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Frankel: Port Of The Americas Must Be Awakened From Doldrums Fast


June 28, 2001
Copyright © 2001 CARIBBEAN BUSINESS. All Rights Reserved.

The transshipment Port of the Americas is grounded. The question now is whether it can be salvaged in time to meet the international maritime industry deadline, which calls for a marketable business plan by fall to compete with other Caribbean ports.

Recent events have led observers to question the project’s fate. These problems included the resignation of the project manager, Francisco Bruno; the two-month absence during June and July of the project’s architect, Prof. Ernst G. Frankel; and the delay in appointing a second international consultant.

In a recent exclusive interview, Frankel discussed his prognosis for the project very frankly.

The project’s timetable calls for a request for proposal (RFP) to be issued in September, and a contract signed by year’s end so construction can start in January 2002. An international consultant was to prepare the RFP. The preliminary Environmental Impact Statement (EIS) is on schedule and should be delivered by mid-July.

Insiders finger Ponce Mayor Rafael Cordero as the culprit of these setbacks given his insistence that the Port of the South, as the municipality-owned port is called, be dredged as part of the transshipment port’s initial phase. Ponce’s license to dredge the federal channel expired five years ago and obtaining a new permit will take three to five years.

The real issue, observers say, is the government’s apparent inability to recognize that if the port is to be built within its extremely tight timeline, the project must proceed with single-minded determination, and all other, mostly political, considerations, must be brushed aside.

Both former Gov. Pedro Rossello and Gov. Sila Calderon have touted the economic bounties the port is expected to yield. Yet critics charge that while the Rossello administration devoted its main efforts to other infrastructure projects, the port project was bumped to the back burner.

From the onset, the Calderon administration set out to fulfill campaign promises by including Ponce as part of project. The original Frankel report, first unveiled in a CARIBBEAN BUSINESS front page last September, identified the Guayanilla harbor as the ideal location for the port. The report explained, however, that the port’s area of influence will extend across Puerto Rico’s southwest municipalities, from Lajas to Guayanilla, including Ponce. The Rossello administration stuck to the Frankel report’s recommendation of Guayanilla and was accused of refusing to include Ponce, a Popular Democratic Party (PDP) bastion.

Meanwhile, the prior and current Government Development Bank (GDB) presidents have recognized the economic development impact of the port and pushed for the project. Lourdes Rovira, under Rossello, single-handedly took on the project, rescuing it from the doldrums, and assigned it to a consultant, former Secretary of State Pedro Vazquez, who in turn hired Frankel.

Juan Agosto Alicea, under Calderon, at first wanted to transfer responsibility for the project to another government agency so he could concentrate on the GDB and help the governor straighten out government finances. However, not only is the GDB still the lead agency for the project, but Agosto Alicea was recently publicly rebuked by Calderon for saying that the project must start in Guayanilla, not Ponce.

The Rossello administration failed in its attempt to turn a transshipment conference into a serious meeting of the minds with interested port developers and major shipping lines. Instead, it ended up with 400-plus island attendees and less than a handful of world maritime players. Critics say the current administration is falling into the same trap.

"The government was supposed to establish four- to six-member committees to make recommendations. Instead, some of these committees have 30 to 50 people and I screamed to heaven," Frankel said during a recent interview.

The 21 committees, originally outlined with a specific agenda by Frankel and targeted to be monitored by his staff, have become status committees with everyone begging to belong. Frankel, an outspoken Massachusetts Institute of Technology (MIT) professor, says he has taken part in 67 successful port projects and at age 77, he has no need for a failed project.

To the question of why there is urgency to build the port, Frankel says Puerto Rico has to market the Port of the Americas before the end of the year. "We must get a preliminary interest or commitment, through a letter of intent. The world economy is expanding quickly and globalizing by leaps and bounds. This is being done largely because of the economies of scale. Once the major maritime industry players are all committed, we have no chance," he said.

