Regulation in the Brazilian waterway sector

Regulation in the Brazilian waterway sector Fernando Fialho Director-general Netherlands February, 2011

General data about Brazil Total area 8.514.876 Km² States 27 Coast 8.511 Km Population 192 million GDP 2009 $ 1.577 Source: MDIC million 2010 Statistical Yearbook 2 % of GD P in Latin Am erica Largest economy in Latin America 8th economy in the world *Source: International Monetary Fund, World Economic Outlook Database, Abril 2010

Federal infrastructure regulatory agencies Period Relevance facts 1990s Deep administrative restructuring of the State through delegation of activities Privatization of state-owned companies Delegation of public service exploration to the private initiative Logo Agency Law of creation Brazilian Electricity Regulatory Agency Law 9.427/1996 Brazilian Agency of Telecommunications Law 9.472/1997 Brazilian Nacional Agency of Petroleum, Natural Gas and Biofuels Law 9.478/97 National Water Agency Law 9.984/2000 National Agency for Land Transportation Law 10.233/2001 National Agency for Waterway Transportation Law 10.233/2001 Brazilian National Civil Aviation Agency Law 11.182/2005 3

Federal infrastructure regulatory agencies Characteristics Independence (immunity to capture) - Decision-making independence Mandate of directors - Financial autonomy - Autonomy regarding Direct Management - Final decisions not subject to consideration by another AP agency/entity 4

Institutional aspects of ANTAQ 5 Created by Law 10.233, of June 5, 2001 Special authority linked to the Ministry of Transport and the Ports Secretariat It acts as a agency that regulates, supervises, and harmonizes port and waterway transportation activities. 3

Port environment Some of the Agencies involved 6

7 State structure Regulation Supervision Port Authority Brazilian Waterway Infrastructure Regulation Supervision Authorization Administrative delegation Private terminals Shipping companies 4

Brazil s Port Sector ANTAQ - Range of atuation- Regulation, fiscalization and Normatization 8 Shipping companies for international shipping, cabotage, port and maritime supply Shipping companies operating in rivers, lakes and inland waterways (passengers, loads and crossings) Public Ports (Landlord Ports): 34 Private Use Terminals: 129 Transfer Station Loads (ETC) and Small Public Facility Port (IP4) Use of the Federal Waterway Infrastructure 13,000 Km of the main inland waterways

ANTAQ Brazil s Port Sector 9 Range of action Expanding regulatory duties Management of grants Inspection and monitoring the Sector Establishment of the Rules in accordance with the Law Management of Information to Study and Set up the Sector s Structure Integration of the Multimodal System

The regulatory environment and the role of ANTAQ 10 Growth of Brazil s trade current Demand for port infrastructure with quality services at low cost Private capital attractiveness for offer of these services, through establishment of stable regulatory frameworks Attraction of foreign investments 6

Main instruments of the waterway subsector Valuing planning: - General Port Grants Plan (PGO) - General Waterway Grants Plan - Development and Zoning Plan (PDZ) Improvement of Port Management - Port Leasing Programs Valuing multimodal integration Realization of investments provided in the PNLT Defending the multiple use of waters as an action on behalf of economic, social, and environmental development 11

Requirements for regulators 12 7

Brazilian port management model MANAGEMENT MODELS 13 PUBLIC AND PRIVATE ROLES IN PORT MANAGEMENT INFRASTRUCTURE SUPERSTRUCTURE PORT OPERATION SERVICE PORT Public Public Public TOOL PORT Public Public Private LANDLORD PORT Public Private Private PORT AUTHORITY = CONDOMINIUM ADMINISTRATION Infrastructure Port operation OGMO Terminals leased or authorized 11

Port facilities 14 under Law 8.630/93, Articles 1 and 4 Organized Port Federal Govt. Leasing (sub-concession) Authorization Adhesion contract Exclusive PT Mixed PT Tourism PT Transfer Station Load (ETC) Public Port of Small Size (IP4)

PDZ Leasing Program Three planning instruments Approval and Supervision Elaboration Elaboration 15 Elaboration

Port Areas and Facilities Forms of exploration 16

How it works Examples under Law 8.630/93, Articles 1 and 4 Direct grant Delegation Agreement (Ministry of Transport State Government of Maranhão/EMAP) Grant to the State of Santa Catarina (state grant) Private Grant Grant by Organized Port bidding Authorization by Adhesion Agreement

