• Countrywide strikes disrupt manufacturing supply chains in Brazil

    24 May 2018

    Multiple strike actions and protests have disrupted supply chains and logistics activities across Brazil since mid-May 2018, including in the automotive sector, a key industry in Latin America’s largest economy.

    On May 21, about 300,000 lorry drivers began nationwide protests against rising diesel prices and toll fees, blocking major highways and important access roads to ports, including the Anchieta Highway near the Port of Santos. Cargo transporters responsible for carrying goods as diverse as automotive parts and fuel have been participating in the strike, leading to component shortages at plants of Volkswagen, Ford, Fiat-Chrysler and General Motors, and fuel shortages in multiple cities across the country. Recent reports suggested that shortages of kerosine have already grounded flights at airports in São Paul and Rio de Janeiro.

    In a separate labor dispute, customs officers with the Sindifisco union have intensified an ongoing operational slowdown since May 14 to underline demands that the Brazilian government implement an agreement to increase their wages. The slowdown entails the availability of minimum staff on 3 days per week for a period of 30 days. As a result, more than 4,000 containers at major ports, airports and border crossings with Uruguay, Argentina and Paraguay are being blocked daily, in particular at São Paulo–Guarulhos International Airport and the ports of Santos, Paranagua, Rio de Janeiro and Itajai.

    Customers should expect backlogs at airport warehouses and port container yards, with some import shipments reportedly taking between 10 and 21 days to clear customs and being transported to their final destinations. Demurrage and storage costs are likely to be incurred as a result of the congestion. However, essential services including perishables and medicines will continue to be cleared.

    Outlook

    While the customs strike has been ongoing since November 2017, truckers, led by the Associacao Brasileira dos Caminhoneiros (Abcam), are demanding relief from rising fuel costs and toll fees. Both customs officials and truck drivers seem determined to pursue their demands and are unlikely to back down for minor concessions from the governement. Sindifisco, the customs’ officers union, has stated that the strike action will continue until the Brazilian administration has fulfilled its promises. Truck drivers, similarly, entered a third day of strikes on May 23 despite reassurances from the government and oil companies that diesel prices would be reduced by 10 per cent for the next 15 days. Truck drivers are likely to demand further concessions to end the strike as fuel prices have risen nearly 50 per cent in less than 12 months.

    In both conflicts, the government is unlikely to give in easily. Reducing fuel prices would mean that the government has to either reverse efforts to close Brazil’s fiscal deficit or interfere in the state-run oil company’s pricing policy. In the case of customs officials, the government reportedly does not have the funds to meet the requests which include the renewal of existing pension terms and a pay increase, causing a stalemate which is not expected to be resolved any time soon. Besides auto manufacturers, industries such as retail, electronics and agriculture are likely to feel the impacts of the sustained strike action, including shipment delays, higher consumer prices and lost sales.

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