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San Juan pursuing bigger cargo role
Journal of Commerce / July 21, 1997

By Larry Luxner

SAN JUAN, Puerto Rico -- As this Caribbean island prepares to mark the 100th anniversary of the arrival of U.S. troops during the 1898 Spanish-American War, the Puerto Rico Ports Authority has some big plans of its own.

An ambitious master plan commissioned by the authority and drawn up by VZM/TranSystems Corp. of Oakland, Calif., foresees the Port of San Juan becoming a major U.S. transshipment center in addition to its current role as the Caribbean's leading cargo and cruise-ship port.

Implementation of the plan is part of a strategy by Puerto Rico's pro-statehood governor, Pedro Rossello, that includes a $1.2 billion waterfront redevelopment project known as "El Triangulo Dorado" (the Golden Triangle), the shifting of maritime activities from Isla Grande to Puerto Nuevo (see map) and the construction of a proposed San Juan Convention Center boasting 300,000 square feet of exhibit and meeting space.

"Puerto Rico has emerged as the passenger and cargo bridge linking Latin America, the Caribbean and the mainland United States," says Ports Authority Executive Director Herman Sulsona. "With this ambitious capital improvement program, we will have the infrastructure we need to play our role well."

Sulsona, 56, has been in charge of the Ports Authority and its 1,600 employees since May 1994. Since then, he says, the agency has gone from "dire financial straits" to economic health, with $140 million in fiscal 1997 revenues.

"In three years, we've done a pretty good turnaround," he told The Journal of Commerce during a lengthy interview at his Isla Grande office. "Puerto Rico's economy is growing, and the forecast indicates that we have to be prepared. This is a dynamic master plan that give us a road map to follow into the 21st century. The plan calls for $600 million in infrastructure investment between now and 2015, with the biggest chunk of that money for cargo and transshipment. The beauty of this plan is you can use berthing facilities either way as the need arises."

At the moment, the port's 482 acres of facilities include containerized/ro-ro cargo (326 acres); breakbulk cargo (51 acres); automobile terminals (32 acres); liquid bulk terminals (13 acres); dry bulk terminals (19 acres) and passenger/cruise facilities (41 acres).

"When the original master plan was done, we were competing to get the 2004 Olympics, and some land was going to be used as an Olympics Village," Sulsona explained. "Now that we know we're not getting the Olympics, we're asking the governor to issue an executive order that would revert the 160 acres to the Ports Authority."

The original plan also included an artificial island in the middle of San Juan Bay, an idea Sulsona says "has since been discarded for environmental reasons."

In fiscal 1996, the Port of San Juan handled 6,868 vessels and 64.9 million tons of cargo -- or 79% of all traffic in Puerto Rico (smaller ports include Guayanilla, Yabucoa, Guayama, Ponce and Mayaguez). That volume was up 7.6% from the 60.3 million tons of cargo that came through San Juan in fiscal 1995.

According to industry sources, Crowley American Transport Inc. has a 34% share of the all-important U.S.-Puerto Rico trade, followed by recently privatized Navieras NPR, with 29%; Sea-Land Service Corp., with 25%, and smaller companies such as Sea-Barge and Trailer Bridge with the remaining 12%.

"Obviously, this master plan is going to make a difference," says Jose Amadeo, Crowley's vice-president for Puerto Rico and the Caribbean. "Right now, we are in two locations, which is ridiculous. The plan calls for allowing us enough land to centralize all our operations in Isla Grande. This in turn will give them an opporutnity to help other carriers operating under the same conditions to consolidate their operations. As we phase out our satellite terminal, we'll have no reason to be there."

Sulsona, who has also served as Puerto Rico's secretary of education, says the island is already a well-established cruise-ship destination, with 26 vessels calling San Juan their home port and 25 more making San Juan their favorite port of call.

During fiscal 1996, San Juan received 1,015,589 cruise-ship passengers and 725 ship visits, a 6.3% jump compared to the previous year.

Yet when Puerto Rico's cruise-ship piers were planned, "they did not foresee third and fourth-generation cruise ships, with 2,300 passengers apiece," he said, adding that "cargo facilities were not adequately maintained during the previous administration" of Gov. Rafael Hernandez Colon of the opposition Popular Democratic Party, which advocates retaining Puerto Rico's Commonwealth status.

Later this month, the Ports Authority will begin accepting RFPs for the design, development, construction, administration and financing of two brand-new cruise-ship terminals, 8 and 9; the deadline for submitting bids is Sept. 26. This year alone, 13 ships will be visiting the island for the first time, including the world's largest cruise ship, the 3,400-passenger Carnival Destiny, which is due to dock here on Nov. 24.

"Without leaving aside the cruise-ship facilities, we are focusing on cargo by building two new berths, N and O, in Puerto Nuevo, which were not there before," said the politician. "We've just negotiated with Intership to build N and O for about $25 million. These will be the first new cargo terminals at Puerto Nuevo in many years."

Sulsona says the project, which will increase cargo capacity by 12%, will be finished before year's end; dredging has already begun.

"This should have been done a long time ago, starting with the renovation of Puerto Nuevo," he said, adding that "because of their volume, Crowley Maritime Transport also has a facility at Puerto Nuevo. Crowley will consolidate facilities at a 16-acre site in Isla Grande by March or April 1998. In so doing, we'll be able to accommodate Sea-Land's requirements in Puerto Nuevo."

Sulsona says the Clinton administration's recent decision to phase out Section 936 -- under which U.S. manufacturers from PC makers to drug companies received tax breaks in return for locating factories in Puerto Rico -- won't have much of an effect on cargo volumes being moved between Puerto Rico and the U.S. mainland. The island still has 3.7 million inhabitants, and most of its processed food, clothing and raw materials still come from the mainland.

In addition to serving the crucial U.S.-Puerto Rico trade, Sulsona says he'd like to see San Juan become a transshipment center for cargo moving between North and South America. The island already has a geographic advantage for certain transshipment routes, while its proximity to the east coasts of the U.S. and South America are key factors.

At the moment, transshipment accounts for only 4% to 5% of San Juan's cargo traffic.

"Our biggest competitors are Rio Haina (Dominican Republic), Kingston (Jamaica) and the Bahamas, all of which are very aggressively seeking transshipment cargo," says Sulsona. "We feel we have a much better infrastructure than any of the above, not only as it relates to shipping but also better telephone, electricity and water service. We are under the U.S. flag, so in terms of security, we feel we have the edge. Where we are behind is in actual new space, which we are working on now. On the other hand, we're a much busier port. So we'll be increasing movement of cargo through San Juan in order to capture a greater percentage of that market."

Adds Amadeo: "We've told the Ports Authority over and over again that the transshipment business that was here on the island has been moving away because there are no facilities, and because of our inability to get our act together. The potential is there to lose more if we don't move faster."

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