Pacific Alliance and Mercosur, the region's two largest existing trade blocs. The Pacific Alliance, comprised of Chile, Colombia, Mexico
and Peru, has long been more committed to free trade than Mercosur, which is comprised of Argentina, Brazil, Paraguay, Uruguay
and Venezuela. As the US has wavered on its promotion of free trade and pro-trade leaders have ascended within Mercosur, the two
blocs have committed to pursuing closer ties with each other and other regional trading partners. Over the coming years, this could
substantially alter trade patterns, facilitate the creation of new value chains and even promote degrees of political integration in
order to ensure consistent and compatible economic policies across the region.
The continued escalation of the US-China trade dispute will support Latin American soybean production over corn, with Brazilian
exporters well placed to benefit. China's imposition of a 25.0% tariff on US agricultural imports in July 2018, including on soybean, is
boosting Chinese demand for Brazilian and Argentinian soybean and meal supply. This trend, which started in Q2 2018, will
continue as long as the confrontation between China and the US lingers. Robust Chinese demand for the oilseed
will incentivise increased soybean plantings in 2018/19 and beyond. We have already revised up our 2018/19 production forecast
for Brazilian soybean to 125.0mn tonnes from 117.0mn tonnes previously and maintain our positive soybean forecast for Argentina
at 47.5mn tonnes.
The planned relocation of Brazil’s embassy in Israel could threaten the key halal meat market from the South American country in
the coming years, which would hit the shipping industry as a result. Former President Jair Bolsonaro’s decision to move the embassy
from Tel Aviv to Jerusalem has reportedly angered the Egyptian government and could also upset other Islamic countries. Brazil will
need to tread carefully, given that USD16bn-worth of exports arrive in the Middle East and Turkey at present, but just 3% of these
head to Israel.
Ongoing talks between the EU and Mercosur to improve trade relations between the two blocs should provide plenty of growth
prospects once concluded. An initial agreement on bilateral cooperation was signed between the EU and Mercosur in 1999, with
talks to forge a free trade agreement between the two blocs ongoing. A European diplomat familiar with the negotiations told
Reuters that the EU is open to the idea of improving its offer regarding beef. However, this would be less than 100,000 tonnes.
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However, one large obstacle to any EU-Mercosur deal presented itself in October 2019 when Austria rejected the free trade pact
and without the backing from every government in the EU, the trade deal cannot be passed. Austria’s decision was predominantly
driven by mounting EU pressure on Brazil’s president Bolsonaro over the country’s environmental policies.
Long Term
Over the long term, we believe that the possibility of a trade agreement between Mercosur - of which Brazil is a member - and the
EU could boost the country's trade volumes with the EU. The agreement could potentially reduce tariffs for trade between the two
blocs. Talks on the issue have stalled previously, partly due to reluctance on Argentina's part. One of the clauses from the Mercosur
founding charter impedes free trade agreements with third parties unless there is unanimous consensus. We believe that with the
newly elected pro-business Argentine government, the opportunity may again be open for an agreement. Both GDP and private
consumption levels are expected to tick upwards beyond 2023, boosting the prospects for trade further. The Brazilian economy has,
in the past, shown great promise and a high level of diversity and resilience. We believe that if the national political scandals are
resolved and a growth trajectory resumes, the country can return to its course of higher levels of trade and growth within a few
years.
Over the longer term, spot depreciation is highly likely given that Brazil's higher inflation outlook relative to the US is not matched
by higher real GDP growth due to weak reform prospects. Given Brazil's significantly high real interest rates, the long-term trend of
total return outperformance versus the US dollar seems likely to continue.
A primary risk to our current revised forecast remains the ongoing political corruption scandal coupled with poor economic
governance that plagues the nation. As the new government begins to take control of the country, it could be that the nation faces
a longer-than-anticipated recession, something that would lead us to revise our forecasts further in subsequent updates.
TRADE OVERVIEW (BRAZIL 2018-2023)

Indicator 2018 2019f 2020f 2021f 2022f 2023f
Imports, real growth, % y-o-y 8.49 -8.43 4.83 3.21 1.73 2.17
Exports, real growth, % y-o-y 4.05 -5.66 3.35 1.65 2.60 3.59
Total Trade, real growth, % y-o-y 6.27 -7.05 4.09 2.43 2.16 2.88
Imports, USDbn 251.15 230.00 251.92 263.01 271.39 281.45
Import growth, % y-o-y 9.70 -8.42 9.53 4.40 3.18 3.71
Exports, USDbn 260.45 250.12 265.37 270.14 278.09 289.21
Export growth, % y-o-y 4.69 -3.96 6.09 1.80 2.94 4.00
Total trade, USDbn 511.60 480.12 517.29 533.15 549.48 570.67
Total trade growth, % y-o-y 7.09 -6.15 7.74 3.07 3.06 3.86
f = Fitch Solutions. Source: National sources, Fitch Solutions
KEY TRADE INDICATORS (BRAZIL 2018-2023)
Indicator 2018 2019f 2020f 2021f 2022f 2023f
Agricultural raw materials, imports, USDmn 2,102 1,970 2,107 2,177 2,229 2,292
Agricultural raw materials, imports, % y-o-y 9.5 -6.3 7.0 3.3 2.4 2.8
Agricultural raw materials, exports, USDmn 11,255 11,520 12,073 12,245 12,533 12,936
Agricultural raw materials, exports, % y-o-y 10.3 2.4 4.8 1.4 2.4 3.2
Ores and metals, exports, USDmn 33,103 33,269 35,854 36,663 38,012 39,898
Ores and metals, exports, % y-o-y 17.7 0.5 7.8 2.3 3.7 5.0
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Indicator 2018 2019f 2020f 2021f 2022f 2023f
Ores and metals, imports, USDmn 6,499 6,535 7,064 7,332 7,534 7,777
Ores and metals, imports, % y-o-y 26.3 0.6 8.1 3.8 2.8 3.2
Iron and steel, exports, USDmn 12,840 13,483 14,153 14,855 15,593 16,367
Iron and steel, exports, % y-o-y 13.8 5.0 5.0 5.0 5.0 5.0
Iron and steel, imports, USDmn 3,288 3,319 3,790 4,029 4,209 4,425
Iron and steel, imports, % y-o-y 32.7 1.0 14.2 6.3 4.5 5.1
Manufactured goods, exports, USDmn 83,426 91,617 96,062 97,454 99,774 103,019
Manufactured goods, exports, % y-o-y 7.8 9.8 4.9 1.4 2.4 3.3
Manufactured goods, imports, USDmn 135,683 142,084 155,383 162,112 167,192 173,297
Manufactured goods, imports, % y-o-y 21.0 4.7 9.4 4.3 3.1 3.7
Fuels, exports, USDmn 25,403 27,576 29,471 30,064 31,053 32,436
Fuels, exports, % y-o-y 35.7 8.6 6.9 2.0 3.3 4.5
Fuels, imports, USDmn 25,564 28,502 32,343 34,287 35,754 37,518
Fuels, imports, % y-o-y 18.6 11.5 13.5 6.0 4.3 4.9

f = Fitch Solutions forecast. Source: UNCTAD, Fitch Solutions
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MAIN IMPORT PARTNERS

2012 2013 2014 2015 2016 2017 2018
China, 36,300.8 39,539.7 39,581.0 32,562.2 24,581.3 28,962.7 36,818.0

Mainland,
USDmn
China, 15.3 15.6 16.3 17.9 16.9 18.1 19.4

Mainland,
USDmn, % of
total
United 34,549.4 38,451.9 37,417.1 28,365.4 25,611.2 26,610.4 31,107.1

States,
USDmn
United 14.6 15.1 15.4 15.6 17.7 16.7 16.4

States,
USDmn, % of
total
Argentina, 17,430.5 17,450.7 14,991.7 10,901.2 9,557.3 10,001.0 11,713.9

USDmn
Argentina, 7.4 6.9 6.2 6.0 6.6 6.3 6.2

USDmn, % of
total
Germany, 15,059.4 16,092.0 14,667.5 11,001.7 9,644.5 9,779.9 11,189.1

USDmn
Germany, 6.4 6.3 6.0 6.1 6.6 6.1 5.9

USDmn, % of
total
Korea, 9,640.8 10,060.2 9,037.8 5,745.6 6,354.1 5,555.0 5,703.5

Republic Of,
USDmn
Korea, 4.1 4.0 3.7 3.2 4.4 3.5 3.0

Republic Of,
USDmn, % of
total
TOTAL 236,493.4 253,986.1 242,803.6 181,743.7 145,062.3 159,781.9 189,966.4
TOTAL, top 5 112,981.0 121,594.5 115,695.0 88,576.0 75,748.3 80,908.9 96,531.5

countries,
USDm
% from top 5 47.8 47.9 47.6 48.7 52.2 50.6 50.8

trade
partners
Note: Total imports data are from Direction of Trade Statistics, consequently there may be some discrepancy with data used elsewhere in this report. Source: IMF, Fitch Solutions
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MAIN EXPORT PARTNERS

2012 2013 2014 2015 2016 2017 2018
China, 41,227.5 46,026.2 40,616.1 35,607.5 35,134.0 47,495.1 63,907.9

Mainland,
USDmn
China, 17.0 19.0 18.0 18.6 19.0 21.8 26.4

Mainland,
USDmn, % of
total
United 26,849.9 24,861.1 27,144.9 24,216.0 23,300.5 27,108.2 29,096.7

States,
USDmn
United 11.1 10.3 12.1 12.7 12.6 12.4 12.0

States,
USDmn, % of
total
Argentina, 17,997.7 19,615.4 14,282.0 12,800.0 13,418.0 17,624.0 14,918.3

USDmn
Argentina, 7.4 8.1 6.3 6.7 7.3 8.1 6.2

USDmn, % of
total
Netherlands, 15,040.7 17,283.1 13,035.6 10,044.5 10,323.0 9,252.8 13,048.1

USDmn
Netherlands, 6.2 7.2 5.8 5.3 5.6 4.2 5.4

USDmn, % of
total
Japan, 7,955.7 7,964.0 6,718.6 4,845.0 4,604.5 5,266.5 4,348.2

USDmn
Japan, 3.3 3.3 3.0 2.5 2.5 2.4 1.8

USDmn, % of
total
TOTAL 242,137.6 241,690.3 225,099.6 191,134.1 184,557.6 217,771.9 242,363.3
TOTAL, top 5 109,071.5 115,749.8 101,797.2 87,512.9 86,780.1 106,746.6 125,319.1

countries,
USDm
% from top 5 45.0 47.9 45.2 45.8 47.0 49.0 51.7

trade
partners
Note: Total exports data are from Direction of Trade Statistics, consequently there may be some discrepancy with data used elsewhere in this report. Source: IMF, Fitch Solutions
fitchsolutions.com
Road Freight Forecast

Key View: Consumer spending will begin its recovery in 2020, with a forecast growth rate of 2.9% over the course of the year, which
is welcome news for the road freight sector given that increased consumer spending domestically will translate into greater demand
for imports, where road freight plays an integral part in the supply chain. Job creation, while uneven, has created space for
consumption to grow, supporting the recovery in consumption after being stagnant for a few years. The road transport
infrastructure sphere in Brazil is poised to benefit from an influx of investment over the coming years, with two major road tenders
opening bids in Santa Catarina in 2019, while two new bridges are also in the pipeline to connect Brazil and Paraguay, which would
improve bilateral trade ties going forward.
Latest Updates
• A tender process relating to the construction of a major bridge in Brazil is to open in November 2019 with the winner set to be
rewarded with a 35-year concession package. The bridge will connect Salvador with Ilha de Itaparica and will cross the Todos-os-
Santos bay (bay of All Saints), measuring 12.4km and having an estimated price tag of USD1.39bn. Both Brazilian and
international firms are expected to place bids for the tender and construction work is expected to take five to six years.
• Abu Dhabi state investor Mubadala Investment is poised to increase its investment in Brazil, with highways one key area that
the firm is seeking to target, according to Brazilian president Jair Bolsonaro in October 2019. He explained that that with
Mubadala being one of the UAE’s two major sovereign wealth funds, the Emirates fund will increase investments in Brazil. The
development coincided with Bolsonaro’s Middle East visit, where Brazil and the UAE agreed to strengthen bilateral trade.
• Brazilian firm EcoRodovias has won a 30-year concession of the BR-364/365 highway project in Brazil. The concessionaire
offered a toll rate of around BRL4.694 (USD1.128) against the maximum rate determined by the National Land Transportation
Agency of BRL7.02 (USD1.729). The scheme includes building the 437km highway, linking Uberlândia with Jataí, as well as access
points, lanes and hard shoulder. Work also includes construction of toll plazas in Uberlândia, Monte Alegre de Minas, Ituiutaba,
Santa Vitória, Paranaiguara, Cachoeira Alta and Jataí. Construction will require an investment of BRL2.06bn (USD507mn) while
BRL2.51bn (USD618mn) will go towards operating costs such as conservation, operation and monitoring.
Short Term
In 2020, the road freight sector in Brazil will see y-o-y growth of 1.3% to reach 1.61bn tonnes, up from 1.59bn tonnes in 2019, when
y-o-y growth came in at 0.5%. Consumption growth is likely to pick up in Brazil over the coming months, which is welcome news
for the road freight sector over the short term at least as rising consumer spending will translate into increased demand for imports,
thus boosting our road freight forecasts for 2020.Brazil's recovery from its 2015-2016 recession was led by the bottoming out and
rebound of consumption, but growth has plateaued over recent months. Relatively sluggish investment growth over recent
quarters appears to have fed into uneven formal sector job creation, and the unemployment rate remains near 12.0%. While
consumer confidence picked up in Q3 2019, in line with an uptick in job creation in August, retail sales expanded an average of just
1.2% y-o-y in the year through July, the latest data available. We expect these headwinds to ease in 2020, as a rise in investment will
likely stimulate job creation, while lower interest rates also support expanding consumer credit.
A number of road projects are to be launched by the Brazilian government with a planned tender date of 2021 pencilled in. The
projects are set to involve around 16,000km-worth of new roads, with between 7,000-8,000km of road projects set to be opened
for tender in 2020 and another 8,000km will be opened in 2021. Further road projects are planned to see their tenders opened in
2022.
Despite the fact that the Brazilian government believes that large-scale privatisations would be beneficial to the freight and
transport infrastructure sectors, it also acknowledges that these privatisations present substantial challenges. The auction of Sao
Paulo’s 1,273km highway concession, which is the largest such concession in Brazil’s history, is set to take place in November 2019.
The Bolsonaro government has been able to capitalise on positive investor sentiment to successfully auction airports, ports and
even rail projects during his first 100 days in office.
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Highways in Brazil are in urgent need of investment amounting to USD9.4bn for repair work, according to a study released in
October 2019 by national transport federation CNT. The repair works would be required on a significant proportion of Brazil’s road
with the CNT finding that 59% of these are in either regular, bad or dismal condition, which is a 2% rise on 2018.
The safety on Brazilian roads is currently improving, albeit gradually, according to data released by the national transport
confederation. In 2018, there were 69,206 crashes on roads in Brazil and 5,269 road deaths, which was the lowest level since 2007.
Improving safety on the country’s roads will be welcomed by truckers using the road network.
The amount of freight vehicles that were stolen in Brazil dropped in the first quarter of 2019, following a ramping up of security in
this area. Between January and March 2019, Brazil reported 3,680 instances of cargo theft, which was down 38% y-o-y, according to
data released by the Brazilian Justice Ministry. The country’s justice minister Sergio Moro has declared that his ministry will focus on
greater integration of different security forces across the nation.
In a bid to avoid any repetition of the truckers strikes that paralysed the country’s roads in 2018, the Brazilian government decided
to postpone new road freight pricing rules in July 2019. The strikes hampered the delivery of a raft of goods from fuel to
grains. Additional costs amounting to BRL500mn were levied on meatpackers following the imposition by the Brazilian government
of the minimum prices for truckers from 2018 to May 2019. Jose Perboyre, who coordinates a logistical group within meat industry
association ABPA, explained that minimum freight prices have meant that companies’ ability to deliver goods efficiently had been
compromised.
We believe the truckers' strike demonstrated the extent of the electorate's antipathy toward the political establishment. Polls and
media reports suggest that the truckers had overwhelming popular support, because, after a decade of subsidised fuel, the removal
of subsidies and subsequent rises in fuel prices are widely seen as another indictment of a high level of corruption.
Huawei Technologies is reportedly set to invest USD800mn over the next three years to build a smartphone manufacturing plant
in the Brazilian state of São Paulo, which should provide support for the road freight sector in Brazil as truckers will be key in the
supply chain of these products. The location of the new plant, which is expected to employ 1,000 people, will be decided in the
coming months. The production from the facility will serve domestic and foreign markets. The facility is also expected to meet
demand following the country's first 5G spectrum auction, which is scheduled for March 2020.
Privatisation plans for the Trans-Amazonian highway were unveiled by the Brazilian government in January 2019 in a bid to finally
fully pave and complete the road. Plans are also afoot to sell a concession to run BR-163 to investors, which is a key northern route
for shipping Brazilian grains. Bolsonaro’s government is presently seeking to overhaul Brazil’s poor transportation infrastructure,
which would reduce freight costs and cut journey times for truckers.
The mayor of Santos has put pen to paper for a USD1.9mn highway adjustment, aimed at reducing bottlenecks on the road leading
to the port of Santos. The move is only a stop-gap solution for congestion problems, however, with the adjustment only providing
an answer when there is an accident on the road into the port; it will not solve the headaches caused by heavy traffic congestion. A
longer-term plan will result in a pledged investment of just under USD80mn towards the USD256mn project to build new exits from
Anchieta Highway down to the Perimetral Road and the port ring road.
Meanwhile, two lots of upgrade works, costing BRL172.7mn (USD52.65mn), have been completed on the Sebastião Ferraz de
Camargo Penteado Highway (SP250) in Capão Bonito, São Paulo, Brazil. The works, covering 70.18km of the highway, included
restoration of the road, pavement of slopes, improvements to the drainage system, construction of two concrete bridges and
signalling. The two lots, carried out by an Ellenco-Vale-TCL consortium and Construtora Ferreira Guedes, are expected to benefit
90,000 local residents. A total of four lots of works have been planned under the highway modernisation project. The state
government set aside BRL327.6mn (USD99.87mn) for the overall project through the Inter-American Development Bank.
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Positive Growth Ahead, Albeit Muted

