INDUSTRY PRACTICES

Transportation
& Logistics

Director of Transportation and
Logistics Industries Practice
2655 Le Jeune Road, suite 1105
Coral Gables FL  33134  USA
Phone: (305) 569-9133

OUR Expertise

Many Latin American governments began the process of overhauling their transportation infrastructure in the 1990s by opening up the sector to foreign investment, privatizing ports, rail links and airports and inviting expansion investment through BOOT and BOT models. None-the-less, transport and logistics costs remain high by global standards, ranging from 12-20% of the cost of goods versus half that level in more efficient markets. Beyond privatization programs, the great driver of growth in this sector is the gradual take over of the retail and manufacturing sectors by multinational players. The last decade was witness to an aggressive consolidation of food retailing in the region’s largest cities as foreign players brought the super-store model to the region. Trade liberalization particularly between the US and Mexico and Brazil with Argentina has led to consolidation and modernization of manufacturing, with a greater reliance on imported components. The mega factories that were built over the last 5-8 years in SE Brazil, NE Argentina and northern Mexico introduced sophisticated JIT inventory management to the region, spurring demand for world-class logistics services, which outgrow basic transport demand by 2:1. Since 1994, InfoAmericas has analyzed and helped develop the eight largest markets in Latin America for international logistics, trucking, air cargo, maritime, and rail operators and equipment/technology suppliers.

InfoAmericas Logistics & Transport Practice has published a strategic whitepaper entitled: Latin America Logistics Trends, Risks & Opportunities. about the whitepaper’s contents and scope

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Challenges

• Foreign investment restrictions still exist in the largest trucking markets including Brazil and Mexico, thereby limiting the modernization of their systems.
• Beyond multinational clients, logistics operators still find it difficult to sell their value-added propositions to domestic clients.
• The high cost of credit limits the ability of transport equipment providers to consistently sell to local players, in spite of the desperate need to update operating fleets.

Opportunities

• The next wave of foreign investment in food retailing will focus on 2nd tier cities (1MM+ inhabitants), of which there are more than 100 such urban centers in Latin America. Foreign owned non-food retailers will continue to penetrate the 1st tier cities over the next five to six years as US consumption slows and companies look southward for growth. Foreign owned retailers demand world-class logistics and transport services in-country.
• Devaluations in Argentina, Brazil and now Mexico will stimulate greater exports from all three countries and generate demand for Maritime and rail transport out of Mercosur and truck transport out of northern and central Mexico.
• The expansion of global logistics firms across the region brings the opportunity to lease equipment to the subcontracted trucking companies they employ, hence boosting demand for new trucking equipment.
• Elevated commodity prices bring cash win-falls to governments in Mexico, Ecuador, Chile, Venezuela, and Colombia, opening the prospect of increased government spending in transport infrastructure.