o some developers in Brazil, the solution to regulatory hurdles the country has to international air cargo service is a network of hubs that will give airlines greater access to the interior of South America's largest economy. But the projects in the northeastern part of the country and near the industrial center of Sao Paulo are also being pressed as Brazil is looking increasingly turbulent, suggesting that barriers to entry aren't limited to regulatory concerns.

The economic woes don't appear to be slowing down efforts by a Zurich-based group of European private investors to pursue a hub strategy to capture what many believe will be a surge in Brazilian air cargo traffic in the coming years.

The new air cargo airports will be developed at Fortaleza, in the Northeast, and outside Sao Paulo, in the industrial center of the country. The airports will cost $450 million, said Jurandir de Freitas, the managing director of Sao Paulo-based Brasil Cargo Infra Estrutura Ltda., the operator for the European group.

The Fortaleza project will lead the two hubs. "We will open the first runway by the end of 2002," said Freitas. The operating permission for the Fortaleza project was signed recently with Ceara state authorities, he said.

The final authorization for the Sao Paulo hub - some 150 kilometers, or about 100 miles away, at Moji Mirim - should come soon, Freitas said.

The attraction of the hubs for international airlines from the northern hemisphere includes the possibility of limiting international flights to Fortaleza - the closest point in Brazil to Europe - then using domestic carriers to transfer cargo south.

Freitas said that FedEx and United Parcel Service are among the international cargo carriers the group has approached about prospective new service. But both the carriers have relatively limited flights in the region and their expansion efforts are not focused on South America right now.

Consuming Demand

By most standards, international carriers should be looking at Brazil. It remains the region's dominant economy and does major trade with its Mercosur neighbors.

Mercosur, the Common Market of the South, includes Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay. These countries maintain low common tariffs for trade within the region.

The recent Mergeglobal 2001 Air Freight Forecast projects traffic from North to South America growing 6.9 percent annually through 2005, significantly ahead of the forecast 5.2 percent growth rate for world air freight tonnage.

But right now it is a risky time to invest in Brazil. The country's gross domestic product slowed for the second straight quarter, and South America's largest country has been dragged down by the economic woes of neighboring Argentina.

The spring peak period shipping appears to be hurt this year by the country's weakening currency, which has put a damper on consumer demand for imports. The country reported a 6.6 percent annual inflation rate in April , the highest gain in nearly four years, and forwarders say they are bracing for a slip in imports of capital goods to go along with the decline in the import of consumer goods.

Domestic Feed

That means the greatest interest in alternative hubs will probably have to come from domestic operators, Varilog, the logistics unit of Varig Brazilian Airways, the most likely candidate. Varig opened a cargo hub in Manaus in November and in January launched door-to-door service for all points in Brazil, along with 350 additional points in the Mercosur region, according to a company spokesman.

The hub in Fortaleza may serve the growing Northeast region with little competition, and attract airlines like TAP, from Lisbon. But the Moji Mirim facility may face substantial competition from Sao Paulo's other regional airports, all of which have plans in various stages to enhance cargo capability.

The Guarulhos airport, at about 40 kilometers or 25 miles from the city center is closest to Sao Paulo, currently has the heaviest volume - and traffic snarls. The Viracopos airport in Campinas, about 100 kilometers or 65 miles away, "is more agile at handling cargo," said Marcio Senise, the supervisor of customer service at Transitarios Internacianios, or ItaTrans, the Sao Paulo-based freight forwarder. And the ex-military airport at Sao Jose dos Campos, near Moji Mirim, has long had plans to develop more air cargo capability, kicking off some new cargo activities last year.

... Briefly

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