Determinants of Efficiency at Major Brazilian Port Terminals

Abstract

This paper reports on the use of different approaches for measuring the efficiency of major Brazilian port terminals. Two of the most important approaches, DEA (Data Envelopment Analysis) and SFA (Stochastic Frontier Analysis), were performed on data collected from 25 terminals. The findings indicate that the majority of Brazilian terminals are running short on capacity due to the export boom that has occurred over the past few years and due to the lack of investment in capacity expansion. Furthermore, efficiency measurements derived from a reduced model with only one input and one output were explained based on variables such as type of cargo handled (container or bulk), connectivity of the terminal to railroads, and control (state or private) of the terminal. Implications and directions for future research are explored.(soy, iron ore, oil, frozen orange juice, petrochemicals, coffee, sugar, ethanol, pulp, etc.); the other half was due to manufactured products (processed meat, automobiles, steel, aircraft, appliances, auto parts, etc.).According to Curcino (2007), the Brazilian Federal Law 8630-amended in 1993 and also known as the 'Port Modernization' Law-was the path for port privatization, leasing of terminals, installation of local port authorities, and labour deregulation, breaking up with the state monopoly on the sector. Although investments in capacity expansion have been minimal from that period to these days, the comparison of several ports in terms of their overall efficiency has become an essential part of the Brazilian microeconomic reform agenda for sustaining economic growth based on foreign trade (Fleury and Hijjar, 2008). For example, in 2006, a federal authority linked to the Transportation Ministry was created to monitor operational bottlenecks and to allocate investments among Brazilian ports and terminals. Since then, performance measurements of ports and terminals are conducted on a more systematic way by Brazilian authorities, albeit they are still based on several traditional single output/single input productivity indexes.Traditionally, the performance of ports and terminals has been variously evaluated by numerous attempts at calculating and seeking to optimize the operational productivity of cargo handling at the berth and in the terminal area . In recent years, approaches such as DEA (Data Envelopment Analysis), FDH (Free Disposal Hull) (Cullinane et al., 2005), and SFA (Stochastic Frontier Analysis) (Cullinane and Song, 2003; have been increasingly utilized to analyse production and performance of ports and terminals. It must be noted, however, that FDH and SFA are less frequently used than DEA, the technique that presents the largest amount of applications in this sector (see Panayides et al., 2009, for a comprehensive list of references). Within port operations, the use of DEA is increasing, while the application of FDH remains low.Despite its original shortcomings, such as not allowing for error or random shock measurement 1 and not being capable to account for the impact of cont...

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