Cruise Conundrum

BRAZIL: CRUISE CONUNDRUM

Stop start cruise operations in Brazil bring not only fi nancial problems for industry participants but also for local communities highlighting the interdependence of the two elements. Rob Ward investigates

Brazilian port communities and cruise terminal operators are reeling over the on-off saga that has marked the southern hemisphere cruise season since it started back on November 5, after a year’s hiatus due to COVID-19, when the MSC Preziosa berthed at the port of Santos.

The 2021-22 season was picking up a head of steam but several outbreaks of COVID-19 between Christmas and New Year led to a temporary suspension from early January to February 18, when operations were scheduled to resume.

According to Clia Brasil (the local branch of the Cruise Lines International Association, which is headquartered in Washington DC), the last Brazilian cruise season (November 2020 to March 2021) hosted 469,577 passengers and injected around Reais2.241billion (US$427.9 million), up from just over Reais2bn the season before, into the Brazilian economy, especially local port communities, and generated 32,000 jobs.

That was the third year of solid growth, and a booster especially for the key ports of Santos and Rio de Janeiro, and it followed seven years of consecutive falls in passenger numbers.

The current season was targeted to attract more than 360,000 passengers, with an impact of Reais1.7bn, in addition to generating 24,000 jobs. With, however, only two months completed it has achieved less than half of those figures and the cruise terminal operators are seething.

The two key ports for cruise operations in the South American country are Santos and Rio de Janeiro, where Concais Passenger Terminal and Pier Maua are, respectively, the two cruise terminal operators. Concais only renewed its concession in 2019, for another 20 years up to 2039, and already its US$42m investment plans, including equipment upgrades and new terminal buildings, are being hit for six by shortfalls in passenger numbers due to COVID-19 restrictions. It can currently handle six vessels simultaneously.

Pier Maua has also invested heavily in recent years (the company would not say exactly how much). It serves Rio de Janeiro, the Cidade Maravilhosa (Marvellous City), famous for the annual Carnival, partying and New Year’s Eve fireworks extravaganzas off the beach at Copacabana; plus the famous sights of the Sugar Loaf Mountain and Corcovado (the famous Statue of Christ that towers over the whole of Rio).

Pier Maua has been completely renovated over the past 10 years, coinciding with Brazil hosting firstly the World Cup (2014) and then the Olympics (2016), and can accommodate up to 35,000 passengers per day, and up to 10 vessels simultaneously. Pier Maua hosted 357,000 passengers during the 2019-20 season, which completed just before COVID-19 hit Brazil, and was expecting a more modest 165,000 for 2021-22 but then came the suspensions, so that target won’t be reached unless the season is extended significantly.

Santos’s offerings are more modest than Rio’s, with just the Museum of Pele (arguably the world’s best-ever footballer, who played his entire career with Santos), a coffee Museum and the world’s longest beach front garden (3.4 miles long), and some decent beaches.

However, a major plus for the cruise lines is that Santos services Sao Paulo, Brazil’s industrial and financial engine, with a metropolitan area of more than 20 million, and some of the richest denizens in all South America: a large pool of potential and actual cruise goers.

Now the two cruise terminals will need divine intervention from Corcovado’s famous resident to turn a decent operating profit this year and overcome the obstacles put in their way.

8 Santos and Rio

de Janeiro cruise terminal facilities have been hit hard by repeated COVID-19 outbreaks

“TOUGH YEAR FOR EVERYONE”

Times are also tough for the two cruise lines that still operate in Brazil: MSC Cruises with three vessels (MSC Splendida, MSC Preziosa and MSC Seaside; with, respectively, passenger capacities of 3900, 4345 and 5119) and Costa Cruises with two vessels (the Costa Diadema and Costa Fascinosa, with 4900 and 3780 passenger capacities). One source said that only one cruise had sailed with the maximum 75 per cent capacity and most had been operating at around 45-50 per cent. Clia said that cruises were averaging around 60 per cent. The five vessels have been waiting in the lanes outside the port of Santos, berthing at Concais once a week for provisions.

