Brazil: Pilotage Services In Brazil

Last Updated: 23 October 2018
Article by Rebeca Arruda Gomes
Most Read Contributor in Brazil, October 2018

Introduction

Pilotage services are mandatory in Brazil: any and all vessels1 that enter and leave a Brazilian port must be assisted by a pilot. Federal Law 9,432/1997, which establishes the general rules for waterway transportation in Brazil, states that pilotage is an essential service and shall be permanently available (Section 14). Pilots are qualified by public entrance examinations conducted by the Brazilian Maritime Authority (Diretoria de Portos e Costas – DPC), and must not refuse to provide services, at risk of having their licences removed (Section 15, Law 9,432/1997). The DPC regulates provision of pilotage services in Brazilian territorial waters.2 All these features bring a strong quality of public service to pilotage in Brazil.

On the other hand, pilotage has a relevant characteristic of the private sector: prices are, in practice, private. In theory, prices have traditionally been negotiated between the parties, namely the contracting shipping company and the pilot. However, reality shows that a free negotiation has never actually occurred. In its role of regulatory agency, the DPC established the so-called rodizio obrigatorio, a rotational system through which each pilot will assist a vessel alternately, so that all pilots assist vessels, one at a time.3 Such a rotational system prevents competition in the market: since all pilots have exactly the same number of vessels to assist, they do not have any incentive to offer better prices in order to gain in scale. The rotational system practically ended competition between pilots. Shipping companies have no bargaining power to negotiate: the service is mandatory; they are not able to choose the pilot who will provide the services; and pilots unilaterally impose prices. Consequently, pilotage prices in Brazil are one of the most expensive in the world, representing a very heavy cost for shipping companies operating in the country.

Even where the service is public, a balanced economic model would require prices subject to market competition or, if market competition does not exist, prices subject to state regulation. Accordingly – and due to the controversial situation concerning pilotage prices in the country – the federal government enacted Decree 7,860/2012, to create the National Committee for Pilotage Matters (Comissao Nacional para Assuntos de Praticagem– CNAP), in charge of regulating the prices of pilotage services, with the coordination of the DPC. In compliance with Decree 7,860/2012, the CNAP has issued: (1) a methodology for calculating pilotage prices in each pilotage region (Zona de Praticagem),4 €which was ratified by the DPC; and (2) maximum price tables for each pilotage region. The maximum prices established by CNAP are significantly lower than the prices being charged by pilots in practice (in some cases, prices are more than 50 per cent lower – and still very reasonable). Before the DPC had the chance to ratify these tables, the pilots brought several lawsuits in different circuits of Brazilian Federal Courts to dispute the maximum price tables. Because of that, the maximum price tables are still not in force.

Lawsuits are still ongoing, with different decisions in different courts – both to confirm CNAP's ability to regulate pilotage services and to impede CNAP from establishing pilotage prices. It is important to note that the second group of judicial decisions does not impede CNAP from establishing prices in any event, but rather limits the establishment of prices to the situation where the permanent availability of the service is threatened. Those decisions do not seem to reflect the reality, when:

  • pilotage is an essential service and must be permanently available;
  • pilotage is mandatory;
  • pilots must not refuse to provide services, subject to having their licences removed; and
  • pilots are free to charge whatever price they want.

Given these factors, there is no situation where the permanent availability of the service is threatened.

Today, Brazil is confronted with a crisis in its pilotage market, with a direct negative impact on the Brazilian economy. It is essential for the judiciary to understand the real context in which pilotage services work. It is also essential for the state to regulate pilotage services in all aspects, both technically, which already occurs, and financially. It does not make sense for the state to regulate the operational aspect of the services but not the financial aspect. The status quo of pilots in Brazil must change.

Footnotes

1 Few exceptions are provided by Normam 12, issued by the Brazilian Maritime Authority –

2 Diretoria de Portos e Costas (DPC), in item 404 and Annexes 4-C and 4-D ('Normam 12').

3 Normam 12.

Normam 12, items 226 and 227. The purpose of the rotational system is to guarantee permanent availability of the service and to avoid pilot fatigue.€

4 Normam 12, Chapter 4.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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