The case of the “old-fashioned” Latinamerican ports Containers

The case of the “old-fashioned” Latinamerican ports

During the last 20 years, Latin America (LA) has seen an increase in investments in ports, as a consequence of important institutional changes. These investments have changed the availability and quality of port services, especially in the field of container ports. Furthermore, LA has been subject of greenfield or brownfield initiatives such as Lázaro Cárdenas, El Callao, Moín or Cartagena de Indias.

However, similarly to other regions of the world, many Latinamerican ports remain located in the heart of big cities. These ports are “metropolitan” and, very often affected by huge problems like congestion, pollution, road safety costs and other externalities. Besides, in LA some main ports do not have direct access to the ocean, water access to the port is through canals, which implies constant dredging works and -in particular- strong constraints to bigger vessels.

Above mentioned characteristics in metropolitan ports without direct ocean access are worsened by another characteristic: an old-fashioned port layout.

In 1992, the UNCTAD[1] clearly defined the function of the ports: 1) traffic planning; 2) storage; 3) procedure related to reception and delivery; 4) operation of the vessel; and 5) operations at the pier. Many ports in LA remain with a layout according to that old definition. Nevertheless, 25 years is a long time for ports… Currently, the reality is totally different, cities are bigger and congested, ports have new functions and technology will give a new shift to ports.

A container port is currently defined in a different way… In effect, the ports try to become a node of the complete logistics chain[2]. This poses new governance challenges for port authorities and for transport in general[3] [4], as ports are intended to provide more specialized services and to integrate into complex logistical chains within economies.

For this reason, a current trend of seaports is to combine operations in their own facilities alongside the docks with others located inside the served hinterland. This is due to the convergence of various factors: the price of land in the old ports’ surrounding area incremented, there is a need for own distribution operations at strategic points, the life cycle of these ports needs to be extended and extended gateways along the hinterland need to be established, among other reasons[5].

In this sense, the concept of port centric logistics (PCL) becomes crucial. PCL is the integrated offer of areas, sheds and facilities for productive, storage and distribution activities, provided with infrastructure, port, rail and road connectivity whose characteristics, locations, modalities, technology, opportunity and costs, respond to the requirements of the various industrial, commercial and service sectors with the profile, flexibility, sustainability and scalability required[6]. When located outside the port area, they operate in practice as an extension of the port itself.

Therefore, the old ports of Latin America must overcome the challenge of traditional layouts. These reflections are a call that there is a need to improve logistics and territory integration throughout the hinterland. The latter is the economic attraction zone of a port that represents a physical and functional link between logistics, transport and distribution networks. Such integration requires continuous investment in port facilities and their connections. It also presents challenges such as coordination and management of public and private sector stakeholders. In this case it is not considered “growth” but rather “structural transformation”[7].

A new layout is required in those old-fashioned ports, in order to adapt them to the necessities of customers and the economy, as well as to be located logically and physically near to the markets: their production, consumption and distribution centres.

In many cases around the world, the relocation of ports is a current trend. That trend will strengthen in the future. The relocation of the old ports allows the port life cycle to be regenerated. It occurs when the limits on rationalization, investment or access are reached. Moreover, it appears when too many externalities are generated in the environment, such as congested roads, railways and infrastructure. As well as when the handling of increasing volumes or demand for transport becomes difficult. This leads many ports to the so-called location splitting process, or relocation of port facilities.

Cases from across the world, such as the London Gateway, Rotterdam container terminals or Jebel Ali, are examples of such developments. As the future is uncertain, the industry must be prepared to face different scenarios. In order to withstand the change, development and innovation must be a priority. In line with that, integration is also a factor of success within the scope of innovation.

“Old-fashioned” Latinamerican ports require a suitable balance between long-term and short-term planning. During such uncertain periods as the current economic one, each cent that is invested in ports must be carefully thought-about and planned: when we talk about investments on port facilities affecting several decades ahead, each invested cent is really worth much more than one cent. Apart from that, the opportunity cost is sky-high, so there is no room for rushed decisions.

