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Guayaquil port privatization could boost coffee industry
The Tea & Coffee Trade Journal / March 1996

By Larry Luxner

GUAYAQUIL -- The Ecuadoran government is planning to expand and modernize the bustling Pacific port of Guayaquil, which handles 70% of Ecuador's coffee exports.

So far, thanks to a privatization program launched last year by President Sixto Durán-Ballén, 85% of the port's operations have been turned over to private companies. A foreign consulting firm, Rogge Marine Corp. of Germany, has been hired for $400,000 to design a new management information and cost-control system, and the port's once-night-marish customs procedures have been cut from 14 steps to three.

In addition, security has been beefed up, and concession rights have been granted for tugboat, cargo loading and pilotage. Container freight consolidation and warehousing and storage operations remain to be sold off.

Major clients say they welcome the changes, but add that more needs to be done.

"Here in Ecuador we have had bad experiences with anything that has to do with the state. Exporters have more confidence in private companies," said Cecilia Velarde de Morales, export manager for Ultramares S.A., Ecuador's largest coffee shipper.

She said that before, "thieves would break the hinges and steal the contents of containers without breaking the seal. State employees were accustomed to receiving bribes. There was no control over strange people entering the port who had no business there. Now, customs police check everything."

Guayaquil currently handles half of Ecuador's total exports by weight -- about 2.3 million metric tons in 1994 -- and 82% of its exports. Around 2,000 ships embarked there in 1995, up from 1,800 the year before. In 1994, bananas were the port's No. 1 export commodity, accounting for 1.84 million metric tons, or 78.3% of total volume. In second place was coffee (119,125 tons), followed by frozen shrimp and seafood (97,326 tons).

Imported goods -- led by chemicals, grain, iron, steel and paper products -- came chiefly from the United States (27.5%), Australia (8.2%), Canada (8.1%), Brazil (6.9%) and Germany (6.2%).

"In general, the port of Guayaquil is expensive and inefficient. It has high fixed costs, low efficiency and a reputation for charging for services that the port doesn't supply," said Antonio Marinetto Calvo-Flores, a Spanish ports and customs expert who was hired by the government two years ago to help modernize the port of Guayaquil.

"When we began working here in 1994, we had around 2,000 employees," said Marinetto, who has revitalized ports throughout Latin America. "Now we have about 400, and we want to get down to 99. This means that most of the jobs will pass to the private sector through the creation of port operators and concessions."

It also means that 1,600 port workers have been fired, a fact that doesn't sit too well with organized labor. In fact, four unions are suing the government because of a ruling which allows the private sector to perform the activities which used to be done only by state workers.

Pablo de la Torre, coordinator of the transportation sector for CONAM, Ecuador's national privatization agency, called the lawsuit a "misunderstanding," and said in an interview that "we expect to solve this in the next few months" and that "we're not violating workers' rights."

In any event, before the government can get on with its $12 million port expansion program, it must complete the labor indemnization of 500 remaining unionized port work-ers. At $30,000 each, this comes to $15 million; it is now seeking financing to do just that.

Meanwhile, said Marinetto, "we eliminated all the security people that were here. Theft has declined by around 80% in the last two years."

Upon completion of the expansion, the port will be offered as a concession for an as-yet undetermined period of time. This is widely expected to increase Ecuador's export potential while reducing port taxes and lowering transportation costs.

"The port of Guayaquil was built 30 years ago, and now its infrastructure and services have begun to run down," comments the U.S. Embassy in Quito, adding that incoming vessels often must wait two or three days to unload cargo. "In addition, traffic has increased as a result of Ecuador's growing foreign trade. This is why it is imperative that the port be expanded."

According to port statistics, the occupancy ratio of each berth throughout the 1980s hovered around 60%. That increased to 86% in 1991, dropping slightly to 83% in 1992 and 72% in 1993.

The expansion will be conducted in two stages. The first stage mainly involves the construction of a pier measuring 185 meters in length and 30 meters in width, and able to accommodate a 40-ton crane. This first stage also entails dredging to a depth of 10.5 meters at the base of the pier, and the paving of a 300-square-meter area at the pier's entrance.

The second stage will require the construction of a 3,000-square-meter warehouse to be used for the storage of fruit, especially bananas. This new warehouse will reduce ships' waiting time at the port, while protecting fruit against damage and saving inland transportation costs.

A feasibility study now in progress should be completed in the next three months. Among the equipment likely to be imported by the winning bidder are one 40-ton gantry crane, 10 to 15 forklifts of 3-5 tons each, a 150-meter-long portable conveyor belt, refrigeration facilities for the warehouse, dredging services and structural engineering. "Due to high demand for the port's facilities," says the U.S. Embassy, "the revenue stream for this project is expected to be relatively high."

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