West

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Copyright © 2004 Global Insight, Inc. Short Sea Shipping in Latin America January 11, 2004 TRB Annual Meeting Omni Shoreham Hotel Washington, DC Robert West Managing Director Global Trade & Transportation 781-301-9078 robert.west@globalinsight.com

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Agenda Cabotage in Central America Cabotage in South America

Definitions: 

Definitions Cabotage – Cargo and passenger traffic by sea, between ports within a country. Regional Cabotage – Cargo and passenger traffic by sea, between ports within an agreed region. Feeder – Maritime movement from one port to another where a transoceanic vessel then exports the cargo (reverse for imports).

Central America Cabotage Feasibility Study: 

Develop Regional Cabotage as a complementary and competitive alternative to land transport, with substantial participation in both intra-regional and extra-regional trade – through feeder services between the region’s ports, to reduce total transportation costs and increase the cargo volumes through the ports. Central America Cabotage Feasibility Study

Ship Definitions: 

Roll-On/Roll-Off (Ro/Ro) – Ship that transports wheeled cargo over a ramp for loading/unloading. It can carry cars, busses, trucks depending on its design. Lift-On/Lift-Off (Lo/Lo) – Container ship, using onboard crane or land-based carne. Roll-On/Lift-Off (Ro/Lo) – Ship that combines the above two features. TEU - Twenty-foot Equivalent Unit, Standard measurement of containerized cargo. A 40’ container equals 2 TEU’s. Ship Definitions

Cabotage can be an integral part of the supply chain.: 

Cabotage can be an integral part of the supply chain. Complements road transportation Environmentally favorable Less contamination Lower road maintenance and repair costs Ship versus rail and truck capacities (Europe): 7,451 tons of general cargo are equivalent to: 291 trucks, or 10 trains, or 1 average size RoRo

Cabotage in Central America: 

Cabotage in Central America Not much now, but - - -

Projections – Central America : 

Projections – Central America Cabotage Atlántic/Pacífic Feeder Atlántic/Pacífic

Possible Cabotage Service: 

Quetzal Acajutla Corinto Caldera Cabotage Service Intra C.A. San Lorenzo Guatemala Honduras Nicaragua Costa Rica El Salvador Possible Cabotage Service Cabotage Intra C.A. Ship: Ro/Ro

Potential Cabotage: Intra-Central America: 

Commercial interchange within Central America shows some potential. The Pacific Coast shows promise for intra-CA cabotage. On the Atlantic Coast, there is not sufficient cargo for a profitable cabotage service. Potential Cabotage: Intra-Central America Tons (000) Note: 1998 figures are estimates of the potential only – not actual. Pacifico Atlántico

Demand Summary - 2002: 

Demand Summary - 2002 * Atlántic after 2015 Cabotage Intra C.A. - Pacífic* Cargo S/B: 592 TEU’s / Week Cargo N/B: 806 TEU’s / Week Feeder C.A. Atlántic S/B: 4,680 TEU’s / Week N/B: 4,942 TEU’s / Week Pacífic S/B: 4,930 TEU’s / Week N/B: 6,838 TEU’s / Week

Cabotage - Pacific:: 

Cabotage - Pacific: Service to each C.A. country: Weekly Proposed ship type: RO-RO Transit time (R.T.): 7 days Ship capacity: 264 TEUs Average ship utilization: 80% Ship speed in service: 15 knots Number of ships: 1 Ship Market potential: N/B: 806 TEUs/Week S/B: 592 TEUs/Week

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Once up and running, the Pacific cabotage service would be profitable. Revenue - $64 million, including land portion Costs - $47 million , including land portion Profit - $17 million

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Cooperation with the truckers - Experience in Other Countries Cabotage is complementary, not competitive Compatibility of land and sea equipment Contractual flexibility between sea and truck: European experience Involvement of the trucker in maritime transport: As stockholder or partner

Possible Feeder Services: 

Feeder Atlántic Feeder Pacífic Possible Feeder Services Ship: Lo/Lo

Potential Cargo for Feeder Services: 

Potential Cargo for Feeder Services Europe CA-Europe has few direct services. Trade with Europe could be transshipped in Panama or in a Caribbean port. Of the 3 markets, Europe is the biggest and fastest growing. Asia-Australia All the trade with Asia is through the Pacific Coast. The trade with Asia could be transshipped in Balboa or in Manzanillo, México. Rest of the World Other markets Exports: 21% Pacífic, 19% Atlántic Imports: 7% Pacífic, 33% Atlántic Global Insight examined the potential markets, excluding services to the US where there are direct services. Also, liquid and dry bulks were excluded. Pacific Atlantic 6 millon tons 2000

Feeder on the Atlantic – Central America: 

