Q&A
What is a Pilotage?
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Pilotage can be defined as an advisory service to ship captains for navigation in restricted waters, that is, where there are conditions that make free and safe navigation difficult, for example, in ports, estuaries and waterways. The activity is essential to safety, because it greatly reduces the possibility of accidents, which can cost people's lives, cause damage to the environment, to the ships themselves and port facilities and, even, losses of millions of dollars, as happened in the case of the Costa Concordia. According to the International Group of P&I Clubs, the rate of accidents with pilots on board in Brazil is only 0.002% (two thousandths of a percent), similar to that of the United States, even with the stark differences in resources and infrastructure.
Is there pilotage in other countries?
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Pilotage exists worldwide and is considered to be of public interest. Its objective is the safety of maritime traffic and port facilities, the safeguarding of human life at sea and on waterways and the protection of the environment. In Brazil, it works in a similar way to the main maritime nations. The pilots are professionals linked to the waterway sector, and not to the port sector, as many imagine. A study carried out by the Secretariat for Economic Affairs, in 1998, confirmed the success of the Brazilian system and even highlighted that there were failed attempts to change the model in Argentina and Australia, which caused serious security problems and a drop in service quality.
What does it take to become a Pilot?
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Pilots must have proven experience in driving vessels and are selected from public selection processes organized and supervised by the Brazilian Navy. Candidates can be of both sexes, must have a university degree in any area and, in terms of maritime knowledge, the qualification of an amateur master (in most other countries there is a requirement to be an officer in the Merchant or War Navy). Once one of the vacancies in the selection process has been won, the candidate then undergoes training that lasts from twelve to fifteen months, accompanying and performing maneuvers with already experienced pilots. After that period, he is submitted to a final exam by the Navy and, if approved, he obtains his qualification. The last selection process, held in 2011, registered 1,973 applications to fill 81 vacancies
How many pilots are there in each port?
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The number of qualified professionals in each of the twenty-two Pilotage Zones (ZP) existing in Brazil is established by the Maritime Authority, depending on the volume of vessel traffic, the time spent and the degree of difficulty to carry out the tasks of pilotage; the need to maintain the license; and the Pilot's maximum workload, in accordance with the legislation. This form of organization, which limits the number of professionals, is not a privilege in Brazil. It is repeated in the main maritime countries, from the most liberal ones, like the United Kingdom and the United States, to the so-called socialist ones, like China and Cuba. This is a technical issue linked to security, which does not depend on political and economic injunctions.
Is it true that in the Port of Rotterdam it only takes 20 maneuvers fully realized in order to become a Pilot?
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Is not true. In Rotterdam, the candidate must be a Nautical Officer. He presents his CV to the Pilotage Association which chooses among the candidates, those who will start the training. It takes seven years to become a full pilot at the Port of Rotterdam.
Wouldn't the new technologies available, such as GPS, electronic charts, VTMIS, etc., dispense with the use of pilotage?​
Although all of these resources represent valuable aids to navigation, maneuvers with large vessels involve several other factors that prevent the control of movement in restricted waters only by equipment. The knowledge and attitudes of the pilot on board are essential for the maneuvers in these places to be carried out safely.
The clearest answer to this question lies in the developed countries themselves. In them, these technological resources have been available for a long time. However, in none of them pilotage was eliminated or had its importance reduced.
What is the income of a pilot?
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Payment for the services provided is made to the Sociedade de Pilotagem, organized by the pilots in each ZP. This company, a legal entity governed by private law like any other, is responsible for all the infrastructure necessary to carry out the maneuvers.
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In São Paulo, for example, pilotage has more than 100 employees; it maintains state-of-the-art equipment for traffic control and monitoring, for meteorological and tide monitoring, for bathymetric surveys and has 18 vessels. In addition, it maintains an Operations Center manned 24 hours a day and its own shipyard, to guarantee the effectiveness of the service and the maintenance of its Quality Certification ISO 9001:2008. Once the payments for the maneuvers have been received, Sociedade de Pilotagem de Santos settles taxes and other taxes, pilot fees, employee payroll, maintenance expenses for equipment, installations and vessels and costing operations, in addition to investments. There is not a penny of public money to subsidize these expenses (as in Hamburg Pilotage, for example).