References:

Bergqvist, Cullinane and Wilmsmeier, Eds. (2013): Dry ports – A Global Perspective: Challenges and Developments in Serving Hinterlands. Farnham: Ashgate.

Drewe Paul & Janssen B (1996): What ports for the future? From “main ports” to ports as nodes of logistics networks. European Regional Science Association. 36 th European Congress, ETH Zurich, Switzerland. 26-30 August.

González Laxe, Sánchez & Garcia-Alonso (2016): The adaptation process in port governance:the case of the Latin countries in South America and Europe; Journal of Shipping and Trade (2016) 1:14

Lambert, Monios & Wilmsmeier (2011): The directional development of intermodal freight corridors in relation to inland terminals; Journal of Transport Geography 19 (6), 1379-1386

Monios & Wilmsmeier (2012): Port-centric logistics, dry ports and offshore logistics hubs: strategies to overcome double peripherality?; Maritime Policy & Management 39 (2), 207-226

Sanchez & Pinto (2015): The great challenge for ports: the time has come to consider a new port governance; 2015-01 FAL Bulletin No.337. UN-ECLAC

UNCTAD (1992): Development and improvement of ports, UNCTAD. Geneva

[1] (UNCTAD, 1992)

[2] (Drewe & Janssen, 1996)

[3] (Sanchez & Pinto, 2015)

[4] (González Laxe, Sánchez & Garcia-Alonso, 2016)

[5] (Monios & Wilmsmeier, 2012)

[6] (Bergqvist, Cullinane and Wilmsmeier, 2013)

[7] (Lambert, Monios & Wilmsmeier, 2011)

Ricardo J Sanchez is an economist graduated from the University of Salvador, Argentina, in 1983. Postgraduate studies: PhD in Economics (candidate) from the Pontificia Universidad Católica Argentina and MSc in Economics and Administration of Public Utilities from the University of Paris X and University Carlos III in Madrid, Spain. He was born in Argentina, August 28th, 1958. Ricardo is an internationally recognised expert in shipping and port economics, as well as in transport and infrastructure, with special focus on the region of Latin America and the Caribbean. He has worked either professionally or academically in 28 out of the 33 countries of Latin America and the Caribbean along 33 years, as well as in Europe and Asia. His main research interests are shipping and port economics, including the maritime cycle, port devolution, national maritime policies and industrial organization applied to shipping markets. He holds more than 160 publications among books, chapters in books, peer reviewed articles, working papers, etc. He is a Senior Economic Affairs Officer at the United Nations Economic Commission for Latin American and the Caribbean (UN-ECLAC). Currently he is the Deputy Director of Natural Resources and Infrastructure Division; main fields of work of the Division are energy, infrastructure, maritime, ports and logistics affairs, and physical regional integration. Member of the following academic and professional associations: the International Association of Maritime Economics (IAME), the International Navigation Association (PIANC), the Port Performance Research Network (PPRN), and the Argentine Association of Political Economy (AAEP). Between 2006 and 2011 was a member of the Council of IAME. Professional career: both in the private sector with local and foreign companies and in the public sector with international agencies and the Argentine Federal Government. Professional focus: currently devoted to areas of Maritime Economics; Economy of Regulations; Infrastructure and Transport Economics. Research and teaching: former Visiting Professor at University of A Coruña, Spain (Maritime Studies Institute). Previously, he spent ten years at Austral University in Argentina (1997-2007) acting as Research Project Director of Regulation and Infrastructure Area, especially devoted to fluvial, maritime and surface transport, as well as regulations and infrastructure matters. Former Director of Continuous Education at the Higher Institute of Government Economists in Argentina, and member of the Academic Committees of two Master’s Programs in Government Economics, and Director of the Postgraduate Course in Public Economics at the ISEG-Buenos Aires University/San Andrés University. Has also served as Consultant for the Services Division of the Latin American Integration Association (LAIA), The World Bank, for RENFE (National Network of Spanish Railroad), for CEPA (Salvadorian authority for Ports, Airports, and Railways), Latinports, the Mexican Association of Port Terminals, and collaborator of the CAF (Development Bank of Latin America) and the OAS Inter-American Committee on Ports.

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