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Puerto Rico plans giant Port of the Americas in Ponce
JoC Week / July 19, 2004

By Larry Luxner

PONCE, Puerto Rico — Approaching from San Juan over the mountains by helicopter, the top tourist attractions of the south-coast city of Ponce gradually come into view: the red Parque de Bombas firehouse, the imposing Catedral de Guadalupe church, the oceanfront Ponce Hilton & Casino, the cross-shaped El Vigia observation tower and the elegant Serrallés Castle, a 19th-century mansion built by the Serrallés rum family.

These famous landmarks are impressive, but within two years, a new development will dwarf them all: Ponce's Port of the Americas, a 1,200-acre complex that aims to become Puerto Rico's leading container port and one of the largest transshipment centers in the Caribbean.

Known in Spanish as Puerto de las Americas, the project has sparked worldwide interest from companies hoping to design, build, operate and maintain the port. On July 15, a final bid will be selected from among three or four entities still in the running.

Puerto Rico's Commonwealth government declined to identify the companies, though they are believed to include PSA Corp. of Singapore, which operates the world's largest transshipment hub; Manila-based International Container Terminal Services Inc.; Dubai Ports Authority and a consortium made up of AP Moller, CSX Lines, the Port of Rotterdam and Main Ports of Puerto Rico Inc.

Estimates of the project's size have been slashed from $1 billion to around $600 million, following a decision not to pursue twin sites at Ponce and nearby Guayanilla, with four container berths in Guayanilla and two in Ponce. Maximum capacity will be 1.3 million to 2 million TEUs, not 3 million TEUs as envisioned when the project was first announced a year ago.

"Originally, we wanted to establish the port in both Ponce and Guayanilla, but we found out that Guayanilla had some serious environmental issues with manatees and other endangered species," said Daniel Nazario, marketing director for the Puerto Rico Industrial Development Co. (PRIDCO).

Even so, the project is being eagerly promoted by local business executives and PRIDCO officials. They say it will make Puerto Rico more competitive by relieving chronic congestion at the Port of San Juan, which handles around 1.7 million TEUs of containerized cargo annually. The cost of internal transportation will also come down, they say, because factories will be located in an adjacent industrial park.

"You have to consider that Puerto Rico's only existing [container] port facility is San Juan. But its physical growth is limited due to sedimentation of San Juan Bay," said Ramón Torres Morales, executive director of the Port of Ponce. "We need to look at a contingency port, and Ponce could provide that contingency."

Federico González Denton, executive director of the influential Puerto Rico Export Council, said the project "opens a new window of opportunity" for the island to act as a bridge between South America and the United States.

"Miami also sees itself as a bridge, but Puerto Rico — due to our geographic location, our special relationship with the U.S. and our capacity to offer tax incentives to industries — puts us in a very good position, especially now that the FTAA is being discussed," he said.

The project's success hinges mainly on two factors. The first is labor costs, which are higher in Puerto Rico than other Caribbean islands since the federal minimum wage applies here. The second is whether the commonwealth can successfully persuade lawmakers in Washington to lift the Jones Act — a 1917 law that requires cargo between Puerto Rico and the U.S. mainland to be transported on U.S.-built, American-operated ships, which usually cost more.

As now envisioned, the Port of the Americas will begin operations by December 2005, with the rest of the project to be finished by January 2007. It will be financed with public and private funds.

In the first five years of operation, the expanded port is to concentrate mainly on international transshipment cargo, with the focus shifting to domestic (Puerto Rico-U.S. mainland) trade once San Juan reaches its capacity around 2011 or 2012.

Torres, interviewed in a comfortable air-conditioned office with glass panels overlooking the docks, told JoC that within 10 years, 50% of the port's business will come from domestic traffic, and 50% will be transshipment. He also said the project will generate over 10,000 jobs for the island, whose unemployment rate presently hovers around 12%.

"Our main goal is to create jobs throughout the southern region of Puerto Rico," he said. "This project will be a tool to enhance opportunities for industrial sites in Ponce, with land that could be developed into facilities for manufacturing."

For now, the area surrounding the port area is largely empty, except for La Mercedita, Ponce's municipal airport, and several warehouses and government buildings. Along the port access road, one can also find vendors selling baseball caps, Puerto Rican flags and bunches of quenepas — a small, tart fruit unique to the Ponce area.

