In Logistics

In 2020, e-commerce will continue to fuel the growth of Latin America’s logistics market.  Conversely, slowing trade flows and security issues will dampen growth in other parts of logistics.  Such a mixed bag of market trends calls for a novel approach of analysis – hence our choice to conjure the imagery of Sergio Leone’s spaghetti western classic. 

The Good

E-commerce is changing freight patterns and expanding the number and type of vehicles operating in the last mile delivery, for example: bulky deliveries.  There is a movement to bring on-demand load-sharing technologies to the freight market, with companies like Ivoy, 99 Minutos, EnvíaYa, Liftit, Cargo X and Truckpad all striving to fulfill this marketplace need. The high fragmentation of the trucking industry in LatAm and the large volumes of goods transported by ground will accelerate the use of logistics marketplaces.

We anticipate more use of modern and efficient vehicles, including electric vehicles, bicycle deliveries and lockers, all in their own way designed to deliver speed and cost savings to last mile delivery.  Such tactics also deliver a milder carbon footprint, which consumers, shareholders and regulators increasingly demand.

As e-commerce gains more traction in smaller LatAm markets, the demand for cross-border traffic increases, particularly direct lanes from Asia to LatAm, often via Panama or Miami.  More trans-pacific flights to bring in e-commerce products opens up greater opportunities for LatAm perishables to reach Asian markets at competitive back-haul rates.  China has become the primary market for some fruits grown in the region, buying over 95% of Chile’s cherry crop [1] and shipping back close to 60,000 packages a day, most of these via AliExpress [2]. The increasing number of returns and product changes will support more value-added logistics players managing the resale in secondary marketplaces, the repair of high-tech products and the consolidation of returns back to origin.

The Bad

Increasing protectionism in international trade, combined with soft Chinese GDP growth, exacerbated by the coronavirus scare, will take a toll on some LatAm exports. Furthermore, supply chain interruption in China, the world’s assembler of consumer electronics, may force stockouts of hot selling products. Some food exports to China may increase as more affluent Chinese consumers eschew domestic food products, given the source of Coronavirus. But overall, China-LatAm trade flows will likely decline by 3% in value. [3].  Mexico’s auto exports which expanded at a healthy clip in recent years, are expected to drop by a dramatic half-million units, or 17%. [4]

The EU-Mercosur trade deal has run into difficulties.  Austria, France and Belgium have succumbed to domestic interests and promise to veto the trade agreement’s ratification.  Furthermore, early foreign relations signals from the new Peronist government in Argentina show at best ambiguity over Mercosur while others in the new government oppose the opening of Argentina’s uncompetitive manufacturing sector. 

The Ugly

Increasing cargo theft and personal security threats (to drivers), most acutely in Mexico but also in Central America and parts of South America, is pushing up insurance premiums and overall logistics costs.  In Mexico, more than 2/3 of cargo theft targets heavy-duty vehicles transporting groceries, electronics and pharmaceuticals. Puebla, Guanajuato and Tabasco are the states with the highest number of truck thefts. The number of theft incidents reported in Mexico increased 15% in 2019 [5]. In Brazil, among the thieves’ favorite products are groceries, appliances, electronics and medicines. The vast majority of cargo thefts in Brazil are concentrated in the southeast region in Brazil.  In the state of São Paulo, the number of 2019 thefts were almost double that of 2018, according to the statistics released by São Paulo’s Public Security Secretariat (SSP) for the first 10 months of 2019. [5]

Explore More

Please contact us for a deeper understanding of logistics in Latin America via our market intelligence work. Our competitive intelligence and lead generation services may also be helpful for companies looking to gain market share, defend themselves against disruption and grow revenues. Our logistics case studies are just a modest sample of the more than 200 projects AMI has completed for the Latin American market over the years, but they will help you understand our approach and experience in this sector.

Sources

[1] Chilean Fruit Exporters’ Association

[2] AMI research and analysis

[3] AMI analysis

[4] Instituto Nacional de Estadística y Geografia, Asociación Mexicana de la Industria Automotriz

[5] São Paulo’s Public Security Secretariat

[6] Fundação Álvares Penteado



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