As a main data collection, Economic Commission for Latin America and the Caribbean, gave us most updated data of ports that are mentioned in this research. This is the best internet website to find economic growth and statistical records in every content of Latin America and the Caribbean, not only provide information to study the dynamics between countries in the area but also attract foreign investments and market shares.
ECLAN has been reporting and analyzing ports competitiveness in the area, however in this study we will focus specifically in the Pacific littoral in Central America, without considering Atlantic littoral as the competition on that area is purely dynamic and follow specific international laws.
Panama Canal Authority (ACP) allowed us access to latest data of vessel traffic and TEUs mobilized of each port by year. From here we can find shipping line relation with the ports.
Georgia Tech Panama Logistics Innovation and Research Center, facilitated access to all main Panamanian logistics assets such as the canal, seaports, airports, roadways, special economic zones and free zones along with a broad spectrum of logistics services.
15 3.2 Primary data
The key result in this research will be conducted by expert’s interview. There are four experts from different sectors (Private, Public and Suppliers) backgrounds. In the search to collect the different points of view, experts were selected from different companies and institutions that can be involve and impact in the port competitiveness environment. The experts and position is listed below:
Evergreen – export division manager,
Maersk Line – CAR Cluster Recovery Supervisor,
Maritime and Logistic Group – CEO, and
Panama Canal Authority – Marine Logistic Engineer.
With each expert, there was about one hour of interview and questions were conducted based in three main specific perspectives: customs, infrastructure and service quality offered by each port, during conversation some others detailed questions were
added.
The perspectives selected follow the principles that other papers used to analyze the logistic performance index (LPI).
Figure,3. The logistics performance (LPI) is the weighted average of the country scores on the six key dimensions:
Customs, analyze the efficiency and the speedily service handle during customs and border clearance management.
Infrastructure, directly measure ports capability based on to the equipment and transport infrastructure.
16
Service quality, study the competence and the quality of the logistic services offered. From customs brokerage to trucking and forwarding.
Timeless, measure the time take to process each shipment having as main counter product reach destinations in the planed delivery day or scheduled.
International Shipment, transparency and competitive standard according to international laws.
Tracking and tracing, measure the ability and technological system to provide real time data and tracking.
Figure 3. Input and outcomes LPI Indicators
Source: Connecting to Compete 2012 Trade Logistics in the Global Economy.
The Logistics Performance Index and Its Indicators. P7
3.2.1 Interview main questions
1. How important is each factor at the time of choosing port of service?
2. Currently which are the principal origin-destiny ports in the Pacific littoral and main port supplier? Why?
3. Why is not the transshipment in the Pacific Littoral of Panama growing?
17
CHAPTER FOUR
RESEARCH BACKGROUND
Panama has had an important influence on commercial traffic between the Pacific and Atlantic oceans, generating a greater and better distribution of the services that can provide for container, bulk, liquid and general cargo, as well as passengers in the cruise terminals, becoming one of the most important transshipment centers. Likewise, an important network of national ports has been developed, dedicated to a wide variety of activities that benefit both the local and international markets.
This chapter will provide more details of how is the administration of the ports in Panama and an explanation of each port to have a better understanding of it infrastructure and others.
4.1 Panama Port Administration
Table, 3. The Panamanian ports within the National Port System (SPN) are divided into two groups: private ports and state ports. Private ports have been granted to port operators after a process of privatization of some state ports (concession). While the national ports are still operated by the State under the administration of the Panama Maritime Authority (AMP) providing berthing services and related services for local and coastal users.
The Panamanian territory has several container ports that serve mainly the East Coast of North and South America, as well as the Caribbean, among them are the 5 most important in the nation (for this study we will highlight and mainly focus on the two ports of the Pacific Littoral).
18 Table 2. Panama National Port System(SPN) Source. The author
(C) Container, (L) Local, (GC) General Cargo, (F) Fuel, RoRo (RR), Dry Bulk (DB).
Passenger (P); (1) includes reefer containerized cargo; (2) includes raw/frozen goods Seaport Location
19
20
Balboa has its origins in the old French port of La Boca. Since its reopening in 1909, this port was vital for maritime trade in the Pacific, because in its category it was the only one existing between Salina Cruz, Mexico, and El Callao, Peru; what represented for the large-scale vessels of the time (3,000 tons) a crossing of two thousand miles between the two points.
The Port of Balboa has had the possibility of growing at the rhythm of the demands of the world markets for being a center of distribution of merchandise, connecting in turn with the main line services from the Far East and North America, towards the West Coast of South America, Central America and the Caribbean. This has put it in the sights of the largest shipping lines in the world.
