Trends in Maritime Transport and Port Development in the Context of World Trade Carlos M. Gallegos 1.

Structural changes in international trade and the evolution of maritime transport have a direct impact on port growth and expansion. Therefore, these elements and their recent characteristics must be examined, since they provide the frame of reference in which port reform in Latin America and the Caribbean has been carried out. These factors also determine future port development. A. Globalization, production, trade, and ports . !lobali"ation, or the expansion of mar#ets and hence of the economic prospects of societies, is ta#ing place not only because of the supra$national nature of mar#ets, but also because of the flow of foreign investment and the strategies of multinational enterprises. These multinationals today account for two$thirds of global exports of goods and services and nearly 1%& of domestic sales worldwide. '. (n this environment of increasing interdependence in the world, the international division of labor is changing as a result of structural changes in trade and unprecedented mobility of international capital. )owever, while the integration of goods and services and capital is progressing at a rapid pace, integration of the labor mar#et is much slower. (n addition, ever more sophisticated technologies are being disseminated, in a framewor# of spectacular streamlining in communications and telecommunications. The development of information technology has, in turn, boosted productivity and, in many cases, wor#er income. (n general, electronic transactions and communications technology have been the necessary complement to full internali"ation and globali"ation and their ma*or impact on production and world trade. +. (n mid$1,,,, developing countries began to recover from the 1,,-$1,,. financial crisis in Asia, which had a severe impact on countries in Latin America. This recovery was spurred on in particular by growth in domestic demand in the /nited States and other developed countries, low interest rates, and the Asian recovery. As a result, overall growth in gross domestic product 0!123 rose '& 0similar to growth in the developed countries3. Countries are now bac# on the road to growth they embar#ed upon in 1,,' that was interrupted in 1,,.. The global economy is pro*ected to grow '.4& in %%% 0but only '& in the developed countries3. 4. (n 1,,,, Latin America and the Caribbean recorded the worst economic indicators of the decade, due primarily to downturns in the Argentine and 5ra"ilian economies. The region went into a recession 0a drop on average of %.6& in !123. The region7s estimated growth rate for %%% is nearly +&, spurred on particularly

by sustained growth in recent months in 8exico, Central America, and the Caribbean. 6. The global economic recovery in the second half of 1,,, was also reflected in the upturn in world trade. 9orld commodity exports in 1,,, were valued at /S:4.+6 billion $$ up '.4& from the previous year when a negative rate of 1.6& was posted. ;xport volume also grew, however at a similar rate to the previous year7s growth of +.4&< and for the third consecutive year, the average price of commodities fell 0excluding oil3. -. 9orld trade in services rose & in 1,,,, after last year7s sluggishness, with exported services valued at /S:1.' billion, and there was a moderate rise in the international price of those services. .. The regions of the world and the individual countries responded with =uite varied demand and growth in their product in 1,,,. The situation in Latin America and the Caribbean was rather uni=ue. ,. 9ith the 1,,, recession, the volume of Latin American and Caribbean imports fell & on average. )owever, performance in the region varied greatly by country. (mports rose 14& in 8exico, but fell 1 & in the rest of the region. Similarly, the region7s exports grew -& in 1,,,, but in 8exico the figure was almost double 01'.-&3. 9e should recall that almost ,%& of 8exico7s exports 0.4& of which are manufactured goods3 are to the /S mar#et, compared to '%& of exports from the rest of Latin America 0+%& of which are manufactured goods3. 1%. (ntra$regional trade was also affected and fell considerably. The 8;>C?S/> countries experienced a downturn of 4& and the countries in the Andean Community, .&. 11. >egarding the importation of services, the slowdown that began in 1,,. persisted, and in 1,,, there was a ,& drop on average 0a ,& increase in 8exico, but a 1'& drop in the remaining countries3. 1 . The outloo# for the volume of world trade in %%% is better< it is expected to rise 6.4&, which is higher than the average increase in world production. Trade indicators are expected to improve in Latin America and the Caribbean, because of higher oil prices, increased investment in the region, better commodity prices and, especially, a ma*or recovery in exports in general. 1'. @oreign trade has gained extraordinary strength and importance in the development strategies for the Latin American and Caribbean economies. (ts expansion and growth is the engine of their economic growth. This is expected to continue, and what7s more the export structure is expected to be geared towards

