In Logistics

While some may think this piece covers key players in the industry, we wanted to focus on a different kind of mover: the factors and circumstances that are—or will be—affecting Latin American logistics this year.

Many of these movers are larger forces that can’t be controlled—but our logistics market intelligence can help you prepare to work through or around them. In this piece, we want to highlight the movers and their moves so your company can deal with them.

Latin America Logistics Market Movers - Stopping the Steal

#1 Stopping the Steal 

As nearshoring has heated up in Mexico, between April 2023 and April 2024, there has been a 35% increase in cargo theft, with the highest rates of cargo theft registered in Puebla (27%), Querétaro (14%), The State of Mexico (13%) and 10% in both Guanajuato and Michoacán. Organized crime groups understand that Mexico and the US are doing much more business together and are going after food and beverage cargo. Interestingly, they are not going after electronics as much—and this is because logistics companies developed more creative countermeasures. The cargo value threshold to use security escorts has been reduced, and other measures have been in place to limit the losses on these high-value goods. 

However, organized crime groups are also creative: they falsify licenses for trucking companies and recruit people who work in warehouses to help steal cargo and move it to be sold in black markets. As such, companies are looking for other ways to ship to reduce cargo theft. In addition to using air freight to replace trucking, they’re also using cabotage. These are relatively new solutions, so we’ll wait to see if they reduce theft significantly.

Latin America Logistics Market Movers - Growing Investment in Specific Logistics Sectors

#2 Growing Investment in Specific Logistics Sectors 

One positive trend we’ve observed is how infrastructure for warehousing and cold storage is modernizing thanks to new investments. One example is Emergent Cold, a relatively new company that has become one of the largest cold storage operators in Latin America after several acquisitions of local heroes in Brazil, Chile, and Peru. Emergent is owned by Lineage Logistics and backed by Bay Grove Capital, a private investment group in the U.S. In addition, logistics firms like Maersk are expanding through the region, making greenfield investments and acquisitions. 

Cold storage is a particular area of interest in Latin America because the pandemic halted much of the investment that would have occurred in that area in those years. Yet, at the same time, Latin American consumers increased their appetite for frozen processed foods and other prepared meals, driving up the demand for cold storage space.

Latin America Logistics Market Movers - E-Commerce Expansion in Latin America

#3 E-Commerce Expansion 

As noted in other articles and webinars, the pandemic helped power up e-commerce in Latin America, and online shopping shows no signs of slowing down. As a result, we’re seeing cross-border e-commerce from Amazon and Ali Express in Latin America and the e-commerce consolidators in Miami serving the Caribbean, Andean countries, and Central American countries. This has led to massive inflows of cross-border packages that need to be delivered using traditional last-mile services.

There are also disruptive services in the foreign trade zones in which companies import the top-selling product categories, store them locally, and then fulfill orders very rapidly because they don’t spend several days with the international leg of transportation. These services only need to focus on last-mile delivery.

These are among the opportunities that are emerging in the region. While many logistics players know them, they haven’t put time into understanding which of these companies are competitors—or potential partners. Companies don’t always have to compete to succeed—they can often partner with disruptive firms that can lower their operational costs and ultimately make their service offerings more competitive. That’s where our market intelligence can be very useful—one of our key specialties is partner research for Latin America.

Latin America Logistics Market Movers - China’s Demand Is Dropping in Latin America

#4 China’s Demand Is Dropping

In 2023, Chile’s exports to China dropped for the first time in five years. This impacts not only Chile’s exporters and logistics services providers but should also extend across the entire economy in Latin America as China’s annual growth slows to around 4% on average over the next five years. 

This will be huge for Latin America because China has become the top trading partner for many of the countries in the region. Even as LatAm countries have been looking for alternatives to the US, China, or the EU, the reality is that they are highly dependent on the big 3, with intra-regional trade still marginal. And so, in logistics, companies should closely monitor China’s economic situation. One issue China has had is that, despite its impressive growth, not all aspects of this growth were sustainable, such as debt: China’s debt to GDP ratio reached 286% in January 2024.  These are levels substantially higher than the ratio of the United States, higher than anywhere in Europe, and quadruple the average in Latin America.

Another factor is the one-child policy in China. For a long time, the percentage of working Chinese kept growing, but it began to shrink as the percentage of the elderly population expands quickly. The other thing people don’t talk about is that a lot of what drove Chinese growth, especially in infrastructure spending, was the massive migration from the countryside to the city, unrestricted for a long time. When people move from the countryside to the city and work, their productivity and output go up in value. That helps drive growth because these country-to-city migrants need infrastructure and material goods, which drives commodity growth.

But China has reached a point where it can’t strip its rural population much more. It needs people on the farm to grow food. China’s migration from rural to city is slowing down. With it, there is less demand for new infrastructure and less productivity gains amongst its average citizens. These are all things we assumed would continue forever, and of course they don’t. This slowdown has made Chinese consumers feel the pinch—and even if they loved Chilean wine, some of these consumers had to cut back, which made Chile’s exports decline significantly.

