Economic growth continues to drive trade in the region, and new port and transport infrastructure is being developed to support this
Overall, countries in the Central America region are registering decent levels of economic growth as trade rises, new infrastructural improvement programmes are launched, and investments in the services and agricultural sectors, in particular, increase. Collectively, the region is heading for a GDP growth rate in the 3.5% to 4% range this year.
However, there are certain anxieties in several Central American nations’ governments, as policies emanating from the US, which is the region’s largest trading partner, threaten future growth prospects. Of particular concern are President Donald Trump’s moves when it comes to putting restrictions on immigration and work permits, cutting economic aid to the area, and limiting trade if political reforms are not undertaken.
Leading the way in the Central America growth stakes is Panama, whose economy, according to the World Bank, should expand by 5.5% this year. In neighbouring Costa Rica, growth of at least 3.5% is forecast, with those nations comprising the so-called northern triangle (Guatemala, El Salvador and Honduras) expected to post growth in the 2.6% to 3.7% range. Inward investment is increasing on the back of competitive land rental and development costs and cheap labour.
Nevertheless, social unrest, political instability, poor and outdated infrastructure present investors with major challenges.
Panama is seeing enormous benefits from the opening of the third set of locks on the Panama Canal. With much larger ships able to transit the artery, including container vessels loading up to 14,000 TEU, the Panama Canal Authority’s revenues have soared (see page 1). This has provided much-needed cash for the government’s ambitious infrastructure improvement programmes, which include the construction of a metro rail system.
The enlarged canal has raised the country’s maritime and freight logistics profile, and this has led to several new maritime terminal and freight transport/ logistics projects being started. The country is keen to build on its reputation as a trading bridge between North and South America and as a regional distribution centre for the Americas.
One of the largest port construction projects underway is on Isla Margarita Island, which is located near Colón on the country’s Atlantic coastline. There, China Landbridge is spending approximately US$1.1B to develop Panama Colón
Container Port. It is scheduled for completion in 2020, and will have an initial capacity to handle 2.5M TEU a year, of which over 85% will be transhipment traffic.
Chinese investors are active throughout Central America, with the nation’s civil engineering companies increasingly chasing construction contracts, its banks aggressively putting in place funding agreements, and its operators pursuing management deals.
The most adventurous project of all surrounds the building of a new trans-isthmus canal through Nicaragua, and the development of new ports and logistics parks on both the Atlantic and Pacific sides of the country to support it.
Elsewhere, last year saw Beijing-headquartered Power Construction Corporation of China win a US$1B contract to construct a new container terminal at Puerto Limón in Costa Rica. The new facility, which will be capable of processing over 2M TEU a year of mainly transhipment cargo, will sit alongside Terminal de Contenedores de Moín (TCM) which is being developed by APM Terminals.
Fruit comes first
TCM has been delayed by more than a year, with a scheduled opening now planned for Q1 2019. The terminal operator’s agreement with the Costa Rican Government means that no more than 10% of its design throughput can be used for processing transhipment cargo. Indeed, its role as a gateway port means Costa Rica’s cold chain will be transformed, as the majority of its banana, pineapple, melon and other tropical fruit exports will be containerised.
This will put immense pressure on Administración Portuaria y de Desarrollo Económico de la Vertiente Atlántica (Japdeva), which operates the current port of Limón. Currently, it handles the majority of the country’s reefer cargo, whether it is moved in containers on liner ships or as breakbulk/on pallets on specialised reefer tonnage.
Most of this cargo will transfer to TCM, with Japdeva’s own estimates suggesting that, in the first year of operations of TCM, at least 700,000 TEU (58%) of the 1.2M TEU currently handled will switch.
To survive, Japdeva’s plan is to focus on handling general and rolling cargo, including iron and steel, construction materials, including aggregates and timber, and vehicles. Japdeva took delivery of two Sany STS container cranes in 2017, but has had ongoing problems using them. Initially, the problem was said to be electrical, but more recently, the Costa Rica Shipping Lines and Shipping Agents’ Association (NAVE) has complained that one of the cranes has been out of service again with a spreader issue. For its part, Japdeva is planning to use the cranes with attachments for handling breakbulk cargo after TCM opens.
The port authority-controlled operator believes this sector of the market will increase from its current level of about 5 Mtpa, and that its planned investments will help encourage growth. It is also targeting the Nicaraguan market, given that nation’s lack of modern ports and cargo handling capacity, and the cruise business, and its location close to Limón city centre.
In Honduras, President Juan Orlando Hernández recently opened Operadora Portuaria Centroamericana’s (OCP) new US$145M Pier 6 facility in Puerto Cortés. The 350m quay increases the terminal’s berthing line to more than 1,100m, with a draught of 14m alongside. It means that several mainline Panamax vessels can call simultaneously.
With two super post-Panamax STS cranes erected as part of the development, OCP, which is majority-controlled by ICTSI, has raised the terminal’s handling capacity from about 950,000 TEU a year to 1.4M TEU a year.
ICTSI, which has a 30-year operating concession (up to 2043), has also built a modern depot and logistics centre within the complex. It is an investment that the firm believes will help create a more captive cargo base for the port. Over the life of the concession, ICTSI is required to invest US$642M in the facility.
“The new Pier 6 positions Puerto Cortés as a leader in Central America and the Caribbean basin,” said Hernández in a speech at the opening ceremony.
“This is a moment in which we see dreams as something that are tangible.”
In neighbouring Guatemala, APMT has spent US$180M upgrading and modernising Terminal de Contenedores Quetzal (TCQ) on the Pacific coast, and plans to invest a further US$145M over the next 18 years or so. The work has increased the port’s design throughput capacity to 340,000 TEU a year.
However, it has not been plain sailing for APMT in Guatemala, with the terminal operator planning arbitration proceedings following a recent ruling by Fiscal General de la República de Guatemala that nullified the company’s concession to build and operate TCQ. After APMT acquired Grup TCB in 2016, it subsequently emerged that TCB had paid bribes to officials to secure the 25-year concession in 2012. APMT is basing its claim on an agreement signed by the governments of Guatemala and Spain in 2004 that protected investments.