Road Freight Tonnage (2018-2023)
f = Fitch Solutions forecast. Source: National source, Fitch Solutions
Medium Term
Over the medium-term forecast period (2020-2023), Brazil’s road freight sector is set to register average annual growth of 1.1%, a
scenario that will see tonnage handled on Brazilian roads grow from 1.61bn tonnes in 2020 to reach 1.66bn by the end of
2023. Over the medium term, we believe growth in the road freight sector will be supported by the expansion of the agribusiness
sector, as well as sustained consumer demand in Brazil.
We hold a more positive view for consumer spending over the medium term. Improving economic growth will support job creation,
boosting consumer spending levels and, by extension, offering potential for growth in the road freight sphere as consumer demand
spurs tonnage handled on the country’s roads. This will be supported by improving consumer confidence, which is likely to continue
after 2020. Retail sales are likely to follow consumer confidence and trend higher.
A new bridge in the pipeline that would connect Brazil will Paraguay is to be put out for tender by the end of 2019. The bridge will
span the length of the Paraguay River, connecting Carmelo Peralta in Paraguay with Porto Murtinho in Brazil. The project’s financing
has been secured with a price tag of USD73.7mn attached to the project. Once opened to traffic, the new bridge will link Brazil’s
Route 267 with Paraguay, thus better connecting the two countries and offering plenty of opportunities for the road freight sector
in Brazil going forward.
The bridge will enable cargo transport between Brazil, Paraguay, Argentina, Bolivia and Chile. The Bioceanic bridge design will be
similar to the international bridge over the Paraná River, connecting the cities of Presidente Franco, in Paraguay and Foz do Iguaçu,
in Paraná. The Brazilian section will be financed by Itaipu Binancional. The structure to reach Mato Grosso do Sul will be under the
charge of the Paraguayan branch of the company. The bridge is expected to be ready in April 2023.
The 10-day truckers strike that hit Brazil between May 21 and May 30 2018 caused major supply chain disruption and adversely
affected road freight output. Over the medium term, the Brazilian government and road freight companies alike will wish to avoid a
repeat of the scenes that saw severe shortages of essential goods, including food and gas, affected every part of the country.
Truckers were protesting rising fuel prices. Poultry producers prematurely slaughtered millions of chickens as feed ran out, several
thousand truckloads of beef spoiled, and industrial activity including beef processing and autos production stopped.
Business sentiment in Brazil is likely to weaken further in the coming months and years due to policy uncertainty, keeping
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investment subdued. While we have long expected business sentiment to weaken as Bolsonaro’s administration disappoints
expectations for significant fiscal reforms, the negative impact on investment decisions, particularly early in the year, has been
greater than we anticipated. Despite low interest rates, credit to the corporate sector is barely growing and market volatility is
increasing as investors re-price expectations. We believe that positive sentiment following Bolsonaro’s inauguration got ahead of the
economy’s underlying performance and is now adjusting to a more constrained growth outlook.
In a move that could prove beneficial for the rail freight sector in Brazil, to the detriment of road freight, the new government in
Brazil could pursue a investment strategy in railways to better prepare the country for more industrial action among truckers, the
like of which severely affected the country’s economy in May 2018. Although the rail freight sector in Brazil is integral in the
transportation of raw materials, such as iron ore, it is also key in the transportation of soy and corn, although road freight is used in
the movement of such agri-products, at a higher cost, meaning that a broad transition of investment towards rail freight is badly
needed in the Latin American country.
The auction and privatisation of a section of the Brazilian highway BR-163 is scheduled for 2020. The section connects the Sinop
municipality in Mato Grosso state with Miritituba in the state of Pará. The concession involves expansion, rehabilitation, conservation
and maintenance work as well as the operation of the road segment. Paving of a 51km stretch of the highway to Miritituba is likely
to be completed by the end of 2019 at a cost of BRL2.5bn (USD689mn) and the auction will take place only after the paving is
complete, added the minister.
Estrada do Feijão Bahia, a consortium between Paviservice Serviços de Pavimentação and SVC Construções, will seek
BRL300mn (USD78.3mn) from Banco do Nordeste for a toll road public-private partnership project in Brazil. The consortium won
a bid to operate, maintain and renew the road in the Bahia state. The project involves making improvements to 547km of BA-052
and BA-160 as well as the construction of a 1km bridge over the São Francisco River. The consortium was the only bidder for the
20-year contract, and requesting up to BRL71.1m (USD18.96mn) in annual availability payments. The tender was carried out
through the Secretariat of Infrastructure. The BA-052 system crosses 18 municipalities and is a key route for the flow of agricultural
production in the western part of the State of Bahia.
We expect Latin America's geopolitical significance to rise over the coming decades. While the region has been relatively focused on
internal issues such as crime, corruption and domestic insurgencies in recent decades, its growing middle class, still-substantial
natural resources and more integrated economies will encourage assertiveness on the global stage. This external focus would be
further fostered by greater political and economic cooperation, and will also see a healthy domestic economic outlook that would
heighten demand for goods transported via the country’s road network, thus boosting road freight growth.
Paraguay's finance ministry has a signed USD42.9mn loan agreement with Fonplata, the financial fund for the development of the
countries of the River Plate Basin, to improve 350km of the country's road network. Work involves upgrading 18 roads in Caazapá,
Misiones, Guairá, Amambay, Concepción and San Pedro. The plan covers some roads in regions near the border with Argentina and
sections in areas linked to the transit with Brazil, which should offer upside once completed.
Agribusiness and, in particular, agricultural exports will provide strong support to road freight volumes during our forecast period. We
forecast strong growth in grains production through to the end of our forecast period. We also see strong growth in the livestock
and dairy sectors, as these will benefit from Russia's ban on imports of US products. We now hold a more positive view on the sugar
industry than we have in the past, due to reforms in the ethanol sector and significant depreciation in the real. Brazilian real
weakness will be a net positive for the country's agricultural sector. The considerable sell-off in the Brazilian real over the few several
months provides significant export opportunities for agricultural producers. In particular, the grains, sugar, coffee and livestock
sectors will benefit from stronger demand over the coming months. We expect the real to remain weak on a multi-quarter basis,
encouraging producers to export and thus boosting road freight volumes.
FS Bioenergy has started the construction of a corn-based ethanol facility in Sorriso, Brazil (Valor Economico), which should present
opportunities for the road freight sector in Brazil going forward as this mode is key in the supply chain. FS Bioenergy is a joint
venture between Summit Agricultural Group and Tapajos Participacoes. The project will entail an investment of BRL1bn
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(USD267.5mn). In the first phase, the facility will have a production capacity of about 70mn gallons annually by processing about
24.8mn bushels of corn. In the second phase, the production capacity of the new plant will be doubled with an additional
investment of more than USD93mn. The plant is expected to start selling ethanol by February 2020.
Long Term
Boasting Latin America's largest population, a high urbanisation rate and a large number of young adults, Brazil offers a very
attractive demographic profile for consumer-facing companies. However, longer-term prospects are less favourable, as the birth rate
continues to fall and the middle-aged and pensionable population soars. We also note that the country's largest cities are seeing
signs of retail saturation, with greater growth opportunities, albeit with more risks, present in secondary cities such as Salvador
and Fortaleza.
Agência Nacional de Transportes Terrestres - Brazil's national regulator for the ground transportation sector - is working on a
30-year federal highway concession tender in the states of Santa Catarina and Rio Grande do Sul, totalling about BRL7.9bn
(USD2.51bn). The concession, part of the government's investment partnerships programme, involves maintenance, improvements
and expansion of the BR-101, 290, 386 and 448 highways. The project covers construction of 60 road access points, 58 highway
intersections, 27 pedestrian overpasses and 22km of side roads.
The Construbase-Cidade-Paulitex joint venture is starting work on a bridge connecting Paraguay and Brazil. The bridge, which was
originally estimated to cost about USD71.3mn, will improve transport links between the two countries as the existing bridge is no
longer sufficient to cope with demand. Work is scheduled to take 36 months to complete.
These investments are much-needed as the World Economic Forum's Global Competitiveness Index 2016-2017 ranks Brazil's road
infrastructure poorly, placing it 111th out of 142 countries. Brazil has 1.7mn km of roads, of which only 96,353km are paved.
Although this marks a slight improvement from previous years, there is still room for improvement. We believe that stronger
economic prospects, rising disposable incomes and household wages, coupled with growth in private final consumption in an
economy as dynamic as Brazil, will continue to result in steady growth of the road freight sector over the next decade.
ROAD FREIGHT (BRAZIL 2018-2023)

Indicator 2018 2019f 2020f 2021f 2022f 2023f
Road Freight Tonnes (000) 1,583,251 1,590,683 1,610,667 1,627,749 1,644,352 1,662,851
Road freight tonnes, % y-o-y -1.0 0.5 1.3 1.1 1.0 1.1
f = Fitch Solutions forecast. Source: Fitch Solutions
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Rail Freight Forecast

Key View: In March 2019, Cosan-owned Rumo SA was successful in a first auction to complete and operate 955 miles (1,537km) of
railroad for a period of 30 years, which will connect port terminals in both the northern and southern regions of Brazil. Rumo chief
executive Julio Fontana explained that the Norte-Sul Railway would be used to primarily move agricultural commodities, as well as
fuel and bauxite, with the railway potentially operational within two years. The development underlines the fact that the
Bolsonaro government has been able to capitalise on positive investor sentiment to successfully auction airports, ports and rail
projects during his first 100 days in office. The BRL2.72bn Norte-Sul railway is expected to form the pillar of Brazil's rail transportation
and reducing the logistical cost of freight transport in the country. Between 2020 and 2023, Brazil’s rail freight sector will see
average annual growth of 1.3% per annum, stymied to some degree by the fact that the Brumadinho dam collapse in 2019 resulted
in the idling of multiple operations owned by Vale and the global mining giant will require time to get the mines back up to previous
levels.
Latest Updates
• In October 2019, Latin American development bank CAF signed a USD3mn grant agreement relating to the funding of pre-
investment studies for part of the Bolivian section of the proposed Bioceanic Railway Integration Corridor. The corridor will
connect Ilo in Peru with Santos in Brazil. Under the terms of the agreement signed with the Bolivian government in Bolivia’s
capital La Paz, engineering design studies are covered for the Bulo Bulo-Ivirgarzama-Villa Tunari sub-sections of the corridor. The
network would help develop enhanced regional integration, thus boosting rail freight volumes over the medium term.
• Bids were submitted in October 2019 relating to feasibility studies covering the construction of new rail lines in the states of
Paraná and Mato Grosso do Sul. Funding for the feasibility studies has been provided by the Inter-American Development Bank
through the national government’s Department of Highways. One project relates to the construction of the 135km line linking
Cascavel to the border with Argentina and Paraguay at Foz do Iguaçu, while the other covers the planned line from Cascavel to
Guaíra, Dourados and Maracaju, with the intention of connecting to the line operated by Rumo from Campo Grande to Ponta
Porã on the Paraguayan border.
• Brazilian firm Rumo Logística signed a concession contract in March 2019 for the Norte-Sul Railway, connecting Porto
Nacional, Tocantins, to Estrela D'West, Sao Paulo. The railway is one of the main channels for the flow of Brazilian agricultural
production. The 1,537km concessioned road is divided into two sections: the 855km central stretch between Porto Nacional
(Tocantins) and Anápolis and the 682km southern segment, which covers the route between Ouro Verde de Goiás (Goiás) and
Estrela D'Oeste. The firm has committed to invest BRL2.72bn (USD720mn) in the project. The railroad will transport industrial
production from Sao Paulo to the centre-west region and grains from Tocantins, Goiás and Mato Grosso to the port of Santos for
export. In March 2019, the Norte-Sul railway was reported to be around 95% complete, with the concessionaire given two years
to make the railway operational. Cargo traffic on the route is anticipated to grow steadily from 1.7mn tonnes in 2020 to reach
22.7mn by 2055.
Short Term
In 2020, Brazil’s rail freight sector is pencilled in annual growth of 1.4% to reach 573.8mn tonnes, up from 565.6mn tonnes in 2019.
In 2021, we forecast the rail freight sector will increase by 1.2% to reach 580.7mn tonnes. The two key sectors that inform growth in
the rail freight sector are mining and agriculture. In terms of the former, Brazil's mining industry value will stagnate over the coming
years as a solid project pipeline and rising non-ferrous metal prices struggle to offset declining iron ore prices, thus tempering major
gains in the rail freight sector. In terms of the latter, producers will favour soybean acreage over corn owing to increased demand
from China, which is good news for rail freight.
We maintain a mixed outlook for rail concessions over the short term, despite the successful auction of the Norte-Sul railway in
March 2019. Following repeated delays, and the withdrawal of international bidders, the concession was awarded to a consortium
led by Rumo, one of only two bidders and both having existing stakes in related rail infrastructure. With far higher investment
commitments we remain wary for the full realisation of the rail concession plan.
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The Norte-Sul (North-South) railroad was the first railway auctioned by the government since 2007. Brazilian rail
concessionaire Rumo (a subsidiary of Grupo Corsan) presented the winning bid, offering a concession fee of BRL2.7bn
(USD705mn). The company signed the concession contract in August 2019. Fellow Brazilian firm VLI Multimodal presented the
only other offer for the project. The concessionaire for the project will be required to invest BRL2.8bn (USD726mn) in the railway,
the construction of which has been ongoing for years and is currently over 90% complete. Limited participation in the auction
highlights the scarce attractiveness of the project and rail assets more broadly in Brazil. While the Bolsonaro government succeeded
in drawing bids for the project above the minimum bid price set, necessary for the project to be tendered, the only two participants
in the auction were the country’s two main rail concessionaires, not coincidentally also the only two companies controlling the key
railways linking the Norte-Sul Railroad with major ports. This result compares poorly with the stronger participation seen in other
recent infrastructure auctions in the country.
Rail concessions were always anticipated to present the greatest challenge as there has been little precedent and plans for rail
concessions under previous programmes stalled over frequent disputes over right of way, third-party cargo and limited investor
interest. Major delays to current rail projects, such as the Transnordestina railway, illustrate the scale of challenges - from permitting,
financing and right of way. With this in mind, we remain cautious for the auction of two further railways under the programme - the
Ferrogrão and the FIOL. Both have been again delayed, and are now due by the end of 2019.
The Brazilian truckers strike that caused havoc in the logistics sector when truck drivers protested high diesel prices in May 2018,
underlines the chaos that such action can have on the road freight sector going forward. Rail freight was presented with
opportunities as companies sought to find alternatives to road transportation, a trend that, should it continue, would help raise rail
freight volumes going forward.
Together, the global shipper Maersk Line and the Brazilian railroad operator, Brado, agreed to invest in Brazil’s inland intermodal
infrastructure in Brazil in April 2019, in a bid to reduce dependency on the road freight sector, which was highlighted as a disrupter
of the supply chain in 2018 due to the nationwide trucker strike. In order to be more impervious to the fall out from future
disruptions, companies such as Maersk and Brado have put the onus on building new inland terminals and dedicated trucking
fleets..
Plans are in the pipeline for a rail-served iron ore mine in the southern part of Bahia state, with agreements relating to the creation
of bulk export terminals at the new Porto Sul deep-water facility near Ilheus signed in May 2019 between relevant parties. The mine
is anticipated to produce approximately 20mn tonnes of haematite natural fines and pellet feed per year for 28 years, with the
products transported via a 525km rail line to Porto Sul. The 1 572 km FIOL will connect Porto Sul with the Norte-Sul Railway at
Figueirópolis, offering a viable route to the Atlantic for agricultural goods and minerals from the Tocantins, Goiás and Bahia states.
China is a more important trade partner and source of investment to Brazil than the US, especially to the agricultural interests that
are a core part of Bolsonaro’s base. Soybean farmers, in particular, have benefited from the rising trade tensions between the US
and China. While Bolsonaro’s vows to keep China and other foreign investors out of key strategic industries play to the nationalist
impulses of the military elements of his support base, there is no clear constituency that stands to benefit from any attempt to
impose barriers on trade with China. Moreover, Bolsonaro’s agricultural base would likely oppose attempts to further liberalise trade
with the US if that were to expose them to greater competition from US agricultural goods.
Global mining firm Vale is reportedly considering the construction of a new railway and port to expand production at its
Carajas Serra Sul mine. The project would connect the Carajas railroad to Vila do Conde port, stretching for 400km. The
development came in the wake of a company statement in May 2019 when Vale declared that it was considering doubling
production at Serra Sul Carajas to 150mn tonnes a year after 2020.
Meanwhile, Votorantim Cimentos plans to invest BRL200mn (USD50.5mn) on revamping its grinding plant at Pecém in Ceará,
Brazil, which would present opportunities for the rail freight industry in Brazil, which would be integral in the supply chain and would
benefit from increased output. The cement plant currently has a 200,000 tonnes per year capacity. The facility's capacity will
improve by 800,000 tonnes per annum once the project is complete. The project will be carried out in line with latest concepts of
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energy efficiency and industrial automation, including the acquisition of new, cutting-edge equipment.
We have raised our Brazilian bauxite production forecasts to grow to 34.3mnt by 2020 which incorporates an expected increase in
production stemming from the Paragominas mine ramp up and the Juruti mine expansion; good news for the rail freight sector,
which is integral in the transportation of mined goods. On May 15 and 20 2019, Norsk Hydro announced the removal of two
government embargoes that came as a result of one civil and one criminal lawsuit involving the Alunorte alumina refinery. These
embargoes were placed by the Brazilian government in early 2018 as waste at the site had allegedly overflowed into the
surrounding environment during a heavy rain storm. Production at the refinery was subsequently halved for over a year, effectively
forcing a production cut at the Paragominas bauxite mine which produced just 6.2mn tonnes in 2018, down from 11.4mn tonnes in
2017. With two of the embargoes now removed, production at the mine is expected to ramp up in line with Alunorte's revival.
Although we forecast corn production in Latin America to grow strongly in 2018/19 and in subsequent years out to 2021/22, these
gains will largely come from a low base and do not reflect a bullish outlook. In Brazil, delayed soybean plantings and sub-optimal
growing conditions constrained the 2017/18 corn crop. We have, therefore, revised our estimate from 87.0mn tonnes to 82.0mn
tonnes, which will impact the rail freight sector to some degree, given this mode’s importance in the movement of agricultural
goods. Record soybean planting this ongoing 2018/19 season as farmers took advantage of increased demand from China allowed
ample time for corn to be planted during the ideal planting window, simultaneously reducing crop vulnerability to the potential re-
emergence of El Niño in the coming months.
On Track For Steady Growth

