After slumping by 12% in 2009, the largest contraction of the post-war period, global trade volumes have steadily rebounded in the first half of 2010. Yet, just as the global economic downturn laid bare the inherent chinks in the armour in the world’s financial system, the upturn is exposing a fundamental weakness in another vital component of the world economy: the logistics sector.

My attention has recently been drawn to increasing reports of kinks and bottlenecks springing up across the global supply chain. In Brazil and Australia, the largest suppliers of iron ore to the Chinese market, road and port congestion has long been accepted as part and parcel of the rise in export growth over the past few years. However, the 44% y-o-y growth in China’s iron ore imports in 2009 brought reports of delays and bottlenecks at major export terminals to unprecedented levels.

In Brazil’s case, the recent difficulties have been underpinned by decades of underinvestment in the country’s transport infrastructure. Though ranked a respectable 41st (out of 155 countries) in the International Bank of Reconstruction and Development (IBRD)/World Bank Logistics Performance Index (LPI), the growing demands of the country’s trade needs have placed considerable strain on its freight transport sector, and, in particular its largest maritime facility, the port of Santos, which despite challenging economic headwinds, in 2009 achieved a record throughput of 83.2mn tonnes.

The under-capacity of Brazil’s port sector is no secret: the National Agency of Maritime Transport (Antaq) is forecasting throughput to reach 1.2bn tonnes per year by 2023, an increase of about 85% on 2008 levels. At present, shippers are overly reliant on Santos to transport goods in and out of the country, with about 25% of total exports estimated to pass through the facility.

The largest port in Latin America with a capacity of just over 80mn tonnes, Santos, just outside Sao Paulo, stands alone as Brazil’s only ‘world class’ maritime facility. Brazil’s next largest port is Paranaguá, which has a capacity of about 40mn tonnes. When compared with China’s port sector, the difference is staggering: China has no less than ten ports able to handle more than 100mn tonnes a year. The two largest facilities, Shanghai and Ningbo, each handled more than 500mn tonnes in 2008 – more than six times the volumes seen at Santos.

As the upward trend in Brazil’s export volumes has continued into 2010, the kinks in Brazil’s supply chain have become more apparent. And it’s not just ports feeling the strain; a bumper grains harvest has led to increasing reports of congestion and bottlenecks along the highways leading from the country’s agricultural heartland to the coast.

Worryingly, in terms of its logistical development, Brazil can be considered to be a regional outperformer. If Brazil’s LPI ranking is flattering, so are those of other major South American states, namely Argentina (ranked 48^th), Peru (67), Colombia (76) and Venezuela (84).

At least Brazil can rely on a relatively stable macroeconomic and political environment, though this has not always been the case. Next door, it has been Argentina’s turn to suffer the historically Brazilian diseases of high inflation (CPI is forecast to hit 21% in 2010) and fiscal mismanagement. The freight transport sector has borne the brunt of increasing public unrest and a series of strikes and road blockades have taken place in protest against the decreasing real pay levels of dockworkers and the excessive export tariffs imposed on agricultural producers.

Of course, when it comes to mismanagement, neither country can come close to matching the exemplary efforts of the Venezuelan government and one Hugo Chávez. Having brought several regionally-managed ports under federal control in March 2009, the port sector has fallen into disarray and, in May 2010, dockworkers warned that the country’s largest maritime facility, Puerto Cabello, was three months away from complete collapse.

The obstacles thrown up by South America’s freight transport sector present perhaps an extreme case: other parts of the developing world including the Middle East, and East and South East Asia generally boast a higher level of transport infrastructure development. However, the problems facing shippers to and from Brazil and its neighbours are not confined to the region and are also common among developed states, most notably Australia. Taken together, the logistical constraints of the developed and developing world are expected to provide one of the major challenges to long-term growth in global trade.