Brazilian Shipbuilding Industry
Paradoxically, Brazil, a country with significant merchant shipbuilding facilities and a rather large arms export industry, has done relatively poorly in developing its indigenous naval ship building capability. Brazil has not taken advantage of the fact that it owns one of largest shipbuilding industry in the world. One of the problems has been the difficulty in convincing private shipyards to interrupt successful merchant ship programs and rearrange its assembly line to satisfy small and sporadic navy orders.
The rise and fall of the Brazilian shipbuilding market is well-known, having plummeted from the top of the world list in the early 1980s to near the bottom by 1999. The Brazilian shipbuilding industry, after being the second orderbook in the world in the 1970s, entered in collapse in the 1980s and 1990s. In the last 50 years Brazilian shipyards went through two expansion periods - 1960-1979, when employment employment rose from 1,400 and peaked at 39,000 workders, and 2000-2011, when employment rose from 1,900 to 59,000.
With all the obstacles to producing domestically its materiel, the Brazilian Navy was heavily dependent on foreign suppliers in spite of the country's large shipbuilding capabilities. Undoubtedly, this dependence was the greatest impediment for the accomplishment of strategies devised to fulfill independent national political objectives.
Brazil has a long and proud naval tradition that began prior to the country’s independence in 1822. Brazil served as the main base for the Portuguese Navy following the invasion of the Iberian Peninsula by Napoleon in 1807, and thus developed an indigenous shipbuilding industry to support it. But it was only on August 11, 1846 that operations related to shipbuilding venture was recognized as formal venture, through the Baron of Mauá initiative to the Establishment of Foundry and Shipyard of Ponta d’Areia, located in Niterói, State of Rio de Janeiro. Between its founding and practically the closing of the activities of this Establishment in 1890, over 70 ships powered by steam and / or sailing were built to trade in the country.
In the early 1960s, Brazil found it difficult to acquire modern armaments from the United States. This led to Brazil's move away from military dependence on the US and towards developing its own indigenous arms industry. There was an initiative in the late 1970s to boost domestic naval shipbuilding industries. It demanded that at least 60 percent of construction costs for Brazilian naval programs be spent in Brazil. In effect, this move prompted the navy to seek foreign contract construction programs in order to avoid these types of restrictions on domestically-built ships. A total of six naval ships were built domestically without foreign involvement.
Four 31-ton, diesel-proppelled Tracker-class coastal patrol craft were delivered by Astreleiros shipyard, Porto Alegre by 1989. Initial plans were to construct these lightly armed EEZ patrol vessels at the rate of two per year, but this pace slowed due to budgetary constraints. Two tankers were delivered, one 10,000 ton in 1990 and one 1300 ton. The large Almirante Gastao Motta replaced the aging Haraj, and was fitted for both abeam and astern refueling.
Speaking of the development of the Brazilian shipbuilding industry, Naval Minister Maximiano da Fonseca said in March 1984 that "the offer of unused or soon-to-be-obsolete foreign vessels, combined with a series of other situational factors, has hindered the continuity of the effort undertaken by Adm Henrique Aristides Guilhem at the beginning of the 1930s to make shipbuilding a domestic effort. "Recently, the accelerated development of technology and the increasing cost of production have dictated a development of national training for the production of naval equipment," the minister said. In 1987, a new emphasis was placed on privatizing national shipyards prompting the naval shipyard at Rio de Janeiro to acquire the capability to build submarines and various specialized vessels.
A total of seven vessels were delivered to Brazil from foreign sources during the 1980s, and all but one were from the United States. Speaking of the development of the Brazilian shipbuilding industry, in March 1984 Naval Minister Maximiano da Fonseca emphasized that "the offer of unused or soon-to-be-obsolete foreign vessels, combined with a series of other situational factors, has hindered the continuityof the effort undertaken by Adm Henrique Aristides Guilhem at the beginning of the 1930s to make shipbuilding a domestic effort. Recently, the accelerated development of technology and the increasing costof production have dictated a development of national training for the pro-duction of naval equipment."
The Transportation Ministry program estimated the tonnage of Brazilian shipsbuilt for export in 1982 at 500,000 dwt. This was considered a first-class item on the tariff list of Brazilian exports because, in addition to the ships themselves, these exports involved a series of domestic factors, such as the man-power and the hundreds of pieces of domestically produced equipment and components used in their manufacture. The export program includes a 30,220 dwt container ship, two oil tankers, one 80,650 dwt and the other 50,600 dwt, a 70,000 dwt grain ship, three 38,500 dwt grain ships and a 37,800 dwt grain ship.