“It’s been a tough year for everyone,” said Marco Ferraz, President, Clia Brasil, “After last year’s cruise season was completely wiped out, we had hoped to get back on track this season, but several outbreaks of COVID-19 over the Christmas and New Year periods meant we had to temporarily suspend all cruise operations. We are talking regularly with the authorities to find a way to resume our activities.”

Many Brazilians take their holidays in January when children are on their school holidays but this year cruise terminals in Rio and Santos were deserted after cruise lines temporarily suspended all operations from January 4, initially to February 4 and then extended to February 18, when they were due to re-commence.

Although Brazil is starting to get outbreaks of COVID-19 under control, and the milder Omicron variant is now dominant in the South American country, there seems to be a clash between the shipping lines and Anvisa, the National Agency for Sanitary Inspection, especially international transit. The government of maverick President Jair Bolsonaro and the Ministry of Tourism, however, are keen to get the cruise terminals open again as they bring in much needed revenue to Santos and Rio, and to federal and local government coffers, vis a vis taxes.

After reports of passengers and crew going down with COVID-19 during the Christmas period cruises Anvisa stepped in and called for an end to the cruise season. Cruise lines said all restrictions and Anvisa rules (such as 75 per cent maximum capacity, regular testing and provision for hospital and hotel spaces in case of outbreaks) had been adhered to and that the operations should be allowed to continue once the voluntary suspension has been completed and Anvisa and Clia have aligned their protocols.

BETTER PROSPECTS?

However, some light might be visible at the end of the tunnel and there is a strong possibility that the season may be extended from its original early April finish and run until the end of May, and even into June, to make up for lost cruises and business.

Now, for the first time ever, there will be two Carnivals! The first one is the usual holiday that Brazilians take five days prior to the start of Lent which is when the Samba Schools usually hold their spectacular competition/show in Rio, which is from February 28 this year. However, with COVID-19 delaying the samba parades, a “second Carnival” will now be held from April 21 to 23 with parades across three days.

One Santos based shipping agent who works in the cruise sector said that If an agreement can be made between the cruise lines and the authorities they will extend their season at least beyond “second Carnival” week, but he can’t see it going much beyond that as Autumn starts to fall in Brazil.

“The culture for taking a cruise in Brazil is November to April,” said the shipping agent, who did not wish to be identified. “That’s when Brazilians book their vacations and children are on holiday and that is the hottest period, especially in the cooler south of the country. I think some of the vessels, especially the Costa duo, will want to return to the Mediterranean before May, but I hope I am wrong.”

As ever in the world of Brazilian ports and shipping, politics is involved in the malaise.

Our shipping agent source told Port Strategy that local politicians were making life difficult for Bolsonaro with one eye on this October’s Presidential election.

“I think that local politicians in the city don’t want SPA to be sold off to private concerns, which is Bolsonaro’s plan, and Joao Doria, Governor of Sao Paulo, is standing against Bolsonaro in October, so he is making life difficult for the President on the cruise and several other fronts,” he said.

8 Light at the end

of the tunnel? There is a possibility the season may be extended

The history of the Brazilian cruise shipping market

Cruise shipping in Brazil took off at the end of the 20th century and expanded every year during the early 2000s, when the Brazilian economy was booming on the back of newly discovered oil reserves and the Brazilian currency, the Real, was strong compared to the US dollar. It was trading at 1.6 to reais to the greenback whereas today it is just 5.25, giving Brazilians less purchasing power.

From 1996 the Brazilian cruise industry grew steadily from a base of about 200,000 passengers per annum before peaking during the 2011-12 season when 805,189 in 19 vessels took a cruise along the South American country’s 7500 km coastline, making it the third biggest cruise market in the world, behind only the Caribbean and the Mediterranean.

Back then cruise terminals, government bodies and cruise lines were aiming for one million passengers per year and extending the season from four months (December to end of March) to all year round (at least for a few vessels), adding vessels every year. Seven years of falling passenger numbers saw the 2016-17 season total just 358,024 passengers but an improving economy saw the 2017-18 season bounce back with 418,504 passengers and seven vessels, and 2019-20 was the third consecutive year of growth and did well to bag 469,000 passengers as COVID-19 started to loom on the horizon, but 2020-21 saw no ships and zero passengers due to the pandemic.