Currently, Balboa is one of the only two container terminals in full operation from the Pacific; serving the different shipping lines for the loading, unloading and transshipment of goods to the region. The port works with 25 gantry cranes (10 Post Panamax, 8 Panamax and 7 Super Post Panamax) and 47 RTGs and has a total of 40 hectares dedicated to the storage of containers and 5 docks for container ships.
4.1.2 Balboa Port operator
The port of Balboa is operated by HUTCHISON PORTS HOLDINGS, an affiliate of the multinational conglomerate CK HUTCHISON HOLDINGS, specialists in development and port operations in Asia, the Middle East, Africa, Europe, America and Australasia.
HUTCHISON PORTS, is the ports and related services division of CK HUTCHISON HOLDINGS LIMITED. Over the years, Hutchison Ports has expanded into other logistics and transportation-related businesses, including: cruise terminals, airport operations, distribution centers, rail services and ship repair facilities.
21
In 2017, Hutchison Ports handled, altogether, 84.7 million TEUs. It manages the ports of Cristóbal and Balboa, located at both ends of the Panama Canal, serving as a distribution network for Atlantic and Pacific trade routes.
4.1.3 Balboa Port operations
The port of Balboa has changed from two separate docks originally built for general cargo handling, to a modern container terminal capable of simultaneously receiving three Neo-panamax vessels, one Panamax and one Feeder. This port is equipped with technology to handle containers, Ro-Ro cargo, solid and liquid bulk, as well as general cargo.
The port system of Balboa manages to serve super Post Panamax ships, ships with dimensions of 333 meters in length (length) and 43 meters in Manga (width) efficiently, because it has a lot of last generation resources for it. The container terminal of Balboa presents a depth between 12.6 to 17 meters, this port system has the ability to service a super post ship Panamax after the extension of the canal. The terminal has self-sustaining electric power, also has more than three thousand connectors for containers that need refrigeration. In its administrative scheme, it has a physical plant where there are entities of control such as Customs and Agricultural Quarantine, as well as an area of phytosanitary control, migration and AUPSA (Panamanian food authority).
Today the Port of Balboa is in the development of a project for its fourth phase of expansion, which will help increase the capacity of TEUs to 5 million per year.
4.1.4 Panama International Terminal (PSA)
With headquarters in Singapore and Belgium, PSA International is one of the leading port groups globally with participation in some 40 terminals in 16 countries in Asia, Europe and the Americas and a workforce of more than 30,000 people.
22
In March 2007, Panama International Terminal was created. One of the main ports located towards the Pacific Ocean, built by PSA International in the place where the old American naval base of Rodman was located. This port operator started activities in December 2010 with the receipt of iron products and other supplies for the expansion of the Canal. Its first phase has a 330-meter-long dock and is equipped with 3 Post Panamax cranes and 9 RTGs.
The second phase has 2 springs with length of 400m each, 12 cranes mounted on rails and 8 additional gantry cranes with a reach of 24 containers wide to serve vessels of 18,000 TEUs. In total, it has the capacity to handle 2.5 million TEUs.
4.1.5 Manzanillo International Terminal (MIT)
MIT started operations on April 16, 1995, in a location near the Atlantic entrance to the Panama Canal, immediately adjacent to the Colon Free Zone (ZLC).
MIT complies with all aspects of the CSI (Container Security Initiative) agreement established between the United States and Panama, the BASC (Business Alliance for Safe Commerce) program, PGCC (Global Container Control Program) of the UNODC (Office of the United Nations Against Drugs and Crime), C-TPAT (Strategic Association Customs-Industry against terrorism) and the code PBIB (Code for the Protection of Ships and Port Facilities). The port also offers:
Security for the ship and the terminal
Access control and IDS (Intrusion Detection System)
More than 150 employees in the security area
Canine anti-narcotics, anti-explosive and patrol units
CCTV and Monitoring and Control Center
Seal program with shipping lines
23
4.1.6 Cristobal- Panama Ports Company (PPC)
The port of Cristobal is one of the oldest ports in operation in Panama. Operating commercially for more than 150 years, Cristobal was built to receive workers and materials during the construction of the Trans-Isthmian Railway.
Cristóbal is operated by Panama Ports Company (PPC) who is in charge of its administration and of Balboa on the Pacific side since 1997, after receiving a concession granted by the State and extensible for 25 years under the Law number 5 of 16th of January, 1997. Since then, Panama Ports Company began the process of transforming the docks and adapting them to the new patterns of world trade.
