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One-Stop Shipping in Montevideo
Américas / March-April 2001

By Larry Luxner

MONTEVIDEO -- Tiny Uruguay, sandwiched in between vastly larger Brazil and Argentina, wants to make a name for itself as the new shipping and logistics platform of the Mercosur trade bloc.

At least that's the goal of hundreds of transportation-industry executives who attended a recent logistics conference in Montevideo, the Uruguayan capital.

"Our opinion is that things will happen in South America the same as they did in Europe," said Santiago Bassols, director-general of the Barcelona-based Instituto de Logistica de Iberoamerica, which sponsored the conference.

"Because of the EU, most companies are changing their distribution strategies in order to provide the best service to the market," said Bassols. "In most cases, European companies are concentrating their activities among three to five distribution centers, changing from a national distribution policy to a European policy. Nike, for example, closed 20 distribution centers and opened one big center in Belgium for all of Europe. Nissan has two distribution centers for spare parts -- one in Amsterdam and one in Barcelona."

Bassols said it all depends on the type of product being transported, with higher-value goods more easily concentrated in a single distribution center.

"Uruguay is located in between the two main South American markets, Brazil and Argentina. It could be similar to Holland, also a small country in between very important markets," he added. "Ricoh has already decided to concentrate some of their product distribution in Uruguay. Xerox is doing the same."

Juan C. Rodriguez, commercial manager at Costa Oriental S.A., Montevideo's largest third-party logistics provider, says he's convinced that Uruguay -- already the administrative headquarters of Mercosur -- should also be the customs union's natural logistics platform as well.

"Uruguay offers multinational companies various advantages, starting with reduction of inventories in each country, so you don't pay duties on the goods until you need them," he said, adding that "Uruguay is a service economy, it has a national port, and the distance to our main markets is very small."

According to Rodriguez, it costs only $150 to move a container through the Port of Montevideo, as opposed to $230 in Buenos Aires and $300 in Santos, Brazil. The 50-hectare Montevideo Free Zone, located just outside the capital, handled $1.7 billion worth of merchandise in 1999, a number expected to rise to $2 billion for 2000. Main destinations for the free zone, which directly employs 1,500 people, are Argentina (40%), followed by Brazil (25%), Uruguay (20%), and Chile (10%).

Uruguay is not without its problems, however. Efforts to privatize and expand Montevideo's container terminal fell apart earlier this year, following the scrapping of a concession agreement by the government of former President Julio Maria Sanguinetti.

Since the November 1999 inauguration of Jorge Batlle as president, the Uruguayan Ministry of Transport, headed by Lucio Caceres, has been talking about forming a joint venture, 20% of whose shares will belong to the National Ports Administration and 80% of which will be auctioned on the Montevideo stock exchange.

"They are avoiding the word privatization, and are instead talking about joint ventures between private interests and the government. I hope they are successful," said Jorge Fernandez, president of Christophersen S.A.

An auction is supposed to take during the first quarter of 2001, according to Ana Rey de Delgado, an economic analyst at ANP headquarters in Montevideo. She says her agency expects $100 million in private investment over a six-year period from a specialized operator on an international level. So far, P&O Nedlloyd has shown interest in the project, along with Belgian, Spanish and Chilean consortia.

"They've been trying for two years to privatize the terminal," said Bassols. "You cannot develop Uruguay as a logistics platform without it. This is a big problem, because the productivity of container handling in Montevideo is lower than it should be. I think the port would be better in the hands of a private company."

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