Whereas eight years ago there were 42 global shipping companies, today there are 10 and next year they will likely be reduced to eight, he said. "Big maritime industry players need one major transshipment center in the Caribbean. Close to half are already committed in the Caribbean." Examples, he said, are Maersk, the Danish line which bought the international routes of U.S.-based Sea Land, and Hutchinson Whampoa, which is committed to Freeport, Bahamas and operates Panama’s Balboa and Cristobal. CSX, which bought Sea Land, is in the Dominican Republic; Stevedores Services of America operates the Port of Manzanillo in Panama; while Evergreen is in Kingston, Jamiaca and in Panama’s Colon.

What’s left? Frankel calculates about 60% of the trade still available. He listed American President’s Lines (APL), which has joined forces with Neptune & Orient Lines and become the third largest shipping line in the world; Peninsular & Orient (P&O), which has joined forces with the Dutch Nedlloyd to become the fourth or fifth largest shipping line; ZIM Navigation, which has joined forces with Hyundai Merchant Marine, the seventh or eighth largest shipping line; and NYK, the Tokyo-based and largest Japanese line, which works in collaboration with Mitsui OSK.

Frankel said some of these lines do not have a presence in the Caribbean, some are actively looking for one, and some want to join forces with others. "Now with the Free Trade Area of the Americas (FTAA) [slated to become effective in 2005 and which will make all of the Americas one large trading bloc] they are very interested in the region." Each of the companies is a potential candidate to build and operate Puerto Rico’s Port of the Americas "but they will be making their decisions soon."

Port operators also include major players, such as PSA, or Port of Singapore, and P&O, which operates six to eight ports, including two in China and one in Colombo.

Frankel does not consider the Dutch major port operators because the majority ownership, which runs the Port of Rotterdam, is the British-controlled European Container Terminals, and the major shipping line is Maersk. Dutch Honorary Consul in Puerto Rico Frank Haacke, an early advocate of the trannshipment port on the island, said the Dutch interests sold a 15% stake to ECT two years ago, but retained the rest.

CSX has terminals in Hong Kong, Long Beach, and Rotterdam. Frankel said the answer to who will operate the Port of the Americas will depend largely on the commonwealth government’s strategy. "If the government wants to own everything then there would be different people who would lease the terminal without making a major investment."

Shipping companies and terminal operators who are not owners are examples of possible candidates in the leasing category. He added that a local operator is Ponce’s Luis Ayala Colon. Another category is a dedicated operator, meaning a shipping line which uses the port either exclusively or sublets to others part of the terminals. Frankel added that a dedicated operator ensures the use of the port because it will bring its own cargo.

"You must write the proper clauses in the contract so as not to repeat Boston’s mistake where a dedicated port operator (CSX) paid rent for 25 years but kept the port shut, not using it or allowing others to use it." That way, the company eliminated competition for the other port it operated, Frankel said.

What should the government do? Frankel, who has a 41-year association with the Port of Singapore, favors the world’s largest port’s example. For starters, decisions must be assigned to a singular authority, which must also have budgetary control and decision-making power.

"The problem in Puerto Rico is that you have six local agencies which have never sat down together to assign who’s responsible for what and each has different rules." He believes that federal agencies are only slightly better than their Commonwealth counterparts.

Singapore streamlined the decision-making process to 281 decisions to run the port and the airport. Now both work in unison, efficiently. Another positive side effect was that the 27 levels in the organizational structure were reduced to seven. " In the process, we found people responsible for making decisions who could not make them because they did not have access to the information."

Before, there were 6,600 employees, and 2,800 of them were blue-collar workers. Now, both the Singapore port and airport run with 3,900 employees, 700 of which are in blue-collar positions. The port is run by 500 people, most of whom (400 to 420) occupy blue-collar jobs. Singapore’s traffic has increased by 40%, costs were reduced by 38% and the profit margin increased from 4% to 28%, Frankel said.

This Caribbean Business article appears courtesy of Casiano Communications.
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