One deficiency limits the development of Brazil's fledgling logistics industry: infrastructure. Despite what should be a promising environment--booming Brazilian exports and the prospect of economic growth--logistics companies in Latin America's biggest market are held back by the constraint of an aged and underdeveloped infrastructure network.
Consider Brazil's trucking companies. Though they are responsible for transporting the bulk of the country's goods to distribution centers, cities and ports, the sector lacks investment because of the high cost of maintaining trucks. Bumpy and inefficient roads mean companies are reluctant to upgrade their vehicles.
The result: an old and inefficient trucking fleet. "Inadequate infrastructure means you have no money to invest in new trucks," says Urubatan Helou, president of Braspress, a Sao Paulo transport company, and of the Transport Cargo Syndicate of Sao Paulo. "It limits the ability of the sector to grow."
Demand from Brazilian exporters--among them fast-growing agriculture, steel and minerals industries--have helped logistics providers evolve in recent years. From a fragmented group of transport and storage companies, a full-fledged logistics industry is now beginning to emerge. Numbers are hard to come by, but nascent industry groups say at least 200 companies now operate in the sector.
"The demand for logistics services exists," says Marcio Dias, president of MGD Desenvolvimento Profissional e Consultoria em Logistica, a Sao Paulo logistics advisor. "But further investment is necessary to really get the industry off the ground."
Brazil should be a logistics heaven. The country--tens of millions of consumers in a land area bigger than the continental United States--offers a market with potential like few else in the world.
Its promise, in fact, in recent years has lured a few of the world's biggest logistics operators to Brazil. Britain's Exel, for example, launched a Brazilian business five years ago in order to serve the needs of consumer-goods giant Unilever, a company it has long worked with in the United Kingdom and other parts of the world.
A one-person Exel office it founded near Campinas--the giant air transport hub outside Sao Paulo--has since grown into an operation that employs more than 2,000 people in major distribution centers throughout the country. The company's relationship with other multinationals has helped it expand its client list in Brazil to include Ford Motor, French retailer Carrefour and Finland's cellular phone maker Nokia.
"Many of these companies have had local providers and they often come to the conclusion that they want the same thing that we do for them in other markets," says Randy Rogers, Exel's vice president of contract logistics for South America.
Limitations. But while growth has exceeded its initial expectations,...