Rail Freight Tonnage (2018-2023)
f = Fitch Solutions. Source: Ministry of Transport, Fitch Solutions
Medium Term
We forecast that rail freight will see average annual growth of 1.3% per annum, to reach just under 600mn tonnes by the end of
2023, up from 573.8mn tonnes in 2020. Volumes will be supported by growth in the mining industries as rail is integral in the supply
chain. Brazil's mining sector is experiencing a recovery, and we expect the industry's value to steadily increase over the coming
years, boosting rail freight volumes.
As previously mentioned in the Latest Updates section, Latin American development bank CAF has signed a USD3mn grant
agreement with the Bolivian government relating to the financing of technical pre-investment studies of the Bioceanic Railway
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Integration Corridor. The railway project seeks to connect the Pacific and Atlantic coasts, assimilating countries such as Brazil,
Bolivia and Peru.
At least 12 companies and countries have expressed an interest in developing the bioceanic train project, which was debated at the
Bolivia-Peru bilateral meeting on May 26 2019 in Lima, Peru. Paraguay, Uruguay, Spain, the Netherlands and the UAE have
expressed their support for the project, as well as China and Russia, while a German entrepreneurial group has paid a visit to Bolivia
to put pen to paper to agreements.
Beijing is increasingly involved in Brazil’s ambitious Amazon rail network in welcome news for the rail freight sector moving forward.
Due to a confluence of negative factors, including a lack of investment, political instability and difficult terrain, the hopes of creating
a railroad crossing Amazonia and the Cerrado has long felt like a pipe dream, but all that could be about to change as Brazil’s
government looks to benefit from Chinese investment in this area as part of the Belt and Road Initiative. China is a huge consumer
of soy on the world market and imports around 60% of the total soybeans produced across the globe, which has seen Brazil
become economically dependent on China, which buys 80% of its soybeans exports. The Railway for Integration of the Center-
West is one proposed railway in Brazil, which would link Campinorte in Goiás state with the Ferrovia Norte-Sul railway with the
Amazon states of Rondônia and Mato Grosso, and the soy producing areas near the towns of Agua Boa and Lucas do Rio Verde.
We believe that grains production will grow from a steady base, slowing slightly out to 2023. Producers will favour soybean acreage
over corn owing to increased demand from China, which will be a welcome development for the rail freight sector, given its key role
in the supply chain.Average soybean production growth to 2022/23 is pencilled in to come in at 1.1% y-o-y to reach 128.4mn
tonnes. We see strong potential for soybean production as the Bolsonaro administration looks to expand farmland.
Bolsonaro’s proposition to expand farmland into protected Amazon territories will likely result in increased beef and soybean
production in the medium term. However, risks of retaliation from importing countries and companies that hold environmental
preservation in high regard have increased and could constrain agribusiness trade to certain regions; the impact of this remains
unclear at this point.
Logistics company Rumo plans to extend the 735km Malha Norte railway with an investment of around BRL6bn (USD1.44bn).
Under the proposed expansion the Norte line will be extended by 700km, which will connect Rondonópolis in Mato Grosso to
Cuiabá and Sonrisa. The Norte line together with Malha Paulista, also under the Ruta concession, links Rondonópolis with the Port of
Santos. The scheme is expected to optimise rail operations in the Centre-West and increase the logistics of agribusiness in Mato
Grosso state. Work on the project will proceed after the company receives final approval for the renewal of its concession for the
Malha Paulista or São Paulo stretch of the network by some 30 years to 2058; at the time of writing, no news was forthcoming on
this. Additionally, Rumo intends to invest BRL4.7bn (USD1.12bn) in Malha Paulista to expand cargo transport by 30mn tonnes to
75mn tonnes annually.
Rail freight is integral in the transportation of heavy goods across the country and so it is welcome news for the sector that Brazil's
mining sector recovery is under way, and we expect the country's industry value to steadily increase over the near-term as
production ramps up, however declining iron ore prices will keep growth limited over the longer term. Brazil's iron ore production
growth will remain strong in the coming years, due to low operating costs and a solid project pipeline. However, growth will begin to
slow towards the back end of our ten-year forecast as declining iron ore prices weigh on the sector.
Brazil's iron ore production growth will rebound in the coming years, due to low operating costs and a solid project
pipeline; welcome news for rail freight, which is integral in the supply chain of raw materials across the country. Brazil will benefit
from producing high-quality iron ore increasingly favoured by Chinese steel producers. We forecast Brazil's iron ore production to
decrease to 443mnt in 2019 then return to growth, reaching 524mnt by 2023. The new government in Brazil's desire to increase
accessibility and improve the country's infrastructure would boost the domestic metals and mining industry if projects beyond
existing ones are announced.
Brazil's bauxite sector will experience modest production growth, given a limited project pipeline and vast reserves, while Brazilian
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lithium mine production is set to ramp up, with both developments being good news for the rail freight sector due to its key position
in the supply chain of such goods.
Upside risk to our medium-term outlook for rail freight volumes is presented by a number of new developments. A group of
international investors are interested in financing a BRL16bn (USD5.1bn) port and rail project involving the creation of an export
channel for agricultural products and minerals from the Pará state to Colares city in Brazil. The project will be carried out as a private
concession and involves the construction of a BRL8bn (USD2.55bn) rail line, a BRL6bn (USD1.91bn) port and a BRL2bn
(USD637.5mn) industrial facility near Colares. The state government of Pará has appointed local firm Pavan Engenharia to
conduct feasibility studies for the 1,200km railway. It will carry approximately 30mnt of freight in its first year of operation, expanding
to 48mnt in five years.
Brazilian logistics company Rumo has various developments in the pipeline, with a USD2.5bn investment programme under way
which will run to 2020. The programme will see existing facilities upgraded and new freight yards built and 170 new locomotives will
be bought, as well as 2,307 new wagons. There will also be capacity improvements at the Rondonópolis terminal and improvements
to access at the ports of Paranaguá, Santos and São Francisco.
Long Term
A public consultation was launched on September 29 2017 by the Brazilian government relating to a USD4bn 1,142km railway that
will link Sinop in Mato Grosso with the river port of Miritituba, in a boost for grain production. Goods transported on the line will be
corn, soybeans, fertilisers, sugar, ethanol and petroleum products. The move is expected to see total freight demand on the line
reach 42.3mn tonnes by 2050, which is up from an estimated 25mn tonnes by 2020.
New infrastructure plans that aim to turn the Amazon into a soy transport corridor have been in the pipeline for some time, and
there has been a concerted effort to achieve channelisation of the Juruena, Teles Pires and Tapajós rivers, creating a 1,000-mile
industrial waterway with two new railways, one of them being proposed over the Andes. However, there are serious environmental
barriers to such development that may delay this plan.
Over the long term, we note that growth in the sector may be constrained by the fact that the Brazilian rail freight sector's
development has not kept pace with demand growth. The World Economic Forum's Global Competitiveness Index in 2017-18
ranked Brazil's railways 88th out of 123 countries, up from 98th the previous year as a result of investment entering the rail
transport infrastructure sphere. Further investment in the sector will be needed if infrastructure is to keep up with volume growth.
RAIL FREIGHT (BRAZIL 2018-2023)

Indicator 2018 2019f 2020f 2021f 2022f 2023f
Rail freight tonnes ('000) 569,871.7 565,640.3 573,766.7 580,713.0 587,464.1 594,986.6
Rail freight tonnes, % y-o-y 5.8 -0.7 1.4 1.2 1.2 1.3
Rail freight tonnes-km (mn ton km) 407,299 402,060 412,123 420,724 429,084 438,399
Rail freight tonnes-km, % y-o-y 8.5 -1.3 2.5 2.1 2.0 2.2
f = Fitch Solutions. Source: Ministry of Transport, Fitch Solutions
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Air Freight Forecast

Key View: Consumer spending growth in Brazil is forecast to accelerate each year from 2020 to 2023, as the economy enters a
cyclical upswing, supporting positive growth in the air freight sector over this periodas, over the medium term, consumers will feel
more confident in purchasing higher-end items that are usually transported by air. Following the success of Brazilian president Jair
Bolsonaro’s concessions programme since he came into power, we have already seen another round of airport concessions floated,
with concessions for 22 airports tentatively expected in 2020.
Latest Updates
• Brazil’s infrastructure minister Tarciso Freitas explained to the audience at the ALTA Airline Leader’s Forum in Brasilia in October
2019 the Brazilian government’s goal to increase the number of cities served by airlines to 200 in the future. This, in turn, would
see passenger numbers transported each year rise to 200mn, according to Freitas. Increasing investment in airport infrastructure
would support this aim.
• A new weekly service has been initiated by LATAM Airlines Brazil to Mount Pleasant Airport on Falkland Islands from São Paulo
as of November. The cargo offering of the airline on the route will increase by more than seven times on the route. Initially,
LATAM Airlines Brazil plans to transport perishables to and from the island, with a monthly stop planned in Cordoba, Argentina. As
a result of the development, LATAM will enhance its Guarulhos hub.
• We are forecasting tourist arrivals growth of 1.1% in Brazil in 2020 to reach 6.8mn. This is a slight slowdown from growth of 1.6%
in 2019 and marks the beginning of a period of slow growth, however, the growth will still support an increase in flight
frequencies, which presents greater opportunities for a rising amount of cargo handled by air.
Short Term
We forecast y-o-y growth of 1.7% for the air freight sector in Brazil in 2020, making the sector the outperformer in annual growth
terms in 2020. This scenario will see tonnage handled at Brazilian airports coming in at 676,600 tonnes in 2020, up from 665,100
tonnes in 2019, before rising to 686,300 tonnes in 2021. We expect airport concessions to remain one of the most attractive areas
in Brazil for private investment over the coming years, thus presenting opportunities for the air freight sector. Following the
successful auction of 12 airports in March 2019, a further 22 airports are due to hit the auction block at some point over the coming
years.
The Brazilian government has signed 30-year concession deals with three winning bidders for 12 airports in March, divided into
three regional blocks - Northeast, Southeast and Midwest, according to a press release from the Ministry of Infrastructure. The
Northeast block, awarded to Spanish firm Aena Desarrollo Internacional for BRL1.91bn (USD469mn), covers airports serving Recife,
Maceió, João Pessoa, Aracaju, Juazeiro do Norte and Campina Grande. The Midwest Block, covering Cuiabá, Sinop, Rondonópolis and
Alta Floresta airports, was won by Consórcio Aeroeste formed by Socicam Terminals Rodoviários and Sinart National Road and
Tourism Support Society for BRL40.4mn (USD9.93mn).
The Southeast Block, comprising the airports serving Vitória and Macaé, was awarded to Flughafen Zürich for BLR441mn
(USD108mn). In the first five years of the concession, the terminals are estimated to receive an investment of BRL1.47bn
(USD360.54mn) with BRL788mn (USD193mn) in the Northeast block, BRL302mn (USD74mn) in the Southeast block and
BRL386.7mn (USD95mn) in the Midwest block. The first investments in the airports, scheduled for the initial 180 days of the deals,
will cover immediate improvements such as restroom and changing facilities and overhaul of escalators, moving walkways, lifts and
luggage return belts.
International players were key to the success of previous airport concessions - some of the first to be awarded under the current
concessions framework. This was essential owing to the regulatory requirements of experience operating airports. However,
international investors have shifted their focus away from Brazil in the last few quarters, citing high risk, low reward and an uncertain
political and regulatory landscape.
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The private development of the 12 airports via the three awarded concession contracts will bring substantial new investment into
Brazil’s airport sector, helping to lift overall investment in Brazil’s transport sector following years of limited development amidst
corruption scandals and public funding cuts. Under the terms of the airport concession agreements, the three concessionaires
combined will inject a minimum investment of BRL1.48bn (USD390mn) in the modernisation of the twelve airports over the first
five years of the concession period. This will support our positive outlook for Brazil’s airport infrastructure sector which we forecast
will grow by an average 4.8% annually between 2019 and 2023 driven by investment from previously awarded concessions as well
as our long-held view that the March 15 auction would be successful. This compares to average annual growth of just 1.4% for the
overall construction industry for the same period.
A cyclical recovery in consumption will remain the primary driver of growth in Brazil, as it has been for the past two years; welcome
news for the air freight sector as it benefits from increases in consumer spending, which then result in increased demand for higher-
end goods transported by air. The labour market has strengthened, with total employment growing by 1.6mn people over 2019. We
expect this trend to continue, with the unemployment rate falling to an average of 10.8% over 2020, from a rate of 11.5% in 2019.
The National Civil Aviation Agency in Brazil (ANAC) completed the redistribution of 41 pairs of slots used by Avianca Brasil in
Congonhas, an airport in Sao Paulo, in August 2019. Azul was awarded 15 of the slots, while two smaller airlines granted slots were
Passaredo (14) and Amazonas MAP (12). During the dishing out of slots, ANAC prioritised incoming companies, rather than those
established at the airport, such as GOL and LATAM.
Virgin Cargo is set to introduce a daily Brazil-UK service in 2020, which aims to capitalise on the fast-growing Brazilian economy, as
well as Sao Paulo’s position as one of the top 20 global economic cities. As part of the new service, the airline will transport regular
shipments of pharmaceuticals, food and agricultural products, and car parts between London Heathrow and Sao Paulo.
As Panalpina Brazil continues to pursue its strategy of enhancing its cold chain logistics solutions in the South American country,
the company invested in its warehouse in Cajamar, Sao Paulo, in March 2019. The 4,000sq m warehouse is now exclusively
dedicated to the cold chain market and will be used to store temperature-controlled cargo, such as medicines, cosmetics and food
and perishables.
LATAM Cargo has initiated its five times per week cargo route between Guarulhos, near Sao Paulo, to the Portuguese capital, Lisbon,
moving six tonnes of cargo on behalf of Panalpina, the global freight forwarder. Using a Boeing 767 passenger plane, LATAM Cargo’s
commercial director of Europe, Guido Henke, explained that customers will benefit from speed, consistency and reliability within the
airline’s network and product portfolio as part of the company’s strategy to strengthen and expand Latin America to Europe
networks.
Consumer electronics is a key market propelling the air freight sector, due to this mode delivering higher-end products in a timely
fashion. We expect device spending growth to weaken in 2020 as optimism about the potential positives from pro-business policies
of the Bolsonaro government have begun to be outweighed about concerns regarding competence. We believe risk is weighted to
the downside because of the divisiveness of President Bolsonaro, as well as the potential for discontent by failing to deliver on
campaigning promises with coherent policies.
After 20 years of negotiations, the EU and South American economic bloc Mercosur reached a deal to liberalise trade in June 2019,
which has implications for Brazil’s BRL83bn (USD23bn) pharmaceutical market and, by extension, Brazil’s air freight sector given its
central role in the supply chain of such goods. It is proposed that the 8% import tax on medicines be reduced to zero. This levy
applies to approximately half of the BRL3.6bn (USD963mn) pharmaceuticals imported from the EU, potentially saving healthcare
payers in Brazil up to BRL144mn (USD39mn) annually. If the deal is ratified, which is not guaranteed, we expect manufacturers of
patented drugs in Western Europe to see a slight uptick in demand for their products in Brazil.
Basilea Pharmaceutica's partner Grupo Biotoscana (GBT), has received the regulatory approval and marketing authorisation for
the antifungal Cresemba (isavuconazole) in Brazil. GBT is Basilea's distribution partner for Cresemba and the
antibiotic Zevtera (ceftobiprole) in Latin America. Cresemba is approved in Brazil for patients 18 years of age and older for the
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treatment of invasive aspergillosis and mucormycosis.
In other pharma-related news with a crossover with the air freight sector, Latam Cargo has expanded its pharma services by adding
a passive service to its London Heathrow network. Heathrow is already available as an active product to customers, but the passive
service will offer the choice of shipping a product between 15 and 25 degrees Celsius. That said, Brazil continues to be present on
PhRMA's priority watch list and so there are downside risks to our air freight forecast due to these legal issues.
LATAM Cargo Brazil began working on the construction of a cooler facility at Guarulhos in Janury 2019, in order to offer increased
capacity for growing perishable volumes currently being exported from Latin America. With more than 45% of LATAM Cargo’s
volumes being perishables, including salmon, asparagus and fruit (with 14% of these transiting through Guarulhos), the new 1,600
sq m centre is poised to be operational in time for the 2019 peak season and will enable LATAM Cargo to store 33% more perishable
cargo when compared with its existing facility at the airport.
Air - The Outperforming Mode In Brazil

