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Cartagena port privatization: Cutting loose
Journal of Commerce / July 25, 1997

By Larry Luxner

CARTAGENA, Colombia -- During most of its 465-year history, the ancient walled city of Cartagena has survived Spanish conquistadores, hurricanes, pirates, civil war, drug traffickers and disease. One thing it doesn't have to put up with anymore, however, is inefficiency and pilferage at the historic port.

"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."

Last year, Roadway -- one of the nation's largest less-than-containerload motor carriers -- began offering direct export service to Colombia. The single-carrier service compliments Roadway's existing links to South America and includes weekly sailings to Cartagena and Buenaventura, with connections to major Colombian cities and a single invoice showing itemized charges for U.S. inland and ocean portions of the move.

Roadway says Colombia's recent privatization of bonded customs warehouses -- a move expected to cut down on theft, delays and red tape -- was a major factor in its decision to begin offering service there. The entire port operation is now run by Sociedad Portuaria Regional de Cartagena S.A., a private firm.

"It's helped bring down theft and damage of cargo," says Mr. Garcia. "Now the port is being run by private companies who are more responsive to customers' needs than government agencies were in the past."

In late 1995, another company Dole Ocean Liner Express began direct shipping service to Cartagena from the U.S. ports of Wilmington, Del., Fernandina Beach and Port Everglades. Dole -- which ships bananas northbound and thus has ample cargo space for the trip south -- provides fixed day-of-the-week service for full-containerload refrigerated and dry cargo.

Colombia's port system consists of 125 terminals along the Atlantic and Pacific coasts, divided as follows: 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 will pass through Colombia's port system, of which 18 million tons is general cargo, 22 million tons coal and 35 million tons petroleum and byproducts. By the year 2000, the total is projected to hit 85 million tons (consisting of 21 million tons general cargo, 32 million tons coal and 32 million tons oil).

Port officials are now involved in a $3.8 million project to dredge the port's access channel to a depth of 44 feet, with work being done in the Bocachica and Punta de Manzanillo areas, as well as the area immediately before the maritime terminal itself. In addition, protective breakwaters will be constructed near the Forts of San Jose and San Fernando, at the entrance to the port.

In addition to cargo, Cartagena port officials are trying to lure more cruise-ship business to their city. Yet that's been an uphill battle, though more for political reasons than anything else.

In February, the Clinton administration "decertified" Colombia for the second year in a row, saying President Ernesto Samper's efforts against narcotics trafficking didn't meet U.S. standards. The fact that Colombia's homicide rate exceeds 88 per 100,000 (compared to 6 per 100,000 for the United States), doesn't help -- even though Cartagena, the jewel of Colombia's tourist industry, is much safer than Medellin or Cali, which have long been synonymous with the country's drug trade.

"We do have an image problem," acknowledges Roberto Lemattre, director of Cartagena's Pro-Turismo organization. "We're conscious of certain factors that can help us bring visitors to Cartagena. Mainly we're thinking of Latin Americans or people with Latin roots in South Florida. We don't have the resources to target all of the United States. That would take millions and millions of dollars, and we don't have the resources right now."

To get around that, Cartagena has adopted a strategy of distancing itself from Colombia and marketing the ancient city -- famous for its Spanish colonial architecure, nightlife and palm-fringed beaches -- as a Caribbean cruise-ship destination.

As part of those efforts to grab a bigger slice of the Caribbean cruise-ship market, port officials will build a duty-free shopping center as well as a new passenger terminal. Construction on the 40-store shopping center -- designed by Miami-based Bermello Ajamil & Partners -- should begin early this year and finish by late 1998.

The retail center is 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. Cartagena now gets 100,000 passengers a year, 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.

"We're hoping that Cartagena can become a home port," says Luis Canizares of the Cartagena Hotel Association. "Even though cruise-ship passengers spend only six hours here, it's good business for Cartagena just being touched by cruise-ship lines." Adds Jean-Pierre Etcheberrigaray, general manager of the new 250-room Hotel Inter-Continental here: "We don't see too many Americans here. This is going to change when we become a cruise-ship hub."

Cartagena took the lead in another area when its Aeropuerto Internacional Rafael Nunez became Colombia's first to be privatized. In August, Holland's Schiphol Management Services -- which runs Amsterdam's Schiphol International Airport -- won a 15-year concession to operate that airport; since then, the airport in neighboring Barranquilla has also been sold off, despite bitter labor opposition to the plan.

Another ambitious project in the works is the much-talked about "canal seco" or dry canal linking the Caribbean and the Pacific. This spring, the Colombian government opened international bids for a $650,000 pre-feasibility study to build the 180-kilometer-long structure, a pet project of President Samper.

This $3 billion project foresees construction of 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. Both locations have the physical conditions that would favor deep-water ports for large cargo vessels; in fact, the Aguacate Bay port would be Colombia's first container terminal on the Pacific.

Government officials hope the dry canal will lure business away from the 80-year-old Panama Canal. FONADE, the agency overseeing the current bidding, says the feasibility study must be completed within six months of awarding the contract. FONADE will then need another five months to prepare the terms of reference for an international tender to initiate actual design and construction.

The contract is to be evaluated and awarded by March 1998, with construction to be finished no later than 2002.

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