manufactured goods with high value added. Since nearly ,%& of trade in this region is shipped by sea, port development is of the utmost important. B. Characteristics of maritime transport 1+. 5elow are some of the characteristics of maritime trade traffic for containers, li=uid and dry bul# cargo, and tourism 0/S:'.4 billion3. 14. 1espite the changing, adverse conditions in production and world trade mentioned above, transport of maritime trade continued to grow in 1,,,, but only by 1.'& $$ a slower rate than in previous years 0 . & in 1,,. and +.1& in 1,,-3. This was the lowest level recorded since 1,.-. The volume of world trade transported on the seas was over 4.1 billion tons, a similar figure to the previous year. !rowth estimates for %%% are roughly +&, similar to 1,,-. 16. Containers. /se of containers has been on the rise since their introduction in 1,46, and this mar#et has the best growth outloo# in the sector. As a result, high$ capacity ships have been built< today more than 6% have a capacity over 4,%%% %$ foot e=uivalent units 0T;/s3. Container traffic was an estimated 1,% million T;/s in 1,,,< of that amount the 2ort of Singapore moved 14., million T;/s. Studies forecast 6& annual growth in container traffic through %%4, as a result of continued expansion of the use of containers by the shipping industry in developing countries< increased trade in manufactured goods and products with a higher value added< the trend towards globali"ation by multinational manufacturers< and growth of megaships and the resulting rise in feeder and ferry traffic. 1-. Liquid cargo. A total of .14, million tons of li=uid cargo was loaded in 1,,,, with an annual rate of change of less than 1.'&. ?il continues to be the main component, accounting for nearly -%& 0roughly 1.4 billion tons annually3, followed by li=uid gas and petrochemicals. 1ouble$hull '%%,%%% ton supertan#ers are used the most to transport crude oil between its main axes, i.e. Asia, the /nited States, and ;urope. 1.. Dry bulk cargo. 8aritime transport of trade in dry bul# cargo includes most notablyA iron ore, coal, grain, bauxiteBaluminium oxide, and phosphates. (n 1,,,, together they represented 1. '' million tons with an annual rate of change of ..&< -%,%%%$ton bul# carriers are also important in this type of traffic. 8any shipping companies build panamax ships to measure with cranes to load and unload bul# cargo, which reduces transport costs. 5ul# cargo is still the largest segment of maritime transport, representing almost one fourth of total freight loaded annually. 1,. Tourism. The cruise ship industry had grown and received massive investments in recent years. (t is estimated that over - million persons will ta#e a cruise this year, a similar figure to last year, and the American mar#et is the main consumer. >ecently, high$tonnage ships have been built, such as the >oyal Caribbean

Coyager of the Seas, at 1'%,%%% tons with the capacity to hold ',114 passengers, inaugurated last Dovember, and the >oyal Caribbean ;xplorer of the Seas, which has the same characteristics and began service in ?ctober %%%. >egionally, the recipient mar#ets are most notably the Caribbean and the new mar#et in the Southern Cone. 2orts are competing to attract these passenger ships and face the challenge of having the appropriate port infrastructure in place, as well as the complementary service facilities that passengers re=uire, such as taxis, buses, guides, and shopping centers. This is certainly a growing mar#et in every respect, but a very competitive, capital$intensive one. C. The shipping industry: characteristics and prospects %. The main shipping lines in the world, such as Maersk Sealand, vergreen, !"# $edlloyd, %an&in, Cosco, and many others serve the most complex, profitable routes in the world, including some in Latin America and the Caribbean. 1. The 4 most powerful shipping lines control almost 6%& of container transport capacity in world trade. (n addition to growing concentration o' container activity in the hands of the largest, most powerful shipping lines, there is an unrelenting process of consolidation and the 'orging o' alliances among the main shipping lines. (n other words, they are growing larger every day, but have also decided to wor# together. The two most powerful alliances that were recently renewed are the !reat Alliance 0among DEF, )apag Lloyd of !ermany, the Anglo$1utch company 2G? Dedlloyd, ?rient ?verseas Container Lines 0??CL3 of China, and the 8editerranean Shipping Company 08SC33 and the Dew 9orld Alliance 0among 8itsui ?SF Lines 08?L3 of Hapan, A2LBDeptuno ?rient Lines 0D?L3 of 8alaysia, and )undai 8erchant 8arine 0)883 of Forea3 which have focused primarily on reorgani"ing the main trade routes. The sphere of action of these alliances is broader, involving a global strategy and ground services. This raises =uestions about the ability of certain container port terminals to survive and particularly about whether or not the conditions for perfect competition are present in these mar#ets. . Another characteristic of this industry is the production and servicing o' mega container vessels. The number and si"e of postpanamax container vessels will continue to grow, which will increase the transport of containers, reduce stops in the main routes, and therefore increase the services of feeder ships. Ship capacity will continue to rise, and ports will have to ad*ust to their si"e. (n 1,,,, over 1 % postpanamax ships were operating. 8aers# has ships that can transport nearly -,%%% T;/s 0F and S classes3 and .,%%%$T;/ ships are due out soon. (ermanischer Lloyd is planning to operate a mega container ship of 14,%%% T;/s by %1%, when the volume of container trade is expected to be double the current figure 0roughly %% million T;/s3. The ship would cover the ;ast$9est route and feed ships of +,%%% and 4,%%% T;/s. This would reduce the number of port movements, but re=uires ports with enormous capacity.

