Issue No. 199, March 2003

BORDER CROSSINGS IN MERCOSUR COUNTRIES: OBSTACLES AND THEIR COST

 Main problems encountered in international land transport

 The study points to the convergence of two phenomena: weaknesses in the infrastructure and problems in the organization of the sector. These phenomena occur in a context of disincentives (lack of coordination, corruption) that hinder the work of the agencies involved and affect staff performance, thus preventing land transport from moving smoothly and efficiently. 

    In the case of infrastructure, it was found that on the Brazilian side, there are ample facilities for logistical support, cargo handling and border controls. However, the road infrastructure (taking into account the condition of road surface, markings and engineering design) creates a serious bottleneck. As far as organization is concerned, the bureaucracy is fairly well organized, enterprises have achieved significant economies of scale, and the transport industry has achieved a high degree of professionalism. 

    In Argentina, the situation has improved considerably in recent years, but problems remain. The road infrastructure is good but still prone to congestion; border infrastructure is poor; there are serious disincentives to performance of officials and public entities (corruption, lack of coordination and management), poor bureaucratic organization, lack of professionalism, excessive impact of problems caused by down time. Indeed, in 1987, the average delay for loaded trucks at some problematic borders was three days. In 1989, the average delay had increased to four days, or even more, as noted in the study entitled Diagnóstico del Transporte Internacional y su Infraestructura en América del Sur (DITIAS) published by the Latin American Integration Association (LAIA); this study mentions delays of up to five days. Delays in procedures have been reduced, although long waits are still common, owing to problems with organization and incentives. It is estimated that 65% of the cargo crossing the border between Uruguaiana and Pasos de los Libres suffers delays of between 30 and 36 hours, with only a few vehicles experiencing delays of 11 hours or less.  

    In Uruguay, the motor vehicle transport infrastructure is extremely important for the country's foreign trade, most of which depends on road transport. However, even though considerable improvements have been made in regard to administration and organization, some of Uruguay's roads are in very poor condition compared with those of Argentina and Brazil. It is essential that further investments be made in road construction and maintenance in order to rehabilitate the deteriorated corridors. Uruguay's road system has bridges with capacity restrictions; in the interior, some bridges have a maximum load capacity of 12 or 15 tons. Substantial improvements in the roads in the interior would facilitate truck traffic between Argentina and Brazil –making the connection between Buenos Aires and Porto Alegre– by cutting down distances and reducing congestion. Thus, improving the infrastructure in Uruguay would not only help improve its own trade development, but would strengthen the economic integration of the subregion. It will also be important to eliminate differences in the technical specifications used by the countries, achieve full integration of customs control activities, simplify bureaucratic procedures and improve personnel performance.

   On other occasions, ECLAC has already expressed its concern at the fact that transit countries, such as Uruguay, do not always offer the incentives that are needed to improve the infrastructure for trade conducted by other countries.   

 
Final remarks on the study

Given the cultural differences inherent to the structure of our societies, the institutions and agencies involved in international land transport and border procedures operate in a context of disincentives that discourage good performance throughout the system. Factors such as the lack of coordination among agencies and officials within a given country and between different countries, as well as the corruption that is often denounced by carriers, keep land transport from flowing efficiently and delay the process of regional integration. This may be one of the fundamental problems hindering this region from moving to a deeper union (such as that existing in Europe) and facilitating movements between countries. The excessive red tape barely disguises the real barriers to trade which must be overcome by authorities and societies in order to ensure the success of the integration process.  

    The problems encountered are not caused by a lack of instruments; as we have noted earlier, the subregional agreements provide reasonable solutions to the main problems arising in regard to coordination and transport operations. Although they can be improved, the agreements provide tools for ensuring a smoother flow of operations. Unquestionably, what happens in practice is that the agreements are not implemented or enforced. One may reach the conclusion that although "international issues" are blamed for the deficiencies, the real cause is a lack of willingness and disposition to facilitate transport, trade and regional integration.

   The aforementioned problems occur on a daily basis in international road transport in Mercosur countries, and they are obvious at the truck stops where, often inexplicably, trucks have to wait for days for permission to continue their journey, usually under difficult physical and sanitary conditions. Interviews with a number of waiting drivers of all the nationalities covered by this study brought to light certain situations that were mentioned repeatedly, namely, bribery ("They always find something…" "If you show them a little money, everything moves quicker…"); inadequate physical facilities; excessive red tape, and lack of coordination (unexplainable delays in implementing unified controls, more time-consuming immigration procedures for drivers, although technically they should be treated the same as tourists, any number of phytosanitary and bureaucratic controls, etc.). All of these situations lead to cost overruns caused by the waste of time and by corruption.