The pilot's income, therefore, comes from the pro-labore he receives for the work he develops in the entity of which he is a partner and from eventual distributions of results, as a general rule of any private company. The values are variable, both within the same ZP and between different ZPs.
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Contradicting news about supposed astronomical yields that are released from time to time, it is important to say that, of the 22 existing ZPs in Brazil, seven have financial difficulties even for paying their associative contribution to the National Pilotage Council (Conapra).
It is said that, in order to reduce the price of the pilotage service, the requirements for candidates for the profession of pilot will be reduced and that the training time will be reduced. How can qualification influence the price of shipping?
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There is no link between price and time for qualification. The objective of mastering the activity, this yes, is that it can be achieved more easily. With an excessive number of professionals, trained overnight and, consequently, with low qualifications, it would be much easier for foreign shipowners to hire their own pilots, who, without the independence that characterizes the activity today, would lead their ships according to their own economic and financial interests.
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About this idea of reducing the level of qualification, Professor Hélio Halite's statement was very lucid: “With regard to Pilotage, it is necessary to be careful. It is a highly qualified career. Reducing the rules for working in this area is the same as graduating a surgeon in two years”.
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The reduction of qualification requirements and the indiscriminate increase in the number of pilots are not new proposals. These very worrying ideas for Brazilian ports were already included in PLS 117/2010, authored by former Senator Demóstenes Torres, from the state of Goiás, and were refuted by the Committees where the project was processed.
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Handing over Brazilian pilotage to foreign shipowners would be a sure recipe for disaster. Sooner or later we would see a ship stranded near Fortaleza da Barra, at the entrance to the Port of Santos, such as the Costa Concordia, on the island of Giglio. The port would be closed for months, significantly harming the Brazilian economy; a probable oil spill would leave the population of Baixada Santista without beaches and without tourism for a long period, as well as harming environmental reserves; the owner would receive the insurance compensation and take all his other ships to any port where there was cargo, continuing to profit, without any commitment to the city or the country.
Is there a monopoly on the provision of the Pilotage service?
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A true monopoly must necessarily meet two fundamental requirements: imposition of the quantity supplied and imposition of price. The pilotage service does not attend to any of them.
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Firstly, by legal determination (LESTA and RLESTA), the pilot cannot refuse to provide the service whenever requested by the shipowner, even if there is no established price for the service. The structure maintained by Pilotage must be available on a permanent basis. There is therefore no imposition of quantity supplied. In other words, the pilot does not have the power to tell the shipowner that he will not serve him until he agrees with the desired price. If you do, you may have your license cancelled.
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Secondly, also by legal determination, prices must be agreed between the pilotage and service takers. If no agreement is reached, prices may be set solely and exclusively by the Maritime Authority. There is no possibility that the price will be determined unilaterally by Pilotage.
Are the prices for pilotage services in Brazil higher than those in force in other countries?
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As this type of statement is a repetitive litany of the few foreign shipowners that dominate world maritime transport, Brazilian pilotage contracted one of the most respected and reputable research entities in Brazil, Fundação Getúlio Vargas. The final report of the study Analysis of the International Competitiveness of the Values Charged by Pilotage Services in the Port of Santos, was released in October 2009. Even in view of the undervaluation of the dollar against the Brazilian currency at the time, which distorted the comparison, Vargas confirmed that Pilotage prices at the Port of Santos are close to the international average and are lower than most reference ports, quoting verbatim that “between 54% and 66% of exports through the Port of Santos in 2008 were destined for countries represented by ports where the values of pilotage services are higher than those practiced in Santos”, concluding that “this fact suggests that pilotage values do not represent any obstacle to the export of Brazilian goods to these ports”.
Is it the pilotage that imposes the price of the service?
No. Pilotage services are remunerated by payments made by the shipowners, owners of the ships, based on prices freely negotiated and agreed between the parties. When there is no agreement, the price is established by the Maritime Authority. It is also important to point out that a possible lack of agreement on prices does not exempt the pilot from providing the service, to which he is obliged by legal determination, even if there is no previously agreed value.