With a handling capacity of more than 2 million TEUs, this port has land access to the Colon Free Zone and an interface with the railroad within its facilities that easily allows the movement of containers, with a total of 1,143 connections for reefer, 3 docks for containers and 12 hectares dedicated for handling and storage of containers, 13 gantry cranes and 36 RTGs.
4.1.7 Colon Container Terminal (CCT)
Container Terminal Colón, S.A. is a modern port specialized in container handling cargo and rolling cargo, with high-tech equipment to provide efficient and faster transport of cargo. The port operated by the multinational Evergreen is located three (3) kilometers from France Field with a modernization investment of US $ 110.0 million.
With ability to move 34 TEUS per hour and container yard capacity to store 400,000 TEUS. Equipped with five (5) gantry cranes. And total staff of 350 workers, including administrative staff and operators, who generate an efficient and organized freight movement.
24
Area of the terminal: 37 hectares; 600-meter diameter maneuvering dock; 982 meters of dock (docks 1, 2 and 3). 14 meters deep (springs 1 and 2) and 15 meters deep (pier 3), respectively.
Inspection ramp and phyto-zoo sanitary zones certified by the Executive Directorate of the Ministry of Agricultural Development of Panama. Customs, Quarantine and Migration services; area for 160 TEU intended for high risk containers; Adjacent intermodal connection provided by Panama Canal Railway Co.
4.2 Pacific Littoral traffic statistics
Table 4. Based on the data obtained from the ECLAC – Top 20 Port’s ranking in the Latin America and the Caribbean from 2014 to 2017, the Balboa port total mobilizing loads in TEU’s decrease of 9.02%, Mexico and other countries on the Pacific littoral shows strong increase by each year, Mexico 5.16%, Guatemala 1.12%, El Salvador 0.3%, Honduras 0.41%, Nicaragua 1% and Costa Rica 1.02%.
On the other hand, the graph made it from Table 4 shows the period decrease of load on Balboa port as in contrast to an in increase in Manzanillo and the other ports in the Pacific littoral.
Table 3. TEU’s total mobilized – main Pacific ports in the pacific littoral.
Source. ECLAN Maritime and Logistic Profile of Latin America and the Caribbean, 2014-2017
25
Table 5. For the period, January-June 2018, a total of 44,329 ships arrived at Panamanian ports (Private and National), which represented an increase of 37.48%
compared to the same period of 2017. Thanks to the inauguration of the new canal locks during the second semester of 2016 which increased the capacity to attend larger ships.
Table 4. Number of ships arriving to the Panamanian port system.
0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000
2014 2015 2016 2017
TEU's Total Mobilized - Main Pacific Ports
Balboa Manzanillo Quetzal
Acajutla San Lorenzo Corinto
Caldera Expon. (Balboa) Linear (Manzanillo)
26
Source. Maritime Authority of Panama. Statistical maritime port report 2018
4.2.1 Ports of Balboa
Panama have five (5) port facilities dedicated to the traffic of containers: three (3) in the province of Colon – Atlantic littoral, and two (2) located in the province of Panama - Pacific littoral.
Table 5 shows the period between January-June 2018. The movement of containers in units was 1.9 million, registering a decrease in activity of 4.1%, compare this same period with the year 2017.
Four of the terminals, in the period January-June 2018, recorded increases in its container movements in units; these were: the port of PSA (Panama International Terminal) with 176.3%, Colon Container Terminal with 10.6 %, and Manzanillo International
Terminal 8.4%, compared to the same period of the year 2017. It should be noted that, in the ports of Panama Ports Company Balboa registered decreases of 21.7% and Panama Ports Cristobal Company with 2.4%, compared to the same period of the year 2017.
Table 5. Load operation in the Panamanian port system.
Source. Maritime Authority of Panama. Statistical maritime port report 2018
27
It is also necessary to have a reference of the containers that arrived empty to the Panamanian port system, which in one way or another affects the statistics of the load.
Table 7. These containers generate income to the ports, since their cargo handling or discharge usually costs a value similar to the value of that of a fully filled container. This is extremely expensive for the different shipping companies that continuously look for Cross docking system avoiding these cost overruns. Behavior of movement of container per type in units.
Table 6. Containers received in Panamanian ports by type - Full and Empty containers comparison. (2016-2018)
28
Source. Maritime Authority of Panama. Statistical maritime port report 2018.
At present, in the National Port System, it comprises two ports that carry out the operation of unloading and loading of rolling cargo, which are Manzanillo International Terminal in the Atlantic littoral and Panama Ports Co. Balboa in the Pacific littoral.
