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Puerto Rico Dreams Big
By Iván Román
March 11, 2001
SAN JUAN, Puerto Rico -- To illustrate the potential a supersized seaport holds for Puerto Rico, the local consul general for the Netherlands points to the island's sweet, juicy mangoes.
They don't grow in the frigid temperatures where Frank Haacke was raised, yet the consul general's native Holland is the largest distributor of mangoes in the world.
"We sold that same mango in Puerto Rico to buyers from abroad for less than 50 cents. My mother in Holland is paying six bucks for it," he said. "Somewhere along the line, someone is making real profits. And you know where those real profits are? Trading companies."
At the Port of Rotterdam, one of the world's powerhouse ports, those trading companies buy mangoes, repackage them or juice them, mark up the price, then resell and distribute them, mostly throughout Europe. Another of the world's premier "superports," in Singapore, works the same way and, like Rotterdam, generates tens of thousands of jobs.
The western side of the Atlantic Ocean has nothing like a Rotterdam or Singapore. Which is why Haacke is leading a Dutch consortium studying construction of a superport in Puerto Rico. His group, island officials and other potential investors from England and Asia are betting Puerto Rico can become the shipping and distribution hub for Latin America and the Caribbean.
They're setting aside cash and land for their dream -- a $1 billion transshipment port in which shipping containers are transferred from large ships to smaller ones, and vice versa. Some say the facility is vital to the island's future, given the fragile state of the U.S. trade preferences and tax benefits that the island's manufacturing industry has depended upon.
Advocates say Ponce's existing infrastructure
(TONY ZAYAS/EL NUEVO DIA)
Worldwide trade with the fast-growing, $2trillion-a-year Latin American and Caribbean markets is expected to continue rising. And with giant container ships in the works -- vessels almost as long as the Empire State Building is high -- Puerto Rico wants to join the global race to build one of a select number of "megaports" that can handle such ships and cash in on the $5 billion-a-year container-shipping business.
"Puerto Rico is on the center trade line that runs around the world from Asia through the Americas," said Dan Clague, director of SG Hambros, a London-based investment bank. "With transshipment ports it's like real estate -- location, location, location."
Most of the world's 20 or so existing transshipment ports are in Europe, Asia and the Mediterranean. In this hemisphere, the heavyweights are the Panamanian port of Manzanillo, near the Atlantic entrance to the Panama Canal, and a facility in Freeport, Bahamas.
Ports in Kingston, Jamaica, and Rio Haina in the Dominican Republic are also attempting to gain a foothold in the region's transshipment trade. Miami and Port Everglades are the closest competitors.
Skilled work force is a plus
When Singapore, with roughly the same population as Puerto Rico, developed what is now considered to be the king of transshipment, it had little competition from its neighbors. Puerto Rico is surrounded by competitors. But proponents insist that the island's educated, bilingual work force, political stability and its solid banking and service industries give it a competitive edge.
Puerto Rico also has a geographical advantage, thanks to its location at the northeastern cusp of the Caribbean -- a placement exploited for military purposes over the centuries, first by the Spanish and then by the United States.
"I think you have to rethink your identity in the Americas and, for this, look less toward the U.S.," Haacke said. "South America, we believe, is going to be a power. So add these forces together, and guess what? Puerto Rico is smack in the middle."
Transshipment ports treat cargo and containers the way airlines treat people and packages, moving them as cheaply and efficiently as possible through a series of hub-and-spoke systems. Shippers ostensibly save money by sending large quantities of goods across the ocean in huge ships to regional hubs, transferring the cargo containers to smaller ships that then fan out to feeder ports in the region.
As the ocean-crossing ships get bigger and bigger, fewer and fewer ports can handle them, forcing more and more trade toward the properly equipped hubs.
Megaships in the works
When Maersk Sealand, the Danish shipping giant, launched the largest vessel now in use -- a ship that is almost the length of four football fields -- no port in the eastern United States could handle it. The ship can carry as many as 8,000 20-foot-long cargo containers. Shipping containers come in varying lengths, but a ship's capacity is measured in "twenty-foot equivalent units," or TEUs.
Now, with vessels capable of carrying up to 12,500 TEUs in the works, port directors around the world are rushing to upgrade facilities or to figure out how to plug into a future hub system.