In the 10 years previous to 1982, the Brazilian shipbuilding industry exported 85 vessels, including grain ships, freighters, petroleum tankers, crude oil tankers and fishing boats, totaling 1.2 million tons and representing over $500 million inforeign exchange for the country. From the beginning of the Figueiredo administration to 1982, Brazil had exported 29 ships, totaling 810,000 tons and valued at $370 million. With a total of 40 river boats to be delivered by the end of 1983, in 1982 the nation's shipyards would launch 20 ships, 18 of the mixed type for CONAVI [Companhia de Navegacao Interior de Amazonia), totaling 832 tons, and two cata-marans for ENASA (Empresa de Navegacao de Amazonia).
To keep the "ways" busy at the national shipyards that had already met their orders for the second PCN (Naval Construction Program) the Transportation Ministry created a continuous shipbuilding program, providing for orders totaling 1.8 million tons by December 1983, representing an investment of about $1 billion.
BAE Systems had a long track record of working with the Brazilian Navy and its involvement can be traced back to Brazil's Niteroi Class frigates supplied by the Company's legacy business VT Shipbuilding in the 1970s. The last Niteroi class frigate was delivered from the Rio de Janeiro shipyard in 1980. These craft carried Exocets, Seacat surface-to-air missiles (SAMs), two 4.5 inch guns, torpedoes, and a medium frequency hull-mounted sonar. Priority was placed on modernizing six of these ships, including enhanced AAW capability.
Brazil is moving towards indigenous shipbuilding, in the area of submarines and small surface combatants. The Tupi-class submarines and Inhauma-class corvettes are modern units, and were built domestically. One German built 209 Class (Type 1400) SS was delivered in 1988. And as of 1992 Brazilian shipbuilders had three more on contract. A German design was selected after intense competition from the British, French, and Italians. The Type 1400, approximately $200 million apiece, is a very capable SS and compared well to the Argentine TR 1700. The navy had planned to build a total of sixteen of the indigenously-designed (with German advice) Inhadma-class frigates. Two units were delivered in 1991, and at that time only two more were scheduled for delivery. These are designed to replace the ex-U.S. Gearing-class destroyers that remained in the inventory.
After outstanding prosperity, between the early 1980s and late 1990s the Brazilian shipbuilding industry faced a period of drastic fall in the levels of production, which was associated with factors such as: the oil crisis worldwide; indiscriminate granting of allowances for a long period of time (more than 20 years), without demanding an increase in productivity that would compel the increase of competitiveness of the industry, dependence on orders from the state sector (Petrobras and Companhia Vale do Rio Doce) and; the long period of economic instability and high inflation, which affected the entire industry of capital goods and particularly, shipbuilding.
The beginning of the revitalization of the shipbuilding industry in Brazil primarily occurred from the late 1990s, with the proclamation of Law 9,478 of 1997, known as the Petroleum Law, which made the exploration and production of Brazilian oil flexible. This law opened the market for the exploration and refining of hydro carbonate to new players, accelerating the expansion of offshore oil exploration. Associated to this factor, the development of new technologies for the exploitation of water depths, ultra-deepwater contract through Petrobras demanded the contraction of marine services of vessel support in the beginning of the year 2000, which originated orders to national shipyards.
Since 2003 the shipbuilding industry became again a priority for the Brazilian government. In that year of 2003, it was decided to recover the Brazilian shipbuilding and offshore industry. The Sindicato Nacional da Indústria da Construção e Reparação Naval e Offshore [SINAVAL] presented to Ministers of President of Brazil, Luiz Inácio Lula da Silva, the study carried out by shipyards on the resumption of the shipbuilding industry. In 2003, as nowadays, the participation of the Brazilian flag in international maritime transport was inexpressive. Navigation between Brazilian ports had reduced. A fleet of ships exceeding the operating age required renewal. In the offshore segment, Petrobras acknowledged the lack of a local capacity for construction of vessels, production platforms and drill ships.
SINAVAL signed agreements for the development of partnerships with institutions that represent industries in Argentina, Spain, Korea and Japan, to expand the options of Brazilian shipyards in the development of its activities. Brazil is now visible in international statistics. These positive facts are the result of the industrial policy set by Presidents Lula and Dilma, considering that this industry needs public policies and strong decisions of industrial, tax and financing policies.
At the Atlantico Sul Shipyard (Brazil’s largest shipbuilder) in Brazil, Samsung Heavy Industries (SHI) held a keel-laying ceremony for a 150,000-ton oil tanker to be built with Samsung's technology. The ceremony was attended by approximately one thousand guests, including Brazilian President Luiz Inacio da Silva. Keel laying, the first process in ship construction in which the main block of ship is mounted on a dock, marked the beginning of operations at the Brazilian Atlantico shipyard. It also will be the largest ship built in Brazil to date, and the shipyard is the largest shipyard in South America. It is a steppingstone to a boom in Brazil's shipbuilding industry, and will lead to many new job opportunities. The president of Brazil, Lula, visited the ceremony to provide his encouragement and support.