Feeder on the Atlantic – Central America Service in all CA nations, and Panama: Weekly Proposed ship type: LO-LO Transit Time (RT): 7 días Ship capacity: 1,130 Teu’s Average ship utilization: 50% Ship speed in service: 16 knots (Cap.18) No. Ships in initial service: 1 ship Potencial del Mercado: S/B: 4,680 Teu’s/Week N/B: 4,942 Teu’s/Week

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In the first full year of operation, the Pacific Feeder service would be profitable. Revenue - $78 million, including land portion Costs - $56 million , including land portion Profit - $22 million

Combination Feeder - Cabotage on the Pacífic: 

Combination Feeder - Cabotage on the Pacífic * The Pacific Feeder service could transship in Manzaillo, Mexico, or in Balboa, Panama. Ship: Ro/Lo

Combination Feeder - Cabotage on the Pacífic: 

Service in all CA nations, incl Panama: Weekly Ship proposed for service: RO-LO Transit Time: 9 days Ship Capacity: 1.130 TEUs Average ship utilization: 72% Ship speed in service: 16 knots Number of Ships: 1 vessel (3 future) Market Potential: N/B: 7,644 Teus/Week S/B: 5,522 Teus/Week Combination Feeder - Cabotage on the Pacífic Also Profitable

Considerations – Central American cabotage: 

Considerations – Central American cabotage The financial results are for a combined land-sea operation, with common ownership. Reducing the costs of land transport by 10% would improve the profitability of the cabotage service by $3 million. The 5 countries must work AS A REGION with unified regulations and treatment of cabotage as a unifying effort.

Panamá and México: 

Panamá and México Panamá. A member of CAUCA but not a signatory to the Multilateral Treaty or to CAFTA (2004). Cabotage is not an important factor in the consideration of an international treaty, but at the same time, this indicates the necessity to give cabotage an independent treatment. México. Represents another important element because of the Plan Puebla-Panamá proposal and because of the trade agreements, either current or in prepartion, between México and the Central American nations.

Maersk-Sealand already operates a related service.: 

Maersk-Sealand already operates a related service. Source: Jan Hoffman, UN

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Each regional block has its own criteria for controlling, or opening, local and international navigation. The EU is the most “open” for cabotage and international traffic.

Cabotage in South America: 

Cabotage in South America Great possibilities – Many problems

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South American Cabotage -2000 Tons (000) Chile Colombia Ecuador Guyana Paraguay Brasil Suriname Argentina Peru Bolivia Liquid Bulk 14.939 Dry Bulk 2.355 General Cargo 412 Venezuela Uruguay TOTAL Total 17.707 n/d 4.140 33 18 6 57

Intra-MERCOSUR Trade: 

Intra-MERCOSUR Trade THIS route is not allowed. Source: Jan Hoffman, UN

Global Networks: 

Global Networks Maersk-Sealand operates in this international route, with Buenos Aires as the final destination, in order to avoid the legal restrictions on cabotage. Maersk-Sealand Source: Jan Hoffman, UN

Global Networks: 

Global Networks Evergreen Source: Jan Hoffman, UN

Global Networks: 

Global Networks Lykes Lines Source: Jan Hoffman, UN

Question: 

Question If it were possible, would the international services carry cargo from San Antonio to Iquique? Source: Jan Hoffman, UN

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Ship capacity connecting Chile ports with other South American ports. Source: Jan Hoffman, UN

Intra-Andean Pact Trade (CAN): 

Intra-Andean Pact Trade (CAN) THIS route is also not allowed. Source: Jan Hoffman, UN

Advantages of a Regional Agreement: 

Advantages of a Regional Agreement Less international cargo on the highways More options and frequencies for the customers Lower transport costs Advantage of the regional fleet over the extra-regional More port traffic Larger regional integration

Example: European Union: 

Example: European Union Factsheet 4.5.8.: “ Regulation 4055/86 applies the principle of open delivery of services for maritime transport among Member Countries and between Member Countries and third parties.”

For CAN, this would mean - - -: 

For CAN, this would mean - - - Open Open International Trade Regional Cabotage

as well as pure cabotage and feedering.: 

as well as pure cabotage and feedering. Also Open? “Feedering”

...even cabotage by international lines.: 

...even cabotage by international lines. International Lines would carry cargo between Buenaventura & Cartagena

Conclusions: 

Conclusions Cabotage needs special treatment Regulatory aspects: customs, legislation and regulation Appropriate installations in the ports Special tariff treatment at the ports Definition of the appropriate enterprise (business structure) Harmonization with road transport

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Copyright © 2003 Global Insight, Inc. Short Sea Shipping in Latin America January 11, 2004 TRB Annual Meeting Omni Shoreham Hotel Washington, DC Robert West Managing Director Global Trade & Transportation 781-301-9078 robert.west@globalinsight.com