'. Changes in container terminal operators. 9ith the expansion of the container industry, the structure and organi"ation of terminal operations have changed. Today there are three categories of container terminal operatorsA 0i3 port authorities that have decided to become directly involved in handling containers, such as the public ports of Singapore and the Cirginia 2ort Authority or the private ports of @elixtowe or @reeport. )owever, this category has been on the decline with the emergence of port corporations< 0ii3 private port terminal operating companies involved in a process of concentration, including stevedoring. The 14 main operators have expanded their activities outside of their ports of origin, associating themselves with large stevedoring groups 0e.g. 2SA Corporation, )utchinson, ;CT, 2G? 2orts, and SSA3< and 0iii3 the shipping lines that have decided to control and manage their own container terminals. This decision was made for two main reasons. The first was for strategic reasons, because these global transporters are involved in hub and transshipment ports and therefore need to control their operations, including doc#ing priority and guaranteed availability of e=uipment for use. The second was to reduce costs, i.e. for savings, based on economies of scale and better control of terminal expenses. +. The provision o' port)to)port logistical services. As shipping lines 0e.g. 8aers# Logistics, ;vergreen American Corporation3 participate in logistical service solutions, they absorb them or forge associations with these intermodal service providers to ensure consistent, regular service, meeting the client7s demands through the port$to$port supply chain. This range of logistical services, which includes the consolidation of containers, documentation services, and storage and distribution, will continue to expand and improve every day and will have a greater impact on reducing costs and enhancing efficiency. 4. *n'ormation and communications technology and electronic commerce. 2ort services will step up their use of computeri"ed systems and information technology, such as the ;lectronic 1ata (nterchange 0;1(3 system and the (nternet. The increase in transport capacity will re=uire immediate data on the exact location and status of cargo, as well as on all logistical and institutional aspects of port operations. (n light of these re=uirements, all port and shipping industry sectors will continue to invest in new systems and channels of communication. The industry will be moving towards a paperless world in which all types of information are handled electronically. 6. /se of the (nternet for electronic commerce is also important. That industry has shown impressive growth of 6.& in the last year. This mode of commerce is affecting how the transport industry does business, and theories abound regarding its impact on the maritime port industry. (nternet commerce was one of the topics discussed at the 9T? negotiations, and the issue of taxes on e$commerce is still under study. -. These characteristics and trends in the shipping industry are the result of the development of the world economy and globali"ation, resulting in demand for