Air Freight Tonnage (2018-2023)
ABEAR/Infraero
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Medium Term
Between 2020 and 2023, the air freight sector in Brazil will see positive, albeit relatively stymied average annual growth of 1.5%.
Over this period, air freight in Brazil will see tonnage grow from 676,600 tonnes in 2020 to reach 706,400 tonnes by the end of
2023. Consumer spending growth in Brazil is forecast to accelerate each year from 2020 to 2023, as the economy enters a cyclical
upswing and moves further away from the recession; further welcome news for air freight as higher-end goods demand remains
heightened. Real household spending will increase every year over the forecast period, reaching 3.8% in 2023, as labour market
conditions improve, inflation stays manageable and consumers see an improvement in their finances. This will lead to non-
essential goods and services outperforming essentials over the next five years. Consumers will feel more confident in purchasing
big-ticket items and pent-up demand from the down years should benefit areas such as furnishing, communications and alcohol,
for example.
Growth is expected to return to Brazil's transport infrastructure sector in 2019 following four years of recession. Increased
government spending resulting from the new public works programme expected to run to the end of 2018 will be one factor
supporting growth, complementing an uptick in investment off the back of port and airport concessions awarded in 2017 and
2018. The public works programme should provide a shot of growth to a market which has seen very little investment in recent
years. The programme is targeting 7,000 projects in the Axis segment of the project and 1,100 projects in the Cities segment both
of which will include significant transport allocations. Already, projects are being progressed under the plan, which was announced
in November 2017, and we expect even a small uptick in investment to support growth given the dearth of projects in recent years.
The success of the airport auctions sets a strong precedent and the greatest challenges for the concessions programme lies in the
higher risk assets. Airport concessions already had a strong precedent under previous auctions, with several internationally
reputable companies already operating airports, and a clear revenue stream. Indeed, the four airports on the auction block had
reported above average passenger growth in 2015, compared to a fall in traffic for Brazil as a whole. Therefore, while positive, it does
not entirely remove caution towards higher risk assets or those with a greater element of greenfield development or those more
exposed to Brazil's poor economic environment.
A total of BRL40mn was earmarked by the Brazilian government in July 2019 to expand Campo Grande airport in the Mato Grosso
do Sul state, in a bid to make airports in the South American country more attractive to investors. The expansion and modernisation
plans centre on the passenger terminal, the building of a new utilities centre and reservoirs. The construction works are expected to
take around 18 months and the terminal capacity will increase from 2.5mn passengers per year to 4.5mn per year, thus presenting
opportunities for the air freight sector as the expected increase in flights will see prospects for cargo handling rise.
Tourist arrivals into Brazil will grow by 1.1% in 2020 and continue rising to 2023, albeit at slow growth of below 1% each year, thus
supporting sustained growth in the air freight sector going forward. Tourism receipts will also continue to grow, encouraging
increased investment in the industry, particularly the accommodation sector. Over the medium and longer term, we expect
infrastructure investment, particularly in airports, to bolster both domestic and international tourism in Brazil by opening up less
visited parts of the country. In turn, we expect this to benefit the hotel sector as chains expand into second- and third-tier cities.
While there are several major infrastructure projects planned for the 2019-2023 forecast period, particularly in terms of new
regional airports, we note that weak economic growth in 2019 and into 2020 may weigh on infrastructure spending over the first
part of the forecast period.
Brazil will remain one of the most attractive markets for drugmakers in Latin America over the medium term and beyond, owing to
the continued growth of an ageing population with more chronic diseases, the ascension of the middle class, expanded healthcare
coverage and the rise of healthcare as a national priority. This is good news for the air freight sector with this mode key in the supply
chain of pharmaceuticals. Despite this, however, high taxes and excessive protectionism along with a turbulent political and
economic environment will limit investment.
We forecast steady growth in consumer electronics spending in Brazil over 2020-2023 as purchasing power growth increases
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device demand; this is good news for the air freight sector given air freight is the favoured mode of transport for these goods.
However, when considered against the recent crisis period growth outlook is weak and we expect total device spending in 2023 will
be 16% lower than a decade earlier in US dollar terms, thus tempering any meaningful gains for the air freight sector.
Long Term
Over the longer term, we caution that Brazil's airport infrastructure will struggle to keep up with demand, with many of the country's
airports currently operating at capacity. Further, we acknowledge risks to our projections from the sometimes-erratic growth in
tonnage volumes. We highlight that over the longer term, we expect average real GDP growth of only around 2.8% (2023-2028).
While economic growth is not expected to be astronomical, the likes of which was seen in previous decades, modest GDP growth
coupled with rising incomes, higher discretionary spending powers and a stable upward momentum of real private final
consumption will all boost air cargo, albeit at a modest pace.
AIR FREIGHT (BRAZIL 2018-2023)

Indicator 2018 2019f 2020f 2021f 2022f 2023f
Air Freight Tonnes (000) 671.1 665.1 676.6 686.3 695.8 706.4
Air freight tonnes % y-o-y 16.8 -0.9 1.7 1.4 1.4 1.5
Air freight tonnes-km (mn ton km) 1,845 1,836 1,854 1,869 1,883 1,899
Air freight tonnes-km % y-o-y 6.3 -0.5 1.0 0.8 0.8 0.9
f = Fitch Solutions forecast. Source: Infraero, World Bank Indicators, Fitch Solutions
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Shipping Forecast
Key View: Following the contraction in growth seen at all of Brazil’s main ports (bar Recife, which benefits from low base effects)
witnessed in 2019, it is welcome news for the country’s shipping sector that all ports will return to positive growth in 2020 (with the
exception of Recife, which will see a contraction). We believe that improving investor confidence on the back of progress on pension
reform and other liberalising policy efforts will support a pickup in investment in Brazil in 2020.We do caution, however, that
momentum is being weighed down by weakening external demand, challenges in the industrial sector and sluggish consumption
growth.
Latest Updates
• The expansion of Brazil’s Paranaguá port was completed in October 2019 by China Merchants Port (CMPort), which
represented the largest investment in the country’s ports in the last five years. Through its subsidiary, Terminal de Conteineres de
Paranagua, CMPort invested USD133mn in the Paraná state terminal, in order to expand capacity by 66%.
• Record volumes of cotton and beef were exported from Brazil in October 2019, on the back of increasing Chinese demand,
which is a key market that Brazil wishes to fully exploit in the coming years; welcome news for the shipping sector. Shipments of
cotton grew by 68% y-o-y to reach 273,400 tonnes in October 2019, while shipments of beef reached 160,100 tonnes in
October 2019, up from 135,940 tonnes in the corresponding month a year previous. The latter development came after the
announcement in September 2019 that China had green lit 17 Brazilian beef plants to ship the meat to the Asian country.
• Santos Brasil is one of more than 50 Latin American ports and terminals that are currently collaborating with TradeLens, which
is the blockchain-based platform jointly developed by IBM and Maersk. The platform aims to allow cooperation among trade
partners, thus generating greater efficiency by digitising trade documentation flows. In October 2019, Natalia de Greiff, vice-
president of cloud and cognitive at IBM Latin America, explained that TradeLens should position Latin America in the ‘major
leagues of world trade’.
Inland Waterways
Short Term
In 2020, inland waterways are set to see y-o-y growth of 1.0%, reaching 36.8mn tonnes. This represents a welcome return to
positive growth after the contraction of 2.8% that was registered in 2019. At present, Brazil only uses around 30% of its navigable
rivers, according to research undertaken by the National Transport Confederation (CNT) in October 2019, underlining the
opportunities that the inland waterways network presents going forward. Approximately 19,000km out of 63,000km of navigable
rivers are currently used for the transit of passengers and cargo.
Medium and Long Term
Between 2020 and 2023, inland waterways is set to see average annual growth of 0.9%, with tonnage handled growing from
36.8mn tonnes in 2020 to reach 37.7mn tonnes by the end of 2023. Looking further ahead, investment in the inland waterways
sector would reduce some of the burden from Brazil’s highways, while increasing the use of inland navigation would also reduce
transportation costs, the CNT explained.
Ocean Shipping
Short Term
The largest port in Brazil, Santos, is pencilled in to see box throughput growth of 3.6% in 2020, while tonnage throughput will
increase by 3.3%. This scenario will see container throughput come in at 4.0mn TEUs by the end of 2020, while tonnage throughput
will reach 131.2mn tonnes. In 2020, we expect that the port of Suape to be the outperformer in both box and tonnage throughout
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terms with growth poised to come in at 6.7% and 6.8% respectively. In 2019, all of Brazil’s ports (bar Recife) saw a contraction in
growth as the sector was affected by lower export gains, which will likely be more modest and concentrated in the primary sector,
given weaker demand from regional trading partners who are larger customers of Brazil's manufactured goods.
After a slump in consumer confidence in Q2 2019, the index saw strong growth over Q3 2019, which bodes well for 2020, offering
support for growth in the shipping sector over the short term as deeper pockets translate into increased demand for goods
transported by sea. The most recent result for September 2019 (89.7), was 6.6 points higher than the same time in 2018. This is the
fourth month of positive growth in the index. However, confidence levels still remain at rates not seen since 2014. Consumer
confidence had been subdued for much of 2017 and 2018, reflecting the fragile nature of Brazil's economic recovery following two
years of recession. With President Bolsonaro's election, households have appeared to turn more optimistic regarding the economic
situation. Consumer confidence still must be sustained over a longer period of time but it has nearly caught up with pre-recession
figures.
Retail sales are likely to follow consumer confidence and trend higher over the short term. Although sentiment among consumers
has improved dramatically since Jair Bolsonaro’s election, we believe many will look for more concrete results from the new
administration before committing to major expenditures and thus we believe sales growth will really pick up pace into 2020. This
combined with low inflation by historical standards, and the short-term economic boost expected by a Bolsonaro victory, will also
support retail sales over the coming quarters.
We expect port concessions to remain one of the most attractive for private investment. In April 2019, six port areas in Para were
auctioned, and another three in August 2019. We maintain a mixed outlook for rail concessions, despite the successful auction of
the Norte-Sul railway in March. Meanwhile, the Ferrogrão railroad will likely be the second rail concession under the programme and
provide an indication of appetite for these types of assets. Already interested parties are baulking at the cost of investment, which
has seen a technical review to reduce the scale of investment to BRL10bn (from BRL12.6bn/USD3.8bn previously). The concession
is for 65 years. The rail line is intended to connect the grain producing regions in the midwest to the Miritituba port in the north and,
therefore, we would expect grain producers to show an interest in bidding. Similarly, Chinese companies have indicated they will bid
on the FIOL project following investments into related port infrastructure.
Diary shipments were initiated from Brazil to China in August 2019. According to the Brazilian Agriculture Ministry, China declared it
had authorised 24 plants to export cheese, butter, condensed milk and powdered milk, which presents upside risk to our shipping
forecasts going forward. In other news that will provide a boost to the shipping sector in Brazil, melons from the Latin American
country were on the verge of gaining access to the Chinese market in October 2019.
An investment cycle of USD15mn was concluded by the Brazilian shipping company Posidonia in August 2019, relating to new
buildings and renewing its fleet to meet the demand of infrastructure projects in Brazil. The company’s first vessel, called the
‘Posidonia Bravo’ has been earmarked for special operations of mining and transportation of minerals explored in open waters.
The fallout from the truckers strike in 2018 adversely affected the shipping sector in Brazil at the start of 2019, with shippers paying
as much as 150% more to secure surface capacity in the first quarter of 2019, while some exports failed to make journeys due to
overbooking. The higher rates came as a consequence of the minimum freight pricing table, which was suspended in July 2019. The
development underlines the negative effects of any further action in future years.
Infrastructure geared around grain and oil seed exports from Brazil is to be modernised and expanded in Brazil in welcome news for
the freight industry in the Latin American country due to the country’s logistics sector is in need of an upgrade. The aim of the
modernisation plans is to reduce the logistical advantages that the United States has enjoyed over Brazil’s export programme in
recent years, while the upgrade of infrastructure could also tie top buyers like China more closely into the process. Underlining the
opportunities that could exist in this sphere, Argentina and China put pen to paper to a USD1bn deal in November 2018 relating to
improvements to a rail line that transports raw materials, including soybeans.
In positive news for Brazilian exporters of soybeans and the country’s ports, in October 2019, Chinese importers were busy
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purchasing stocks of the crop in a move away from the US. The development occurred despite the announcement in the US that
China had agreed to buy up to USD50bn of American farm products each year during trade talks in October. In the first two weeks
of October, China booked at least eight boatloads (480,000 tonnes) worth USD173mn-worth of Brazilian soybeans.
Brazil is a major commodities exporter, with manufactured goods the most-traded item in terms of monetary value. Brazil was
already favouring to export to China as the country remains the largest global consumer of the material. Since 2014, China's share
of Brazilian iron ore exports increased from 52.2% to 57.9% in 2018. This equates to an increase of 46mnt of iron ore over the
period. Over the past two years, Brazil has made up on average 22.2% of China's iron ore imports, second only to Australia who has
averaged 71.9%. Due to the recent Brumadinho dam impact choking Vale's iron ore production, Brazil's weight in the Chinese
market fell to 18.1% in February 2019, down from the two-year monthly average of 22.2% and below last year's weight of 20.6% in
February 2018. We expect Brazilian exports to China to rebound in 2020 as production at major mines resumes.
Brazil's iron ore production growth will be driven largely by Vale, with the firm's low-cost S11D project expected to produce
between 75mnt and 80mnt of iron ore by the end of 2019 (approximately 17% of Brazil's production), up from 55mnt in 2018. The
firm is Brazil's predominant miner with yearly production of 388mnt in 2018 or roughly three quarters of the country's production.
S11D will continue to rise, reaching its nameplate capacity of 90mnt by 2020 while Anglo American's restart of Minas Rio will
provide further support to growth.
Another sector informing growth in the shipping sector in Brazil is autos. Therefore, it is welcome news that in September
2019, Toyota Motor announced that it will invest BRL1bn (USD243mn) in expanding its vehicle production plant in Sao Paulo,
Brazil. The company also stated that its investment in the plant, which builds the Etios and Yaris sedan model, would also allow it to
produce a new, yet to be named, model.
We believe that Brazil’s automotive industry will remain an attractive investment destination in the Latin America region, providing
an opportunity for Brazil-based carmakers to capitalise on the region's recovering passenger vehicle market. This latest
announcement follows that of Volkswagen, which announced in August 2019 that it will invest USD577mn in one of its factories in
Brazil, and General Motors and Honda Motor who are also looking to capitalise on the country's incentive programme. The new
automotive policy will provide tax incentives for local auto manufacturing companies if they invest in research and development,
which is expected to feed into increased investment into Brazil's automotive manufacturing industry. This, coupled with the strong
sales potential for the passenger car market in the Latin America region, which we forecast to expand at an average annual rate of
4.2% over 2020-2028, will offer automakers in Brazil all the incentives they require to further commit to producing vehicles in the
country.
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Agribusiness To Continue To Propel Box Growth