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Today, with regard to price imposition, what is observed is exactly the opposite: it is they, the shipowners, who have the greatest power of pressure. In certain places, a few shipping companies have not been paying for services provided for several years, taking advantage of this obligation to provide the service. Sometimes, they even resort to postponing judicial appeals, paying nothing until the final decision and obtaining financial gains, either through financial investments or through exchange rate variations.
Why do many shipowners refer to pilotage “fare” instead of “price”?
It is a fallacious attempt to confuse pilotage with public service and, in this way, force regulation by cost spreadsheets, as with concessionaires or permissionaires, for example. Pilotage societies are private entities, which provide services in a private manner and, thus, are remunerated by "prices".
The price of the pilotage service is made up of two very different parts: the first, tangible, is made up of the costs of the infrastructure necessary for the effective provision of the service, such as speedboats, fuel, personnel, communication equipment, etc.; the second, intangible, reflects, on the one hand, the expertise required of the pilot to manage the risks inherent in each maneuver to be performed, and on the other hand, the negative externalities that are avoided and the positive externalities that are aggregated by his work. Hence, higher or lower prices as more or less risks associated with the maneuver.
What is the weight of the pilotage price in the total expense of a Brazilian exporter or importer?
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The study carried out by Fundação Getúlio Vargas demonstrated that pilotage represents only 0.12% to 0.18% of the cargo owner's costs. It is important to point out that that study was focused on transport in containers. Certainly, for bulk carriers the percentages would be even lower.
And what is the weight of the pilotage price in the total expense of a passenger on a cruise ship?
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In the case of maritime cruises, statements by ABREMAR (Brazilian Association of Maritime Cruises) leave no doubt about the reality of the low cost of pilotage for passengers.
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On 10/03/2010, an article published in the Diário do Litoral recorded that, according to ABREMAR, that season, around one million passengers would pass through the Port of Santos. On 29/11/2010, in Folha de São Paulo, Ricardo Amaral, then president of the same ABREMAR, declared that the pilotage expenses, in the same season and in the same port, would be R$ 9,664,000.00.
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A simple mathematical operation demonstrates, therefore, that the cost of pilotage is only R$ 9.66 per passenger, less than what is charged, for example, for a can of soda on board (US$ 6), or for a photo (US$12), or for carrying your luggage (US$19) or a trip to the ship's infirmary (US$70). Not to mention the compulsory gratuities or expenses in the ship's casino.
Does the price of pilotage influence the value of sea freight? What about the cabotage freight rate?
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It is very important to dissociate any reduction in the pilotage price with some cost reduction for the shipper (exporter or importer) or even for the passengers (in the case of cruises). Pilotage is a cost for the shipowner, that is, a cost inherent to the operation of the ship, such as the costs of the tugboat, crew salary, crew meals, ship documentation, etc.
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The cargo owner is not even aware of these values, individually considered. What does influence the price of transported products, among other factors, is the freight that he pays to the shipowner, and which is regulated by the “market”, by supply and demand, with the aggravating factor being the fact that world maritime navigation is dominated by by an oligopoly of mega-owners.
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As shown in the table below, the six largest shipping companies account for half of the world's transport capacity. If the top 15 are considered, 75% of the market.
Faced with this reality, invariably, freight is much higher than the shipowner's costs and any reduction in one of these costs only results in greater profit for the shipowner.
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In addition to high freight rates, shipowners often unilaterally impose bunker surcharges on cargo owners, peak harvest surcharges, priority surcharges, congestion surcharges, shortages of containers, lack of reefer equipment, reefer consumption, strike, of shallow depth, of piracy, of “no show”, of fog, of "low-sulphurfuel", etc.
It is worth remembering that, even if pilotage were free, the shipper would pay the same freight rates and surcharges, which are established by the “oligopolized market”. Ship handling costs have no influence on the final cost of the transported product.
CADE's 1997 Annual Management Report already showed concern about the lack of competition between shipping companies and recorded that price variations in the pilotage service could have small effects for the user, given the possibility of eventual cost reductions be absorbed only by the shipping companies themselves.
