How important is MERCOSUR for the Brazilian port and maritime sector?

If the maritime intermediation has a fundamental role in the commercial development of a country, it is quite common to think about such consumption relationships around the globe. However, what is the role of the sector in the relationship with our continental neighbors?

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In this article, we invited Rene Wlach, commercial director of Tecon Rio Grande, Wilson Sons Unit, to talk a little about the Mercosur agreement for the growth of companies in Brazil willing to expand their borders. Check it out.

Chronology of the Mercosur agreement

From the moment the market began its global transition in the 20^th century, countries across the globe started to realize the need to align goals and production demands in order to strengthen their position when dealing with negotiation and industrial development.

Therefore, the last 100 years were marked by this approximation between governments and private sector, taking down walls between borders. North Atlantic Treaty Organization (NATO), European Union and Organization of the Petroleum Exporting Countries (OPEC) are some of the examples of economic and political agreements that dominated market dynamics in that period.

As a response to those initiatives, it was seen as natural the creation of an international block gathering Latin American countries towards the same goal. The Southern Common Market, also known as Mercosur, was signed in 1991 with the mission of integrating in a more practical way the economies of the majority of nations in that subcontinent, led by Brazil, Uruguay, Paraguay and Argentina.

This movement was proven as very important for the commercial development of the whole block, which fostered free trade and transit of citizens between border and a higher articulation towards joint negotiations in the market.

And it is exactly that power that can and must be explored by the maritime transportation logistic in the creation of even more opportunities and business in Brazil.

The importance of Mercosur for the Brazilian port/maritime sector

Brazil, as the largest country of the block, figures as the protagonist and leader since the creation of Mercosur. It has, among all members, not only the highest GDP, but also holds more investments in logistics and foreign trade, including maritime chartering.

After all, according to Rene himself, the port is the main entry and exit door of nation’s wealth. It is a vital path for those eager to invest in foreign trade.

And it is an interest topic to be further discussed when we talk about Mercosur. Many businessmen and professionals dealing with sales to other countries correlate maritime transportation to long distances. However, the modality can be much more interesting when we think about the creation of commercial bonds with our closest neighbors.

This is the case of cabotage: transportation model where the ship navigates always close to the shore, offering local chartering courses with potential to be more efficient than roads. 

“Brazil has a cost with more than 8,600 km and approximately 20 ports prepared to receive and distribute products overseas”, says Rene. “Ports of Santos, Rio de Janeiro, Salvador and Recife have experienced exchange of goods via maritime routes due to their more distant locations, and the market is constantly growing.”

With this port infrastructure network getting bigger and bigger, it is possible not only to expand its market to neighbors but also take part in joint efforts with the intention of obtaining more negotiation power in the global scenario.

And it is indeed happening, but with some changes and adjustments in the relationships between neighbors. According to Wlach:

“In the past there were bilateral agreements between Brazil-Chile, Brazil-Uruguay and Brazil-Argentina (where only countries bearing flags of such countries could operate in the route). However, changes in treaties were already announced and flags from other countries will be permitted to join this market”.

Still according to him, the competition must result in a reduction of freights and increase of the involved trade volumes.

What are the trends for the future development of the agreement?

With this movement, the future of Mercosur envisions an even more important participation of transportation by ships, not only in the exchange of goods within the block but also in the joint strength of such economies towards the international market.

Rene, as well as many other professionals working directly in the routine of ports across Brazil, understands that this is growing market that still needs to foster more attractive conditions in terms of opportunities and competitiveness against the road transportation modality.

It is a natural consequence of the agreement’s maturity, which just turned 30 in 2021, and is further leveraged by the populational and consumption growth triggered by those market dynamics.

In this sense, the participation of Wilson Sons in Tecon Rio Grande is a highlight, and Rene is at the center of this process.

Wilson Sons’ business unit is fully involved in the creation of a HUB (cargo concentrating port) in our port complex with the purpose of making it a major logistic platform for the South Cone”.

The role of the company in this case is to keep in touch with ship-owners (owners of ships or carriers) so that together we can implement this quality and agility service in the international logistic. This is the wild card of the sector in its effort to recover post-pandemic.

In fact, it is not possible to talk about future without mentioning the lessons 2020 and 2021 taught the sector. “The just-in-time model, which organized time and reduced stock, is undergoing a serious revision as the pandemic demonstrated a lack of raw materials in the whole industry”.

Still according to Rene, we are seeing an upheaval for the increase of safety stocks and distribution centers, logistic pavilions, collection and delivery companies are growing hand in hand with the port sector, the latter is expected to get a sound boost of volume in 2023.

And this whole new dynamic directly affects the role of the maritime logistic sector. With more integration, investment in technology and approximation between neighbors, it is possible to further increase the strength of Mercosur in the next years with the exchange of goods based on growth of the port infrastructure.

With such elements in sight, Wlach seemed optimism: “as soon as the current logistic challenge is overcome, we will return stronger to the international travel routines between the main global economic blocks”. It is an opportunity for Mercosur to become even more relevant.Would you like to know more about this commercial relationship between countries of the South Cone? Then check this article on the increase of cargo in Uruguay being currently exported by Tecon Rio Grande!