South America: Trouble spot or pathway to prosperity?

www.worldtrademag.com Posted on: 02/17/2003 Tony Seideman

The Columbus Pacific in the Port of San Antonio, Chile. (Communication Resource Management)

Transportation providers understand how a country operates in an intimate, detailed and often devastating way. They see up close whether corruption or commitment to quality and efficiency dominates government operations. They know from hands-on, sometimes painful experience whether an infrastructure works for a country or against its future.

In few regions is this reality truer than South America. While some pundits have described South America as a continent slipping rapidly into chaos and dysfunction, its economies stunted and its potential thrown away, carriers with on-the-ground experience say the reality is far different.

"US-South American trade is quite viable and continues to grow," says Allen Clifford, senior vice president of sales and marketing at Mediterranean Shipping Co. (USA) Inc. Although some South American countries are facing vast, seemingly insurmountable challenges, others have dramatically altered the way they operate in ways both small and large. The question is whether the countries that have reshaped themselves to conduct business more effectively will be able to withstand the economic stress caused by other nations that are experiencing crippling difficulties.

Two nations are currently garnering kudos from carriers and other economic experts, while two others seem to be battling hard for the bottom slot. Brazil and Chile have won plaudits from carriers and economists alike for the changes they've made in their regulatory policies, physical infrastructures and worldview in recent years, while Venezuela and Argentina are both seen as wasting abundant opportunities and resources both human and physical. And, while Brazil and Chile have both taken a number of specific steps to win their accolades, each needs to do a great deal more work.

Brazil's steps include increasing the efficiency of its regulatory apparatus, privatization, and modernizing its ports. The country has faced problems with inefficient structures and its tax system. To its credit, Brazil went through a number of economic and political reforms.

"They opened their industries up to international competition," says Doug Webster, spokesperson for Hamburg Sud North America. One positive result of Brazil's efforts is that the country now has a trade surplus of $13 billion U.S.

Chile's biggest advance is embodied in its embrace of the first free trade agreement any South American nation has made with a North American neighbor.

"More than 85 percent of bilateral trade in consumer and industrial products became immediately tariff-free. About three-quarters of both U.S. and Chilean farm goods will be tariff-free within four years," the American Association of Port Authorities says in a statement about the agreement.

While some South American countries are doing well, others are in deep trouble. Venezuela's situation is so difficult some major carriers have temporarily ceased calling on its ports, while Argentina's decline is reflected not just in its local economy, but in a radical drop in its trade with the outside world as well.

Argentina's financial problems are having a strong impact on trade, Webster notes. "There was a time when Argentina's ports were moving well over 1 million TEUs a year. This year, they're moving six-hundred thousand," he says. Prompt resolution of the country's difficulties is unlikely, he adds. "Not a lot is going to happen until Argentina goes through a set of elections which are now scheduled for some time this spring."

Ocean carriers are confident enough in South America's strength to be adding new capacity to lanes serving the continent. "An indication of MSC's commitment to this trade are the enhancements made to its East Coast South America service made in late October," Clifford says. " MSC now offers all water service from Miami and New Orleans to a select number of ports in South America, which means improved transit times and more space available for shipments," he says.

Hamburg Sud is also making investments in new services and capacity. "Our long term view is that the area is a region that has real prospects for trade improvement," says Webster.