The Port of Ponce is also unique in that it has been owned by the municipio of Ponce since 1911, whereas all of the island's other port facilities are owned by the Puerto Rico Ports Authority.

At present, the port employs only 35 people and registers $1.7 million in annual revenues.

When the project is completed, the Port of the Americas will boast up to 14 post-Panamax shore-side cranes, along with total wharf length of 4,400 linear feet in two segments: one measuring 1,400 feet long and the other measuring 3,000 feet long. Average throughput will range from 8,000 to 10,000 TEUs per acre per year. The terminal alone will cover 145 acres.

"It is not one single project but a combination of different elements that will spread economic activities throughout the island," said Nazario. "We're not going to focus only on transshipment. We realize we have to build another port to handle all the volume San Juan won't be able to handle."

The Port of the Americas is hardly the first in the Caribbean area to go after the transshipment business. But it faces competition from already established ports in Jamaica, the Bahamas, Panama, Venezuela, Colombia and the Dominican Republic.

Torres concedes that labor costs are lower in these other places, but that ports are now a capital-intensive operation.

"Clients will go to ports that can handle volume at a cheaper price," he said. "Through a strategy of complementing the port with a value-added zone which is not available at either Freeport or Kingston, the Port of the Americas could compete in that sense."

Torres said the Caucedo transshipment project in the nearby Dominican Republic has close to 8,000 feet of pier surface, but only 2,000 feet of that is available for post-Panamax vessels. "They have five cranes, and there's a decent container terminal area, but right now, the volume is not there," he said.

In order to accommodate post-Panamax ships up to 200 feet wide, the Port of the Americas will be dredged to a depth of 50 feet (compared to the current 38 feet). The dredging alone will take 18 months, cost around $35 million and involve 5.5 million cubic yards of earth.

"You're talking about a project that deals with construction over water. The number of municipal, local and federal agencies involved is huge," said Nazario, noting that the project's environmental impact statement alone runs over 4,000 pages. Despite a series of public hearings, however, "we haven't gotten any negative feedback from the community."

A key element of the project is Caribe Business Parks, an industrial facility being overseen by commercial real-estate developer CB Richard Ellis.

"In the case of high-value exports manufactured here, the raw materials arrive by ship but the finished products — mostly pharmaceuticals — leave by air, and most of what's imported by ship is consumed here," said Antonio Sosa Pascual, director of the government agency Puerto Rico Trade. "So we have a surplus of containers going to Florida and elsewhere that are waiting to be filled, despite our strong manufacturing sector. For us, that's an opportunity for local business."

Pascual said local, Puerto Rican-owned companies account for less than 10% of the island's $52 billion in annual exports. The rest is exported by U.S. and European multinational companies that have been lured to Puerto Rico by generous tax breaks and other incentives.

The port is hoping to attract companies that assemble value-added quality products and those involved in third-party logistics and distribution. Likely targets include food processing and packing firms, contract manfacturers of dietary supplements, and companies that make perfumes, cosmetics and auto parts.

Nazario conceded that while Puerto Rico is hardly competitive in labor costs, "the efficiency of that labor force offsets the island's high operational costs."

In order to prepare for the enormous project, the Port of Ponce, the municipality and the Puerto Rico commonwealth government are jointly investing $40 million in major infrastructure initiatives, said Torres.

This includes the rehabilitation of Piers 4, 5 and 6, which will add about 1,200 feet of berthing space — enough to accommodate one post-Panamax vessel. In addition, the port is improving its electrical system, enhancing security and expanding the area for container parking. The rehab project will be completed this September, with one crane in service by then.

The port is also certified to receive cruise ships in the event of an emergency in San Juan or the nearby Virgin Islands.

At one point, said Torres, Ponce handled 90,000 TEUs of containerized cargo a year, though San Juan has now taken most of that business, leaving Ponce with less than 10,000 TEUs per year.

"The port already has a small market in bulk and general cargo such as wood and construction materials," said Torres, estimating that clinker and coal represents 30-40% of Ponce's one million tons of annual bulk cargo volume. In fact, most of the cement produced by Puerto Rican Cement Co. for export to nearby Caribbean islands is shipped out of Ponce.

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