The Journal of Commerce / February 19, 1999
By Larry Luxner
PUERTO CORTES, Honduras -- With its economy in ruins following the devastation left last year by Hurricane Mitch, Honduras has pushed through a series of laws aimed at opening up ports, airports, roads and utilities to foreign investment.
At the same time, Honduran officials are lobbying very hard to get the same U.S. trade benefits Mexico enjoys under NAFTA. If successful, the effort would result in an explosion of maquila factories, more garment exports -- and much more volume out of the country's Caribbean port, Puerto Cortes.
Private-sector executives worry, however, that Puerto Cortes can't handle the volume it already has. A recent visit to the port revealed long lines of ships carrying grain and other hurricane relief supplies waiting to discharge their contents, and only two container cranes in operation.
"It's very inefficient," said Jaime Rosenthal, president of Grupo Continental S.A., a conglomerate of 22 banks, insurance companies, construction firms and free-zone manufacturers based in nearby San Pedro Sula. "We should have at least four or five container cranes at Puerto Cortes."
Adds Crowley Maritime Co. official Rinus Schepen: "Puerto Cortes is definitely congested. There's limited space, and the port authority is encouraging us and other carriers to get the equipment moving. The bad part is that as a result, we believe security at the port is less strict than before the hurricane. We have already had some problems of pilferage."
Mr. Schepen, Crowley's vice-president and general manager for Central America/Mexico services, says his company is a heavy user of Puerto Cortes, where it makes close to 300 port calls a year and has an estimated 18% share of the business.
Since Hurricane Mitch -- which left an estimated 8,000 Hondurans dead and hundreds of thousands more homeless -- Puerto Cortes has been the hub for all incoming shipments of relief supplies, food donations and construction equipment. Northbound, Honduras is shipping mainly finished apparel, melons, vegetables and frozen seafood. In addition, Puerto Cortes is used to ship out similar exports from Nicaragua.
If Honduras and other Central American countries are successful in winning NAFTA parity in Congress -- and they may, given the recent outpouring of sympathy in Washington following Hurricane Mitch -- observers say the volume of finished apparel may double. Last year, Honduran free zones in and around San Pedro Sula employed nearly 96,000 workers, 80% of them women, who turned out $1.6 billion worth of garments for the U.S. market. Most of that production was loaded onto containers and trucked to Puerto Cortes, about a 45-minute drive north along a modern paved road.
But those who support privatization say the port employs far too many workers and hasn't kept up with modern technology.
"The port is not adequate to handle the volumes which are going through it, and Hurricane Mitch only made it worse," said the Crowley executive. "Even before Mitch, there were many instances of congestion, and that means slower handling of equipment in and out of the port. "
Mr. Schepen estimates Puerto Cortes needs "in excess of $150 million" worth of foreign investment to bring it up to the level of similar ports in Panama and Costa Rica.
To that end, the Honduran government in December passed sweeping legislation that allows private companies to build and run public infrastructure projects such as ports, airports and highways. Since then, the government has apparently had negotiations with Seattle-based Stevedoring Services of America to build a bulk handling terminal at Puerto Cortes, though no details are available as yet. Plans are also afoot to build an additional four cranes and 600 meters of berthing facilities at Puerto Cortes by 2002.
Mr. Rosenthal, who's also a politician with his eye on the presidency, thinks that's an excellent idea.
"We don't have a bulk handling terminal like other countries, so we can't unload coal, grain or other commodities efficiently," said the 62-year-old Liberal Party candidate.
Other incentives passed by Congress include a renewable energy law, which gives certain tax breaks and incentives for non-thermal energy generation, including several projects proposed by U.S. companies; a new mining law, and the repeal of Article 107 of the Constitution, which had for years forbidden foreign ownership of land along shorelines and international borders.