Most Important NAFTA Imports from MERCOSUR, 2001 By volume By value Iron and precious metals Steel and iron goods Petroleum products Non-auto motor vehicles Steel and iron goods Fruits and vegetables Ore and fertilizer Leather goods Fruits and vegetables Autos and motorcycles Chemical products Non iron metals Wood pulp Energy machinery
Both The Bahamas and Panama were selected because of their strategic position in Latin American logistics
Important Points of Departure 1. Major population is concentrated in a few countries Other 21.5% Brazil 32.8% Venezuela 4.6% Chile 2.9% 8.6 Peru 5.0% Argentina 7.1% Mexico 19% Colombia 8.1% Source: http://oas.org
Much of this population is located along the coast and is found mainly in port cities
2. The location and Darien Gap geographic features (such as the Andes Mountains and the Darien Gap) create significant transport challenges Coast-to-coast rail lines
3. And thus the strong dependence on maritime transport for trade (except for Mexico and Paraguay) 100% Other 90% Rail 80% Road Percent Exports 70% 60% Air By Mode, By 50% Maritime Value 40% 30% 20% 10% 0% Colombia Uruguay Argentina Chile Bolivia Brazil Paraguay Mexico Peru
4. The Gross Domestic Product (GDP) of Latin America is dominated by a few countries Brazil Mexico Argentina Venezuela Colombia Chile Peru Uruguay 0 200 400 600 800
Argentina The highest GDP per capita is 8000 Uruguay o concentrated in the c i Venezuela 7000 x e M Southern Cone GDP/capita, 2000 $ 6000 Chile Panama 5000 countries of l i z a r 4000 B Argentina, Uruguay Colombia Peru 3000 and Chile as well as 2000 Mexico and 1000 Venezuela 0
5. North America is not the only important trading block for South America South American Import Origins, 1994-1998 (millions $) OCEANIA AFRICA ASIA SOUTH AMERICA 1% 2% 16% 24% EUROPE 26% 27% 1% 3% NORTH AMERICA REST OF AMERICA CENTRAL AMERICA
6. Different institutional arrangements can be used to foster trade, e.g., • Tariff Preference • Customs Union • Free Trade Agreement • Common Market
7. Many different trade groups have been created to “liberalize” trade, e.g., • NAFTA • MERCOSUR • AC (Andean Community) • CARICOM (Caribbean Common Market) • ALADI (Latin American Integration Association)
These trade groups and individual countries continue to create new trade alliances and agreements The “Spaghetti Bowl” Source: Inter-American Development Bank, “The Spaghetti Bowl of Trade Liberalization,” Latin American Economic Policies , Third Quarter, 2002
8. Perhaps most importantly, as a point of departure….. The transportation challenges of Latin American trade MUST be placed within a much broader international economic and competitive market context
Thus, for example, the following issues become important in understanding future transportation and trade flows…. --Strength of national economies --Logistics supply chains and areas of productivity improvements --International economic competition in relation to relative market advantages --National strategies, if they exist, on providing the incentives to the private market to trade
World Class Logistics Platform World Class Logistics Platform Imperceptible & Flexible Imperceptible & Flexible “Turn Key” “Turn Key” Supply Chain Supply Chain Communications Communications Delivery Network Delivery Network Infrastructure Infrastructure Cargo Consolidation Cargo Consolidation Commercial support Commercial support to streamline the supply chain to streamline the supply chain with an “Expert Base” with an “Expert Base” “Real Time”control and “Real Time”control and visibility of assets visibility of assets
Two Pre-Departure Meetings in New Orleans and Miami In New Orleans, we heard about the…. --Historic importance of the Latin America market to the U.S. --Brazil is a dominant player in Latin America, but is facing economic and political uncertainties; other countries have had weak economic performance over the past decade as well --Southeastern U.S. ports are expecting increasing trade volumes from Latin America
--Brazilian agricultural products (e.g., soy) will have a bigger impact on the competitive global market in the future, especially with investments on river feeder-to-port/distribution systems that serve Brazil’s agricultural interior --Security with respect to ship/cargo movements is an important issue for homeland defense
In Miami, we heard about…. --Importance of Latin American (especially Caribbean) market to Florida ports (e.g., 65% of cargo through Port of Miami) -- Port access is a key constraint to growth in many Florida ports --Florida has created an innovative state Finance Commission to provide funds for port improvements -- Participants want a national trade strategy that links economic policies with transportation investment
What did we observe on the scan?