Waterway legislation and it s application in projects PORT TERMINALS PUBLIC BY LEASE (bidding) PRIVATE BY AUTHORIZATION ORGANIZED PORTS ORGANIZED PORT BY GRANT (bidding) LEGAL FOUNDATION Laws 8.630/93 and 8.666/93 Dec 6.620/08, 4.391/02, and 6.413/08 Res ANTAQ 55/02 (under review) IN TCU 27/08 Law 8.630/93 Dec 6.620/08 Res ANTAQ 1.660/10 Law 8.630/93 and 8.987/95 Dec 6.620/08 Order SEP 108/10 PECULIARITIES Assignment of public property Project assessment Term of up to 50 years Property reversible to the Federal Govt. Use of OGMO Term of up 50 years Possibility of operation under consortium Authorization for shipyards and offshore support bases Exclusive use private cargo only Mixed Use private and third-party cargo Private initiative bidding Assignment of exploration of Organized Port to legal entities under public or private law, through public bidding Bidding by ANTAQ, meeting the PGO guidelines 45

MACAPÁ SANTARÉM MANAUS 19 BELÉM VILA DO CONDE RORAIMA ITAQUI AMAPÁ FORTALEZA AREIA BRANCA NATAL AMAZONAS CEARÁ MARANHÃO PARÁ CABEDELO RIO GRANDE DO NORTE PARAÍBA PIAUÍ RECIFE SUAPE PERNAMBUCO ACRE ALAGOA TOCANTINS SERGIPE RODÔNIA BAHIA SALVADOR ILHÉUS BARRA DO RIACHO VITÓRIA FORNO MINAS GERAIS NITERÓI RIO DE JANEIRO ITAGUAÍ (Sepetiba) O NEIR DE JA RIO ANGRA DOS REIS SÃO SEBASTIÃO SANTOS ANTONINA ÍRIT OS AN T O GOIÁS ESP MATO GROSSO DO SUL SÃO PAULO 34 MACEIÓ ARATU MATO GROSSO PUBLIC MARITIME PORTS S PARANÁ PARANAGUÁ SÃO FRANCISCO DO SUL RIO GRANDE ITAJAÍ DO SUL IMBITUBA LAGUNA PORTO ALEGRE PELOTAS RIO GRANDE SANTA CATARINA 10

MACAPÁ SANTARÉM MANAUS 20 BELÉM VILA DO CONDE RORAIMA ITAQUI AMAPÁ FORTALEZA AREIA BRANCA NATAL 14 TUP AMAZONAS ETC CEARÁ MARANHÃO PARÁ CABEDELO RIO GRANDE DO NORTE 13 TUP RECIFE PARAÍBA PIAUÍ SUAPE PERNAMBUCO ACRE TOCANTINS ALAGOA BA = 8 TUP SERGIPE RODÔNIA BAHIA BARRA DO RIACHO ES = 9 TUP ÍRIT OS AN T O VITÓRIA FORNO MINAS GERAIS NITERÓI Rio = 22 TUP RIO DE JANEIRO ITAGUAÍ (Sepetiba) O NEIR DE JA ANGRA DOS REIS RIO SÃO SEBASTIÃO SANTOS ANTONINA ESP MATO GROSSO DO SUL SÃO PAULO RS= 16 TUP SALVADOR ILHÉUS GOIÁS 129 MACEIÓ ARATU MATO GROSSO PRIVATE PORT TERMINALS SC= 11 TUP (PPT) S PARANÁ RIO GRANDE DO SUL PARANAGUÁ SÃO FRANCISCO DO SUL ITAJAÍ IMBITUBA LAGUNA PORTO ALEGRE PELOTAS RIO GRANDE SANTA CATARINA 10

Estatísticas Export Statistics Exportação 21 21 Percentual de exportação/importação Export/import percentage by sea in Tonnes por viaand marítima $ FOB (2010, Tonelada January e US$toFOB June) 88 Imports In Tonnes 96 Exports In Tonnes 72 83 Imports In $ FOB Exports In $ FOB Source: ANTAQ Statistical Yearbook 2009 e MDIC, Alice sistem (http://aliceweb.desenvolvimento.gov.br/)

ANTAQ Database Total cargo transported: Ports and PPT Source: ANTAQ 2009 Statistical Port Yearbook 2010 projection based on Port Newsletter 2 nd quarter 2010 ANTAQ 22 (Amount in million tonnes) 12

Development of containerization in Brazil Historical development of container handling 1977 to 2009 Containerization index Source: ANTAQ internal database 23

Domestic handling statistics 24 Historical development Container handling series 2005 to 2009 Container handling in TEU x 1000 Source: ANTAQ 2009 Statistical Yearbook TOTAL LONG-HAUL CABOTAGE

Container Total cargo transported TEU since 1977 2010 projected

Planning: Programs and tools required 26 National Port Logistics Plan (SEP/PNLP) by 2012 Port management by results (Dec 6.413/08, Article 2; Order SEP 214/08) Strategic reorganization, management and process plan National Dredging Plan Smart Cargo (rastreability) Reporto (Differentiated tax scheme for modernization and expansion of the port structure ) Growth Acceleration Program PAC (Waterways and Ports) General Grants Plan PGO (waterway PGO in progress) Leasing Programs (Port Authority) 26

