Thursday, April 18, 2024

ON THE LEFT: Regional ports need greater efficiency


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Can regional ports be more efficient?

The importance of seaports to Latin America and the Caribbean economic growth is rooted in the region’s colonial history and natural endowment.

LAC’s economy has long depended more on seaborne international trade for income (from agricultural products and extractive industries exports) and consumer goods (from imports) purchased with the capital accrued from those commodity exports than it has on intra-regional trade over land corridors.

Another determinant of the importance of maritime trade in LAC is the Panama Canal, a key element of the main East-West trade axis of the global economy, transforming the ports in Central America and the Caribbean into natural transshipment hubs, not only between the Northern and Southern hemispheres, but also between Asia, Europe, and both coasts of the United States of America.

Because of the planned expansion of the Panama Canal and the expected traffic increase in associated maritime routes, ports throughout the region have been under stress, preparing for higher demand and larger vessels.

Port expansions in countries such as Brazil, Argentina, and Mexico have been driven by increasing exports and imports propelled by a significant growth in agricultural trade, moved as either bulk or container cargo.

This supply-led growth has taken place alongside a noticeable increase in household consumption and import demand for final, intermediate, and capital goods, propelled by appreciated exchange rates in many countries in the region.

In 2011, LAC merchandise exports and imports reached US$886 billion and US$874 billion, respectively, 81 per cent of which was transported through seaports.

Cargo in LAC is increasingly dispatched as container shipments, a situation that has led to an increasing trend of port terminals specializing in container handling.

At the regional level, container traffic more than doubled in the last decade, from 17 million 20-foot equivalent units (TEUs) in 2000 to 40 million TEUs in 2010, with an average compound annual growth rate of ten per cent.

More than one-third of these container flows can be traced to Brazil (19 per cent) and Panama (16 per cent) combined.

In the case of Brazil, container traffic is driven by the size of its market, while in the case of Panama, transshipment is the leading factor.

Therefore, technically efficient and inefficient ports in terms of containers handling can be found in Latin America and the Caribbean regardless of country or sub region they are located.

The average port efficiency for the ten-year period was 58.6 per cent in Latin America and the Caribbean, higher than the 30 per cent estimate for Africa and in the same range than the 60 per cent efficiency estimate for Europe during relatively similar periods.

The analysis shows an improvement in average technical efficiency over time in LAC: from 52 per cent to 64 per cent between 1999 and 2009.

Assessing technical efficiency can provide guidance for ports seeking to improve asset allocation.

In order to improve technical efficiency, ports should consider that it tends to be associated with port-specific indicators, such as type of ownership, rather than with country-level variables such as corruption or income levels.

However, since different reasons can lead to inefficient allocations, a detailed port-specific efficiency analysis has to consider a careful assessment of operational efficiency, liner connectivity, investment planning, inter alia.

Information taking from a new study entitled Exploring The Drivers Of Port Efficiency In Latin America And The Caribbean. It was authored by Tomas Serebrisky, Javier Morales Sarriera, Ancor Suarez-Aleman, Ancor Suárez-Alemán (Inter-American Development Bank), Gonzalo Araya, Cecilia Briceno-Garmendia, and Jordan Schwartz (World Bank).


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