Observation 1: The economic downturn in the global economy has created economic and infrastructure challenges in Latin American countries
Observation 2: Some countries more than others view trade from an “outward” or global perspective while others focus more regionally For example, Chile, Uruguay, Panama and Mexico have much more of a “trade” focus, partly explained by location, trade heritage, and governmental policies
Observation 3: Ports are the major centers of international trade for Latin American countries
And most ports have ambitions to be a hub of international trade
Main Trade Routes EUR- NWC US-Atl EUR- Med US-WC US-Gulf Far-East Asia-Pacific SE-Asia AUS-NZ MercoSur Total Foreign Trade volume SAN ANTONIO SHARE to/from economic influence area 54% 15,800,000 m/tons Courtesy of the Port of San Antonio, Chile
PORT OF SANTOS PORT OF SANTOS Maritime Routes Maritime Routes Mexican Gulf Mexican Gulf East American and East American and Canadian Coast Canadian Coast Oceania Oceania South Africa, Middle South Africa, Middle East and Japan East and Japan North Europe Port of Santos North Europe Port of Santos Port of Santos Mediterranean Mediterranean East and West African East and West African Coast Coast American West Coast American West Coast Courtesy of the Port of Santos, Brazil
Important to understand…. --Different economic impacts of transshipment ports versus import/export ports --Role of ports in context of E-W major trade flows and N-S feeder services --Ports provide not only a physical movement capability, but in today’s global economy, often offer a logistics support platform
Observation 4: Port access is a problem everywhere… Difficult terrain can lead to…. and thus delay
And there are significant levels of congestion. Especially when accessing ports in crowded city centers where many ports are located
What have been some of the strategies adopted to provide improved port access?
• 24-hour operations • Examining truck-only roads • Trying to shift loads to rail and to a lesser extent barge • And use of private concessions to provide needed investment capital for improvements….
Observation 5: Economic difficulties in the 1990s and today have led to privatizing the provision and maintenance of transportation infrastructure…for highways, railroads, ports, and airports. New toll road extension accessing the Port of Santos, Brazil
Some examples…. --New toll road concessions --Concessions for maintenance and upkeep of existing rail and road facilities --Port terminal concessions --Free trade zone leasing --Airport concession
HOWEVER….. In the absence of governmental involvement in the provision of transportation infrastructure, and especially in times of economic stress, the necessary provision and maintenance of transportation facilities suffers
Observation 6: In the countries visited, national government policy has been to allow private investors to effectively determine port performance through concessions of terminal operations… …which, in most cases, involves major international logistics/freight corporations
Terminal operators most often work with favorable and flexible labor conditions, market their own terminal operations, provide investments in distribution/collection systems and have abilities to invest quickly in needed infrastructure Thus…..
Observation 7: Private terminal operators, most often representing major global businesses, have been able to enter a market and make an impact very quickly --Hutchinson Terminal, Freeport, Bahamas --Katoen Natie Terminal, Montevideo, Uruguay --Port of San Antonio, Chile --Manzanillo Terminal, Panama
Observation 8: Private terminal operators have been the major initiators of the application of advanced information technologies in port operations However, in most cases, the application of intelligent transportation system (ITS) technologies lags behind that found in NAFTA countries
Reception & & Loading Loading Process Process: : Reception Courtesy of Reception Process From Customer CAL Output to Customer: Pre Gate Gate In Yard EIR LOCATION GATE IN Received cargo Booking status (STTIF Format) NAVIS-Powerstow RECEPTION Gate-In movements CODECO Format - EDI Loading Projections SEQUENCE LOADING NAVIS (Powerstow) Loadings movements COARRI Format - EDI Loading Process Yard Apron
Observation 9: National strategic transportation policies that linked transportation investment to economic or trade policies were not apparent… --In some cases, no dedicated national transportation funds --No multimodal integration in decision making --Lack of data on basic traffic flows and volumes --Trend toward semi-autonomous decisions at strategic facility level
