A rampage this month by dockworkers at the Brazilian Port of Paranagua hasn't shaken maritime executives' confidence that the nation's notoriously high waterfront costs may soon be reduced.
Under a law passed in 1993 and reaffirmed late last year, responsibility for setting the size of work gangs on vessels was supposed to shift from unions called sindicatos to port administrative bodies known by their acronym, OGMO.
"This is what we have been fighting for, for many years," said Oswaldir Vaghetti, general manager in Brazil for Crowley American Transport.
The change was aimed at cutting costs that have made Brazil's ports some of the most expensive in the world, with container ships requiring more than 140 dockworkers a day. In several ports, administrators' efforts to determine the size of work gangs have been met with violence.
In Paranagua, south of Sao Paulo state, dockworkers smashed computers and damaged administrative offices. The violence forced the OGMO to back off its plans to reduce the number of sindicato-supplied casual workers.
Despite the headline-grabbing events, executives say there are reasons to feel change is under way.
"The avalanche has started," said Richard Klien, vice president of Transroll Navegacao in Rio de Janeiro, where ship lines and terminal operators convinced unions to lower costs and change the overtime structure.
The move in Rio was possible because of the promise of more transshipment and coastwise cargo shipments. Transroll and partner Docenave, along with carrier Alianca, plan a coastal service to compete with long-haul trucking. High labor costs have discouraged many operators from coastwise services between Brazilian ports. Some carriers relay Brazilian cargo through Argentina's Port of Buenos Aires, where costs are lower.
The agreement in Rio de Janeiro is significant because Rio is the first major port to tackle some aspect of labor costs. Up the coast, the smaller Port of Salvador last year suffered a six-week strike, after which the OGMO and private stevedores won the right to set gang sizes. Other smaller ports, such as Fortaleza, have followed suit.
But Rio, Santos and the southern Port of Rio Grande do Sul are the principal waterfronts in Brazil. The reforms at Rio have been pushed along by developments nearby at the new Port of Sepetiba, which is operated by steel conglomerate Companhia Vale do Rio Doce (CVRD). CVRD has already worked its first steel vessel with its own longshoremen and is readying for its second vessel call, one shipping executive said. Terminal operators in Rio point to Sepetiba and say CVRD could eventually compete with Rio by offering nonunion labor at a nearby port.
That argument appears to have worked. "This might have been the reason that there were some changes in the syndicates, who appear to be more positive to negotiations," the executive said. "This, we think, is how it should work. If you promote good competition and play it wisely then we believe we will solve the problems."
Industry sources say stevedoring costs at Brazilian waterfronts such as Rio de Janeiro and Rio Grande do Sul have come down, in some cases close to the government-sought throughput rate of about $150 per TEU. Rio Grande do Sul costs about $180 per box and Rio de Janeiro has fallen to about $250, but Santos -- the busiest port Latin America -- remains around $330.
In Santos, there is little sign of progress. Talks between unions and terminal operators have been stalled for months. There is little political pressure to resolve the matter, since neither Sao Paulo state Gov. Mario Covos nor President Fernando Henrique Cardoso want to do anything that will raise unemployment during the current recession.
Dockworkers in Santos last year rioted over proposed downsizing, damaging OGMO offices. "We are worried about Santos," one carrier executive said. "I can imagine that there will be some kind of problem, maybe a longer strike or action or something like this. This is a process we have to go through."
But Transroll's Klien said he is optimistic that as goes Rio, so will go the rest of Brazilian ports. "When you see the breakthrough deal here in Rio, this is not happening by chance or because the Rio terminal operators are in any way better salesmen than in the rest of Brazil," Klien said. "Labor knows they have to come to terms and it is up to the two sides in the various ports to seize this opportunity."
