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Caribbean: Rivalry for transshipment business
Business Latin America / October 23, 2000

By Larry Luxner

Huge new megaports planned in Puerto Rico and the Dominican Republic threaten to shake up the Caribbean transshipment industry, traditionally dominated by Kingston, Jamaica, and more recently by Freeport in the Bahamas.

In July, Puerto Rico Gov. Pedro Rossello selected the southern coastal town of Guayanilla as the site of a $1 billion transshipment port. According to the Government Development Bank (GDB), the Commonwealth will finance $360 million, or 35%, of the project's total cost. The remaining 65% would be financed by private investors to cover the cost of engineering services and infrastructure. Interest has already been expressed by an investment group led by the Port of Rotterdam and including Dutch shipping companies, engineering firms, construction companies and two banks.

Proponents hope that at least half of all merchandise transported out of Guayanilla will acquire added value at local manufacturing facilities before it is shipped abroad, further encouraging the establishment of free-zone garment, electronics, medical-devices and other kinds of factories.

"What we aim to do is capture the volume that is now going through Long Beach and other mega-transhipment ports," said Xavier Romeu, Puerto Rico's secretary of economic development and commerce. "The way we'll do it is have components coming from the Far East go through the Panama Canal directly to Puerto Rico, where value will be added for reshipping back to Europe and other destinations. The present market will always be the U.S. mainland, but our future market is Europe, and we need to capture that market."

But David R. Segarra, president of San Juan-based Intership Inc., isn't convinced there's enough business to justify the $1 billion investment.

"One of the most important things is being able to get the rates that'll make the transshipment port competitive," said Segarra, whose company represents half a dozen shipping lines. "Number one, I don't know if that's reachable, and number two, I don't know if the authorities here have the capability to handle such a massive project. It can be done but you need a lot of hard work, and a lot of knowledgeable people to pull it off."

Meanwhile, the nearby Dominican Republic, whose economy continues to be one of the fastest-growing in Latin America, plans its own world-class transshipment terminal just two miles from Santo Domingo's Las Americas International Airport.

Construction should begin early next year on the Zona Franca Multimodal Caucedo, with the port in operation by the end of 2002. CSX World Terminals, based in Charlotte, N.C., has a 50% interest in the $200 million venture and will be responsible for the development, marketing and management of ongoing port operations. The other 50% stake is held by Caucedo Development Corp. (CDC), which is composed of three partners: shipping industry veteran Jaak Rannik of Agencias Navieras B&R, industrial developer Samuel Conde, and Manuel Enrique Tavares, chairman of the Itabo Industrial Park and founding president of the Dominican Free Zones Association.

"By having a major transshipment point in the Dominican Republic, free zones as well as the rest of the economy will benefit from being able to ship directly, as opposed to having to go through some other transshipment point," said Tavares. "If, for example, a shipment has to go from here to Costa Rica, and there's a direct service, it won't have to go through Miami or San Juan or Kingston."

Nevertheless, the two new Caribbean ports don't seem to worry officials in the Bahamas, where in less than three years of operation, Freeport Container Port Ltd. has become one of the region's leading transshipment hubs.

Freeport's current capacity stands at 950,000 twenty-foot equivalents (TEUs) a year, while current volume is about 660,000 TEUs. Two customers, Mediterranean Shipping Co. Ltd. and Maersk-Sealand, alone account for 85% of the port's business.

"We're very fortunate in that we're a dedicated transshipment port, so it's not a port that has grown from handling builk and general cargo," said port manager Gary Lemke. "This means we can build it as we want, without having the restrictions that other ports usually have."

Freeport Container Port is a 50-50 venture between Hutchison Port Holdings Group and the privately owned Grand Bahama Development Co. Lemke wouldn't reveal annual revenue figures, but he did say that at least $160 million has been invested in the project since its inception.

Phase I, completed in early 1997 at a cost of $78 million, provided 1,800 feet of berth, four super post-panamax cranes, 10 straddle carriers and a 10,000 TEU-capacity yard area. Phase II, finished this past January at a cost of $72 million, gave Freeport another 1,200 feet of quay, three more super post-panamax cranes, another 12 straddle carriers and 6,000 additional TEUs of space. "Despite some turmoil in the North Atlantic trade," says Lemke, "the future looks very rosy for us."

The Jamaican government, meanwhile, has embarked on an ambitious expansion program aimed at preserving Kingston's role as the oldest and one of the largest transshipment hubs in the Caribbean.

According to local officials, a $100 million project is now underway to expand the port's capacity from its current 800,000 TEUs to over 1.2 million TEUs.

"We were the first transshipment port in the region, having operated our port for over 20 years now," said Ian Blair, senior vice-president of operations and development at the Port Authority of Jamaica, noting that this is Kingston's second expansion in six years.

Blair said when the current expansion is finished in December 2001, Kingston will have an additional 2,134 feet of berth, four additional super post-panamax cranes and an additional 12 straddle carriers. Approximately $35 million of the total price tag is being financed by the European Investment Bank, while the Bank of China is financing Jamaica's purchase of the cranes, since they will be supplied by China's ZPNC.

Blair said transshipment accounts for 80% of Kingston's container traffic, which is growing by 15% to 20% a year. Kingston's largest customers are Zim Israel Navigation Co. Ltd., with 46% of the port's total volume, followed by the New Caribbean Service consortium, with a 29% share.

He added that he's not terribly worried about competition from nearby Santo Domingo.

"The Dominican Republic is a very small port in relation to us. We handle maybe three times cargo as much as they do," he said, adding that "Kingston has been a traditional transshipment hub, and we have a very good clientele."

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