Waterway Emphasis on the use of inland navigation 27 Integration with the electricity sector in decisions relating to lock projects Waterway PGO Social aspects in passenger transportation in regions of poor infrastructure Multimodality Production outflow Carbon Credits 27

Planning: Georeferenced multimodality network Strong emphasis in highways! Pipes Waterways Airways Cabotage Highways Railways Source: PNLT/2007 28

29 General Grants Plan- PGO http://www.antaq.gov.br/portal/pgo.asp Strategic planning for the sector Governance and Guidelines for investment PNLT as a source Considerers environmental aspects in its mapping Indicates areas for expansion (new ports) and expansion of existing port facilities Allows for the clear publication of implementation and development policies In the figure, green areas represent environmental preservation units. The red line shows stretches not released for projects.

30 PGO Considered elements FACTORS CONSIDERED 30 20

PGO What has the PGO identified on the coast line? 31 21

Identification of macro-areas 32 22

Characterization of priority sub-areas 33 23

Planning for the 2010 World Cup 34 Passenger handling leasing 7 Ports chosen Manaus Fortaleza Natal Recife Salvador Rio de Janeiro Santos Largest bed offer Public investments Amendments to PDZ Assignment of non-operating areas to TOURISM PT 34

Tourism PT Planning Resolution 1.556/2009 35 Number of passengers in maritime cruises in Brazil season 800.000 passengers 700.000 2007-2008 2008-2009 396,119 521,983 Nº de passageiros 600.000 500.000 400.000 300.000 200.000 100.000 0 2009-2010 720,621 2007-2008 2008-2009 2009-2010 Season Temporada Maritime tourism handling grew by 38% during season 2009-2010 884,000 passengers expected for the next season = growth above 22% Source: Brazilian Association of Maritime Company Representatives Abremar http://www.abremar.com.br/pdf/impactos-economicos-2004-a-2009-16jun09.pdf

New projects Barnabé-Bagres Projects 36 Challenges in meeting new demands outflow with no bottlenecks Creation of approximately 20,000 direct jobs Capacity of the Port of Santos with an additional 120 million tonnes 80% installed on water and degraded areas Potentiality to the shipping industry, supply boat, offshore, repair, bulk solids and liquids, retro-areas for containers, general diversified cargo Binding of vocation of the new area to the PDZ elaborated by the CODESP Pre-salt

Brazilian navigation flow Maritime trade: 63% performed in 25 ports of the Northern Hemisphere In Brazil, focus on cabotage and inland navigation multimodality 37

Maritime support navigation: Pre-salt Petrobras Demand Critical resources Current status (Dec 09) 38 Future status (to be contracted) Cumulative figures By 2013 By 2015 By 2020 5 26 31 53 Support and special boats 254 465 491 504 SS and FPSO production platforms 41 53 63 84 Others (jacket and TLWP) 79 81 83 85 LDA drilling rigs above 2,000m LDA drilling rigs above 2,000m Support and special boats +250 +48 SS and FPSO production platforms +43 Others (Jacket and TLWP) +6 34

Cabotage 39 Challenges in shifting modes and fleet growth planning Extensive coastline with ports and port terminals in a continuous modernization process and expansion of the cargo handling capacity Concentration of Brazilian production and consumption sectors along the coast Investment in land transportation infrastructure enabling development of multimodal door-to-door transportation Modernization of Brazilian Companies of Navigation (EBN) in the provision of multimodal transportation services with emphasis on integrated logistics Existence of comparative advantages of cabotage in relation to the highway mode

Authorized Brazilian navigation companies Type of navigation Longitudinal inland cargo Longitudinal inland passenger Amount 76 1 Inland crossing 48 Mixed longitudinal inland 35 Worldwide routes (liner services) 20 Cabotage 39 Maritime support 110 Port support 176 40

Brazilian shipyards current and expected Norte 41 Northeast Characteristic No. of Shipyards Area (m²) Capacity (t/a) Current Future 1 2 120,000 - Characteristic Current Future 1 7 No. of Shipyards Amazonas 12,000 Area (m²) Pará Capacity (t/a) - 1,500,0 00 60,000 - Ceará New tankers, support vessels, platforms, and Pernambuco Alagoas drilling rig ships encourage the construction of Bahia 18 shipyards South Characteristic No. of Shipyards Area (m²) Capacity (t/a) In Operation Expansion Current Future 5 8 513,000-65,000 - New Plant Rio de Janeiro São Paulo Santa Catarina Southeast Characteristic Rio Grande do Sul No. of Shipyards Area (m²) Capacity (t/a) Source: SINAVAL National Union of Construction Industry of Repair and Offshore Current Future 14 15 1,715,0 00 292,000 - - 41