new standards of efficiency for maritime transport and creating new challenges for the world7s ports. D. Economic reforms and trade challenges for ports in the region .. Macroeconomic re'orms. The region has underta#en a series of macroeconomic reforms that prioriti"e export promotion, putting aside import substitution, which has been considered detrimental since the 1,-%s. ,. (mportant tariff reforms have been adopted that include mar#ed drops in tariffs on finished products, and even lower levels for inputs for exportation< the adoption of fewer tariff tiers, with a single flat tariff< and the establishment of a positive, effective protection mechanism. This promotes the generation of value added, instead of punishing it. (n terms of exchange rates, the various fixed exchange rates were eliminated, which were arbitrary and ignored mar#et criteria. >eal exchange rates govern currency exchange today. Tax reform has also been tac#led, but not with the necessary vigor. 1omestic taxes on income, assets, use, or value added are now contributing more to national public treasuries, replacing taxes on foreign trade as the main source of revenue. There is still a long road ahead for tax reform in most countries. Attracting foreign capital is another important element on the list of reforms that have sped up the growth of our economies, by helping external resources to complement low domestic savings and finance pro*ects in new productive sectors. State reforms complete the picture< they are an effort to redirect state leadership in the economic development process, where the state goes from being a ma*or player, monopolist, and executor of economic activity to playing the role of a regulatory, control body that wor#s with the private sector. State reforms also include the privati"ation of public agencies 0ports have been in the forefront here3 and other public institutions, such as customs. '%. Almost all governments in the region have made a ma*or effort to move forward with economic liberali"ation, trade opening, and export promotion, allowing for ma*or growth in the 1,,%s. Donetheless the imbalance in wealth distribution, the inability of large segments of the population to overcome extreme poverty, and the still wea# reforms of institutions and some branches of government are disturbing, destabili"ing elements that are reflected in the serious economic malaise that many countries in the region are experiencing today. '1. +T,, -../. The heads of government of the )emisphere agreed at the Summits of 8iami 01,,+3 and Santiago 01,,.3 to promote the @ree Trade Area of the Americas 0@TAA3, in order to form a broad mar#et stretching from Alas#a to Tierra del @uego that would be the largest international consumer mar#et, with .%% million inhabitants. Degotiations on customs rebates are geared towards complying with this date, and this mechanism is expected to substantially increase inter$American trade, thus intensifying the flow of hemispheric port traffic. ' . uropean 0nion. The policy of strengthening trade relations, particularly between South America and ;urope, has been gaining ma*or momentum< for example,

trade negotiations with 8;>C?S/> are being promoted. ?ther plans, such as the free trade agreement between 8exico and ;urope, confirm the trend towards increased trade between these two regions in the medium term. ''. Subregional integration systems. Another factor that has accelerated the flow of trade is the existence of several subregional integration systems, such as the Andean Community of Dations 0CAD3, 8;>C?S/>, the Central American Common 8ar#et 0CAC83, or the Caribbean Community 0CA>(C?83. They must speed up subregional trade, but must also support the formation of the @TAA and facilitate the standardi"ation of different trade policies. All of this will translate into increased movement in maritime and hemispheric port traffic. (t is noteworthy that, at the Andean level, over 4%& of commodities were shipped by sea in 1,,,. '+. Strengthening international trade negotiations. The 9orld Trade ?rgani"ation 09T?3 tried unsuccessfully to promote a new round of trade negotiations at its Third 8inisterial Conference in Seattle in Dovember 1,,,. The proposed wor# program for the next five years consisted in negotiations on liberali"ing trade in agricultural products, services, food security, electronic commerce, and other topics. ;ven though the differences of the developing and developed countries could not be bridged, important progress was made, indicating that a new round could be launched soon. The developed and developing countries also gave clear signs of their intent to continue with a policy of trade opening and economic liberali"ation, and there are no signs of a rebirth of protectionism. These indicators strengthen the foundation for the future growth and expansion of world trade. '4. Customs 'acilitating trade. Similarly, the 9orld Customs ?rgani"ation 09C?3 is ma#ing progress in technical areas that facilitate trade, which favors the expansion of world trade in the short and medium terms. Significant progress has been made towards adopting revised standards on the origin of traded goods< the new and revised version of the Convention on Simplification and )armoni"ation of Customs 2rocedures 0IFyoto ConventionI3< standards for applying the Code to assess the value of goods in customs according to transaction value criteria< the ongoing amendments under the )armoni"ed Commodity 1escription and Coding System< and the application of new information and communications technology. All these customs instruments are essential complements for facilitating and expanding trade in our countries. E. ort actions for port de!elopment '6. !ort re'orms. The port sector in the region has exhibited change, but in different ways and to different degrees in each country. !enerally spea#ing, the sector has been regulated and national port policies set, which in many cases had been absent. State monopolies in port operation and administration have been revised, by either totally or partially decentrali"ing port activity to local governments andBor granting the private sector concessions. Labor constraints have been

