Chile: Maritime Ports Port Investment and Opportunities Marcela Cintron August 2009 ID: Summary Chilean ports were state- owned and managed until the early 1990’s through Empresa Portuaria de Chile, Emporchi, the government body that regulated all port activity – including a few small privately owned and used ports in the country. During the 1990’s the Chilean port system was reorganized, converting the 10 existing state-owned ports into independent companies, which are still state-owned but independently managed to better serve the ever increasing cargo requirements. Today, Chile has a port system consisting of 33 ports divided into 3 subsets: Privately- owned and operated, state- owned and operated, and privately- owned but open for public use. Approximately 95% of Chile’s foreign trade is transferred through its ports, a trend likely to continue given Chile’s free trade agreements with numerous countries – among them Canada, Mexico, the United States, European Union, China, Japan – as well as their ongoing pursuit of new FTAs. The U.S-. Chile Free Trade Agreement (FTA) came into force on January 1, 2004. Approximately 97 percent of U.S. goods now enter Chile duty-free. All remaining tariffs on U.S. goods are expected to be phased out by 2015. Although Chile’s economy grew by 3.2 percent in 2008, the country experienced its first negative GDP growth rate (-2.1 %) in 10 years during the first trimester of 2009, evidence of the effect of the global financial crisis. Nevertheless, Chile has been praised for its sound counter-cyclical policy and its favorable economic position in managing the crisis. Challenges As is the case worldwide, Chilean ports face the constant challenge of financing and building infrastructure and purchasing state-of-the-art equipment and technology to improve efficiency. At the same time, Chilean ports struggle to afford the ability to serve larger vessels that stop at ports for increasingly shorter periods of time, generating fewer profits for port operations. Additionally, ports face strong competition from other service providers, and currently need to comply with strict security measures (International Ship and Port Facility Code – ISPS), due to terrorist threats, as well as environmental regulations and requirements, which have increased significantly in recent years. These facts alone put severe pressure on the Chilean port system, pressure that is further increased by the following challenges: 1. Chile’s foreign trade depends almost exclusively on maritime transportation given its geographic location being so far away from its main export markets. 2. Sea waters in the Chilean coast are open and very deep which requires construction of high cost docks and piers. 3. The geography of the Chilean coast does not present large adjacent areas for port operations. Let us help you export. export.gov The U.S. Commercial Service — Your global business partner. 800-USA-TRADE Chile: Maritime Ports ‐ Port Investment and Opportunities 2 Investment: Past, Present, Future Investment in Chilean ports was mobilized in December of 1997 with the implementation of Law 19.542 – Modernization of the State Port Sector. This law mandated the creation of state-operated businesses to work with a specific port, or cluster of ports, and established the guidelines for future pathways to port improvement. The results of this law are evident by simply examining the recent investment history by the Directorate of Ports’ Works (DOP). Since 1999, the DOP has invested just over USD$300 million globally. Between 1999 and 2008, this investment fell into the range of USD$21-$26 million dollars per year. However, the combination of an increased DOP budget and shifted investment focus has seen that amount rise to a projected USD$51.9 million for 2009. Daniel Ulloa, the head of the DOP, has also declared that the DOP intends to invest approximately USD$3 billion by 2020. These investments are to be focused in four primary areas: • The transformation of a harbor support platform into a foreign-trade friendly area • The physical connectivity between ports • Development of ports’ cities • Enhancement of tourism opportunities • Market Demand and Port Security The ISPS went into effect July 1, 2004. ISPS asks of all countries under compliance to align security practices and standards through information exchange and port visits. Ports in Chile successfully meet the standards expected by ISPS. However, even though Chile has implemented the Container Security Initiative (CSI), and the Customs Trade Partner Against Terrorism (CTPAT), there remains much needed training and awareness/education. The ISPS, however, provides incentive for increased efficiency and efficacy of port security in Chile. With this in mind, the annual budgets often reflect a portion designated specifically for this cause. In 2009, the DOP received a 105% increase in budget – a jump that was greeted by a similarly large increase in projected investment. The projected investment for 2009 is outlined in the table below, illustrating a focus on improved integration between ports, fishery productivity, coastal recreation areas and security, and maintaining prior efforts by the DOP. Let us help you export. export.gov The U.S. Commercial Service — Your global business partner. 