Reasons to invest in brazilian ports Brazil s growth in foreign trade 42

Reasons to invest in brazilian ports Cargo demand 43 Ano Granel Sólido % Granel Líquido % Carga Geral % Total 2009 432.986 59 197.935 27 102.011 14 732.932 20101 440.800 58 205.200 27 114.000 15 760.000 Solid bulk Source: Bulletin and Statistic Yearbook - ANTAQ (1) Projection of cargo for the year of 2010 Liquid bulk General cargo

Brazil s port sector Cargo demand 44 Container handling development and forecast 9.000.000 Total Handling Estimated Handling 7.500.000 Forecast 6.000.000 Growth rate 27,61% per year TEUs 4.500.000 3.000.000 Growth rate 6,04% per year 1.500.000 Years 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Brazil s port sector Cargo demand 45 Cargo handling delelopment and forecast 900.000.000 Total Handling Estimated Handling Forecast 750.000.000 Growth rate 7,29% per year 600.000.000 TONs 450.000.000 300.000.000 Growth rate 3,82% per year 150.000.000 Years 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Brazil s port sector Cargo demand 46 Solid bulk devepoment and forecast 600.000.000 Total Handling Estimated Handling 500.000.000 Forecast 400.000.000 Growth rate 13,73% per year TONs 300.000.000 200.000.000 Growth rate 5,37% per year 100.000.000 0 1994 1995 1996 1997 1998 1999 2000 2001 Ye ars 2002 2003 2004 2005 2006 2007 2008 2009 2010

Brazil s port sector Cargo demand 47 Liquid bulk development and forecast 200.000.000 Total Handling Estimated Handling 160.000.000 Forecast 120.000.000 Growth rate 3,55% per year TONs 80.000.000 Growth rate 2,87% per year 40.000.000 Years 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Brazil s port sector Cargo demand 48 Brazil s Port Sector General cargo development and forecast 140.000.000 Total Handling Estimated Handling 120.000.000 Forecast 100.000.000 Growth rate 13,86% per year TONs 80.000.000 60.000.000 40.000.000 Growth rate 4,80% per year 20.000.000 Years 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Waterway navigation (Inland navigation) 49 The modal shift: CO2 and fleet cost reduction 48

Brazil s port sector Hydrographical basins Hydrographical Basins Amazon Basin North-eastern Basin Sao Francisco Basin Tocantins Araguaia Basin Paraguay Basin Tietê Paraná Basin Southeast Basin South Basin Main Inland Waterways: 11 Total Length: 16.724 km 50 Brazil s Port Sector

Waterway corridors routes for planning 51 *Fonte: Ministério dos Transportes 51

Navigation potentialities 52 Source: Ministry of Transport

Navigation potentialities 53 Source: Ministry of Transport

Transportation matrix under the PNLT 54 54 Current and estimated for 2025 Demand planning HIGHWAY RAILWAY WATERWAY PIPE AIR

RMSP Waterway-RailwayMALHA Connection of the FERROVIÁRIA Port of Santos Highways Railways North Ring Rail South Ring Rail ~50km ~50km Salto Stations Port of Santos Traffic RMSP Traffic 25-40km Waterway ~60km PORT OF SANTOS The Tietê Waterway can be connected to both: Port of Santos (exports and imports) and RMSP (urban cargo)

Study of the Waterway Complex of the Santos Lowlands Cargo outflow via waterways with multimodal interconnection with Piaçaguera Highway Cubatão River Casqueiro River Piaçaguera Channel Bertioga Channel Rio Cascalho Santana River Pompeba Plaza São Vicente Plaza Piaçabuçu River Access Channel Port of Santos

New Projects: Tietê River Navigation 57 2011: Construction of a new shipyard by the Tietê-Paraná Waterway, in Araçatuba (Tietê River Shipyard): - Construction of 20 thrusters and barges to transport ethanol, at the amount of $239.1 million - As of 2013, Petrobras will transport ethanol using the Tietê-Paraná Waterway (PAC) - 20 thrusters and 80 barges - 4 billion liters of ethanol per annum = 40,000 truck trips - Ethanol produced in the Center-West and Southeast to the Paulínia refinery, with subsequent outflow via São Sebastião (SP) and Ilha D água (RJ): exports Source: Petrobras

Policies for the new decade waterway subsector 58 Making use of the potential for navigation of Brazilian rivers Development of applicable standards and laws Focus on Port Management as modernizers of the port infrastructure Improvement of PNLT, PGO, PDZ and Leasing Programs Integration of various entities interacting with the port activity Investment in access routes to ports and maritime terminals Planning to implement less-favored regions Development of supervision methods and grants agreement

59 Thank You Fernando Fialho Director-general fernando.fialho@antaq.gov.br www.antaq.gov.br