overcome, and port authorities have therefore been playing a different role. This new environment is reflected in the revision of port tariffs, see#ing to develop a more efficient, more flexible port system that is swifter, safer, and cheaper. The experts attending this event will more clearly and ob*ectively illustrate how port systems operate in different countries in the )emisphere. '-. ( would li#e to reaffirm that, port re'orms must be sped up 'or greater port e''iciency and competitiveness, particularly in countries that have not yet done so, regardless of the ownership model the governments decide to adopt, since international trade will not wait, and the countries7 growth and development can not be put off because of undefined policy. 1elaying this reform will only result in higher social costs in the medium term. 9hile it is important to define a port system $$ be it public, private, or a combination of the two $$ it is essential to have the means and facilities for achieving levels of efficiency to be able to adapt to the re=uirements of world trade and compete successfully. Landlord ports are the most common arrangements in the region. That is where port authorities cease to serve as port operator, provide the necessary infrastructure, and grant concessions to the private sector to operate complementary services and terminals. !enerally, in this situation, the central government grants financing to the sector, such as direct subsidies and credit guarantees. (n general, this model promotes higher$ =uality service delivery. '.. The impact o' ports on promoting national economic development. This is another consideration that ( would li#e to reiterate, with a few examples of what is being done in other developing countries that have made progress in port reform. These countries have concessionaires and private terminal operators and have been adversely affected by the various financial crises. Their development strategy also depends heavily on exports. )owever, strategic development plans and specific recommendations are in place to strengthen the role of the port sector to ensure significant recovery of the national economy. They includeA 0i3 operators reviewing their operating costs to eliminate unnecessary expenditures< 0ii3 enhancing the efficiency and productivity of port operations, particularly by shortening the time needed for container movement by crane or using more cranes for ships with higher cargo volume and employing information and communications technology in daily operations, bearing in mind the growing volume of cargo being moved and the corresponding volume of communications that must be executed< 0iii3 conducting more aggressive mar#eting campaigns to raise the volume of cargo sent directly from the country7s ports to its final destination< 0iv3 implementing infrastructure pro*ects aimed at raising port capacity in the medium term< 0v3 conducting e=uipment and port facility maintenance campaigns to continue to ensure efficient operations< and 0vi3 continually revising the role of port authorities to cover changes in the mar#et. (n light of these reforms, their role is focused on planning and regulating port activity, facilitating the transport chain, controlling and supervising the activities of private enterprises by developing information systems, and promoting and wor#ing with the port community and foreign and international institutions.

',. Take into account trends and developments in the maritime industry and port operators in order to ad*ust port development strategies to the world challenges of this century. 0i3 !lobal port operators will continue to expand to new geographic areas and will maximi"e the use of technology to create worldwide port networ#s that can offer consistent levels of services and modes of operation. 8ore alliances will be forged among port terminal operators to promote economies of scale and use of global capacity. 0ii3 Since capital investments will be high, only the most powerful enterprises with significant financial resources will remain in these alliances. 0iii3 2ort facilities will ac=uire new and better standards and advanced technology in order to serve mega ships. 0iv3 Container storage capacity must be improved through new systems and new facility designs. 0v3 There will be significant investment in communications and information technology for a world run electronically. +%. @inally, partnership 'or development. This mechanism will be crucial for the future of regional port activity, given the urgent need for information exchanges for decision$ma#ing in port operations on shipping companies and port operators, as well as on producing pro*ects to be implemented *ointly and meeting mar#et re=uirements in general. 5ilateral and multilateral cooperation must increase. The ?rgani"ation of American States 0?AS3 has an (nter$American Committee on 2orts 0C(23 which serves as a forum for dialogue for the governments of all countries in the Americas and the port authorities, but also for port operators, shipping lines, and commercial, industrial, financial, academic, and scientific entities. /se of this mechanism is an effective, low$cost option for strengthening hemispheric cooperation among ports in the Americas and contributing to their development. 2ort forums, such as those offered by the Andean Committee of 9ater Transport Authorities 0CAATA3 and the Association of Caribbean States 0ACS3, among others, wor# along the same lines for cooperation and to achieve port efficiency, which our government authorities must use to the fullest. +1. Conclusion. Ladies and gentlemen, my goal has been to provide you with up$to$ date information on the ever$changing world of ports. 9hat we are seeing in the world7s ports today we could never have envisioned 4 years ago, li#e .,%%%$T;/ megaships or ports with great capacity to move containers, such as the 2ort of )ong Fong with 16. million T;/s per year. )owever, we often consider 4$ year bloc#s in long$term investments in the maritime port industry. Changes in the industry in the next =uarter of a century will be even more di""ying and spectacular, and our ports will have to adapt. + . (n this globali"ed world and in our corner of the world where ,%& of our trade goes through ports, it is the responsibility of the governments, operators, shipping companies, service providers, and wor#ers to wor# together to support the development of both our ports and our economies. Let7s forge an efficient, competitive inter$American alliance for the future of our portsJ

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