Tough business environment in Brazil as weak economy takes its toll

Cargolux Airlines International
Cargolux Airlines International

2016 has been a challenging year for RIOgaleao Cargo as it has been for most Brazilian airports, which it says is due to the “unprecedented economic and political crisis” that has impacted all sectors of the Brazilian economy.

The gateway says as a result, imports and exports volumes have dropped quite significantly versus the previous year. Performance this year was expected, but the airport says the decline was probably more pronounced than it ahd forecasted.

The silver lining for Rio de Janeiro was the 2016 Olympic Games, which bolstered volumes between June and September. Among freight handled was 300 horses for the event, an operation it notes it received a lot of attention from local and international media, but the challenging task went without a hitch.

The Olympics generated 2,000 tonnes of import business in 2016 and it was an opportunity to showcase cargo operations and the improvement it has made to infrastructure and processes since the privatisation in 2014.

This saw $10 million invested in the cargo terminal and since the privatisation of the airport, the cash ploughed in has seen upgrades across the airfreight infrastructure.

RIOgaleão Cargo 003

These investments included a brand new fork lift fleet, the refurbishment of our exports terminal, tripling our cold storage facilities and the implementation of 180 CCTV cameras.

In 2017, the gateway is planning to invest in a new warehouse management system and further improvements to its pharmaceuticals centre to tap into the opportunities on offer.

Rio did manage to significantly grow its share of the aero parts business in 2016 as says it won a large strategic account and as a result grew its market share of this segment.

And in a declining market, pharmaceuticals also held up better than expected and this is where it has made significant investments in the past two years, tripling capacity and it was the first airport in the Americas to be awarded the International Air Transport Association CEIV Pharma certificate last month.

Europe as whole remains the strongest import market, led by Frankfurt from where it has grown by 45 per cent in 2016, much of it pharmaceuticals.

The strongest individual trade lanes, it explains are Houston and Miami, reflecting Rio de Janeiro´s rise as an oil and gas market in the past few years.

In 2016, it has managed to attract its first regular European freighter – a weekly Cargolux Boeing 747 Freighter service.

The airport notes: “We work very closely with Cargolux and all our airline partners and given the success of this service to date we are confident that we can soon announce a second frequency.

Rio de Janeiro
Rio de Janeiro

“From Miami, we currently have a weekly 777F LATAM service and as the oil and gas market bounces back in 2017, we see an obvious opportunity to add another frequency. Our business model allows us to offer freighter operators attractive incentives for starting a new route.”

There are challenges in Brazil with the most immediate the state of the Brazilian economy, which is impacting business.

The gateway explains: “However, we are seeing consumer confidence returning and a modest GDP growth is forecasted for the first quarter of 2017. These numbers are reflected in our own performance where we are starting to see a modest recovery. The Brazilian economy is a roller-coaster.

“During the last recession, air cargo volumes dropped by 20 per cent only to bounce back with 50 per cent growth the following year so I am optimistic about 2017.

“Another challenge for air cargo in Brazil remains the volatile performance of government agencies involved in the cargo clearing process. Dwell times for import cargo in Brazil are well above those of comparable economies and mitigate much of the time gained by shipping by air.

“Another challenges for air cargo in Brazil are the varying tax benefits between Brazilian states which do not encourage efficient supply chains.”