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The position of not passing on any savings to cargo owners is confirmed by the shipowners themselves, as made clear by the Vice-President of SYNDARMA (Union of Brazilian Shipping Companies), in Portos e Navios magazine, issue 572, in September 2008, on the drop in fuel prices: “For Galli, the measure will bring a small relief to shipping companies”, but he points out that this “relief” will not necessarily cause a change in freight prices. “When there is a change in cost, this does not mean that, at the same time, this change has to be passed on to the price. The price for the customer has more to do with the market, he says”.
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On November 1, 2010, at the DCI, the President of Hamburg Sud do Brasil stated that “The [freight] pricing is actually very simple. It depends on demand and demand. In industry, in general, the freight price is made up of demand and supply. It goes up or down.”
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Corroborating the reality that the freight rates charged by shipowners derive more from their dominant position than from their costs, a study carried out in 2008 by researchers from the BID (Inter-American Development Bank) found that Latin American exports to the United States pay ocean freight rates that are, on average, 70% higher than the rates paid for exports from the Netherlands, pointing, as one of the causes, the low degree of competition between the transport companies that operate in the Latin American routes. In the same line, articles recently published by the newspaper O Globo and by the website PortoFolk report suspicions of cartel in the maritime freight charged in Brazil.
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A concrete example that freight rates, even in cabotage tariffs, are not closely related to the shipowner's costs can be seen in the freight table of the Asia service, of the German group Hamburg Sud / Aliança. For the transport of a 40-foot container, with general cargo, from Itaguaí to Hong Kong, the amount charged is US$1,100. However, if this container is shipped from Vitória, a “PRECARRIAGE ADDITIONAL COST” of US$1,800 is foreseen. In other words: Itaguaí-Hong Kong freight (10,274 nautical miles) = US$1,100; freight Vitória-Sepetiba (337 nautical miles) = US$1,800.
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Furthermore, in that same table it can be verified that the freight is identical, whether leaving from Buenos Aires, whether leaving from Montevideo, or leaving from Santos. According to shipowners, pilotage prices in Argentina and Uruguay would be lower than those in Santos. Well, if, as they say, pilotage has an influence on freight, why then are freight rates the same?
If there is no impact on freight, why do shipowners put so much pressure on pilotage prices in Brazil?
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In the tussle between the shipowners' oligopoly and Brazilian pilotage, profit growth is a desirable but secondary factor. The main reason is the pursuit of mastery of the activity. In fact, it is functional independence, with no ties of subordination to shipping companies or interests other than navigation safety, which is the main cause of attacks that are launched against the pilotage service.
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These international groups do not accept that qualified and independent Brazilian professionals, under the supervision of the Brazilian Maritime Authority, strictly enforce safety standards, to the detriment of any profits that could be generated by breaking these same standards. And pilots often have to go against commercial and economic interests, in defense of the safety of the port, people and the environment, in short, in defense of the community they serve.
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Former Minister Pedro Brito himself, in the book “Tudo a Navegar” attested to the existence of these attempts at interference when, discussing the Brazilian port model, he stated verbatim that “... working in favor of the interests of some large shipowners” (pg 44) and that “Any pressure to change it is linked solely to strictly business and private interests, unrelated to the interests of the country” (pg 46).
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The pressures of such international groups on the Brazilian authorities for the pursuit of unjustifiable privileges or advantages are nothing new. See, for example, the questioning of Hamburg Sud to the Ministry of the Navy, in September 1898, on the grounds that there were undue charges relating to pilotage, by the Captaincy of the Ports of Paranaguá. The Opinion of the Naval Council, dated April 1899, demonstrated that the complaint was unfounded.
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Attacks against Brazilian pilotage invariably use disinformation or fallacies about costs and derogatory accusations of alleged wages. As much as one does not want to link, it is almost impossible to ignore Goebbels, Nazi propaganda minister. He maintained that the truth could not be allowed to undermine the goals. The essential aspect would be to achieve the purpose; whether the motives were real or not was of no consequence. The important thing would be to ridicule opponents by starting lying rumors or making outrageous accusations.
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The shipowner pays for the pilotage service at both ends of the route. As demonstrated by the FGV, most of the ships' destinations represent locations where pilotage is more expensive. Why would the values here have to be lower than those abroad? Just because it's in Brazil? Just because they come from developed countries (where they don't dare to harass their governments with the same issue) and the pilotage represents a developing country?