The Atlantico Sul Shipyard (EAS) shipyard launched the first tanker (Suezmax) built in Brazil after 13 years, on 07 May 7 2010, at the EAS Suape yard with the presence of Brazilian President Luiz Inácio “Lula” da Silva. “This launch is a milestone. They used to say it was impossible for Brazil to start building ships again. Not only did we resume building them, but we are also establishing a modern, competitive shipping industry, creating jobs and changing the lives of Brazilians,” said the CEO of Transpetro, Sergio Machado during the launching ceremony.
In the 21st Century Brazil was swiftly moving towards indigenous shipbuilding, especially in the area of submarines and small surface combatants. The Tupi-class submarines and Inhauma-class corvettes, for example, are all modern units, and are built domestically. Though Brazil possessed some of the most advanced shipbuilding capabilities in the South American region, a large number of the ships in the fleet came from purchases of ships from other countries. Only recently had the Brazilian shipbuilding industry begun to produce modern units, including submarines, on its own.
The Shipyard for construction of submarines (RJ) is located in Itaguaí, Southern region of State of Rio de Janeiro. Odebrecht has been selected by DNCS to build the shipyard. Business plan calls for construction, in France and in Brazil, of five submarines, one of them nuclear powered, with technology transfer from French DNCS. The first submarine will be ready in 2016. The location of the shipyard and the base of submarine fleet in Itaguaí responds to strategic need of protection of the areas of offshore oil production in the pre-salt, in Santos basin.
By 2010 the national shipyard workforce hit 50,000, impressive considering its rise from a low of around 2,000 just a decade and 25,000 in the year 2007. In efforts to increase Brazil’s ship exports, by 2011 the Brazilian government had plans to invigorate its shipbuilding industry by building a new, powerful structure for the industry. Each year an estimated 4,600 ships sailed along Brazil’s coastline, where no modern repair facilities were available; this offered numerous opportunities for U.S. suppliers to naval, offshore construction and repair facilities.
State-run energy company Petroleo Brasileiro needed ships and drilling rigs to support development of recently discovered offshore oil fields. Several new shipyards are under construction along Brazil’s Atlantic Ocean coast, while many yards that were closed during an industry downturn in the early 1980s are being revived.
Vessels and platforms built in Brazil meet international quality standards. The recent resumption of Brazilian shipbuilding industry, driven by the purchasing power of the state, presented controversial opinions concerning its effective contribution to, in the first instance, the innovation and competitiveness in the sector and secondly, for Brazilian development. In spite of the boastful speech of the Federal Government, the Brazilian shipbuilding industry still cannot be understood as a sectoral innovation system. Concerning this, it is also seen that Brazil still has a lot to advance in sense to structuring its industrial policy that lacks focus on innovation, as well alignment with the scientific and technological policy. Most of the Brazilian shipyards have no engineering department, supplying its needs through projects firms.
The growth of offshore oil & natural gas exploration and production became this segment an important market for this industry Demand is clearly visible for the next 10 years and beyond, based on the offshore demand of high valued drill rigs, oil production platforms, OSV and tankers. As of 2011 Brazilian participation in world orders = 3.94% [Suezmax tankers = 10.69%; Support vessels PSV type = 13.60%; Order book of FPSOs = 57.4%]. But Brazilian participation is still timid in: Bulk carriers = 0.07%; Containers ships = 0.60%.
In October 2010 BAE Systems submitted a detailed proposal to the Brazilian Navy to supply a package of naval vessels to meet its ambitious fleet renewal programme through a full technology transfer agreement, with the ships to be built in Brazil. The proposal came after the Defence Cooperation Agreement between the UK and Brazilian Governments and marked the latest step in a move towards greater bilateral trade between the two countries. Based on BAE Systems' proven ship designs, it included the provision of five ocean patrol vessels, one logistics support vessel and five escort vessels as well as a comprehensive logistics support service. Importantly, the proposal also set out arrangements for the UK Government endorsed opportunity of Brazilian partnership in the design and development of the new multi-role Global Combat Ship.
The BAE Systems 90 meter Ocean Patrol Vessel included in the proposal is based on the proven River Class vessels in use with the UK Royal Navy. It uses the same core platform as the vessel being built by Bangkok Dock in Thailand under a similar technology transfer agreement, with systems and equipment tailored to the Brazilian Navy's requirements. In addition, the Company has proposed a variant of the UK Royal Navy Wave Class fleet tanker, tailored to meet the specific aviation, stores and personnel requirements of the Brazilian Navy.
In January 2012 BAE Systems won its first big naval contract in Brazil in a £133m deal for three ocean patrol vessels to Brazil, which intends to procure five more ocean patrol vessels. BAE would provide engineering support to a Brazilian company to build the second batch. The three vessels sold to Brazil in January 2012 were built in the UK for Trinidad and Tobago under a contract signed in 2007. But BAE began marketing them to other countries in 2010 after the deal went sour.
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