China: Reorienting Latam Infrastructure
Trade with Asia, as well as the entry of Chinese investment firms, has boosted the development of port infrastructure on both the Pacific coast of Latin America and the Caribbean and the Atlantic coast of the continent. In addition, it has stimulated projects of railroads and roads that would connect by land the two oceans. However, only a small part of the contemplated projects will be carried out.
In the years following the admission of the People's Republic of China (PRC) to the World Trade Organization, trade between that country and Latin America multiplied by almost twenty. It went from $ 15 billion in 2001 to $ 288.9 billion in 2014. But beyond affecting the business environment, this growing trade with Asia, coupled with the entry of financially well-supported Chinese actors, is transforming the region's infrastructure and, With this, its socio-political dynamics.
Responding to these trends, almost every public and private commercial port in the Pacific of Latin America is carrying out expansion projects. These include traditionally important ports such as Manzanillo, Lázaro Cárdenas, Callao and Iquique, but also contemplates multiple projects in ports that have traditionally received less attention, such as Buenaventura, Manta and La Unión, the latter giving access to El Salvador, Honduras and Nicaragua . Also, in the last years, mining companies have contemplated the construction of ports in Machala, Ecuador, and Paita, Peru, among others, to export their products.
The intensification of trade with the Pacific has also impacted the dynamics of the port industry in the Caribbean and the Atlantic side of the continent. With the construction of a third set of exclusions in the Panama Canal, governments and port operators throughout the Caribbean basin are improving their infrastructure, dredging deeper channels, expanding docks, bringing new cranes and making other investments to position their ports with In order to receive the new motorboats and, perhaps, serve as hub. Miami, Freeport, Colon and the ports of Mariel and Santiago de Cuba, are some of them. New ports are also contemplated in Puerto Rico - on the island of Cabras - in Guyana - in Berbice - and in Jamaica, among others.
If the increase in maritime trade in the Caribbean will not be enough to make all projects contemplated profitable, at least it shows how the anticipation of growth is encouraging port investment and changing the region's trade patterns.
As a complement to the port expansion, trade with Asia is also promoting railroad and highway projects that would connect the Atlantic coast with the Pacific coast, and these with the interior of the continent. This is to facilitate the export of primary products and the access of imported products to manufacturing, processing and consumption centers. Some examples include the "bioceanic" roads connecting Pacific ports like Iquique, Ilo, Callao and Paita with Manaus, and improvements in interconnections between Chile and Argentina.
In recent years, a large variety of projects have been presented with possible funding from the PRC to include "dry canals" (road and rail connections) connecting the Atlantic and Pacific coasts through southern Mexico (Veracruz to Puerto Salinas, Oaxaca), Guatemala, Honduras and Colombia. More recently, there has been talk of a bioceanic railway linking the Pacific coast of Peru with the Atlantic coast of south-east Brazil. Although it is contemplated that the $ 10MM project would be financed by Chinese companies, there is still no agreement on the route, and if a stretch of it would pass through Bolivia.
Infrastructure changes in the region driven by growing trade with the PRC impact the continent's trade and socio-political dynamics. The success of a project such as the Nicaraguan Canal could establish the associated ports, such as Brito (Pacific Coast) and Águila (Atlantic Coast), as hubs (provided it was accompanied by an efficient and reasonably priced port operation). Similarly, a bioceanic train would contribute to the expansion of export agriculture projects, such as soybeans, in the interior of Brazil. So far, the southern bioceanic highway project in Peru has opened up departments in the interior of the country, such as Madre de Dios, to new commercial actors.
However, if the projects mentioned in this essay can transform the commercial dynamics of the region, it is also true that only a small portion of everything contemplated here is going to be realized. Projects with a focus on the extractive sector, such as transcontinental railways and mining ports, are being impacted by falling commodity prices, environmental sensitivities, and land rights in the areas they have to cross. Projects funded by the PRC are particularly vulnerable in this regard because the difficulties are compounded by the requirement to use Chinese enterprises and a significant number of Chinese workers.
When trying to anticipate how the transpacific logistics business will evolve, it is important to keep in mind the concept of how the implementation or postponement of each project impacts the others, to include the range of options and costs of users of the system, changes in patterns of Trade flows, the net present value flow for existing port infrastructure, and the projects contemplated to come later.
From the perspective of Colombia, the implications for strategic planning are different. It all depends on whether one examines the opportunities and challenges from the point of view of a shipping company, a port operator, a system user or government. Demand patterns, port options, hubs and services between Asia and the region are going to evolve significantly in the coming years. For shipping companies, considering that new ships will enter their fleets, this implies an expansion of both options and competition. For ports, it means an expansion of potential customers, but also a stronger competition, which forces them to invest in dredging, infrastructure, services and efficiency, to be able to continue or capture the shipping companies' business. For users, it will mean more service options at less cost.
So while these changes have benefits, they also involve major challenges, as this will apply to everyone. Those who remain in their comfort zone will lose their position to those who take advantage of these new possibilities to lower costs and increase the speed and agility of their operations and transpacific logistics.
Source: www.puertocartagena.com