800-USA-TRADE Chile: Maritime Ports ‐ Port Investment and Opportunities 3 Investment Programs – Directorate of Ports’ Works 2009 Amount Invested 1990‐ Projected Investment Project Purpose 2008 (Millions USD) 2009 (Millions USD) Port Infrastructure to Integrated isolated regions ‐ regions $60.03 $32.02 Connect Zones X, XI, and XII Port Infrastructure for Improve fishery productivity, $163.68 $4.91 Fisheries operation security and local tourism Improve Coastal Create public coastal recreation $26.81 $3.96 Infrastructure areas Coastal Protection Increase coastal security $37.18 $1.52 To maintain operation for the Conservation $70.73 $9.53 Directorate of Ports’ Works Source: Dirección de Obras Portuarias – www.dop.cl The projects in the table above represent opportunities for potential purchases of security related equipment and technology. Examples of how these investments could be applied to the port system include: • Towards the improvement of operation security of fisheries • To increase security in coastal towns Best prospects of specific Technologies: • X-Ray detection equipment • CCTV • Access control • Signaling systems • Firefighting and encapsulated suits In addition to the opportunity presented by the ISPS in port security, the Chilean Ministry of Public Works (MOP) has announced investments of several billion U.S. dollars, which will be realized under the existing private-public partnership and very successful concession program. This program allows private investors interested in bidding on these BOT construction projects, to be granted with 15 to 30 year concessions via collection of toll-fees. These projects range from inter-regional and rural highways, to hospitals and jails. There are also projects that would include ports. The construction industry sees to gain from projects such as: • Maintenance of past DOP projects • Improvements upon coastal infrastructure • Increased physical connectivity of area ports • Development of port cities With a goal of spending USD$3 billion by 2020, DOP is prepared to provide funds towards some of these projects, and the umbrella MOP appears poised to invest money towards similar goals. Let us help you export. export.gov The U.S. Commercial Service — Your global business partner. 800-USA-TRADE Chile: Maritime Ports ‐ Port Investment and Opportunities 4 Market Entry Seaports are instrumental in the movement of merchandise in Chile. Approximately 97 percent of exports and 59 of imports go through seaports, of which the most important state-owned ports are the Ports of San Antonio and Valparaiso. The primary cargoes loaded in Chile’s ports are materials relating to metallurgy and minerals (32%), wood (15%), paper (10%) and copper (8%). By contrast, the main cargoes unloaded in Chile’s ports are liquid and solid fuels (60%), cereals and meals (7%), and general chemical products (6%). Exports can also be generalized geographically – ports located north of Santiago, from Arica down to Quinetor, often load cargo related to metallurgy or metalic coppers. By contrast, ports to the south of Santiago are the major exporters of wood and paper products. And the aforementioned ports of Valparaiso and San Antonio are the major exports of Chile’s fruits and vegetables, and seafood, while also exporting copper, wood, paper, and the bulk of the other commodities traded by Chile. Imports tell a different story for Chile – as the main imported good for the country is liquid and solid fuel as Chile is a predominantly energy dependent country. Many of the ports are active – at various levels – in the importation of fuels and other goods, but the privately owned Port of Quintero easily handles the largest supply, unloading just under 12,000,000 metric tons of fuels in 2007. Valparaiso and San Antonio remain active ports in the unloading of cargoes, acting as prominent players across all commodities imported into Chile. Let us help you export. export.gov The U.S. Commercial Service — Your global business partner. 800-USA-TRADE Chile: Maritime Ports ‐ Port Investment and Opportunities 5 Ports By Ownership Type: The following tables provide information on the amount of cargo loaded and unloaded in each of Chile’s ports, as well as the primary cargoes loaded and unloaded. These charts