Port Of Santos Container Throughput, TEUs, % Change y-o-y (2018-2023)
f= Fitch Solutions forecast. Source: Port Authority, Fitch Solutions
Medium Term
Over the medium-term forecast period (2020-2023), the outperforming port in Brazil in both tonnage and container throughput
terms will be the port of Suape, seeing average annual gains of 4.4% and 4.6% respectively. The country's largest port, Santos, is set
to see average annual tonnage throughput of 2.3% and box throughput of 2.6% over the medium-term forecast period.
Over the medium to longer term, Brazil's concessions programme should unlock a moderate but sustained investment into the
country's transport infrastructure. Since its launch, Projeto Crescer (more recently referred to as Investment Partnerships
Programme (PPI), referring to the PPI Council established to oversee concessions) has been expanded multiple times, with new
projects added frequently. These moves have been in line with our expectation that the plan would be expanded as precedent and
confidence was raised following successful early auctions.
We hold a mixed outlook for the success of the concessions programme, with ports, airports and energy assets all expected to be
attractive to investors compared with a more cautious outlook for rail and highway projects given the higher risk and lower margins
associated respectively. Under the latest expansion, the addition of several new port and airport projects indicates that the plan is
responding to market demand for assets, with a reduced prominence of highway and railway assets; however, the continued fallout
of the corruption scandal is limiting domestic construction capacity and constraining access to financing, placing limits on the
success of auctions.
The Brazilian government has raised USD57.8mn through the auction of four port areas. The concession for the three port areas in
Cabedelo in the state of Paraíba was awarded to Consórcio Nordeste, represented by Corretora Ativa, for USD14.3mn. The
fourth terminal, VIX30, will be located in the port of Vitória. It was awarded to the Navegantes Logística consortium, represented
by Itaú, for USD43.4mn. The four terminals will involve a total investment of USD52.4mn. The terminals awarded in Paraíba are
brownfield projects with 25-year concessions, while the Terminal VIX30 in the state of Espírito Santo, is a greenfield project and has
been leased for 25 years. It will entail a planned investment of USD33.7mn. The leased area is 74sq m and is used for the handling of
liquid bulks fuel.
Meanwhile, Eurasian Resources Group (ERG) signed an agreement with the Brazilian state of Bahia for the construction of Porto
Sul port complex in May 2019. The complex is a major component of ERG's integrated 20mn tonnes per annum iron ore mining and
logistics greenfield project, called BAMIN. The project also includes the development of a railway line serving the iron mine in
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southern Bahia. Works at the port are likely to begin by the end of 2019. Additionally, the government of Bahia and ERG’s
subsidiary Bahia Mineração have signed the agreement on the unification of the terminals of Porto Sul and Ilhéus. The new port will
provide storage and transport capacity for major commodities including iron ore, grain and fertilisers and will be able to handle up to
41.5mn tonnes of iron ore a year once fully operational.
Agribusiness is a key industry that informs growth in the Brazilian shipping sector. Therefore, it is good news that grains production
is expected to grow from a low base, slowing slightly out to 2023. Producers will favour soybean acreage over corn owing to
increased demand from China. Following the win of Jair Bolsonaro in the presidential election of October 2018, we believe
agricultural production will increase over the coming years as he has promised to expand farmland into protected forests. However,
Bolsonaro has a long history of opposing liberalising reforms and uncertainty remains on whether he will have the capability to
deliver on his promise to the farming sector.
Meanwhile, we expect a modest recovery in Brazilian sugar output from 2019/20 onwards and expect output to gradually gain
strength out to 2022/23. We note that export opportunities will remain a bright spot, but global oversupply pressures, coupled with
low international prices, will constrain total yields below historical highs.
The Bioceanic railway project will include the construction of three megaports, according to Bolivia’s minister of public works Milton
Claros in November 2018. One will be built in Santos (Brazil), the second one in Carmelo Peralta (Paraguay) and the third in Ilo (Peru).
The project includes 3,755km of railways, from Santos to Ilo, to link the Atlantic Ocean with the Pacific Ocean through Bolivian
territory. Claros stressed that in order for the entire supply chain to benefit from a fully integrated multimodal logistics chain.
Over the medium term and beyond, the largest port in Brazil, the port of Santos, will be able to handle 10% more cargo owing to a
deal that was struck between local pilots and the port authority that saw the harbour’s draft deepened to enable larger vessels to
dock at the facility. The official draft of the navigation channel has now increased by 30cm to reach 13.5m at low tide. The new
deeper draft has now secured the port an extra BRL1.6bn in funding per year.
Local firm Odebrecht signed an agreement with Petrocity Portos in April 2018 to study the engineering and construction of a
seaport in São Mateus in the Brazilian state of Espírito Santo. The BRL2.1bn (USD584.41mn) project will encompass terminals
specialising in the transportation of vehicles and ornamental stones. Odebrecht has executed all project studies including coastal
morphology, geophysics and material that will form the basis of the environmental approval process. The port is scheduled to
become operational in H2 2021.
The regularity of strikes in Brazilian workplaces may continue to affect the shipping sector in the country, adding potential downside
risk to our forecasts with potential for long-lasting interruptions of services affecting trade and possibly diverting volumes to
neighbouring ports. However, upside risk is presented by proposed infrastructure investment and free-trade agreements, both of
which would accommodate and accelerate trade growth.
Long Term
Looking beyond 2023, we believe that once the Brazilian currency begins to stabilise and the national macroeconomic outlook
turns positive, the overall outlook of the major ports will remain robust and positive. The major ports will continue to post stable
gains as imports and exports drive forward national economic growth. Brazil's positive real GDP outlook, forecast to average 2.8%,
and private final consumption forecast to average 3.6% (2024-2028) will lead to an improved shipping outlook.
Brazil’s output of soybeans has more than doubled since 2006/07, underlining the massive strides that have taken in the
agricultural sphere in the Latin American country, which has had a positive impact on the country’s shipping sector. Tonnage output
of soybeans has risen from 59mn tonnes in 2006/07 to 119.5mn in 2017/18, with Brazil currently vying for the world’s number one
spot with the US. Exports of the crop have grown to 75.5mn tonnes, putting it 18mn tonnes ahead of the US. Brazil’s soybeans
exports are poised to rise by a further 40% by 2026 which will provide increased support for the shipping sector over the medium
term and beyond.
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Climate change is likely to severely impact weather patterns throughout Latin America over the long term. The melting of Andean
glaciers is likely to increase flooding in parts of Chile, Argentina, Peru and Bolivia, while rainfall is likely to decrease in parts of the
Amazon basin, with major impact on the ecosystems as well as on populations in those areas. In addition, the transcript from a 2014
World Bank event suggests that an increase of just a few degrees in temperature would precipitate a significant increase in sea
levels, putting the port cities of Rio de Janeiro in Brazil and Barranquilla in Colombia at significant risk.
In terms of port infrastructure in the country, Brazil ranks 106th in the World Economic Forum's Global Competitiveness Index
2017-2018, down from 114th a year previous, which underlines that, on the one hand, strides are slowly being made by the country
to improve port transport infrastructure but, on the other, there is a long way to go before Brazil's ports are competitive. Investment
is, therefore, vital for the country to begin fulfilling its port potential over the longer term.
MAJOR PORTS DATA (BRAZIL 2018-2023)

Indicator 2018 2019f 2020f 2021f 2022f 2023f
Port of Santos throughput, tonnes '000 133,159 127,009 131,181 133,790 136,087 139,204
Port of Santos throughput, tonnes, % y-o-y 2.5 -4.6 3.3 2.0 1.7 2.3
Port of Santos container throughput, TEU 4,122,243 3,860,632 4,001,152 4,089,010 4,166,353 4,271,350
Port of Santos container throughput, TEU, % y-o-y 7.0 -6.3 3.6 2.2 1.9 2.5
Port of Salvador throughput, tonnes '000 4,417 4,324 4,450 4,528 4,597 4,690
Port of Salvador throughput, tonnes, % y-o-y -1.9 -2.1 2.9 1.8 1.5 2.0
Port of Salvador container throughput, 283,082 270,303 277,304 281,505 287,358 290,850
Port of Salvador container throughput, TEU, % y-o-y 1.9 -4.5 2.6 1.5 2.1 1.2
Port of Recife throughput, tonnes '000 1,228 1,267 1,246 1,233 1,221 1,205
Port of Recife throughput, tonnes, % y-o-y -15.4 3.2 -1.6 -1.0 -0.9 -1.3
Port of Itajai throughput, tonnes '000 12,822 11,665 12,286 12,675 13,017 13,481
Port of Itajai throughput, tonnes, % y-o-y 3.1 -9.0 5.3 3.2 2.7 3.6
Port of Itajai container throughput, TEU 1,150,587 1,048,737 1,103,435 1,137,646 1,167,626 1,208,606
Port of Itajai container throughput, TEU, % y-o-y 2.8 -8.9 5.2 3.1 2.6 3.5
Port of Suape throughput, tonnes '000 21,682 20,035 21,397 22,553 23,064 23,758
Port of Suape throughput, tonnes, % y-o-y -8.3 -7.6 6.8 5.4 2.3 3.0
Port of Suape container throughput, TEU 412,412 366,972 391,390 406,643 420,248 438,350
Port of Suape container throughput, TEU, % y-o-y -10.5 -11.0 6.7 3.9 3.3 4.3
Port of Paranagua throughput, tonnes '000 53,029 50,676 51,940 52,730 53,425 54,370
Port of Paranagua throughput, tonnes, % y-o-y 2.9 -4.4 2.5 1.5 1.3 1.8
Port of Paranagua container throughput, TEU 769,908 697,645 736,460 760,728 782,092 811,094
Port of Paranagua container throughput, TEU, % y-o-y 2.7 -9.4 5.6 3.3 2.8 3.7
Port of Rio throughput, tonnes '000 7,127 7,011 7,226 7,361 7,479 7,640
Port of Rio throughput, tonnes, % y-o-y 12.1 -1.6 3.1 1.9 1.6 2.2
Port of Rio container throughput, TEU 317,014 301,928 309,049 313,501 317,420 322,741
Port of Rio container throughput, TEU, % y-o-y 8.2 -4.8 2.4 1.4 1.3 1.7
f = Fitch Solutions. Source: Port Authority, Fitch Solutions
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Market Overview
One key development spurring growth in exports and, by extension, across the whole freight industry in Brazil, is the fact that
ongoing trade tensions between the US and China will likely lead it to a continuation of increased demand for Brazilian goods, such
as soybeans, from China. In further positive news for the freight industry in Brazil, we continue to believe that port and airport
concessions will remain the most attractive areas for private investment over the coming years. A series of successful auctions for
ports and airports over recent years will see both sector drive overall investment into the transport industry, thus improving
efficiency.
Over the medium to long term, Brazil's concessions programme should unlock a moderate but sustained investment into the
country's transport infrastructure. Since its launch, Projeto Crescer (more recently referred to as Investment Partnerships
Programme (PPI), referring to the PPI Council established to oversee concessions) has been expanded multiple times, with new
projects added frequently. These moves have been in line with our expectation that the plan would be expanded as precedent and
confidence was raised following successful early auctions.
Although there is still a possibility of a trade agreement being reached between Mercosur and the EU, Brazil is more interested in
bilateral agreements, which makes this deal unlikely. By declining to move forward with the EU-Mercosur trade deal, Brazil will be
turning its back on a huge potential market, thus preventing freight and shipping from benefitting from better access to the EU
market. In the latest development in this regard, in October 2019, Austria rejected the free trade pact; without the backing from
every government in the EU, the trade deal cannot be passed.
In a bid to enhance bilateral trade between Brazil and China, Chinese vice premier Hu Chunhua explained in October 2019 that the
Asian super power wishes to increase its agricultural and industrial goods imports from Brazil. Infrastructure was highlighted as
another key area of potential cooperation between the two nations by Hu. Underlining the benefits that the development could
have on Brazil’s freight industry is the fact that China is presently Brazil’s largest trading partner, as well as largest source of foreign
investment.
Brazil is currently seeking further permissions to export greater amounts of beef to China, after official statistics in November 2019
showed that exports from Brazil were currently soaring on the back of healthy demand from China. With shippers well placed to
benefit from healthy growth in such exports, developments will be being watched keenly by the industry. Antonio Camardelli, head
of exporter group Abiec, explained that, in September, approvals were awarded for 17 facilities in Brazil to export their goods to
China. A total of 65,827 tonnes of beef were shipped to China in October from the world’s largest exporter of beef.
Brazil wishes to continue to see inward investment from China grow over the coming years, with the Latin American country set to
play a significant role in the Chinese Belt and Road Initiative in the coming years. China is currently Brazil’s most important trade
partner and bilateral relations are set to enhance going forward, presenting ample opportunities for the Brazilian freight industry as
exports to China grow. With soybean prices on the rise in Brazil (ISD0.92 per bushel in June 2019) in response to the ongoing trade
war between the US and China, demand is anticipated to rise for the lucrative crop from China. With soybeans being the top export
product from Brazil, this is good news for the freight industry in the country over the short term at least.
The potential for a new freight and logistics hub has been created with the building of the USD7.85mn HyperloopTT XO Square,
situated near Belo Horizonte, in April 2018. The hub will play host to a logistic research division and fabrication lab involving startups,
universities, innovators, scientists and governments. This development presents upside risk to our freight and shipping forecasts as
Brazil's reputation for being a leader in the freight and logistics sector will be cemented by the fact it has placed such an onus on it.
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Road Cements Its Dominance

