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Colombian ports: Investors get another chance
Journal of Commerce / July 28, 1998

By Larry Luxner

WASHINGTON -- On Aug. 7, Colombia's newly elected leader, Andres Pastrana, will take the oath of office -- replacing Ernesto Samper as president and marking the end of one of the most unpopular administrations in Colombian history.

The inauguration of Mr. Pastrana will likely spark renewed U.S. investment in many sectors of the Colombian economy, says Michael Skol, chairman of the U.S.-Colombia Business Partnership in Washington.

"There was just no possibility of any decent, normal relationship with Colombia until President Samper had left," said Mr. Skol, a former U.S. ambassador to Venezuela. "This [election] gives both countries the opportunity to get back together again. The U.S. government very definitely wants to do that. We just can't afford another four years of schizophrenic relations with Colombia."

One area likely to see significant investment is Colombia's port system, which consists of 125 terminals along the Atlantic and Pacific coasts, including 11 public-service terminals, two private terminals, 23 standardized public-service wharfs; 23 standardized private wharfs, and 66 terminals or wharfs in the process of being standardized.

In 1997, an estimated 75 million metric tons of cargo passed through Colombia's port system, of which 18 million tons was general cargo, 22 million tons coal and 35 million tons petroleum and byproducts. By the year 2000, the total will hit 85 million tons (consisting of 21 million tons general cargo, 32 million tons coal and 32 million tons oil).

Earlier this year, Parsons Engineering Science Inc. and Colombian regional planning agency Incoplan completed an environmental access impact and feasibility study for three new ports to be constructed along Colombia's west coast.

The $500 million project -- proposed by the Colombian Ministry of Transportation and Corpes de Occidente, a regional development agency -- envisions reconstructing and expanding the port at Buenaventura, and building new ports at Malaga and Tribuga. In addition, a new road is to connect Tribuga with the Colombian interior as well as other locations in the department of Choco.

According to the Parsons-Incoplan study, the three ports should be in full operation by 2020, handling some 25 million tons of cargo a year. Buenaventura's present capacity is 8 million tons.

Once the study is evaluated, the ministry will issue an international tender for the engineering works; foreign construction firms will be invited to participate.

Buenaventura has seen its share of problems lately. In May, Mexico's top shipping line, Transportacion Maritima Mexicana, suspended vessel service between Buenaventura and six North American ports -- Houston, New Orleans, Long Beach, Seattle, San Francisco and Vancouver. The move by TMM and local subsidiary Transportacion Maritima Grancolombiana follows several highly publicized incidents in which narcotics traffickers loaded cocaine into containers filled with coffee.

"While it costs us a lot of money, we decided to suspend this service," a high-level TMM official said. "We have done everything possible" to protect against smuggling. The official added, however, that it's up to Colombian authorities to solve port security problems."

On another issue, Mr. Pastrana has given no indication whether he'll pursue the pet project of his predecessor, Mr. Samper -- the construction of a "canal seco" or dry canal linking the Caribbean and the Pacific. In 1997, the Colombian government opened international bids for a $650,000 pre-feasibility study to build the 180-kilometer-long structure. As envisioned Mr. Samper, the $3 billion project would include a 1.5-meter-gauge railway crossing the Darien and Uraba regions, and two ports -- one in Boca Tarena on the Caribbean coast, the other near Bahia Cupica along Aguacate Bay.

Meanwhile, Ferrovias, Colombia's national railroad entity, has opened an international 30-year tender to connect major cities in western Colombia with the Atlantic line awarded to the Fepaz consortium in February. The Pacific tender is for rehabilitation and maintenance over the next five years of a 499-kilometer track linking Buenaventura, Cali, Cartago, La Felisa, Zarzal and La Tebaida to Medellin. The total cost is estimated at $500 million, including $120 million to be provided by the Colombian government.

In addition to the track itself, the project foresees construction of a freight transfer terminal in La Felisa -- a coffee, fruit and sugar-growing center. This terminal is essential for integrating the Atlantic and Pacific lines, which according to the U.S. Embassy in Bogota aren't connected "due to poor maintenance and inefficient operation."

On the Atlantic side, The Inter-American Investment Corp. has approved an $8 million loan to Sociedad Portuaria Regional de Cartagena S.A. (SPC), which operates the port of Cartagena in one of Colombia's first privatizations of its type ever. The money will fund a modernization program that'll help the port handle containers as well as general cargo, and also allow the docking of second- and third-generation vessels capable of carrying 1,500 to 3,000 containers each.

The IIC, an arm of the Inter-American Development Bank, says this project "will shorten delivery times, lower shipping and handling costs, and reduce cargo losses" while creating 35 jobs.

"Privatization of the ports have definitely helped not only us but everyone in the business, in that we're able to provide faster service," says Hector Garcia Ortiz, general manager of Latin America for Roadway Express. "The ships are unloaded much faster and more efficiently. Therefore, costs have decreased and part of the savings has been passed along to the NVOCCs, and we can offer better rates to our customers."

Separately, SPC will invest up to $50 million to expand Cartagena's cruise-ship complex, by adding an 18,000-square-foot shopping center. Construction of the retail village -- housing 16 to 18 duty-free shops, numerous restaurants and a business center -- will be completed by December 1999.

It's part of a four-part master plan that also includes dredging the port to receive large cruise ships, as well as the development of a home-port cruise-ship terminal. In 1997, Cartagena received over 100,000 cruise-ship passengers, though this is projected to jump to 234,000 by the year 2000 and 548,000 passengers by 2015. All told, says project manager Alfredo Sanchez, the terminal and related works will cost around $40 million.

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