Table. 8. For the period, January-June 2018, this activity registered an amount of 79,202 vehicles, of which landed 49,228 and embarked 29,974. The disembarkation of vehicles represented 62.2% of the total movement, of which 42.7% corresponds to the local condition and 57.3% to the transshipment condition. Similarly, for boarding of vehicles represented 37.8% of the grand total; 2.5% corresponds to the local condition and 97.5%
to the transshipment condition.
Table 7. Rolling cargo operation in the Panamanian port system.
Source. Maritime Authority of Panama. Statistical maritime port report 2018
1,241,634
29
CHAPTER FIVE
30 RESULT
From the globalization of the economy, how to face the competition has become a challenge for many companies. A technique to successfully answer this question is strategic planning.
Currently, many companies are going through a difficult situation. Some fail to overcome and others survive even if reactive. Only a few anticipate and bet to be owners of their own destiny. They choose in a determined and active way, to influence their future.
Leading a company is to develop a vision of the future of what I want the company to be. It's not just theory. It does not help to make an endless statement of values and objectives and hang them on the company's website. We must take actions, design a plan is the best way to predict it.
It is time for companies to lead and know the vision of your business and share it with all your collaborators to have the commitment to fulfill it. It is time to bet on a mission, vision, strategy, and it is time to bet on people.
To have a clear way of understanding, the results in this study has been divided in external and internal factors, data analysis and interview result.
5.1 External Factors
The competitive environment of Panama has grown due to the new strategies that have been developed to increase its economy in reference to world trade. The geographic position of Panama and the short distance between the Atlantic and Pacific Oceans are competitive advantages that elevate and position the ports of Panama as the most appropriate option to establish any commercial and logistics company.
The international economy has encouraged commercial activities within Panama to prosper. Currently, the country exports goods and services equivalent to between 35% and
31
90% of its gross domestic product (GDP), generating, in turn, foreign currency to import materials that are produced within the territory.
5.1.1 The expansion of the Panama Canal and the effects on the regional environment
The expansion of the Panama Canal is the ones of the main factor since now the ships can travel with more cargo so it is not necessary to make connections from / to Asia in the Pacific.
The fact that the post-panamax ship type navigate the route, impacts on the use of cargo transfer stations (transshipment), there are many important ports on the Pacific coast of America competing for transshipment cargo. Most of these countries have a larger population than Panama, so it is more attractive for shipping companies to capture local cargo and transshipment, larger volumes, Panama is only attractive for the position (including the Canal).
5.1.2 Port competition
The competition framework with respect to the ports of the Panamanian environment in relation to Asia is very broad. Some of these services already operate vessels of more than 13,000 TEUs and serve the main ports on the west coast of the region.
Panama's main competitors in terms of transshipment are:
1. Manzanillo (Mexico) 2. Lazarus Cárdenas (Mexico) 3. Buenaventura (Colombia) 4. Guayaquil (Ecuador) 5. Callao (Peru)
6. San Antonio / Valparaíso (Chile)
32
Likewise, the main countries that stand out as port competition for Panama are Mexico, Costa Rica, Colombia and Peru, thanks to their terminals being located in strategic sectors and ports that increase the transshipment capacity.
5.1.3 Development of shipping companies and alliances
Table, 9. Among the possible factors that have influenced the decrease are the mega shipping alliances. Since the conglomerates that handle most of the container shipping routes in the world merged to lower their costs and optimize the load on larger ships.
Table 8. Mega Shipping Alliance.
Source: The Author
Alliance Members Details of the Alliance
2M HMM,
MSC,
Maersk
Vessels: 223 ships
Capacity: around 2.4 million TEUs Operation: 25 weekly services globally
Port Connectivity: 1327 port pairs Ocean Alliance Cosco Group,
OOCL
CMA-CGM,
and Evergreen.
Vessels: 323 ships
Capacity: around 3.5 million TEUs Operation: 40 weekly services globally
Port Connectivity: 1571 port pairs The Alliance Hapag Lloyd,
Capacity: around 3.3 million TEUs Operation: 32 weekly services globally
Port Connectivity: 1152 port pairs
In addition, since April 2018, the start of operations of the mega-alliance conformed by Mitsui O. S. K. Line (MOL), Nippon Yusen Kaisha (NYK Line) and K Line, Inc (K
In addition, since April 2018, the start of operations of the mega-alliance conformed by Mitsui O. S. K. Line (MOL), Nippon Yusen Kaisha (NYK Line) and K Line, Inc (K