Freight Mode Breakdown (2017-2028)
f = Fitch Solutions forecast. Source: National sources, Fitch Solutions
Road
Given the size and terrain of the country and limited development in the air and rail networks, the road network is understandably
the main transport option, accounting for a total 72.49% of the total freight market in 2020, although this will drop slightly to
72.42% by the end of 2023, as rail freight makes slight inroads into road’s dominance. Brazil's road network stretches for 1.58mn
km, making it the fourth longest in the world, with a paved network stretching 212,798km. That said, it ranks a very poor 103rd in
the World Economic Forum's Global Competitiveness Index 2017-2018, underlining the need for investment.
The density and quality of Brazil's road network varies by region, with the southern and coastal states enjoying much better road
connections than the central and northern areas. This reflects the fact that the road network has developed to connect the main
seaports to the most highly populated and economically important regions, which are located in the south and on the coast.
Therefore, the country's major cities - including São Paulo, Rio de Janeiro, Brasília, Belo Horizonte, Porto Alegre, Recife and Fortaleza -
are relatively well served by roads.
The introduction of new road freight pricing rules were postponed by the Brazilian government in July 2019 as it looks to avoid a
repeat of a truckers strike that brought Brazil’s roads to their knees in 2018. Truckers' representatives had voiced their displeasure
with the official table fixing minimum prices for road haulage, with the Brazilian government suspending the table to avoid
widespread strikes.
A total of 16,000km of highways in Brazil are to be transferred to the private sector by the country’s federal government through
concessions, according to Tarcisio Gomes de Freitas, Brazil’s minister of infrastructure, in June 2019. The minister declared that the
entire state road network in Brazil should be offered to the private sector, including the key Arco Metropolitano ring road around Rio,
as well as the Rio-Santos Highway.
Underlining moves to increase investment in Brazil's road infrastructure is the announcement in May 2017 that a consortium
comprising Arteris - the subsidiary of Spanish firm Abertis - and Brookfield Brazil Motorways Holdings has won a concession
contract for the 10-highway network Rodovia dos Calçados in São Paulo, Brazil. The 30-year contract requires an investment of
BRL6.4bn (USD2.01bn). The highway network entails a total of 720km of roads between the cities of Itaporanga and Franca.
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Meanwhile, the Paraguayan government has initiated the construction of its section of the Bioceanic Corridor. The project aims to
connect the Atlantic and Pacific Oceans through a road route that will cross Chile, Argentina, Paraguay and Brazil. The Paraguayan
section of the project links Carmelo Peralta in the department of Alto Paraguay and Lomo Plata in the Boquerón department. The
277km section will have four reinforced concrete bridges. The government expects to have 40-50km of the section paved by the
end of 2019. The works will be carried out by the Bioceanic Road Corridor Consortium, which involves Brazil-based Queiroz
Galvão and Paraguay-based firm Ocho. The overall Paraguayan section requires an investment of USD443.4mn and is scheduled to
be completed in 40 months.
Soybeans are a key Brazilian export and work is currently ongoing to reroute exports of the good through the Amazon. This move is
designed to cut transport costs by moving the supply chain north, away from southern ports. The Brazilian government has said
that the BR-163 highway will be fully paved by the end of 2019, which is welcome news indeed for truckers attempting to transport
soy to port terminals on the Tapajós River in Itaituba, in the Miritituba district.
Rail
Stretching to a total of 29,850km in 2019, Brazil's railways are, like its road network, mostly concentrated in the southern and
coastal regions. It has the second largest railway network in the world, just behind France. Rail freight will account for 25.82% of total
freight handled in Brazil in 2020 and we expect this to rise slightly to 25.91% by the end of 2023 as certain companies seek to avoid
the disruption caused by the truckers strike in 2018, using rail freight instead. The majority of railway network capacity is used to
transport mining and agricultural products, for example, iron ore and soybeans, from the interior of Brazil to major seaports for
export. The specialisation of railway lines towards heavy industry, combined with limited investment in the sector, increases the
difficulties with adapting the railway lines for other purposes. Structural limitations also limit regional trade; although the railway
network provides links to the neighbouring countries of Uruguay, Argentina and Bolivia, only Bolivia uses the same gauge as the
Brazilian network. This means that more time and cost is expended on bogie changes for rail freight travelling between Brazil and
Uruguay or Argentina. There are currently no rail connections with Brazil's northern and western neighbours. As the country also
has limited road connections with these states, it restricts the capacity for regional trade.
Brazil's rail freight ranks 88th in the World Economic Forum's Global Competitiveness Report 2017-18 and, while the highest ranked
out of all freight modes, this underlines the huge strides that need to be taken in this sphere. It is, therefore, welcome news that
Companhia Paulista de Trens Metropolitanos (CPTM) has issued three tenders totalling around BRL683mn (USD215mn) to improve
the rail network in São Paulo, Brazil. The largest contract, valued at BRL548mn (USD172.5mn), covers the provision of preventative
and corrective maintenance on 80 four-car train formations for CPTM's series 7000 trains.
Railway logistic company Rumo has won a 30-year concession to complete and operate the 1,537km southern section of the
North-South rail corridor in Brazil. The section links Porto Nacional in Tocantins with Estrela d'Oeste in São Paulo state. Rumo
offered BRL2.7bn (USD697mn) for the non-renewable concession, twice the minimum amount established by the government. The
company surpassed its only competitor, VLI, which made an offer of BRL2.06bn (USD531.8mn). Rumo will have to pay 5% of the
total value offered, within 45 days after signing the contract. The remaining 95% will be paid in 120 quarterly instalments. However,
the Aepvalec union has accused the government for undervaluing the concession. The railway is reported to be around 95%
complete and the concessionaire has been given 24 months to make it operational. In coming months, two more railroad
concessions are expected to be awarded: Ferrogrão and Fiol (West-East Integration Railway).
Latin American development bank CAF signed a USD3mn grant agreement with the government of Bolivia in October 2019 to
finance technical studies of the Bioceanic Railway Integration Corridor. The grant, to be disbursed in next two years, will support
engineering design studies for two priority sub-sections of the railway network, on the Bulo Bulo-Ivirgarzama-Villa Tunari route. The
Bioceanic railway corridor involves around 4,700km of freight and passenger line, linking the Port of Puerto Santos in Brazil with
Puerto de Ilo in Peru, via Bolivia.
We believe that the realisation of the Bioceanic railway, a USD15bn mega project, will face a number of major challenges including
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financing, limited institutional capacity, a precedent for delays in major infrastructure development and weak relations between the
governments involved. As a result, we do not expect the project to move significantly forward within the next several years and are
not including it in our forecasts as yet.
Plans to build a rail-served iron ore mine in the south of Bahia state are moving closer to reality after agreements were signed
relating to the development of bulk export terminals at the new Porto Sul deep-water facility near Ilheus, in May 2019. The Bahia
Mineração subsidiary of Eurasian Resources Group are currently developing the ironstone reserves at Caetite and it is anticipated
that the mine will produce around 20mn tonnes of haematite natural fines and pellet feed per annum for 28 years. As these
reserves would be exported via Porto Sul via a 525km segment of the planned East-West Integration Railway, the Brazilian rail freight
industry is poised to benefit from the development.
The government of the Brazilian state of Parana approved the beginning of four studies over possible concessions for a railway
project in December 2018. The engineering, technical, environmental and economic feasibility studies will analyse a concession to
implement, operate, manage and maintain a 1,000km freight railway between Paranaguá Port and Dourados. The estimated cost of
the project is BRL10bn (USD3.03bn). Teams selected to carry out the feasibility studies through an expression of interest procedure
include the consortium HaB comprising Bureau de Engenharia, Hendal and Advice Consulting and
Service; SSSE consortium comprising Sener Setepla, Sener Ingeniería and Engefoto; and Egis-Esteio-
COPEL consortium comprising Egis Engenharia e Consultoria and Esteio.
Export of soybeans of Brazilian origin could increase due to increased Chinese demand owing to the ongoing US-China trade
dispute, S&P Global Platts reported in May 2019. Grain exporter AgriBrasil also expressed that a weak Brazilian currency and the
approaching corn harvest would also buoy Brazilian exports of soybeans, which is welcome news for the rail freight sector, which is
key in the supply chain of agribusiness cargoes. In July 2018, China imposed an additional 25% import tariff on US-origin soybeans,
as a direct response to tariffs put in place by the US on Chinese goods.
At Fitch Solutions, we are bullish on mine production growth in Latin America's lithium sector on the back of new projects coming
online over the coming years in Chile, Argentina, Brazil, and Bolivia. Brazil will secure a spot as the third largest lithium producer in
South America over the coming years, beating out close competitor Bolivia, as projects in the pipeline are closer to production and
the investment environment is more attractive. This development is positive news for the rail freight sector in Brazil as this mode is
integral in the supply chain of heavy goods.
We estimate Chile and Argentina to drive Latin American production on a absolute tonnage basis while Brazil and Bolivia catch up to
their regional neighbours. Chile, the world's second largest producer, will lead production growth, which we expect to rise from
18.8kt of lithium production in 2019 to a forecast 47.1kt in 2028. The country is home to two of the top lithium miners, Chilean
company SQM and US based Albemarle. Both firms have sizable brine projects in the pipeline which will ultimately push production
higher over the coming years. As for Argentina, the country has numerous smaller projects that will aggregate to significant
production increases. The size of projects in Chile and the number of projects in Argentina outweighs the thinner project pipeline in
both that of Brazil and Bolivia. However, Brazil and Bolivia will see higher growth rates due to the low base effects in each country.
Air
Although air transport is not used for most freight in Brazil, with the volumes handled being very small, the importance of this freight
mode is shown when freight is measured by value - goods such as perishables, consumer electronics and pharmaceuticals are
routinely transported via this mode. At present, air freight in Brazil accounts for just 0.03% of total freight handled, a proportion that
will not change over the course of the forecast period out to 2023. Air transport infrastructure ranks in a poor 95th in the World
Economic Forum's Global Competitiveness Index 2017-2018, which shows that investment must be forthcoming in this arena for
the air freight sector to prosper going forward.
Brazil's primary exports are iron ore, petroleum products and grains, none of which are suitable for air freight. There are 698 airports
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with paved runways in the country, and seven of these have runways longer than the 3,047m which are needed to cater for the
largest planes in service. These include the country's busiest airport, São Paulo-Guarulhos International Airport, Rio de Janeiro-
Galeao International Airport and Brasilia International Airport. There are also major airports at Fortaleza, Belem and Manaus in the
north.
We expect port and airport concessions to remain the most attractive for private investment. Following the successful auction of 12
airports in March 2019, a further 22 airports are due to hit the auction block at some point over the coming years. President
Bolsonaro’s market friendly strategy was tested by the airport auction in March with the tender anticipated to generate BRL3.5bn
(USD910mn) over the next 30 years.
The success of recent airport auctions set a strong precedent, but the biggest challenges for the airport concessions programme lie
in the higher risk assets. Earlier auctions had ensured that several reputable international companies were operating airports with a
clear revenue stream. The four airports on the auction block had reported above-average passenger growth in 2015, compared to a
fall in traffic for Brazil as a whole. However, while positive, it does not entirely remove caution towards higher risk assets, those with a
greater element of greenfield development or those more exposed to Brazil's poor economic environment.
The Brazilian airline Azul Cargo Express announced it had signed a deal with the largest e-commerce firm in Latin America,
Mercado Libre, in September 2019. The new contract will see Azul become the only air carrier in Brazil for products sold on the
Mercado Libre’s website. According to John Rodgerson, Azul’s chief executive, the partnership means expedited deliveries through
Mercado Libre’s and Azul’s extensive network, which will cover the entire length of Brazil with almost 900 daily flights.
Construction work began in January 2019 on a new perishable hub by LATAM Cargo Brazil with the new cool facility at
Guarulhos–Governador André Franco Montoro International Airport designed to offer a more reliable connection service and
improved perishable product offering to cater for the rising perishable volumes being exported from Latin America to the rest of the
world. Once completed, the new facility will enable LATAM Cargo to handle 33% more perishable cargo than at present.
Shipping
The largest port in Brazil is the Port of Santos, with other major players being Itajai, Suape and Paranagua. In terms of TEUs handled,
the Port of Santos came in 33rd place in the world's top container ports, behind Manila in the Philippines and ahead of Savannah in
the US. Port infrastructure in Brazil ranks a poor 106th in the World Economic Forum's Global Competitiveness Report 2017-2018
which, although an improvement on 12 months previous, still underlines the necessity for investment in facilities over the medium
term and beyond. Inland waterways, meanwhile, will account for a small proportion of Brazil’s total freight in 2020 (1.66%), a figure
that we expect to drop slightly by the end of 2023 (1.64%).
We hold a mixed outlook for the success of the concessions programme, with ports expected to be attractive to investors compared
with a more cautious outlook for rail and highway projects, for instance, given the higher risk and lower margins associated
respectively. In April 2019, six port areas in Para were auctioned. Under the latest expansion, the addition of several new
port projects indicates that the plan is responding to market demand for assets, with a reduced prominence of highway and railway
assets; however, the continued fallout of the corruption scandal is limiting domestic construction capacity and constraining access
to financing, placing limits on the success of auctions. In August 2019, another three port terminals were auctioned. Of the three,
two are in the Port of Santos in Sao Paulo; nearly 38,398sq m Terminal STS13A and 29,278sq m STS20 terminal. The third terminal,
PAR01, is in the Port of Paranaguá in Paraná.
Following some financial difficulty, Grupo Libra was considering selling off its T-37 and T-35 terminals in 2019, however, in April,
a Brazilian bankruptcy judge told the company that it must maintain its operations at the terminals. Grupo Libra currently owes the
Santos Port Authority more than BRL2bn (USD509mn) and the original contract signed by the operator for operating the terminals
ends in May 2020. A new owner could revitalise the terminals, thus proving to be beneficial for the shipping sector over the medium
term and beyond.
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Latin America and the Caribbean require USD55bn investment by 2040 to boost maritime and port industry, according to a report
released in July 2018. The report, called Port Investment Analysis in Latin America and the Caribbean at the 2040 Horizon,
states that the investment should be used for new container port capacity and improving operations. Brazil should
focus investment on avid dredging plans over the medium term.
The medium-term investment needs considered are USD15bn for the port markets of Mexico, Brazil and Panama. Long-term
investment needs exceed USD50bn by 2040, of which Mexico accounts for 24%, Panama 16% and Brazil 13%. The outlook by 2040
for the maritime and port sector in Latin America and the Caribbean suggests a conducive environment for investors based on
factors such as expected GDP growth, industrial diversification and modernisation and improvement of logistics corridors. The
report revealed that Latin America and the Caribbean will need to overcome the gap between demand and container handling
capacity in ports by 2040. This gap in the long term focuses mainly on the maritime sub-regions of Mexico, the South Pacific, Central
America and the Caribbean.
A memorandum of understanding (MoU) was signed between the Suez Canal Economic Zone and Brazil’s Port of Santos and Port
of Itajaí in April 2018. The Brazilian ports will impart knowledge and expertise, as well as training under the terms of the MoU,
providing a potential boost to the Brazilian shipping sector over the medium term.
Agribusiness is a key sector informing growth in the Brazilian shipping sector, as a significant amount of agri products reach
international markets via sea. It is, therefore, relatively welcome news for the sector that we envisage grains production will grow
from a steady base, before slowing slightly out to 2023. Producers will favour soybean acreage over corn owing to increased
demand from China.
Meanwhile, grain farmers in Brazil are becoming more and more reliant on ports in the north of the country to get their crop to
major export markets. Some 24% of the country's corn and soybean exports are now being handled through the Northern Arc
ports, comprising Itacoatiara, Itaqui, Santarem, Barcarena and Salvador.
To coincide with the 125th anniversary of the Port of Santos - also the largest port in Latin America - the Brazilian government
announced an investment of BRL369mn to improve capacity at the port. The port of Santos is now able to handle 10% more cargo
owing to a deal agreed by local pilots and the port authority, which has seen a deepening of the harbour's draft, enabling larger
vessels to call at the facility.
Underlining the opportunities that exist in the Brazilian capsize sphere, in one month, the amount of capesize vessels currently in
Brazil or otherwise estimated to arrive in Brazilian waters over the course of September 2019 is up 100%, standing at around 125.
Spot rates are expected to ease in the short term.
BRAZIL FREIGHT MODE BREAKDOWN, 2017–2022

Indicator 2017 2018 2019f 2020f 2021f 2022f
National Sources/Fitch Solutions
BRAZIL FREIGHT MODE BREAKDOWN, 2023-2028
Indicator 2023f 2024f 2025f 2026f 2027f 2028f
National Sources/Fitch Solutions
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Company Profile
EcoRodovias
SWOT Analysis
Strengths • EcoRodovias's logistics systems are in strategic regions in the states of São Paulo, Paraná and Rio Grande do
Sul. Together, these states account for 46.6% of the Brazilian GDP.
• The company continues to see profits and revenues expand at a healthy rate.
Weaknesses • Brazil's economy has grown at a rate that has far surpassed its freight transport infrastructure.
• Despite EcoRodovias purchasing Ecoporto Santos as an investment, the global economic downturn has had
a harsh effect on the bottom line, with some insiders alleging that the firm could sell the terminals in order
to concentrate on the road concession business.
Opportunities • The company is well placed to take advantage of rising domestic consumer demand in Brazil and of the
country's growing export volumes.
Threats • A slowdown in China could affect the growth trajectories of Brazilian freight transport businesses.
Company Overview
EcoRodovias is an integrated logistics infrastructure company, operating intermodal logistics assets, highway concessions and
associated services. It currently has five highway concessions and 17 logistics units, comprising the Cubatão, Imigrantes and
Viracopos logistics terminals (Ecopátios), as well as the Armazéns Gerais Columbia and EADI Sul units. EcoRodovias also retains an
interest in STP - SemParar/Via Fácil - an electronic means of payment firm that provides related services to logistics infrastructure
clients.
Latest Updates
EcoRodovias Wins 30-year Concession
In October 2019, EcoRodovias was awarded a 30-year concession of the BR-364/365 highway project in Brazil. The concessionaire
offered a toll rate of around BRL4.694 (USD1.128) against the maximum rate determined by the National Land Transportation
Agency of BRL7.02 (USD1.729). The project includes building the 437km highway, linking Uberlândia with Jataí, as well as access
points, lanes and hard shoulder. Work will also include construction of toll plazas in Uberlândia, Monte Alegre de Minas, Ituiutaba,
Santa Vitória, Paranaiguara, Cachoeira Alta and Jataí. Construction will require an investment of BRL2.06bn (USD507million) while
BRL2.51bn (USD618mn) will go towards operating costs such as conservation, operation and monitoring.
Strategy
In line with our expectations for other Brazilian companies, we expect to see EcoRodovias attempt to increase its use of synergies in
order to offer a more streamlined service to its clients. The company has said: 'Our assets are part of an increasingly integrated
intermodal logistics network that generates operational and economic synergies and whose concessions coincide with the main
corridors involved with Brazilian import/export operations and the circulation of domestic market goods, as well as routes crucial to
production, consumption and tourism activities throughout the country.'
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EcoRodovias is well placed to benefit from synergies resulting from the interconnection of the highways under its concession and
the logistics terminals it operates, allowing investments to be better managed and more competitive.
There are plenty of opportunities for EcoRodovias to expand in Brazil, as the country's infrastructure and transport concession
sectors are ripe for investment, evidenced by its low ratings for infrastructure in the World Economic Forum's Global
Competitiveness Index 2017-2018 (overall infrastructure is ranked 103rd in the world).
The development that the state of Sao Paulo is poised to sue the federal government of Brazil over the latter’s decision to reduce
highway toll prices as a response to the crippling industrial action of truckers in May, could ‘help major highway concessionaires in
Brazil who were hurt by the federal government’s move’. EcoRodovias will be keeping a keen eye on developments as it may be in
line for compensation if successful in its legal action.
EcoRodovias has reportedly completed the purchase of the MinasGeraisGoiás(MGO) road concessionaire for BRL654.mn, according
to Money Times in May 2019. The acquisition received approval by Brazil’s National Land Transport Agency (ANTT), the
Administrative Council for Economic Defense - CADE, BNDESand other creditors.
Huge transport infrastructure plans were laid out in August 2019 by the Brazilian government, which will see extensive works being
carried out until 2022, which should reduce transit time, thus presenting opportunities for EcoRodovias. Analysts are currently
optimistic about Ecorodovias’ prospects going forward with BB Investimentos analyst Renato Hallgren explaining that ‘prospects for
new highway auctions and the possibility of the company negotiating its port asset (along with a possible capital increase) could
unlock the value of Ecorodovias’ shares’, BNamericas reported in August 2019.
Financial Data
Q2 2019
EcoRodovias posted a 27.3% y-o-y drop in earnings during the second quarter of 2019, owing to a sharp rise in costs, BNamericas
English reported in July 2019. Net profits came in at BRL58.5mn, representing a decrease from BRL80.4mn on a year previous. Net
revenues, meanwhile, rose 19% y-o-y to reach BRL695mn, while operating costs and expenses increased 52.5% y-o-y in Q2 2019 to
reach BRL678mn.
Q1 2019
During the first quarter of 2019, EcoRodovias posted a net income of BRL86.07mn, which was 42.3% lower than the net income
posted in the corresponding period in 2018 (BRL149.17mn). Net revenues grew by 11.87% y-o-y from BRL788.3mn to reach
BRL881.86mn.
Q3 2018 & 9M 2018
Ecorodovias saw its net revenues come in at BRL629.8mn and BRL1,875.4mn in 9M 2018. Net revenues from highway concessions
came in at BRL584.5mn in Q3 2018, which was down 2.2% y-o-y and BRL1,783.7mn in 9M 2018. The drop in revenues in the third
quarter were put down to the impact of the exemption of tolls for suspended axles of trucks, which qualifies for contractual
rebalancing.
Q4 2017
EcoRodovias posted net revenues of BRL665.0mn in the fourth quarter of 2017, representing a 7.7% annual increase, the company
announced in a press release. Pro-forma net revenues from highway concessions came in at BRL601.8mn, which was up 9.6%.
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EBITDA in Q4 2017 amounted to BRL437.6mn, an increase of 12.3%. Net income, meanwhile, came in at BRL97.2mn in Q4 2017,
up 9.5% y-o-y.
Q1 2017
Net revenues for EcoRodovias came in at BRL662.7mn, which represented an increase of 10.7%. EBITDA amounted to BRl442.7mn
in Q1 2017, which was up also up by double digits (14.8%).
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LATAM Cargo
SWOT Analysis
Strengths • LATAM is the largest airline group in the region.
• LATAM has 12 dedicated freighter craft in its fleet.
• In Q2 2019, LATAM Airlines Group was named the ‘Best Airline in South America’ by Skytrax World Airline
Awards.
Weaknesses • The company's stock price has been underperforming.