Latin America Logistics Market Movers - Nearshoring—but NOT to Mexico

#5 Nearshoring—but NOT to Mexico

While Mexico has garnered most of the media coverage regarding discussing nearshoring, companies are taking advantage of some fantastic opportunities in other markets. For example. Honduras and El Salvador are very good at production for the textile and fashion industries. In addition, our research team recently uncovered a report discussing the cost per unit of manufacturing clothing in multiple countries. While China’s cost was US$2.90 per unit, Honduras has a clothing manufacturing cost per unit of approximately US$3.80 per unit, slightly above Vietnam’s cost per unit. In addition, the transportation costs from Honduras or El Salvador are much lower than those of Asian markets. The one disadvantage that Central American countries have is that they lack the clusters that China offers, i.e. the entire supply chain for the textiles industry, from the raw materials to the manufacturing.

However, Central American governments are working on creating these clusters, so there could be opportunities in the medium term for these markets. In fact, we recently reviewed a report indicating that Honduras’s exports grew by nearly 28% in 2023 versus 2022, while other countries declined in this respect.

Beyond Central America, Brazil is also becoming a possible hotspot for nearshoring. Recently, SHEIN—a global, integrated online marketplace of fashion, beauty, and lifestyle products—has been investing in Brazil. Marcelo Claure is the Group Vice Chairman of SHEIN but also is the chairman of SHEIN Latin America and, as part of his work in the region, oversaw the investment of US$150 million to localize SHEIN’s manufacturing operations in Brazil. SHEIN will serve Brazil and should be well-positioned to serve Chile, Colombia, and Argentina. This means these countries could supplant Asian imports in favor of those from a neighboring LatAm country.

Latin America Logistics Market Movers - Brazil’s Tax Reform

#6 Brazil’s Tax Reform

While the details of this legislative change are still unclear, the Brazilian government will likely be able to reduce the regulatory burden on companies and change the tax system to consolidate five taxes into one. It’s expected to foster economic growth and business competitiveness while shifting the tax burden from production to consumption. Many logistics companies are waiting to see what will happen because the production infrastructure and networks created in Brazil were based on serving the firms, taking advantage of the incentives to be in locations that didn’t make sense from a logistics standpoint.

With the new change shifting taxes toward consumption, we may see companies moving to more natural places along the coast, near the ports. We may also see a lot of changes in the logistics industry in terms of warehousing and the middle-mile and last-mile depots near ports in Brazil. In addition, we may see a lot of cabotage in Brazil due to this reform.

#7 Panama Canal Restrictions

The daily average of ships allowed through the Panama Canal was 38 during normal operations. But in January 2024, only 24 ships were allowed to pass through, and in March, this was increased to 27. In May 2024, the daily average increased to 31, and it’s projected that it will increase to 32 in June 2024.  

While dry years have occurred in the past in Panama, in earlier years they occurred every decade or so. But recently, 2016, 2019, and 2023 have been dry years, so climate change is impacting the long-term play of the Panama Canal. When public or private entities think about potential solutions, they also must consider that Lake Gatún is Panama’s main water supply. While it’s likely that the new Panamanian government will fund very aggressive action plans to help with this, the solutions will take years to build. Thus, we are the mercy of Mother Nature for the foreseeable future. 

Logistics companies have created intermodal solutions to connect land, rail and ocean services to work around this. For instance, Maersk created two loops, one coming from Asia and the Pacific, dropping cargo on the Pacific side, then using rail services and trucks to connect the cargo to the Atlantic loop. We’re seeing companies adapting to this new reality of the Panama Canal. One key concern is how logistics companies and the East Coast of South America could re-engage in the global trading system if there are more years with these low rain levels in Panama—and the resulting restrictions on ships permitted to pass through per day. 

Many companies our researchers have interviewed recently have been exploring additional or alternative logistics services. For example, they are exploring leveraging cross-border trucking services to connect salmon exports from Puerto Montt to Argentina and Brazil or perishable exports from Peru via Colombia. 

The supply chain risk assessment services that many companies started to offer during the pandemic are in high demand nowadays because the supply chain has become a focus of the board of directors. It’s not an obscure area as it was in the past—it’s now front and center. Dealing with the impacts of challenges with the Panama Canal and the Suez Canal—and the increased cost of moving goods by air, ocean, or truck—is becoming a key area of focus for companies. They want to reduce costs and become more efficient with their logistics networks.

The LatAm Logistics Market Data Portrait

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The LatAm Logistics Market Data Portrait

Latin America's big-picture, and granular data for six of the largest logistics markets: Brazil, Chile, Argentina, Colombia, Mexico and Peru.

Next Steps 

Contact us to learn how our logistics market intelligence can help your company deal with these market movers. We can help with several key areas, including: 

  • Partner research to find companies in Latin America to improve your service or capabilities 
  • Acquisitions research to help expand your company’s footprint 
  • Competitive intelligence into your rivals to understand their upcoming moves and strategies 
  • Operational research to help your company identify cost-saving opportunities 
  • Investment research to uncover new opportunities or threats based on growth or contraction trends in the market 

And much more. 

For further reading, feel free to download some of our recent free reports:

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