   To compare operations at border crossings, information was obtained on waiting periods in other regions. The findings were striking: on the border between Canada and the United States on the first day it was opened after the attacks of 11 September 2001, when national security precautions were at the highest level (which meant applying extremely strict controls for every vehicle), delays affecting trucks averaged around eleven hours; at present, the average waiting period is two or three hours. Likewise, the average delay at all borders in Central and Eastern Europe is 2.5 hours per truck.

   At our borders, on the other hand, the problem is very serious, especially at the border between Argentina and Brazil. Some progress has been made over the last few years in reducing down time (which averaged between four and five days a few years ago). On the border between Uruguay and Brazil, there are still some deficiencies in physical facilities and in regard to organization. In general terms, procedures at the border between Argentina and Uruguay are somewhat more efficient.

   Considering only the direct cost overruns caused by inefficiency and problems with the organization of the bureaucracy, trade procedures and border facilities, plus other special costs, it has been estimated that such costs amount to some US$ 32.3 million per year (at 2002 values) for the three borders studied. Eighty per cent of this amount is generated at the border between Argentina and Brazil; the border between Uruguay and Argentina accounts for only 6.5 per cent. When this level of inefficiency is prorated according to the number of trucks affected by delays between Argentina and Brazil, where most of the inefficiency lies, the cost amounts to US$ 170 per truck. This is very high compared with the typical price of freight between Buenos Aires and São Paulo or Porto Alegre.

       However, other delays must be considered besides those which occur on leaving the country of origin.  Among them, the delays that trucks incur when returning and certain organizational inefficiencies related to carriers, the practices of handling of vehicles and losses of time have been considered incurred in the process of loading and unloading at the point of origin or destination.  To the same daily cost before used, the sum of delays concerns an extra-cost of 22,4 million dollars between the three countries.  Consequently, the aggregation of both estimations totals an extra-cost of 54,7 million dollars per year.  Between Argentina and Brazil, to consider this aggregated value, the extra-cost by truck would amount to a maximum of 273 dollars.  For the other two borders, the total extra maximum cost is: 129,5 dollars per unit between Brazil and Uruguay and 97,14 dollars between Uruguay and Argentina.

   Highways between the three countries have been improved, thanks to an investment of nearly US$ 10 billion over the past few years, although some work still remains to be done. In Brazil, in particular, border facilities have been greatly improved, and the country's highway improvement plan includes some very ambitious projects that will allow for significant progress to be made in the road system in the southern part of the country (so crucial to trade with Argentina and Uruguay) over the next few years. Uruguay also has some important plans for improving its road system in the near future.

   Argentina, for its part, plans to conclude its highway concessions in 2003. At that time, it will review the situation, although the roads linked to Mercosur have improved dramatically, thanks to the substantial investments made in recent years. On the other hand, investments for improvement of the border infrastructure, which have been delayed considerably, are not significant.

   This brief summary should make it clear that although there are problems with the physical infrastructure, they are not as serious as the problems relating to organization, which may be summarized as follows: red tape, delays and uncertainty regarding international permits for carriers; lack of continuity in public agencies and in their personnel; too many national regulations and overlapping of same; obvious non-compliance with subregional rules; problems with application of Mercosur rules; overtime and cost overruns in the multiplicity of border procedures required and in loading and unloading operations at points of origin and destination (caused by organizational problems in the private sector); marked differences between countries as regards professionalism of the private transport sector; excessive number of cargo transfers at the border; imbalance in the direction of traffic flows and high degree of seasonality in traffic and in numbers of vehicles returning empty; problems with fiscal asymmetries and tax pressure between countries; and serious security problems on the road.    

ANNEX

Movement of cargo vehicles at border crossings

 Of all the border crossings between the three countries, the first six, which account for 85% of the cargo transported, are: Paso de los Libres-Uruguaiana, Foz de Iguazú-Puerto Iguazú, Fray Bentos-Puerto Unzué, Chui-Chuy, Jaguarao-Río Branco and Santo Tomé-Sao Borja (table 1). The two strategic points for movement of goods between the three countries are the crossing between Paso de los Libres and Uruguaiana and the triple border between Paraguay, Brazil and Argentina. Together, these crossings account for 56.2% of all traffic.