The issue becomes more serious when remembering that the pilotage service provided to foreigners means exporting services, inflow of currency and taxes fully paid in Brazil. No part of the payments is made outside the country, unlike what could happen, for example, between some foreign shipping companies and some foreign tug companies. Recalling what the IDB found, foreign shipowners already charge Brazilian exporters and importers 70% higher freight rates than those charged by Europeans and Americans.
Are Brazilian port fees high? Do they reduce the competitiveness of national products?
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On 11/12/2012, Mauro Salgado, President of the National Federation of Port Operators, expressed himself very objectively on this topic, in the newspaper Valor Econômico:
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“The most common mistake is the mantra "Brazilian ports are inefficient" or "high port fees reduce the competitiveness of national products". Nothing more false. The big bottleneck is the bureaucracy and difficulties in accessing the port.
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Mechanically repeated for decades, when some generalization could still be justified, such a speech is still invoked today, something inadmissible. During a recent seminar in Brasília, a class entity told journalists, businessmen and authorities that Brazilian ports charge exporters US$ 400 per container shipped, while the same service costs US$ 150 in other countries.
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It happens that the exporter, as a rule, does not pay anything to the terminal. The port terminals charge for the handling service (loading and unloading) of containers from the shipowners, companies that own the ships - and not from the exporters.
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It is the maritime carriers, the shipowners, who charge exporters and importers, depending on the form of contract applied, for the maritime freight service of containers plus applied fees, whose values are established individually by the shipowners with their customers, a common procedure in many countries ”.
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In the same sense, the statement by Vicente do Valle, First Vice-President of the Commercial Association of Santos, at the Santos Export Forum, held on 08/14/2012, was emblematic:
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"We had an improvement in terms of productivity at the Port of Santos, but we continue to have problems regarding prices. Before the Ports Law, we paid R$120 reais per container to transport coffee. In 2004, this value increased to R$ 202 and is currently at BRL 605".
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Both corroborate the available data: in Santos, the amount paid by the shipowner to the terminal would be R$54.44, according to IPEA, or R$63.30, according to ANTAQ. However, the amount charged to the shipper by the German group Hamburg Sud / Aliança, as reimbursement (THC), is R$ 661.00. As can be seen, the lower cost resulting from the higher productivity of the terminal is fully absorbed by the shipowner itself. Shippers do not benefit from that improvement. This fact was also corroborated by the representative of ABRATEC, at the round table held on 10/30/2012, at the Commission for Roads and Transport of the Chamber of Deputies.
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Anyway, this is the reality: foreign shipowners earn large profits from improving the efficiency of Brazilian terminals and, at the same time, maintain the mantra “high port fees reduce the competitiveness of Brazilian products – it is necessary to reduce costs”.
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If this concrete example were not enough, the presentation made by the French shipowner CMA-CGM (3rd largest regular shipowner in the world, according to the “Alphaliner TOP 100”) at the Democratic Forum promoted by the Legislative Assembly of Rio Grande do Sul was not enough. There, the costs of a typical trip – Rotterdam / Hamburg / Santos / Rio de Janeiro / Rotterdam – lasting 28 days, transporting 4,375 containers in the sum of the round trip were presented.
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Slides 30, 31, 33 and 34 allow you to assemble the following table of shipowner costs:
From this table, at first glance, it is easy to verify the relationship between the price of pilotage in Brazil and the price of pilotage abroad: one third of the value.
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The proportion between port expenses in Brazil and abroad is the same: one third.
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Finally, attention is also drawn to the stark difference between the amounts paid to tugboats in Brazil and abroad: 300%. It is strange, to say the least, that similar equipment, with practically identical acquisition and maintenance costs, offer such a magnitude of differentiation, even more so when the persistent complaints of the Union of Brazilian Shipping Companies – SYNDARMA, regarding the costs of Brazilian seafarers are remembered.
Much has been said about the infrastructure deficiencies of Brazilian ports. However, the amount of cargo moved has grown dramatically year after year. How has this been possible?
