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Caribbean ports vie for Latin transshipment business
Development Business / August 16, 1998

By Larry Luxner

FREEPORT, Bahamas -- Since its inauguration in July 1997, business has been so good at Freeport Container Port Ltd. (FCP) in the Bahamas that the port's owners now want to double the size of their operation.

Phase I of the project -- which boasts 1,800 feet of berth, four gantry ship-to-shore cranes and 10 straddle carriers -- represented an investment of $78.3 million. Phase II, to cost another $71.3 million, envisions the addition of 1,200 feet of quay, another 12 straddle carriers and another three cranes.

"We started operations last April, and very quickly reached near-capacity with our 1,800 feet of berthing space for super post-Panamax ships," says S. Gregory Rodgers, operations controller at FCP. The company is a 50-50 venture between Hutchison Port Holdings (HPH) Group and the Grand Bahama Development Co.

With transshipment, large ocean vessels bring containers to a centrally located port, where they're loaded onto smaller feeder vessels serving smaller ports -- taking advantage of economies of scale and saving money for both shipper and ocean carrier.

"Our overall objective is to provide a hub port for the Caribbean," Rodgers told Development Business. "Geography is everything. We're ideally situated on the main routes between Europe, the Gulf of Mexico, Panama and the east coasts of North and South America, as well as the Caribbean. So any service running between these places could call here and feed other cargo to other parts of the world. Companies can scale their operations to meet their needs. Because they can give a better service, they actually generate more cargo."

The straddle carriers zipping around the impeccably clean Freeport terminal are made by Sisu, a Finnish manufacturer, and cost $750,000 each. The bright blue cranes, made by Italy's OMG, are worth $5 million apiece. Among those bidding to supply the three additional cranes are Great Britain's Morris, China's ZPNC and Korea's Hyundai.

"Our cranes are designed to handle the largest ships, though they don't call here at the moment yet," said Rodgers, adding that by the time Phase II is completed in September 1999, more than $150 million will have been spent on the project. According to an internal company magazine, annual throughput at Freeport is expected to jump from the present 560,000 twenty-foot equivalent units to around 930,000 TEUs.

In positioning itself as a transshipment hub, Freeport is clearly taking the lead over rival San Juan, Puerto Rico, which also wants to become a transshipment center for cargo moving between North and South America. Likewise, Uruguay is promoting a similar role for its capital, Montevideo, within the four-nation Mercosur region (see box).

Herman Sulsona, executive director of the Puerto Rico Ports Authority, says his island's biggest competitors are Río Haina, Dominican Republic; Kingston, Jamaica, and the Bahamas, "all of which are very aggressively seeking transshipment cargo."

"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," Sulsona said in a recent interview. "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 José Amadeo of Crowley Maritime Co., a major player in the Caribbean island's shipping trade: "We've told the Puerto Rico 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."

Yet San Juan has a long way to go before it can compare itself to Freeport. At the moment, transshipment accounts for only 4% to 5% of San Juan's cargo traffic -- compared to 99.9% for Freeport.

Part of the latter's attraction for multinationals is Freeport's abundance of land, tax incentives, lower labor costs, English-speaking workers and its proximity to major Florida ports including Port Canaveral, Palm Beach, Port Everglades and Miami.

Asked what advantages Freeport has over Miami as a transshipment center, Rodgers doesn't hesitate. "No interference from statutory and regulatory bodies such as Customs, and no paperwork," he says. "And our labor costs are much cheaper, about 50% less than in Miami."

FCP already employs 105 people directly. When completed, the expanded container terminal will create 150 full-time positions, and almost 1,000 indirect jobs in warehousing and storage, component assembly, transportation, distribution and security services. Other developments within the Freeport Harbor area under consideration include ship and yacht repair facilities and a $10.6 million upgrading of Freeport's cruise-ship facilities, which welcome over 600,000 cruise passengers a year.

HPH also has interests in Panama, where in August 1996 it won the concession to run Panama's two largest ports, Balboa and Cristobal. HPH -- the world's largest independent port operators with interests in Asia, Europe and the Americas -- is paying Panama $22.2 million a year for the concessions and has pledged $170 million for operations and port improvements.

Within walking distance of HPH's Cristobal port on Panama's Caribbean coast is Colón's recently inaugurated Manzanillo International Terminal, right at the entrance to the Panama Canal. Inaugurated in April 1995, the project is a 50-50 partnership between Panama-based Motores Internacionales S.A. and the local affiliate of Seattle-based Stevedoring Services of America. The joint venture has poured $210 million into what was originally envisioned as a $10 million project.

"Our goal is that over the next five years, Panama will become the No. 1 transshipment container port in Latin America," says Nicolas Ardito-Barletta, executive director of Panama's Autoridad Regional Interoceanica (ARI). "Large ships are moving to big ports, dropping their cargo there for other ships to pick up and distribute. But there's no place like us in Latin America. Other countries are trying to do it, but they're not moving as fast as Panama, and they don't have the right conditions."

John Bressi, MIT's port director, says 90% of Manzanillo's business is containers, with the remaining 10% consisting of Ro-Ro and breakbulk cargo. He declined to release sales or earnings information, though he did say MIT is comparable with the Port of Miami. MIT's top three countries in terms of sources of revenue are Brazil, Colombia and Venezuela, in that order.

Likewise, Rodgers -- at the Freeport Container Terminal in the Bahamas -- declined to give out information on projected sales and profits, saying only that "we don't work with standard tariffs, but with individual shipping lines." FCP's biggest customer at the moment is Mediterranean Shipping Co., though other important clients include Sea-Land, Maersk, Tropical Shipping, CMA, TNX and Cagema.

Another Caribbean island nation, Jamaica, is also benefitting from increased trade throughout the Americas. The port of Kingston -- in the final stages of a $103 million expansion -- will install two cranes at the new South Terminal in August, bringing the facility's complement to 10. This adds 4,000 feet of berthing space to a depth alongside of 48 feet, taking total berthing to 25,000 feet. Israel's Zim Lines is the port's major client, accounting for 42% of Kingston's transshipment business. New Caribbean Services, a consortium that includes Hapag-Lloyd, accounts for another 22%.

Meanwhile, Costa Rica is getting into the transshipment act. Investors are now being sought for the development of a $300 million port complex near Limón, on the country's Caribbean coast. A separate railroad would link the new port with Costa Rica's northwest coast, aiming to offer a route to the Pacific for cargo on vessels too big to pass through the Panama Canal.

"Containers would be brought in and then shipped back out, some going south and some going north," said Richard Halford, finance director of OSI Proyectos, a Costa Rican firm created specifically for this project by Kansas City-based Owl Securities and Investments. The project would be built on 50 square miles of barren land that the government has declared a free-trade zone. The development would face competition from Panama's Manzanillo. But Halford says the Limón complex will win on "state-of-the-art equipment and capacity."

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