Much-Needed Investment Coming To Ports

BMI View: In a recent re-election pledge, victorious Venezuelan incumbent President Hugo Chávez stated that his government would invest in developing the country's freight transport network in order to better facilitate Mercosur (Common Market of the South, the Latin American trade bloc) trade. While this may be welcomed by the sector, we maintain that the need for investment is perhaps more pressing in the country's existing maritime facilities, which have a reputation for being poorly operated. The setting up of commissions to improve port operations, and specific projects such as a new terminal for Puerto Cabello, should help restore the ports' standing.

As part of his victory speech, Chávez laid out how his third six-year term would see a 'greater advance' towards the goal of socialism, with 'greater efficiency in this transition from capitalism.' One of the key stratagems towards this goal is to develop trade with the Mercosur countries - Argentina, Brazil, Paraguay and Uruguay (Venezuela's membership is pending ratification, and Bolivia, Chile, Colombia, Ecuador, Peru are associate members of the bloc). This aim will be aided by the development of Venezuela's freight transport infrastructure, with railways and deep-water ports to be constructed in order to export products to the Mercosur states: 'There is an extremely important project to convert La Ceiba, Tujillo state and the Lake of Maracaibo into international ports. Further, we should start at once to begin the construction of the railway line between the Orinoco and the Caribbean.' The president added that 'this is the power of Latin America. This is the historic project.'

Although we support the view that transport network projects are necessary if Venezuela is to fully take advantage of its 2012 accession to the Mercosur bloc, we caution that the existing Venezuelan ports are in dire need of investment also. In 2009, the country's ports were nationalised, and there followed a spectacular fall in tonnage throughput of 58.9% at the primary container-handling facility, Puero Cabello, followed by a further 7.7% drop in 2010. While some of this decline can be attributed to the economic headwinds of the time, the poor running of the port played its part.

Return To Slow Growth
Puerto Cabello TEU (LHC) & Tonnage '000 (RHC) Throughput

In March 2010, stevedores at the port went on strike, claiming not to have been paid by the port authority. In H110, the port became the source of a major scandal when 35,000 tonnes of rotten food were discovered in abandoned containers. The food had been imported by the government-run PDVAL food distribution company, which is an offshoot of state oil company PDVSA.

This poor management continues, although throughput saw a large gain in 2011 - rising 53.3% - lost tonnage volumes have not yet been recouped (though boxes have recovered), poor operating conditions persist and there are frequent complaints from companies using the ports. These include ships waiting up to 20 days for a dock, a lack of machinery, and poor coordination by the authorities. In light of this, we forecast Puerto Cabello seeing growth of just 0.5% in total tonnage throughput in 2013.

Money is now being invested into the existing ports, however. Venezuelan state-owned port operator Bolivarian Ports (Bolipuertos) and the China Harbor Engineering Company (CHEC) have signed an agreement to build a container terminal in Puerto Cabello. Through its involvement in the development, China is seeking both a new export market for its manufactured goods, and, through strong relations with Venezuela, access to the Latin American country's resources.

More recently, Bolipuertos has this week announced that it is to set up a number of commissions with shipping lines in order to improve existing operations at its ports. A press release read: 'New work commissions will be set in order to tackle and propose mechanisms for further approach between ports and their users, with the purpose of improving port operations and boosting economic development.' A modernisation plan at Puerto Cabello and the country's second port, La Guaira, is expected to be completed by 2014.

This article is tagged to:
Sector: Freight Transport, Shipping
Geography: Venezuela

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