In the late 1990s, as countries around Puerto Rico began building such superports -- installing cranes that can unload ships wider than the Panama Canal -- former Gov. Pedro Rossello studied the feasibility of developing a transshipment port on the island's south coast.
Two cities vie for port
His government planned to put up 40 percent of the $395 million needed for first-phase construction in and around the Port of Guayanilla. Potential investors were consulted, and work was to start next year. But the project stalled during the transition to Gov. Sila Maria Calderon's administration, and officials in the nearby port city of Ponce are now pushing to have the first phase built there instead.
The Port of Ponce doesn't have enough open land around it to grow past a first phase, which concerns some of those involved in the project. But a first phase could be finished more quickly if done in Ponce.
Regardless of the location, Calderon has said she is committed to the project, which would create an estimated 5,000 direct jobs and 10,000 to 12,000 indirect jobs once it is open and operating for five years.
"We know that we have to act fast," said Juan Agosto Alicea, president of the Puerto Rico Government Development Bank, which would arrange part of the financing. "The transshipment port is the project that, in the long term, could really change Puerto Rico and truly make it a shipping and service center for all the Caribbean and Latin America."
But to make Puerto Rico the Singapore of the Americas, a new superport would have to be surrounded by hundreds of acres of warehouses, distribution centers, packaging plants and even some factories.
That way, television sets arriving from Europe or Asia could be pulled from their containers to be finished or repackaged before continuing on to Caracas or Buenos Aires. Directions in different languages for taking Viagra and Prozac made in Puerto Rico could be inserted before the medications are shipped to hubs in Europe. Project investors are going after not only the shipping lines; they're pursuing foreign corporations that may want operations closer to Latin America for assembling, repackaging or distributing their goods -- similar to what U.S.-based Reebok and Japanese-based Toyota already do in Rotterdam for their European markets.
No guarantee of success
"That's a safer way of competing, because by doing that they are not going up against a Panama or a Bahamas, which mostly don't even open the containers," said Neil Davidson, director of Drewry Shipping Consultants in London. "If they can make themselves into a different kind of animal and a staging post, they could have a shot."
Not everyone is optimistic about the island's prospects, however.
With more than 1.2 million containers a year divided among them, Freeport, the Dominican Republic's port at Rio Haina and Panama's Manzanillo Terminal already have healthy shares of the region's transshipment businesses.
Also, U.S. shipping laws that require the use of more expensive ships for trade between two U.S. ports hurt Puerto Rico's chances of serving the mainland. So investors are looking south and west, away from the United States, to make the project successful. Latin American ports, particularly those along the east coast of South America, are expected to generate the fastest growth in container traffic -- about 12 percent a year.
Jan Hoffmann, with the United Nations Economic Commission for Latin America and the Caribbean, isn't sure Puerto Rico's skilled work force and other competitive advantages outweigh its higher labor costs and taxes.
He also thinks it's too soon to say whether a new generation of giant container ships will restructure the world's main shipping lanes around five or six transshipment hubs.
"I don't know when we're going to get those huge boats carrying 15,000 containers," said Hoffmann, who specializes in Latin American and Caribbean shipping and ports issues. "We're going in that direction, but I don't know if we'll get to that extreme, and I don't see why Puerto Rico would be one of the hubs."
Economy is a draw
He acknowledged, however, that the island may be attractive to shippers looking for economies of scale.
The Port of San Juan, which handles more than 2 million containers a year but can't accommodate oversized vessels, is the fourth-busiest container port in the Western Hemisphere, behind only Long Beach, Calif.; Los Angeles; and New York. It receives and ships more container cargo than the ports of Miami, Jacksonville and Baltimore combined.
Most of that traffic is goods heading to the island for local consumption. But about 15 percent of it is direct foreign trade, mostly with Europe and Asia, and that's more than double the foreign trade generated by any other Caribbean transshipment center. Megaport shippers could be enticed into making Puerto Rico their transshipment center, particularly if they wanted to traffic in goods for consumption by the island's $38 billion-a-year economy -- the largest in the Caribbean.
"If the shipping lines get the opportunity to put bigger vessels in, then they'll do it," said Davidson, the London-based shipping consultant. "They want economies of scale. I don't think it's complete pie in the sky. There's some logic there."
Iván Román can be reached at email@example.com or 787-729-9071.