Logistics startup CargoX was one of the Latin Americans selected in WEF's list. Photo: Shuttestock

How the Brazilian startup CargoX is helping small carriers to maintain the transport of essential goods

The company's CEO Federico Vega talked to LABS about the new BRL 30 million fund created to anticipate the payment of 70% of the freight of products such as food and hospital supplies

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The Brazilian logistics startup CargoX has zeroed its marketing investments planned for 2020 to create a BRL 30 million ($5.7 million) fund to help small carriers and fleet owners in the country amid the coronavirus pandemic. With the money, the startup will pay 70% of the freight for essential products such as food and medicines at the time of loading, as a way to help these small companies in maintaining the transportation of these items. The other 30% of the freight will be paid at the final destination.

“We are using this money to not only help companies with working capital, but also to reduce the risk of shippers’ (a name that CargoX gives to the companies that own the shipments being transported) default on transport companies. And we do this by charging the minimum to cover our costs. We also assume the risk of default because we have a machine learning technology that allows us to analyze the cash flow of companies and understand the probability or not (of them defaulting),” explained the CEO of CargoX, Federico Vega, to LABS.

Federico Vega, CEO at CargoX. Photo: CargoX/Courtesy.

Using its marketplace, CargoX also tries to optimize the work of these small carriers on the road, reducing the idle time of unloaded trucks, and increasing freight demands and predictability.

Essential carriers

In addition to health professionals, truck drivers and small carriers are also at the forefront of the fight against coronavirus. They are the ones who transport food, hygiene products, equipment and hospital supplies, everything that is necessary for the part of the population who can stay at home. Like most Brazilians, these professionals are afraid of Covid-19, not only of the disease itself, but of all the impacts brought with it.

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Social distance is an effective measure to curb the spread of the virus, but it also causes the closure of an entire network of essential services for truck drivers to keep on running: restaurants, hotels, gas stations, tire shops and workshops.

Access to services on the road

To help truck drivers on the road, the Brazilian federal government is adjusting, with states and municipalities, the functioning of essential road services. According to the Ministry of Infrastructure, the maintenance of essential services is being coordinated by a new National Council of Transportation Secretaries, which should eliminate specific problems created by local restrictions to trade, harmonizing rules.

The number of carriers operating on our platform has dropped 7% (since the beginning of the crisis), but the number of those who do not want to move from one state to another has increased by 50%.

Federico Vega, CEO of cargox

“Truck drivers are afraid to cross a state border and not be able to return, because each governor is taking its own (traffic restriction and isolation) measures, without coordination. They also don’t want to make very long trips, of over a day, because they can’t store food in the truck, and it’s very dangerous for them to drive without the basic services that they need”, says Vega.

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Currently, CargoX has 20,000 active carriers on its platform – Brazil as a whole has around 110,000. These haulers hire drivers for their own fleet or hire truck drivers who already own a truck. In total, the 20,000 carriers today have around 400,000 trucks in the country.

Essential products are precisely those whose transport has increased in recent weeks. According to Vega, food transport grew 23% in March, compared to February, and the transport of hygiene products 13%. “The reason the transport of these two kinds of products has increased is because people are stocking these products at home. There is a certain panic, uncertainty about when the crisis will end, so people are going to the supermarket and buying at once what they would buy for a whole month,” said Vega.

No shortage, just barriers

According to him, there is no shortage of food and hygiene products in the country. “The problem is to find a way to transport these products so that they don’t run out in supermarkets”, explains CargoX’s CEO. “We don’t have an impact on whether people buy online or offline. We have an impact when people buy more, and this is what is happening now”, he added.

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Agribusiness cargos, on the other hand, have stopped. In February, according to Vega, grain transportation stopped for two reasons: because the Chinese were holding back imports of these products; and because the health authorities had started to inspect all ships that docked in Brazilian ports. “Now in March, farmers are stocking agricultural products because of the devaluation of the real,” he said. The transport of steel products and civil construction also started to fall in March.