The Journal of Commerce / September 27, 2004
By Larry Luxner
BUENOS AIRES, Argentina — Decaying infrastructure, excessively high fees and an ongoing jurisdiction battle over who exactly owns the Port of Buenos Aires have all contributed to the decline of Argentina's largest container terminal — much to the benefit of competing ports in Uruguay and Brazil.
Shipping industry experts say Buenos Aires is gradually becoming a feeder port while Brazil's Port of Santos — already the largest in South America — is evolving into a key hub port. Vessels coming from Asia stop at Valparaiso, on Chile's Pacific coast, go around Cape Horn and end up at Santos rather than Buenos Aires.
Andreas Meyer, local manager for Hamburg Süd Argentina, said at a recent press conference that Argentine ports in general — not only the Port of Buenos Aires but also smaller ports in the province of Buenos Aires and Santa Fé — can no longer compete with their neighbors. That's despite the general increase in international maritime trade between South America and emerging markets in Asia and Africa.
On the other hand, smaller ports like Ushuaia (in extreme southern Tierra del Fuego) and Puerto Deseado (in Santa Cruz province) stand to benefit thanks to increasing trade with Brazil and other neighboring countries.
"We are very expensive compared to Montevideo," said Alejandro Carbajal, commercial manager at Agencia Maritima Nabsa S.A., a shipping agent based in Buenos Aires. "We have here several fees which are not assessed in Montevideo, for instance the Rio de la Plata channel tax, which all ships coming to Buenos Aires must pay."
In fact, a 2,500-TEU vessel pays an average $50,000 to enter the Port of Buenos Aires, compared to $17,000 if that same vessel were to choose Montevideo.
"Everybody's concerned about this because we are losing a lot of business," said Carbajal, whose company represents K Line and several large agribusiness firms like Cargill, Dreyfus and Bunge. "During the 1990s, Argentine terminals made big investments in infrastructure. The Port of Buenos Aires is fully dedicated to container vessels, but our largest volume is coming through barges instead of vessels. This means lots of infrastructure for only a few containers."
According to David Craig, commercial manager at Multimar S.A., the Port of Montevideo — located right across the Rio de la Plata from Buenos Aires — last year handled 333,600 containers, more than half of which about 50% of the volume of Buenos Aires (655,900 containers).
The irony is that Uruguay's economy is only 1/15th the size of Argentina's; the whole country is considered by many Argentines to be a suburb of Buenos Aires. Yet only half the volume at Montevideo consists of real Uruguayan exports; the rest are largely Argentine containers being rerouted through Uruguay or even Brazil to save money.
In addition, Montevideo's port infrastructure is more modern, and it can accommodate much larger ships. Carbajal said Buenos Aires cannot receive vessels of more than 3,500 TEUs because of draught limitations.
Large vessels with capacities of 4,000 TEUs or more require a channel at least 100 meters wide and 10 meters deep, but the dredging just hasn't been done. An industry association known as the Centro de Navegación is lobbying hard for these changes to be made, but as Carbajal says, "the main issue is political."
At the moment, a significant tonnage of potential exports has to stay on the piers due to a lack of shipping space. Hamburg Süd has planned to bring in large vessles to the Rio de la Plata in May 2005 to meet the export demand, but can't happen until dredging and widening works are finished — and it doesn't look like the work will be completed in time.
"Unfortunately, Buenos Aires has to have constant dredging because it has sediment coming down from the Rio de la Plata all the time," he said. "It's not only a question of competitiveness because of costs, but also competitiveness becuase of depth and the quality of the channel."
Luís Angel Díez, a government-appointed trustee, agreed at a press conference called by the national Administración General de Puertos (AGP) that infrastructure improvements are badly needed.
In the 1990s, the Menem government sold off inefficient state assets, and container operations at the Port of Buenos Aires were largely privatized. The long-term plan was to replace the AGP with an autonomous body made up of the key players in this sector.
But as the Buenos Aires Herald reported in July, "10 years later, the AGP is still in the process of being wound up, and no organization has been set up to replace it."
Díez said that although the facilities that have been privatized are up to world-class standards, the surrounding areas have fallen into a state of almost total neglect "after a decade of government disinterest."
Initially, the cost of dredging — being done by the Belgian conglomerate Hidrovias S.A. — was borne 50% by the government and 50% by the shipping companies themselves, through the so-called "channel toll." But following the economic crisis that began in 1999, the government could no longer subsidize the dredging, so the companies were forced to bear 100% of the dredging costs, said Craig.
The AGP's budget this year is around 90 million pesos ($30 million), though most of it will go to pay the salaries of its 350 or so employees, with little left to spend on maintenance — let alone develop a port infrastructure.
According to Díez, the agency faces an urgent list of priorities. These include the following:
*dredging. The AGP is responsible for dredging a 12-kilometer access channel to the port, plus the port itself – some 6.0 million cubic meters a year — and Díez and other officials say the AGP's dredging vessels are in terrible shape.
* rail access. Despite being surrounded by a railway network, no line currently delivers freight directly to the vessels; there's been no investment in this sector for over 20 years. As a consequence, containers and other freight must now be transferred to trucks in nearby Retiro and then moved to the piers. Extending the rail network to the port itself would enable a further 170,000 TEUs a year to be moved, though Díez conceded that the project faces He admitted, though, that it's difficult to get this project moving due to the number of government organizations involved.
* Terminals 5 and 6. Left out of the privatization process, these terminals have almost been abandoned, with sunken ships at the head of Pier 6 clogging any possibility of progress. According to the AGP, reactivating this area would involve clearing the sunken vessels and moving the breakwater and landfills to create about 16 hectares of additional storage space.
Díez also said the AGP has begun to improve access roads to the South Dock, an area that had almost fallen into disuse, except as a depository for vesels that had been abandoned by their owners.
Meanwhile, the Port of Buenos Aires faces an unrelated problem, as a 400-year-old battle over jurisdiction over the port rages on with no end in sight.
In 1996, the City of Buenos Aires achieved an autonomous status, becoming a city-state in its own right. This new staus soon gave rise to the age-old squabble of the port's jurisdiction, which constitutional lawyers, historians and politicians have continued to debate despite the country's economic crisis.
The issue blew up again in early July, when Díez vehemently opposed ongoing attempts by city legislators to transfer the port to the city's jurisdiction. At the meeting, Díez produced a report drawn up by the AGP's legal experts which argues fervently that the port should belong to the whole nation, not just the city of Buenos Aires.
"The port is linked to the country as a whole, as every province relies on it in some way for its foreign trade," he said. "The city has ceased to be an industrial powerhouse as it was in the 1960s, and has become a service center. Therefore, it has little impact on the port's activities."