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CSX touts potential of Dominican transshipment post
Journal of Commerce / September 22, 2000

By Larry Luxner

The Dominican Republic, whose economy continues to be one of the fastest-growing in Latin America, could soon get a world-class transshipment terminal to cope with increasing congestion at existing facilities.

The proposed Zona Franca Multimodal Caucedo, located two miles from Santo Domingo's Las Americas International Airport, represents a $200 million investment. Construction should begin early next year, with the port in operation by the end of 2002.

CSX World Terminals, based in Charlotte, N.C., has a 50% interest in the 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 principal 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.

"It is envisioned that Caucedo will become the primary facility for container shipping to and from the Dominican Republic, meeting the growing needs of the local garment, tourism, agricutlure and industrial products container markets," said Robert Grassi, president and chief executive of CSX World Terminals, in a recent statement. "The country's central location in the Caribbean region also will allow Caucedo to develop quickly into a strategic shipping hub for markets in the Caribbean, as well as Central and South America."

The port will primarily handle container freight cargo coming from North America and Europe to Latin America, and vice-versa. As such, it'll compete for traffic with Freeport, Bahamas; Kingston, Jamaica; Panama's Colon Free Zone and a proposed $1 billion transshipment terminal in Guayanilla, Puerto Rico.

In a telephone interview from Santo Domingo, Conde said the Caucedo terminal "is an ideal linkage" between the U.S. and Canadian east coasts and the east coast of South America.

"There is evidently a need for a regional hub in the central Caribbean, and Caucedo is ideally located," said Conde, adding that "we might service the west coast of South America as well, if the volume is there."

CSX says the new terminal facility is a greenfield site within a larger free trade zone. The area has about one kilometer (0.7 mile) of seafront, and the berth will be dredged up to 15 meters (49 feet) to handle larger post-panamax vessels. The container terminal will have 50 hectares (123 acres) of container yard, and will be equipped with new gantry cranes and related support equipment.

As the liner industry continues to focus on slashing unit costs by improving operator efficiency and optimizing vessel networks, says CSX, the Caucedo terminal will offer "distinct opportunities for carriers to achieve substantial economic benefits," such as deepwater access, which enables carriers to deploy larger vessels.

Tavares, who wouldn't say how much his stake in the project is worth, told JoC Week the Dominican Republic "has a very cost-effective and productive workforce" that would compete strongly with more established Caribbean transshipment hubs.

Tavares, founding president of the Dominican Free Zones Association, established the Itabo Industrial Park outside Santo Domingo in the 1980s. The zone today is home to 18 factories employing over 10,000 people, mostly women, in the assembly of electronics, health-care products and apparel.

"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," he said. "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."

Long touted as a success story by U.S. manufacturers, the Dominican Republic -- with nearly 8 million inhabitants -- will see its economy grow by 6.5% this year, following spectacular growth of 8.3% in 1999 and 7.3% in 1998.

During his first trip to Washington, President Hipolito Mejia, sworn in Aug. 16, told bankers and executives that he'll establish "an attractive investment climate," adding that the Dominican Republic should become a "regional gateway" for U.S. investment.

Under Mejia's predecessor, Leonel Fernández, employment in the country's free zones grew from 160,000 in 1996 to 200,000 at present. In 1996 there were 34 industrial parks, while today there are 46 -- a 33% growth. Exports are up 39% in the four years, rising from $3.11 billion to $4.33 billion in 1999.

Forecasts call for a 25% jump in free-zone employment as the Dominican Republic begins to enjoy the benefit of the Caribbean Basin Trade Partnership Act (CBTPA). An estimated 250,000 people could be working in Dominican free zones by December 2001.

The new U.S. law, which takes effect Oct. 1, cuts tariffs on a wide range of imports -- largely textiles and apparel -- from 25 Caribbean and Central American nations. The law is intended to restore an advantage to CBI countries that suffered because of more generous benefits enjoyed by Mexico under NAFTA.

"We're going to see a surge in production and exports into the United States, particularly in places like Honduras, Dominican Republic, El Salvador and Guatemala," said Dr. David E. Lewis, senior associate at Manchester Trade Ltd. in Washington, adding that "42 new companies set up in the Dominican Republic in the first six months of this year."

Yet port development hasn't kept pace with economic expansion.

At the Port of Rio Haina, which handles 70% of the Dominican Republic's commercial shipping activity, truckers wait in line for hours to transfer their loads full of apparel, textiles and electronic components to containerships in the harbor. Importers waiting to discharge cargoes of canned foods, stereo systems, tires and electrical appliances face similar delays.

Observers say the congestion at Rio Haina is only getting worse -- a situation due in large part to the Dominican Republic's success as a low-wage manufacturing site for U.S. multinationals.

"Every point of GDP growth translates into three points of foreign commerce growth," says Rannik. "As a result, the country has seen 18% to 21% annual growth in shipping activity since 1995. The impact of all this is that cargo volumes have overwhelmed the existing ports. It's a horrendous, congested mess."

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