Observation 10: To the extent that some “systems” level perspective is provided in planning and decision making, it takes the form of corridor planning aimed at strategic gateways --Market or commodity orientation --Determining feasibility of concessions --Focus on historical movements
The Santiago Belo- Horizonte Corridor •100 million inhabitants •US $800 billion GNP • Belo Horizonte •US$ 8.000 per Río de Janeiro • Sao Paulo Córdoba capita income • Curitiba Santiago • • Porto Alegre • Mendoza Montevideo Buenos Aires MERCOSUR Santiago de Chile-Belo Rosario COUNTRIES Horizonte Corridor Courtesy of Katoen Natie
Observation 11: Use of rivers for feeder services to hub ports is developing
Observation 12: Security for freight movement is a concern to national officials, port and terminal operators… especially with respect to additional anticipated costs (and perceived competitiveness) --No changes in security procedures since 9/11 --Everyone awaiting new requirements --Some expectations that private terminal operators will bear the costs --Some looking at being a “security gateway” to the U.S. as a niche market
Observation 13: MERCOSUR is currently facing significant problems in developing a trade market --Border crossing issues --Political uncertainty with respect to Brazil/Arg. --Economic uncertainties --Primarily oriented toward internal protection of products versus fostering open global trade --Future with respect to hemispheric trade influence is unclear
Observation 14: Brazil, Uruguay, Chile and Panama seem to view NAFTA from a strategic perspective Brazil because of size of market and the others because of location (good and poor) and economic survival strategy
Observation 15: In many cases, critical trade-related transportation facilities are extremely congested and vulnerable to disruption
Observation 16: The Panama Canal is by far the most strategic facility for NAFTA in Latin America
--13 to 14% of U.S. sea-borne trade passes through Canal --Approximately 9,000 ships going through Canal annually are going to or coming from U.S. ports (about 2/3’s of Canal movements) --Agricultural products from Brazil to Asia in larger ships could have significant impact on trade competitiveness
Observation 17: Because of it being at such a crossroads, Panama is rapidly becoming a major logistics service supplier and transshipment point --New container terminal expansions --Customer oriented logistics services --Government support of private initiatives --Free trade zones --Confluence of five major fiber optic cables
As a crossroads, Panama, and the freight being handled through the Canal and in container terminals, also becomes an important concern for homeland security and the security of freight movement
Observation 18: The Europeans and Chinese are investing heavily in Latin America --Port terminals --Urban infrastructure --Commercial businesses in free trade zones --Concessions for roads U.S. has also invested heavily in business, but not in infrastructure
Observation 19: Mexico is investing in port facilities and transport corridors to develop integrated, intermodal service opportunities that could possibly compete with U.S. services --Port terminals --Highway and rail infrastructure Goal is efficient logistics with security However, border is still a barrier!!
Observation 20: Mexico’s economy is changing; Government is promoting higher value-added manufacturing industries 4000 3500 3000 # of plants 2500 2000 1500 1000 500 0 0 2 4 6 8 0 2 4 6 8 0 2 8 8 8 8 8 9 9 9 9 9 0 0 9 9 9 9 9 9 9 9 9 9 0 0 1 1 1 1 1 1 1 1 1 1 2 2 Some maquiladora plants have moved to Asia
Observation 20: Even though the Latin American scan was focused on freight movement, it was striking to see the number of infrastructure improvements and high expectations associated with passenger cruise ships Which could certainly raise significant security challenges
Some Examples
The Bahamas Freeport
Freeport Hutchinson Terminal • Combined airport/port/tourism/logistics/ development • Port has seen remarkable growth in trans- shipment of containers 1996: 0 TEU’s 2000: 800,000 TEU’s 2003: 1,000,000 TEU’s 2004: 2,500,000 TEU’s
• Strategic positioning in E-W trade flows between Asia and Mediterranean market (and thus major competitors are Kingston/ Jamaica and, in the future, possibly Havana/Cuba) • Can handle larger ships than many U.S. east coast ports • Potential for increasing feeder movements from U.S. ports for E-W movements; and thus becomes part of U.S. logistics system
• Strong emphasis on productivity and efficiency of container handling • Privatization, along with government cooperation and conducive excavation/construction conditions, have allowed rapid expansion of port facilities
Brazil 33% Imports from NAFTA (by value) 27.6% Exports to NAFTA (by value) Sao Paulo Port of Santos
Port of Santos, Brazil
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