• The Brazilian consumer has been hit hard by slow growth and high inflation. This has depressed domestic
demand for LATAM's services.
Opportunities • LATAM Cargo is well placed to take advantage of Brazil's growing domestic consumer demand.
• LATAM Airlines Group has said it will lease out three of its nine 767-300 freighters to another carrier for a
period of three years as part of its strategy to rationalise its fleet and maximise the use of existing belly
capacity for cargo shipments.
• LATAM looks to forge new routes ahead as it recently agreed to fly a direct route from London to Santiago.
This will make the company the only carrier to offer the London to Santiago route.
• The launch of a new perishable hub by LATAM Cargo Brazil, construction of which began in January 2019, is
aimed at offering a more reliable connection service and improved perishable product offering to serve the
increasing perishable volumes being exported from Latin America.
Threats • Volatile fuel costs represent a threat to airline profits.

• If Brazil's infrastructure does not improve soon, it could restrict LATAM's growth.
• The prolonged macroeconomic and political instability in Brazil could further threaten the financial outlook
of the company.
• With consumer confidence not at a strong level at present, Brazilian air freighters, such as LATAM, will
continue to struggle with output while domestic consumers rein in their spending.
Company Overview
LATAM Airlines Group is the name of the company formed from the merger of Brazilian carrier TAM with the Chilean airline LAN,
which was completed in June 2012 after clearing a number of legal and regulatory hurdles. The cargo arms of the two airlines - TAM
Cargo and LAN Cargo - have also been merged, making the airline the largest in the region and one of the largest in the world.
Latest Activity
LATAM Launches Falklands Weekly Flight
A new weekly flight connecting Sao Paulo in Brazil with Mount Pleasant Airport on the Falkland Islands is set to launch on November
20 2019 by LATAM Airlines Brazil, which will increase freight transport offered on the route by more than seven times. Latam plans
to transport perishable products to and from the island, incorporating a monthly stop in Cordoba, Argentina.
Strategy
While LATAM is well placed to benefit from low base effects in Latin America's air freight sector over the short term, sustainable
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growth will hinge on major infrastructure investment and a turnaround in the economies of key regional players. Of Brazil's 20
largest airports, 13 are operating above capacity. Investment is needed to ensure that the country does not run out of airport space.
Given the difficult operating environment air freight carriers face, we maintain our view that more airlines will be seeking to merge in
order to scale back capacity and cut costs.
In terms of its fleet, the airline has access to bellyhold capacity in 35 767-300Fs, 10 B767Fs, 24 787-8/-9s, 10 777-300 ERs, 49
A321-200s, 125 A320-200s, 46 A319-100s, 4 B777Fs, 13 A330-200s and seven Dash 8-200s, as of August 2019.
The airline's current strategy is based around three pillars: agility, reliability and trust. The company is now preparing for its Santiago
to London direct route and is expected to offer customers a weekly lift of 3,360 tonnes into Latin America. This comes as the firm
struggles to keep up with its dwindling revenue base due to decreased cargo tonnage hauled and dwindling revenues. The
company has spoken of its desire to launch its new, tailored portfolio of cargo services.
August 2017 saw the fourth straight month of improvements in revenue tonne kilometres (RTKs). In August, air freight volumes of
291mn RTKs were recorded, 7.6% y-o-y growth. This performance was the strongest monthly growth since May. Load factors
improved in August to hit 54%.
A new direct cargo service linking South America, including Brazil, to Brussels and Madrid has been established by LATAM Cargo,
which should boost trade between Latin America and Europe. LATAM Cargo is the only airline to offer customers direct cargo
transportation on the new routes and the move was designed to cater for growing demand. Claudio Torres, international
commercial director- South America at LATAM Cargo, stated: ‘By expanding our network, we are in a position to offer better
alternatives to our customers. This is particularly important for the South American market, where we export fresh, temperature-
sensitive products that require shorter transportation periods.’
LATAM Airline Group’s joint business agreements (JBAs) with American Airlines and International Airlines Group, the holding
company of British Airways and Iberia respectively have been approved by a Chilean court. The JBAs cover both passenger and
cargo activities and had already been approved by the regulatory bodies of Brazil, Colombia and Uruguay.
A new perishables hub that LATAM Cargo has commenced construction on in Guarulhos, Brazil, will bolster the airline's perishable
cargo volumes by 33% once completed. The new perishables hub will allow LATAM to boost their strategic position. The new facility
will enable LATAM Cargo to undertake the re-palletising process and transport to an aircraft in a temperature-controlled
environment. In recent times, Guarulhos has become a strategic hub for LATAM Cargo, owing to its connectivity between Latin
America and Miami, London, Madrid and Paris.
Data for April 2019 from the International Air Transport Association presents a gloomy picture for the global air cargo market at
present. The one bright spot is the Latin American market with volumes on the rise for the past three months. Underlining the
strides taken in the region, LATAM Cargo signed an agreement with provider of active and passive temperature-controlled
packaging solutions, CSafe Global, to offer increased options to customers transporting temperature-sensitive pharmaceuticals.
A new direct service between Scandinavia and Latin America was launched in June 2019 by LATAM Cargo, making it the first cargo
airline to do so, by adding Copenhagen to its network. The new weekly route, which will use a B767-300F, reduces transit times by
up to 48 hours by decreasing the need for land transportation, LATAM Cargo announced.
Financial Data
Q2 2019
LATAM Airlines Group posted an operating income of USD40.2mn and an operating margin of 1.7% during the second quarter of
2019. LATAM Airlines Group net result improved by reach USD144.9mn y-o-y, although a net loss of USD62.8mn was posted in Q2
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2019. Total revenues increased 0.5% y-o-y to reach USD2,370.0mn. Meanwhile, cargo revenues declined 10.2% y-o-y, influenced
by currency devaluation.
Q2 2018
Revenues from the second quarter of 2018 grew by 16.8% to reach USD299.7mn, which was attributable to a recovery in both
imports and exports in the South American region. Cargo yields in the period increased by 6.7% due in no small part to a better
demand environment, as well as the ending of the Brazilian truckers strike in May 2018. An unnamed spokesperson for LATAM said:
‘Imports from North America and Europe to Brazil and Chile showed an improvement in terms of revenues per available ton km
(ATKs), driven by higher imports of electronics and capital goods.’
Q3 2017
LATAM Airlines Group saw cargo revenues increase by 2.5% to reach USD272.2mn, which represented the first rise in cargo
revenues for four years. The revenue increase was attributed to a 3.5% rise in cargo traffic. A LATAM spokesperson explained:
'Imports from North America and Europe to Brazil, continue to show improvement year-over-year, driven by major imports of
electronics and spare parts, as a result of a more stable market conditions in the country as well as the appreciation of the Brazilian
Real.' Cargo revenues per available tonne km also saw an increase of 8.2% y-o-y.
Q2 2017
Earnings for LATAM Airlines came in at a company record USD48.2mn, representing a huge improvement on the USD1.3mn
registered in Q2 2016. The company put the performance down to rising passenger revenues and fleet management efforts. That
said, a net loss of USD138mn was still experienced by LATAM for the quarter, which compares unfavourably with Q216's 92.1mn net
loss.
Q1 2017
A profit of USD65.6mn was reported by LATAM, which represented a drop of 35.9% on the corresponding period in 2016.
Meanwhile, operating revenues grew by 6.4% per annum to USD2.5bn, although operating income dropped by 30.5% to reach
USD152.3mn.
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Santos Brasil Participações

SWOT Analysis
Strengths • The company has positioned itself at the centre of the multimodal container business, where we forecast
strong medium-term growth to 2023.
• Growing domestic demand for containerised goods should continue as Brazilian consumer demand
increases.
Weaknesses • The company is heavily exposed to the auto industry, so any fall-off in Brazilian consumer demand would
negatively affect their performance.
• The termination of the contract to move containers for the ESA consortium of ship owners in May 2017
signals growing competition at the Port of Santos.
Opportunities • The company has announced its interest in three upcoming federal government port terminal concession
tenders.
• The company is expanding its network of regional container terminals and distribution centres.
• With LNG bunkering demand on the rise, Santos Brasil Participacoes’ share of offtake from the
ConocoPhillips-operated Barossa field development could prove to be a potential opportunity to meet this
growing demand, Lloyd’s List reported in May 2019.
• The port of Santos has joined TradeLens, a platform which enables it to generate insights into the more than
1.6mn TEUs handled at its Tecon Santos terminal. Over 50 ports and terminals in several Latin American
countries now use the digital system aimed at allowing shippers and port authorities to move goods more
effectively.
Threats • We forecast a slowdown in Brazilian total trade growth towards the end of our forecast period.
• Rising fuel prices threaten the company's profit.
• Any drop off in Chinese demand could see cargo volumes fall.
• The company could be negatively affected by ongoing labour disputes in Brazil's port sector.
Company Overview
Santos Brasil Participações manages and operates container terminals and provides logistic services for maritime and terrestrial
cargo transport. Its services can be separated into four categories:
Loading and unloading operations from ships
• Warehouse operations
• Shipping
• Multimodal railroad services
The company's Tecon terminals are located in São Paulo, Vila do Conde, Pará and Santa Catarina. The Vila do Conde terminal,
Convicon, is operated by Nara Valley, a subsidiary of Santos Brasil Participações. The company also has shares in subsidiaries such as
Mesquita SA Transportes e Serviços and Tecon Imbituba, among others.
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Latest Updates
TradeLens Grows In Importance in Latin America
In October 2019, Natalia de Greiff, vice president of cloud and cognitive at IBM Latin America hailed the introduction of TradeLens
into the Latin American market, with more than 50 Latin American ports and terminals currently working with TradeLens, the
blockchain-based platform jointly developed by IBM and Maersk. Processing approximately 10mn shipping events per week,
Santos Brasil now uses the platform.
Strategy
Santos Brasil's logistics structure comprises two bonded industrial logistics centres (at Santos and Guarujá), as well as a distribution
centre in São Bernardo do Campo (located in the greater São Paulo area). This is in addition to its own road transportation fleet.
According to the company's website, Santos Brasil began to supply logistics services for the Mercedes-Benz truck and bus
production lines plants in 2011. Santos Brasil oversees the import and export of containers, inventory management, shipping of
parts and the supply of plant assembly lines. The decision to open a second distribution centre in São Paulo (the first is in São
Bernardo do Campo) was triggered by a new contract with Mercedes-Benz, which already imports through the port terminal in
Santos, Automotive Logistics reported in July 2018. Santos Brasil took over the logistics flow of cargo of the carmaker to and from
the company's plant in São Paulo. An investment of USD150.6mn was made to develop the 1m sq centre.
Underlining the potential of the partnership over the medium term, Brazil was chosen as the hub to supply Arab countries with
medium-sized Mercedes trucks at the end of December 2015.
The port of Santos, which is operated by Santos Brasil Participações, is to take delivery of 30 Ottawa T2 Terminal Tractors, which are
to be delivered by Kalmar, part of Cargotec Corporation. The new terminal tractors will form part of the Tecon Santos’ fleet
expansion programme, thus addressing a significant growth in demand during 2018.
Financial Data
Q2 2019
During the second quarter of 2019, EBITDA came in at BRL58.7mn, while a net profit of BRL6.3mn was posted. Consolidated net
revenues came in at BRL264.9mn, representing an increase of 14.9%. The company’s cash and equivalents position as of the end of
June 2019 was BRL460.3mn, with a net debt of BRL19.8mn.
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Vale (Logistics)
SWOT Analysis
Strengths • Vale is the world's second largest mining company, with operations in North America, Latin America, Asia,
Europe and Africa.
• Despite recording net losses in the first two quarters of 2019, Vale remains cash flow positive with net cash
provided by operating activities reaching USD2.96bn in Q2 2019 and USD2.20bn in Q1 2019. Vale's cash
generation enabled the company to resume its trajectory of debt reduction and strengthened the balance
sheet further.
Weaknesses • Heavily exposed to the Chinese market, any drop-off in Chinese demand will have a negative effect. The
rerouting of the first very large ore carrier on its maiden voyage highlights the risks in Vale's strategy.
• Both Chinese ship-owners and domestic steel producers are raising objections at government level over the
perceived threat of the mining giant dominating the iron ore shipping market with its fleet of Chinamax
vessels, putting Vale's expensive strategy in doubt.
Opportunities • Vale is well placed to take advantage of continued Asian demand for iron ore and coal.
• We expect to see a rising presence of copper mining within Brazil's mineral sector, driven by numerous
projects under global miner Vale.
• Brazil's transport ministry has approved a plan from Vale to carry out USD4.68bn-worth of railway
infrastructure works.
• A new Vale-owned iron ore marine terminal - Teluk Rubiah - in the port of Lamut in Malaysia will allow the
company to better access the Asian iron ore market.
• Mining company Vale is reportedly considering construction a new railway and port, in order to expand
production at the Carajas Serra Sul mine. The project would connect the Carajas railroad to Vila do
Conde port, stretching for 400km.
Threats • In building a fleet of Chinamax mega-tankers, Vale hopes to avoid the volatile spot market, but if rates
continue to fall, this plan may backfire.
• Any slowdown in the US economy would result in reduced US demand for Chinese imports and, in turn,
lessen China's demand for raw materials like iron ore, with negative effects for Vale.
• The company remains heavily dependent on Chinese demand.
Company Overview
Vale, the world's second largest mining company, was transferred from the control of the Brazilian government to the private sector
on May 6 1997, when CSN-led Consórcio Brasil acquired 41.7% of the federal government's common stock for BRL3,338bn
(USD3.14bn). The decision to privatise Vale caused much controversy and some politicians opposed it. Vale remained a publicly
traded company both in the Bolsa de Valores de São Paulo and the NYSE.
Although it is primarily a mining and steel company, Vale invests more in logistics in Brazil than any other company. Vale's logistics
infrastructure in Brazil includes 10,179km of railroad. It has four railways: Centro-Atlântica Railroad (FCA), Vitória-Minas Railroad
(EFVM), Carajás Railroad and the North-South Railroad (FNS). In addition, Vale has a 41.5% stake in MRS Logística.
Vale also owns eight seaport terminals: a multi-modal terminal, five general cargo ports and two iron ore export terminals - Ilha
Guaíba Terminal (TIG) and Sepetiba Port (CPBS) - both in the state of Rio de Janeiro.
As well as transporting minerals, the company's logistics infrastructure transports: agricultural produce such as sugar, soybean,
wheat and bran; fuels and petrochemicals; construction materials; and wood products.
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Brazil is the world's top exporter of soybeans and, over the past decade, the onus has been on building and upgrading facilities and
transportation infrastructure such as roads, railroads and river systems to improve the movement of Brazilian grains for export.
Growing Chinese demand for iron ore from Brazil is a welcome trend for Vale Logistics at present. With China decreasing iron ore
output in order to combat high levels of smog over the winter, steel mills in China have been required to import higher quantities of
high-grade ore.
Latest Updates
Vale Links Up With Baowu Steel Group
A number of agreements have been signed between Vale and China’s largest steel producer Baowu Steel Group in October 2019,
placing an onus on exploring partnerships in various areas, including logistics and supply chain. The link up will see cooperation in
terms of steel making, base metals, technology research and development, as well examining improvements that can be made to
the shipment of iron ore.
Strategy
Brazil's iron ore sector will continue to outperform over the medium term and longer term, supported by low operating costs, and a
strong output growth strategy from Brazilian mining giant Vale. We forecast Brazil's iron ore production to increase from 437mn
tonnes in 2018 to 556mn tonnes by 2026, averaging 3.2% annual growth, supporting growth in the logistics sphere.
Vale announced in July 2018 that it had overseen record iron ore and pellet production during the second quarter of 2018, in spite
of the fact that production and logistics across Brazil were severely disrupted by the nationwide truckers strike. Iron ore production
totalled 96.8mn tonnes and pellet production came in at 12.84mn tonnes in Q2 2018.
Public hearings were initiated by Brazil’s National Land Transport Agency related to the renewal of Vale’s concessions to operate the
Carajás Railway and Vitoria-Minas Railway. The period for submitting submissions on both concessions ended on September 24
2018. The Attorney General’s Office suggests that the requirements set out in the law are ‘insufficient to ensure the provision of
adequate service by the concessionaires, which may adversely affect the public interest and the users of rail transport’.
Brazil’s secretary for the Investment Partnerships Program has declared that the global mining firm and the world’s second-largest
mining company and top iron ore exporter, Vale, along with logistics company Rumo, are anticipated to sign an early renewal of rail
concessions during 2019. Both companies have already agreed and their contracts just need approval by the federal audits
court. Vasconcelos added that the Ferrograo grain railway, which will link Sinop in Mato Grosso state to Miritituba on the Tapajós
river, is expected to take 10 years to construct.
A compensation package amounting to BRL400mn has been proposed by Vale for workers who were impacted by the rupture of
the Brumadinho tailings dam in January 2019. The Brumadinho dam collapse sparked a flurry of investigations into Vale's
operations, leading to executive removals, idling operations, and fines on the horizon. The disaster triggered an initiative by Vale to
decommission its remaining upstream tailings dams over the next three years, effectively cutting off 40mn tonnes of iron ore per
annum. Since the announcement, multiple operations have been idled, causing further supply disruptions. For example,
the Brucutu mine (30mn tonnes per year) was idled for six weeks, allowed to re-open, then idled again days later following another
court ruling, then finally re-opened in June. We expect to see continued regulatory scrutiny over Vale and the iron ore sector as the
government grapples with the deadliest environmental disaster in the nation's history.
Over the past two years, Brazil has made up on average 22.2% of China's iron ore imports, second only to Australia who has
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averaged 71.9%. Due to the Brumadinho dam impact choking Vale's iron ore production, Brazil's weight in the Chinese market fell to
18.1% in February 2019, down from the two-year monthly average of 22.2% and below 2018's weight of 20.6% in February 2018.
We expect Brazilian exports to China to rebound over the remainder of 2019 and into 2020, as production at major mines resumes.
In October 2019, Vale announced it had temporarily suspended the disposal of tailings at the Itabiruçu dam, which is a part of the
Itabira Complex. As a result, the firm reaffirms guidance of 302-337mnt of iron ore and pellet sales for 2019 but acknowledges that
sales are expected to be in the lower to midpoint of that range.
iron ore production rebounded in Q3 2019, compared with Q2 2019, up 35.4% q-o-q to 86.7mnt. However, production through 9M
2019 remains well below the first nine months of 2018, down 21.2% to 223.6mnt from 283.7mnt. Production in the Northern
System was the firm's strong point as the S11D mine ramps up while the Southern and Southeastern Systems dragged down
overall production. The two regional segments were down 56.1% and 27.9% y-o-y respectively through the first nine months of
2019. Vale expects to resume 50mnt of annual iron ore production from its halted operations over 2020 and 2021.
Financial Data
Q2 2019
Vale had its second consecutive quarter of losses in Q2 2019, as net income reached negative USD133mn, mainly as a result of
additional provisions related to the Brumadinho dam rupture (USD1.5bn), the decommissioning of Germano dam (USD257mn) and
the Renova Foundation (USD383mn).
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Brazil Demographic Outlook

