Signs of a rebound

Signs of a rebound

After several down years, the air-cargo market between the U.S. and Latin America appears set for a modest recovery in 2004 if trends that developed last year continue.

Fed by strong perishables traffic, the northbound market rebounded in 2003 but could be slowed this year by new rules imposed by the Food and Drug Administration to thwart potential bioterrorists. Shipments moving from Latin America via Miami and Los Angeles to Europe and Asia could be affected if shippers decide that complying with the regulations isn't worth the trouble and decide to route their traffic via Caribbean nations or Mexico. In the case of Europe, they also could opt for direct flights.

One of the more encouraging developments in 2003 was the recovery of the Argentine market. One of the region's biggest economies, Argentina rebounded nicely from its economic meltdown of early 2002 and showed promise of regaining some of its former luster as a key market for U.S. air exports.

While the southbound trade remains far weaker than U.S. air imports from Latin America, it started to pick up in the second half of 2003 after an anemic start.

"The market is recovering pretty nicely. In the last six months we've seen strengthening in the southbound trade. There are a lot of car parts that go south," said Dave Brooks, president of American Airlines Cargo.

American is also starting to see improvements in its northbound business from Brazil.

Still, air imports from Brazil during the first nine months of the year were down 5.8 percent to 62,000 metric tons, compared to 65,800 in the first three quarters of 2002, according to Global Trade Information Services of Colombia, S.C.

Despite the overall market decline, Brazil's largest airline, Varig, is operating at 100 percent capacity on both its seven weekly northbound flights and its 21 passenger flights, said Jack Servera, Varig's director of cargo for North America and Asia. Northbound cargo includes perishables, particularly seafood, as well as leather goods, auto parts and components and machine parts and components.

The northbound flows reflect the Brazilian government's efforts to stimulate the region's largest economy through an export-led expansion.

The southbound trade continued to decline because of stagnant domestic demand. U.S. air exports to Brazil in the first nine months of 2003 were down 7.9 percent to just over 43,000 metric tons, compared to 46,800 tons during the same period in 2002 and 63,200 tons in the first three quarters of 2001. Auto parts and electronics are the core southbound cargoes, Servera said.

Argentina's imports of manufactured goods expanded in mid-year, largely spurred by growing domestic demand. Last August, for example, industrial activity was up 17.5 percent from a year earlier.

U.S. air exports to Argentina jumped 78 percent in the first three quarters of the year to 11,800 tons, but that was still far below the 17,900 tons in the January-September period in 2001, before its economic crisis.

"Our volumes to Argentina have been on a steady upswing for the past six months," said Rick Whittaker, vice president of international services at BAX Global.

U.S. air imports from Argentina were off 21 percent in the first nine months of the year.

Latin America has been primarily a southbound market for Kuehne & Nagel, but in the second half of 2003 it began to see strong northbound trade, said Rainer Wunn, senior vice president. While most of the Swiss-based global forwarder's Latin American business has been with Europe, Wunn said exports from Latin America to the U.S. were also climbing, with shipments of automotive components to the U.S. and Mexico driving the non-perishables trade.

Perishables continued to dominate the northbound market. Colombia's flower-driven exports to the U.S. rose 12.3 percent in the first three quarters to 87,000 tons, the same as Chile, whose volume increased a far more modest 2.5 percent. The principal exports from Chile, the region's most robust economy, include seafood, fruits and vegetables.

Air exports from Ecuador, the region's second-biggest flower producer, gained 8.7 percent to 36,850 tons, while Peru's exports jumped 18.6 percent to 36,270 tons.

"Asparagus is extremely heavy out of Lima," said Jack Boisen, vice president of cargo at Continental Airlines.

The Dominican Republic has also been a good perishables market for Continental, which exceeded its growth plan in the region.

One reason carriers such as American and Continental experienced growing volumes was the reduced presence of other carriers. UPS halted service to Caracas and Lima in June because it wasn't making money in those markets. It also reduced flights to Ecuador and

Costa Rica. El Salvador-based Grupo Taca terminated its freighter service. But other carriers such as Tampa Airlines and DHL Aviation Americas, expanded their cargo operations. Tampa's primary market is Colombia, while the DHL freighter operations, which focus on airport-to-airport freight at the wholesale level, is mainly geared to Central America and the Caribbean.