Drought: The navigation and transport challenges of the Manaus Free Trade Zone in 2024

Manaus (AM) — In 2023, the record drought in the Amazon was devastating in many ways for the Manaus Industrial Pole (PIM). There were around R$1.4 billion in additional expenses by companies to transport their products. The drought between the months of October and November last year caused the Rio Negro, for example, to reach only 12.7 meters deep — the lowest level in more than a century.

With data from Comex Stat (a platform for querying and extracting data on Brazilian foreign trade, linked to the Ministry of Industry, Foreign Trade and Services), it was possible to verify that imports via the Amazon waterway route reduced their volume between September and October 2023, by around 83%, when excluding products associated with grains, hydrocarbons and others unrelated to the industrial input chain for the Manaus Free Trade Zone.

This drop in navigation is related to the extra costs that local industries had to pay, as a large part of the goods that enter and leave the State of Manaus are transported by ships.

“Companies plan every year for drought and prepare to face an extreme scenario. The problem is that the drought was much worse than expected. The industry planned to stop for 30 days, but stopped for 60”, emphasizes Augusto César Rocha, coordinator of the logistics commission at the Amazonas State Industry Center (Cieam).

“Even though it is more affordable to transport products by plane, there is no way to provide the same cabotage service to serve long-haul ships,” he explains.

Between October and November, PIM stopped importing the equivalent of US$ 1 billion in inputs, due to the drought, when compared to the level imported in September. It was a reduction of approximately 82% compared to what was predicted before the drought. However, production volumes were not affected to the same extent.

“This shows that companies took advantage of the stock of inputs accumulated until the end of September”, highlights Rocha. When it comes to water transport, the reduction was 73.82%, while imports by air, which are more expensive, rose 9%.

The interruption of large shipping led to reductions in the State’s tax revenue. “The accumulated losses in ICMS collection in October and November were R$253 million, if we use the volume collected in September as a reference. The accumulated losses in the collection of Import Tax were R$ 23 million in the same period. However, we believe that part of these losses will be reversed in the following months”, says the coordinator.

October was also a month in which the Amazon industry saw a drop of 5.7% compared to the same period in 2022, according to data from the Brazilian Institute of Geography and Statistics (IBGE). In November, industrial production in Amazonas fell by 4.2% compared to October, according to IBGE. In the annual comparison, this percentage was even higher, reaching 10.3%.

“Even with all this impact that the industry suffered, the consumer felt little in their pockets, as the price of the product is what the market defines, it is supply and demand. Therefore, the final public hardly notices. But the matrix of what would be the sale of the company has been completely modified. For example, instead of selling a motorcycle with the highest added value, it will sell with the lowest added value”,

reveals Rocha.

Even with the drought eased and, consequently, with the increase in river levels, the state of Amazonas has not yet returned to normality. The state’s latest drought bulletin reported that 62 municipalities in Amazonas remain in emergency.

“It is essential that the federal government makes investments to prevent the scenario at the end of 2023 from being repeated in 2024, as we cannot depend on rain. Investment is necessary, there must be alternative routes for products arriving and leaving Amazonas”, highlights the CIEAM executive.

“A good option would be the recovery of the BR-319 highway, which connects Manaus and Porto Velho, in Rondônia, as there is no paving on a large part of it, which prevents the passage of cargo trucks”, concludes Agusto.

About CIEAM

The Amazonas State Industry Center (Cieam) is a business entity with legal personality, linked to the industrial sector, which aims to act in a technical and political manner in defense of its members and the principles of the economy based on the Manaus Free Zone (ZFM).

Implemented by the federal government in 1967, with the aim of enabling an economic base in Amazonas and promoting better productive and social integration between all regions of Brazil, the Manaus Free Trade Zone (ZFM) is a successful regional development model that returns more than half of the wealth it produces goes to public coffers.

Currently, there are 600 companies installed in the Manaus Industrial Pole (PIM), which generate more than 500 thousand jobs, direct and indirect, and guarantee the preservation of 97% of the forest cover in Amazonas. In 2022, it handled more than 177 billion, an increase of 12% compared to the previous year.

*With information from consultancy

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