Shape up or ship out: new regulations have Brazil's port operators rushing to upgrade security.

It's June 30, 2004. A cargo ship loaded with containers approaches the Brazilian coast, scheduled for a quick stop at a shipping terminal. It drops off some boxes, picks up some others and heads to the next port of call--business as usual.

But what should be business as usual will become a bit trickier from July 1 onwards, when the International Ship and Port Facility Security code, known as ISPS, takes affect here. If the terminal where the ship is due to berth is not duly ISPS certified according to new security rules sanctioned by the United Nations, then the port will be considered unsafe and the captain may have to skip that port to avoid "contamination."

In layman's terms, ships that call on non-certified terminals become "contaminated" and may not be allowed to dock at certified ports afterwards.

The July 1st deadline has sent port officials in Brazil scurrying to upgrade security. Measures have been taken to restrict access and to separate sensitive areas of the port from those where the vehicle traffic maybe heavy, such as in the old port of Santos, which is located near downtown.

Closed-circuit cameras must monitor port activities and identification checks are to become more rigorous. However, some anticipate problems with stevedores, who often send unauthorized relatives to substitute for them on the dock. Those fill-in workers are commonly known as bagrinhos in the local jargon (named after a small fish that feeds on sharks' leftovers). "All registered stevedores must be checked in. But there may be problems with bagrinhos, which may even cause solidarity strikes," says Carlos Camara, a security officer at Hamburg Sud, a German shipping company.

Getting Brazil's ports ready is going to cost money. Guards will have to be trained, and new equipment, such as security scanners, must he purchased. As of yet, it's not clear who will foot the bill. The government has earmarked some US$20 million to address the immediate concerns over security. Among the country's 34 ports, five key ports have been prioritized for security upgrades, Santos, Rio de Janeiro, Paranagua, Rio Grande and Vitoria. Another five have also received some attention from the authorities, Itaqui, Suape, and Itajai and ports in Para and Bahia states. Nevertheless, Paulo de Tarso Carneiro, the transport ministry's director in charge of ISPS code implementation, says government funds do not cover the cost to acquire expensive scanners, which may have to be acquired at a later stage.

Meanwhile, the government has already hinted at what many port users have feared for some time: A new tax may be created to finance the investment in security, which means higher costs for importers and exporters. "Our intention is not to transfer costs, because it's not good to increase export costs. But if we have to acquire expensive equipment, there will have to be some charges," says Carneiro. Some argue that tight security measures will reduce the risk of cargo theft and smuggling activities, which may eventually lower insurance costs. "We have to think in terms of competitiveness, rather than costs," he says.

Mobilized. Santos port officials have admitted that the implementation of the security plan may not be complete by the end of June. This scenario may become a nightmare that many shippers would like to avoid, as it has the potential of disrupting economic activity. But the threat of terrorist attacks has become so great after Sept. 11 in the United States and March 11 in Spain that the shipping community has mobilized its forces to reduce the risk to the minimum.

"We are lacing a dilemma: We want open borders, but we want safer trade," says Jim Hunter, a partner at the risk management consultancy Merlin in Sao Paulo. Brazil's great export push over the last few years is now bearing fruit, but if there is a flaw in the implementation of the security code, it may have a disastrous effect, Hunter adds. Brazilian exports surged 20% last year at US$73 billion and are expected to exceed $80 billion in 2004.

Nevertheless, Brazil has long been considered a weak link in the global shipping chain in terms of security, and some here say the new code is past due. "Our ports are extremely vulnerable," says Armando Vidigal from Brazilian shipping syndicate Syndarma. "[The new rules] are going to give us a great boost to improve conditions."

THIERRY OGIER * SANTOS