Demographic analysis is a key pillar of our macroeconomic and industry forecasting model. Not only is the total population of a
country a key variable in consumer demand, but an understanding of the demographic profile is essential to understanding issues
ranging from future population trends to productivity growth and government spending requirements.
The accompanying charts detail the population pyramid for 2017, the change in the structure of the population between 2017 and
2050 and the total population between 1990 and 2050. The tables show indicators from all of these charts, in addition to key
metrics such as population ratios, the urban/rural split and life expectancy.
Population
(1990-2050)
f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
Brazil Population Pyramid

2017 (LHS) & 2017 Versus 2050 (RHS)
Source: World Bank, UN, Fitch Solutions
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POPULATION HEADLINE INDICATORS (BRAZIL 1990-2025)

Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, total, '000 149,352.1 175,287.6 186,917.4 196,796.3 205,962.1 213,863.0 220,370.6
Population, % y-o-y 1.46 1.18 0.98 0.86 0.69 0.54
Population, total, male, '000 74,065.8 86,623.2 92,224.8 96,931.9 101,283.7 105,007.0 108,046.4
Population, total, female, '000 75,286.4 88,664.3 94,692.6 99,864.4 104,678.4 108,856.1 112,324.2
Population ratio, male/female 0.98 0.98 0.97 0.97 0.97 0.96 0.96
na = not available; f = Fitch Solutions forecast. Source: World Bank, UN, Fitch Solutions
KEY POPULATION RATIOS (BRAZIL 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Active population, total, '000 90,354.8 113,611.8 124,574.8 134,537.5 143,204.0 149,204.2 152,607.0
Active population, % of total population 60.5 64.8 66.6 68.4 69.5 69.8 69.3
Dependent population, total, '000 58,997.3 61,675.8 62,342.5 62,258.8 62,758.1 64,658.8 67,763.5
Dependent ratio, % of total working age 65.3 54.3 50.0 46.3 43.8 43.3 44.4
Youth population, total, '000 52,959.7 52,797.0 51,301.9 49,005.8 46,362.6 44,239.2 42,657.7
Youth population, % of total working age 58.6 46.5 41.2 36.4 32.4 29.7 28.0
Pensionable population, '000 6,037.6 8,878.7 11,040.6 13,253.0 16,395.5 20,419.7 25,105.8
Pensionable population, % of total working age 6.7 7.8 8.9 9.9 11.4 13.7 16.5
URBAN/RURAL POPULATION & LIFE EXPECTANCY (BRAZIL 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Urban population, '000 110,404.1 142,319.5 154,831.1 165,968.1 176,482.8 185,725.1 193,536.0
Urban population, % of total 73.9 81.2 82.8 84.3 85.7 86.8 87.8
Rural population, '000 38,948.1 32,968.1 32,086.2 30,828.1 29,479.4 28,138.0 26,834.5
Rural population, % of total 26.1 18.8 17.2 15.7 14.3 13.2 12.2
Life expectancy at birth, male, years 61.7 66.3 68.3 70.1 71.6 72.8 74.0
Life expectancy at birth, female, years 69.2 74.0 75.9 77.6 78.9 79.9 80.8
Life expectancy at birth, average, years 65.3 70.1 72.0 73.8 75.3 76.4 77.4
POPULATION BY AGE GROUP (BRAZIL 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, total, '000 17,964.6 17,571.6 16,433.4 15,166.6 14,875.0 14,279.6 13,571.3
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Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 80-84 yrs, total, '000 520.2 818.1 1,122.9 1,518.4 1,799.7 2,308.8 2,683.5
Population, 85-89 yrs, total, '000 169.6 326.3 455.4 655.4 973.6 1,182.4 1,547.2
Population, 90-94 yrs, total, '000 37.6 77.9 127.5 191.1 343.4 524.4 650.9
Population, 95-99 yrs, total, '000 4.0 9.7 18.9 34.2 77.4 142.9 222.5
Population, 100+ yrs, total, '000 0.2 0.6 1.3 2.8 9.7 23.4 44.9
POPULATION BY AGE GROUP % (BRAZIL 1990-2025)
Indicator 1990 2000 2005 2010 2015 2020f 2025f
Population, 0-4 yrs, % total 12.03 10.02 8.79 7.71 7.22 6.68 6.16
Population, 100+ yrs, % total 0.00 0.00 0.00 0.00 0.00 0.01 0.02
fitchsolutions.com
Freight Transport & Shipping Methodology

Industry Forecast Methodology
Our industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric
modelling. The precise form of model we use varies from industry to industry, in each case being determined, as per standard
practice, by the prevailing features of the industry data being examined.
Common to our analysis of every industry is the use of vector autoregressions, which allow us to forecast a variable using more than
the variable's own history as explanatory information. For example, when forecasting oil prices, we can include information about oil
consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most
desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile
form of univariate models: the autoregressive moving average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historical data or data quality is poor. In such cases,
we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting.
We mainly use OLS estimators and in order to avoid relying on subjective views and encourage the use of objective views, we use a
'general-to-specific' method. We mainly use a linear model, but simple non-linear models, such as the log-linear model, are used
when necessary. During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy
variables are used to determine the level of impact.
Effective forecasting depends on appropriately selected regression models. We select the best model according to various different
criteria and tests, including but not exclusive to:
• R2 tests explanatory power; adjusted R2 takes degree of freedom into account;

• Testing the directional movement and magnitude of coefficients;
• Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value);
• All results are assessed to alleviate issues related to autocorrelation and multicollinearity.
We use the selected best model to perform forecasting.
Human intervention plays a necessary and desirable role in all of our industry forecasting. Experience, expertise and knowledge of
industry data and trends ensure analysts spot structural breaks, anomalous data, turning points and seasonal features where a
purely mechanical forecasting process would not.
Sector-Specific Methodology
There are a number of principal criteria that drive our forecasts for each transport variable:
• GDP Growth
As transport activity is heavily influenced by real GDP growth, this factor is examined to ascertain its relationship with overall trade
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volumes. Projected GDP growth is calculated using our own macroeconomic and demographic forecasts. The level of port
throughput activity is also influenced by real GDP growth. This is used to represent the level of demand in a country and movement
in this indicator will indicate changes in net exports volumes, hence throughput volumes.
• Real Trade Volumes
The sum of imports and exports plays a particularly important role in developing countries with a small domestic industrial sector.
The focus is on goods, as services do not employ transport. The volumes are forecast based on the following criteria:
• Trends manifested through historical data;

• The impact of future step changes to the economy (such as future membership of the EU or some other regional body).
The port throughput forecasts consider historical trends in trade data and the impact of changes to the trade openness in an
economy, such as sanctions or membership of trade unions.
• External Factors
External factors also influence the shipping throughput forecasts. These include the likelihood and impact of strikes
at local port level, and future investment plans that aim to improve port capacity.
Freight Transport Tonnage Estimates
We aim to generate best estimate figures for freight transport for countries where raw data on freight tonnage is not published or
accessible. The estimate for tonnage data integrates macroeconomic, country area, transport and infrastructure data into our
model. A parent market is selected which represents the benchmark for the region, and we then use weighted scale factors to
adjust the raw data of the parent to calculate estimated proxy figures for a given market.
The three indicators for which we estimate tonnage data are road freight, rail freight and air freight.
One indicator used in estimating for all three indicators is real GDP. This is the value of output for a given country adjusted for
inflation. This is used to represent the size of an economy and the level of transport activity in a country. It is one of the main scale
factors used when generating our estimates.
The additional indicators used in freight tonnage estimations are given below:
• Population: The number of people living in a country. The data is sourced from the UN and the World Bank.
• Total road length: The total length of the road network in a given country. The data is sourced from the CIA World Factbook.
• Country area: The sum of all land and water areas within international boundaries. The data is sourced from the CIA World
Factbook.
• Number of airports with paved runways: The number of airports with concrete or asphalt landing surfaces. The data is
sourced from the CIA World Factbook.
• Length of railways: The total length of the railway network in a country. The data is sourced from the CIA World Factbook.
• Number of airline take-offs: The number of domestic registered carrier departures worldwide from a given country. The data
is sourced from the World Bank.
Road Freight
Road freight tonnage data is estimated with parent market data, which is then scaled by a 25% weighting for real GDP, 25% for
population and 50% for total length of roads.
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The population in a country represents demand for goods and thus the size of the road freight market. The total length of the road
network determines how much freight can be carried by heavy trucks and goods vehicles.
Rail Freight
Rail freight tonnage data is estimated with parent market data, which is then scaled by a 25% weighting for real GDP, 25% for
country area and 50% for length of railways.
The length of railways and the country's size will determine the demand and capacity to carry rail freight. A large country with an
active railway network will likely use this to move greater volumes of goods over long distances.
Air Freight
Air freight tonnage data is estimated with parent market data, which is then scaled by a 25% weighting for real GDP, 50% for number
of airline take-offs and 25% for number of airports with paved runways.
The number of domestic airline take-offs is used to represent how active the airline market is in the country. Airports with paved
runways indicate that a country is able to accommodate larger planes which carry goods.
Sources
Sources used in Freight Transport & Shipping reports include local transport ministries, officially released company results and
figures, established think tanks and institutes and donor agencies such as the World Bank and the Asian Development Bank.
For shipping tonnage and container data we source information from port authorities, officially released shipping company
performance reports, and established port news reports and articles.
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fitchsolutions.com
Fit
Fitch
ch Solutions, 30 North C
Colonnade
olonnade,, Canary W
Wharf
harf,, L
London.
ondon. E14 5GN, UK
Tel: +44 (0)20 7248 0468
Fax: +44 (0)20 7248 0467
Web: www.fitchsolutions.com
IS SN: 2397-3862
ISSN:
Copy Deadline: November 2019

opy
© 20
2019
19 Fit
Fitch
ch Solutions Gr
Group
oup Limit
Limited.
ed. All rights rreserv
eserved.
ed.
All information, analysis, forecasts and data provided by Fitch Solutions Group Limited is for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Fitch Solutions Group Limited.
All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Fitch
Solutions Group Limited makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.
This report from Fitch Solutions Macro Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch
Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2019 Fitch Solutions Group Limited.


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Q1 2020

EMISPDF br-falconi-latam1 from 201.48.145.50 on 2020-03-02 20:33:18 GMT. DownloadPDF.

Brazil Demographic Outlook....................................................................................................................................................53

Freight Transport & Shipping Methodology........................................................................................................................56

Key Updates And Forecasts

All Modes To Decrease Slightly In 2021 (Except GDP)

f = Fitch Solutions forecast. Sources: National sources, Fitch Solutions

Exports To Remain Ahead

f = Fitch Solutions forecast. Source: IBGE, IMF, Fitch Solutions

TRADE OVERVIEW (BRAZIL 2018-2023)

Imports, USDbn 251.15 230.00 251.92 263.01 271.39 281.45

Import growth, % y-o-y 9.70 -8.42 9.53 4.40 3.18 3.71

Exports, USDbn 260.45 250.12 265.37 270.14 278.09 289.21

Export growth, % y-o-y 4.69 -3.96 6.09 1.80 2.94 4.00

Total trade, USDbn 511.60 480.12 517.29 533.15 549.48 570.67

Indicator 2018 2019f 2020f 2021f 2022f 2023f

Fuels, exports, USDmn 25,403 27,576 29,471 30,064 31,053 32,436

Fuels, exports, % y-o-y 35.7 8.6 6.9 2.0 3.3 4.5

Fuels, imports, USDmn 25,564 28,502 32,343 34,287 35,754 37,518

Fuels, imports, % y-o-y 18.6 11.5 13.5 6.0 4.3 4.9

MAIN IMPORT PARTNERS

China, 36,300.8 39,539.7 39,581.0 32,562.2 24,581.3 28,962.7 36,818.0

China, 15.3 15.6 16.3 17.9 16.9 18.1 19.4

United 34,549.4 38,451.9 37,417.1 28,365.4 25,611.2 26,610.4 31,107.1

United 14.6 15.1 15.4 15.6 17.7 16.7 16.4

Argentina, 17,430.5 17,450.7 14,991.7 10,901.2 9,557.3 10,001.0 11,713.9

Argentina, 7.4 6.9 6.2 6.0 6.6 6.3 6.2

Germany, 15,059.4 16,092.0 14,667.5 11,001.7 9,644.5 9,779.9 11,189.1

Germany, 6.4 6.3 6.0 6.1 6.6 6.1 5.9

Korea, 9,640.8 10,060.2 9,037.8 5,745.6 6,354.1 5,555.0 5,703.5

Korea, 4.1 4.0 3.7 3.2 4.4 3.5 3.0

TOTAL 236,493.4 253,986.1 242,803.6 181,743.7 145,062.3 159,781.9 189,966.4

TOTAL, top 5 112,981.0 121,594.5 115,695.0 88,576.0 75,748.3 80,908.9 96,531.5

% from top 5 47.8 47.9 47.6 48.7 52.2 50.6 50.8

MAIN EXPORT PARTNERS

China, 41,227.5 46,026.2 40,616.1 35,607.5 35,134.0 47,495.1 63,907.9

China, 17.0 19.0 18.0 18.6 19.0 21.8 26.4

United 26,849.9 24,861.1 27,144.9 24,216.0 23,300.5 27,108.2 29,096.7

United 11.1 10.3 12.1 12.7 12.6 12.4 12.0

Argentina, 17,997.7 19,615.4 14,282.0 12,800.0 13,418.0 17,624.0 14,918.3

Argentina, 7.4 8.1 6.3 6.7 7.3 8.1 6.2

Netherlands, 15,040.7 17,283.1 13,035.6 10,044.5 10,323.0 9,252.8 13,048.1

Netherlands, 6.2 7.2 5.8 5.3 5.6 4.2 5.4

Japan, 7,955.7 7,964.0 6,718.6 4,845.0 4,604.5 5,266.5 4,348.2

Japan, 3.3 3.3 3.0 2.5 2.5 2.4 1.8

TOTAL 242,137.6 241,690.3 225,099.6 191,134.1 184,557.6 217,771.9 242,363.3

TOTAL, top 5 109,071.5 115,749.8 101,797.2 87,512.9 86,780.1 106,746.6 125,319.1

% from top 5 45.0 47.9 45.2 45.8 47.0 49.0 51.7

Road Freight Forecast

Positive Growth Ahead, Albeit Muted

f = Fitch Solutions forecast. Source: National source, Fitch Solutions

ROAD FREIGHT (BRAZIL 2018-2023)

Rail Freight Forecast

On Track For Steady Growth

f = Fitch Solutions. Source: Ministry of Transport, Fitch Solutions

RAIL FREIGHT (BRAZIL 2018-2023)

Air Freight Forecast

treatment of invasive aspergillosis and mucormycosis.

Air - The Outperforming Mode In Brazil

AIR FREIGHT (BRAZIL 2018-2023)

Medium and Long Term

Agribusiness To Continue To Propel Box Growth

f= Fitch Solutions forecast. Source: Port Authority, Fitch Solutions