BR do Mar: A Lot of Uncertainty

The bill that creates the Cabotage Transportation Stimulus Program (BR do Mar), legislation aimed at encouraging the shift from road to maritime transport, is still in limbo in the Senate, after being approved by the Chamber of Deputies at the end of 2020 and considered a priority by the economic team and the Ministry of Infrastructure. After being promised for July, the current prediction is that it should be approved by September.

The program aims to increase cabotage supply, promote competition, create routes, and reduce costs. According to data from the Ministry of Infrastructure, maritime transportation of goods along the coast has been growing by 10% annually. However, with the approval of BR do Mar, it would be possible to boost this number to 30%, which would help balance the transportation matrix, stimulate the use of chartered vessels, reduce costs and bureaucracy, increase supply, and encourage competition.

According to a study conducted by the National Confederation of Transport (CNT), 162.9 million tons are transported annually through cabotage, accounting for 11% of the market, while the road system is responsible for 62% of cargo transportation. Reducing this distortion and minimizing cargo theft and accidents on highways, as well as decreasing damage to the road network, are also among the program’s objectives.

Furthermore, the legislation seeks to streamline the rules for navigation between ports and expand the fleet of vessels, promoting competition through changes in the rules for renting foreign vessels. According to the original project and the amendments added to it by the Chamber of Deputies, navigation companies will not be required to own their own vessels, contrary to current legislation.

In theory, this will contribute to increasing service availability, as companies can charter ships, including foreign ones, which will help expand transport capacity. This chartering, in the form of time charter, can be done for six months, extendable for up to 36 months. The legislation will also allow for the hiring of crew members under foreign labor law, which is not currently possible.

With the opening of the modal to the participation of foreign ships, freight costs are expected to decrease, allowing for the migration of cargo from roads to cabotage. However, the most important thing is to have regularity in the service because the cargo owner needs to be sure that the goods will arrive at their destination on schedule, which will only be possible if there is a constant supply. Without reliability, it is clear that the shipper will continue to rely on road transport. And for cabotage, only part of the bulk liquid cargo, which is of large volume and low added value, will remain.

So far, points requested by the industry have not been discussed, such as reducing the Tax on Circulation of Goods and Services (ICMS) for the purchase of bunker, fuel oil for large vessels. Currently, bunker accounts for 1/3 of cabotage costs, while long-haul vessels are not burdened. The industry also calls for a reduction in taxes, such as the Tax on Services (ISS), on pilotage.

Obviously, these measures will end the shipyard industry, which, in reality, does not represent much because, according to data from the Ministry of Infrastructure, only four ships were built in ten years. National maritime workers could also be affected. Likewise, companies that have already invested in the country may be adversely affected by the new legislation, which would allow foreign companies to enter the market without investment, i.e., only by chartering foreign vessels. Apparently, these are the issues that are preventing BR do Mar from becoming a reality.

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