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If there is a professional category that applauds the willingness shown by the federal government to improve the infrastructure of Brazilian ports, this category is pilots.
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For more than 200 years, since it was regulated in the country in 1808, along with the Opening of Ports, pilotage has faced enormous challenges to ensure that the port structure can respond to the requirements dictated by economic growth. Today, more than 90% in volume and around 80% in value of Brazilian foreign trade pass through our ports, by sea and river. Throughout the 22 Pilotage Zones spread across the national territory, pilots maneuver ships with dimensions and characteristics far above those recommended by technical standards, considering the infrastructure and means of support available.
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In this adverse scenario and despite the severe logistical deficiencies they have to deal with, the pilots have been extremely successful, preserving the safety of waterway traffic, safeguarding human life and protecting the environment, with a very low rate of accidents.
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Were it not for the proactivity, the high degree of readiness, the investments made, the integration and, above all, the training and expertise of the Brazilian pilots, the Port of Santos, for example, would not be able to receive ships measuring 330 meters in length, practically twice as much as its structure allows. Another emblematic example comes from the Port of Manaus: if it weren't for the level of excellence reached by the pilots, the terminal built in 1907 and designed for ships of up to 35 thousand tons, would not be operating with vessels three times larger.
This overcoming routine ended up making the expertise of Brazilian pilots obtain international recognition. Recently, the National Pilotage Council was represented in London, at the invitation of the International Maritime Pilots' Association, to speak about the Brazilian experience. In addition to the factors already mentioned, the attention of colleagues abroad is drawn to the fact that the two largest pilotage zones in the world are located in Brazil, in the Amazon, with 2,260 and 1,808 kilometers of extension respectively (the third, that of the Mississippi River, in the USA, has 383 kilometers).
How could Brazilian shippers truly have their expenses reduced?
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Immediately, it could gain from modifying the THC, starting to pay directly to the Terminal for handling the cargo, suppressing the harmful intermediation of the shipowner.
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The most important thing, however, would be to gain from the reduction in freight. But neither the pilotage, nor the tugboats, nor the port fees will bring any difference to the Brazilian shipper, either in the long haul or in the cabotage tariff.
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Two actions are urgent and necessary:
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a) careful monitoring, by ANTAQ, of the amounts effectively charged to shippers, both in the long haul and, above all, in cabotage tariffs; It is
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b) establishment of a genuinely national Merchant Navy; Today, all passenger ships and the main Brazilian shipping companies are owned by international megacarriers (Libra by Chilean CSAV; Alliance by German Hamburg Sud; Flumar by Norwegian Oldfjell; Mercosur Line by Danish Maersk; etc). As the study “EVOLUTION AND PERSPECTIVES FOR THE DEVELOPMENT OF THE BRAZILIAN MERCHANT NAVY”, carried out in 2008 by the Legislative Consultancy of the Senate15, already warned, “Brazil is practically the only country that accepts the majority presence of foreign capital in shipping companies”.
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By way of illustration, it is worth remembering that in aviation companies the participation of foreign capital cannot exceed 20% and, in communication companies, 30%. Sérgio Machado, President of Transpetro, in May 2010, warned: “As an emerging power, Brazil cannot transport just 1% of its trade and pay US$ 16 billion annually in freight for foreigners - which tends to rise, with increasing nature of commerce. The giants that control half of world trade own 72% of the fleet - which should make the Secretariat for Strategic Affairs of the Presidency of the Republic think about the issue”. One can even think about the creation of a State Merchant Navy. A new 8,000 TEU container ship costs about US$100 million, a small amount compared to the US$16 billion spent annually on foreign freight and charter. Recently, Iraq adopted this line, with the creation of the Iraqi State Company for Maritime Transport. The true port user is the cargo owner, exporter or importer. It is not the shipping company, as has been instilled by the media. The concepts are dangerously inverted. The transport company is just one of the service providers that use the port to serve the owner of the cargo.
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It is the shipper who pays a lot to take the cargo to the port. It is also the owner of the cargo who pays a lot in demurrages for delays in loading and unloading.
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It is also the cargo owner who pays high freight rates and a multitude of surcharges that are controlled by international "players".
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Cargoes and their shippers should be the center of attention in ports!