13 April 17

The case of the “old-fashioned” Latinamerican ports

Sud americaDuring the last 20 years, Latinamerica (LA) has seen an increase in investments in ports, as a consequence of important institutional changes.

These investments have changed the availability and quality of port services, especially in the field of container ports. Furthermore, LA has been subject of greenfield or brownfield initiatives such as Lázaro Cárdenas, El Callao, Moín or Cartagena de Indias.

However, similarly to other regions of the world, many Latinamerican ports remain located in the heart of big cities. These ports are “metropolitan” and, very often affected by huge problems like congestion, pollution, road safety costs and other externalities. Besides, in LA some main ports do not have direct access to the ocean, water access to the port is through canals, which implies constant dredging works and -in particular- strong constraints to bigger vessels.

Above mentioned characteristics in metropolitan ports without direct ocean access are worsened by another characteristic: an old-fashioned port layout.

In 1992, the UNCTAD  clearly defined the function of the ports: 1) traffic planning; 2) storage; 3) procedure related to reception and delivery; 4) operation of the vessel; and 5) operations at the pier. Many ports in LA remain with a layout according to that old definition. Nevertheless, 25 years is a long time for ports… Currently, the reality is totally different, cities are bigger and congested, ports have new functions and technology will give a new shift to ports.

A container port is currently defined in a different way… In effect, the ports try to become a node of the complete logistics chain. This poses new governance challenges for port authorities and for transport in general, as ports are intended to provide more specialized services and to integrate into complex logistical chains within economies.

For this reason, a current trend of seaports is to combine operations in their own facilities alongside the docks with others located inside the served hinterland. This is due to the convergence of various factors: the price of land in the old ports’ surrounding area incremented, there is a need for own distribution operations at strategic points, the life cycle of these ports needs to be extended and extended gateways along the hinterland need to be established, among other reason.

In this sense, the concept of port centric logistics (PCL) becomes crucial. PCL is the integrated offer of areas, sheds and facilities for productive, storage and distribution activities, provided with infrastructure, port, rail and road connectivity whose characteristics, locations, modalities, technology, opportunity and costs, respond to the requirements of the various industrial, commercial and service sectors with the profile, flexibility, sustainability and scalability required. When located outside the port area, they operate in practice as an extension of the port itself.

Therefore, the old ports of Latin America must overcome the challenge of traditional layouts. These reflections are a call that there is a need to improve logistics and territory integration throughout the hinterland. The latter is the economic attraction zone of a port that represents a physical and functional link between logistics, transport and distribution networks. Such integration requires continuous investment in port facilities and their connections. It also presents challenges such as coordination and management of public and private sector stakeholders. In this case it is not considered “growth” but rather “structural transformation”.

A new layout is required in those old-fashioned ports, in order to adapt them to the necessities of customers and the economy, as well as to be located logically and physically near to the markets: their production, consumption and distribution centres.

In many cases around the world, the relocation of ports is a current trend. That trend will strengthen in the future. The relocation of the old ports allows the port life cycle to be regenerated. It occurs when the limits on rationalization, investment or access are reached. Moreover, it appears when too many externalities are generated in the environment, such as congested roads, railways and infrastructure. As well as when the handling of increasing volumes or demand for transport becomes difficult. This leads many ports to the so-called location splitting process, or relocation of port facilities.

Cases from across the world, such as the London Gateway, Rotterdam container terminals or Jebel Ali, are examples of such developments. As the future is uncertain, the industry must be prepared to face different scenarios. In order to withstand the change, development and innovation must be a priority. In line with that, integration is also a factor of success within the scope of innovation

“Old-fashioned” Latinamerican ports require a suitable balance between long-term and short-term planning. During such uncertain periods as the current economic one, each cent that is invested in ports must be carefully thought-about and planned: when we talk about investments on port facilities affecting several decades ahead, each invested cent is really worth much more than one cent. Apart from that, the opportunity cost is sky-high, so there is no room for rushed decisions.

Source: Porteconomics

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