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Argentina Freight Transport Report Q3 2010
Business Monitor International, Aug 2010, Pages: 31
Business Monitor International's Argentina Freight Transport Report provides industry professionals and strategists, corporate analysts, freight transportation associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Argentina's freight transportation industry.
In March 2010, toll road operator Abertis identified its concessions in Bolivia and Argentina as the most at risk of being expropriated, Spanish newspaper Cinco Dias reported, citing company announcements. According to the company's statement, concessions in those two countries face a higher risk of total or partial expropriation without compensation. Argentina is the most pressing problem for Abertis. The largest of the two toll roads it operates in the country is the toll road providing northern access to Buenos Aires, operated by Ausol. Unable to service the interest on bond payments, the company went into administration in November 2009. A delay in toll rate increases has been the core reason for the company's financial troubles. In the firm's 2008 annual report, Ausol noted that the government had frozen tolls since 2001. This has happened against a backdrop of rising costs for operation and maintenance (O&M), meaning the company's revenue has been increasingly falling. The key reason for the rise in O&M costs is the increased cost of wages for employees in unions.
Recovery, albeit weak and somewhat overshadowed by political risk, is our summary for the Argentine economy in 2010, setting the environment in which the country's freight transport industry is operating. We have recently lifted our forecast for the year to 1.5% GDP growth, up from 0.5% before (and after a 0.3% contraction in 2009). For the medium term, we see annual growth hovering around an unexciting 2% mark.
The big story in the airfreight sector has been last year's renationalisation of Aerolíneas Argentinas, with the government forcing out Spain's Marsans, which had been the majority shareholder. The question for 2010 and subsequent years is whether the state-owned airline, together with its subsidiary Austral, can reemerge as a significant and eventually profitable player. That said the sector as a whole, including private companies such as LAN, is experiencing a recovery after the slump of 2009 when airfreight carried (measured in million tonnes/km) fell by 13.7% to 118.2mntkm. For 2010, we see freight carried recovering by 1.2% to 119.6mntkm.
For Argentina's major ports, the story of 2010 looks like being one of moderate recovery following the steep throughput declines of last year. At the Port of Buenos Aires (POBA), throughput slumped by 32.5% to an estimated 8.6mn tonnes in 2009 and we are projecting a modest 3.6% rebound in 2010 as the economy picks up tentatively against a background of political uncertainty. Port of Buenos Aires tonnage is set to reach 8.91mn tonnes this year.
In principle, the Port of Bahía Blanca (POBB) in southern Buenos Aires province is better placed this year because of its location to benefit from the improvement in the agricultural harvest, but we are cautious over the degree to which this will happen as shippers remain troubled by higher handling charges and potential labour unrest. In fact, after a fall of 13.4% in 2009, we see 2010's total growing by only 2.9% to 11.3mn tonnes.
The freight rail sector should also benefit from this season's improved harvest, as a significant part of the freight business involves moving grains to the country's principle seaports. In 2009, freight carried dropped 17.4% to 9.93bntkm, while total volumes hauled fell by 16.9% to 19.62mn tonnes. In 2010, we expect both measures of haulage performance to be back in positive territory. Freight carried will rebound by 1.3% to 10.06bntkm, while the total tonnage carried by rail will gain 1.5% to 19.90mn tonnes. Argentina's trade recovery in 2010 is being somewhat held back by the government's policies. On the import side, the administration's use of non-automatic import licences, as part of a policy to protect local manufacturers, is limiting growth. And while better grain harvests will be an important plus on the export side, there is a story of bitter conflict between the government and the country's farmers over export taxes. As President Fernández approaches her last year in office (presidential elections are due in 2011), we do not see these difficulties being easily overcome.
That said, we see imports gaining 18.8% in value in 2010 to US$81.2bn, while exports, lifted by the larger grain harvest, will gain a stronger 21.7%, also in value terms, to US$108.2bn. In real terms, import growth will be a much more modest 2% this year, with exports doing significantly better at 5%. In the medium term, Argentina's trade totals are set to grow relatively strongly, as the country benefits from growing Chinese demand for some of its key agricultural exports such as soya. We see total trade growth averaging just 4.6% per annum in real terms and 17.5% per annum in nominal terms in the five years to 2014.
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