As soon as global economies recovered from the negative impact of COVID-19, adverse events on important maritime routes once again threaten international trade — and could leave an impact on Brazil. A historic drought has lowered the water level in the Panama Canal, reducing the flow of ships crossing the Central American country, where around 6% of global trade passes. On the other side of the planet, attacks by Houthi rebels in the Red Sea affect the entire route that passes through the Suez Canal in Egypt, which accounts for around 12% of world trade.
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Immediate Impact
The most immediate impact of what has been described as the biggest crisis in maritime transport since COVID-19 is the increase in transport times and costs, which affects the price of Brazilian exports and imports, according to analysts.
Routes that enter the Red Sea through the Suez Canal, for example, between Asia and Europe, are diverted to the Cape of Good Hope, in southern Africa, to avoid attacks on vessels.
In Panama, which has restricted the number of ships that can pass daily to 24 due to low water levels, logistics operators are looking for alternatives in other means of transport.
More Time
There was an expectation of an oversupply of maritime transport in 2024, which would tend to lower freight prices. But ships can take up to 15 days longer to complete routes with the necessary detours. Therefore, they spend more time busy and therefore there are fewer vessels and containers available. This affects imports of machinery, fertilizers, packaging, and other types of inputs, which impacts industries such as fruit production, says Zakaria Benzaama, logistics director at Abrafrutas (sector association).
Impacts in Brazil
For Fabio Pina, an economist at FecomercioSP, even though Brazil is not directly impacted by the conflicts, countries producing goods imported by Brazil could be affected — in other words, Brazilian industry can experience the consequences of a change in the global production chain.
Analysis:
Examining the average shipping costs for containers reveals a decline compared to the previous year, primarily due to the annual contracts signed before the onset of the crisis. Nonetheless, transportation companies introduce surcharges during turbulent periods, often doubling the initial freight expenses and contributing to the overall increase in transport costs.
Should these challenges persist in the medium or long term, they could potentially transform into an advantageous opportunity for Brazil as a supplier to the American East Coast and Africa. Currently, products destined for these regions are shipped from Asia, but Brazil’s strategic geographic position allows it to serve Latin America, the East Coast of the United States, Northern Europe, and Asia (via the Cape of Good Hope). Despite Brazil’s historical focus on exporting raw materials and primary goods, increased foreign investment in recent years has propelled growth in the manufacturing sector, enhancing its appeal on the global trade stage.
Source: Folha de São Paulo.
