Latin Finance - July 2008 - (Page 33)

peru port investment “We see Callao as quite easily becoming a cargo logistics center for the entire west coast of South America. This would encompass not only the transshipment of containerized cargo to the other countries in the region via a world-class container terminal, but moving cargo into the interior of South America through an intermodal transportation network,” Maciek Kwiatkowski, GM of DP World in Peru, tells LatinFinance. There is also a plan in the works to eliminate a pier used for mineral exports, freeing up more space for container cargo. The transport ministry sees this happening after 2010, but the project is contingent on the development of alterative ports, primarily in the northern limits of the Lima department and in the central Ica region. There are 30 private port projects on the drawing board. trade levels through 2015. Right now containers are stuck in the port for up to five days, twice the regional average. According to the US Trade Representative’s office, each day a package remains in a warehouse is equivalent to a 1% tariff. Importing Private Cash Port operators say the only solution for Callao is to continue bringing in private investors, either following the DP World model or simply privatizing. They also see the need for diversification, with Callao as the hub, but satellite ports up and down the coast dealing with specific cargo like minerals and grains. The García administration has partially embraced privatization at ports, creating conflict with the private sector, as well as congress, including members of the president’s own party, and the stevedores union in Callao. Legislation has been introduced in congress to legally block the privatization of the National Port Authority (ENAPU). Opponents of privatization are pushing for ports to remain public and want the administration to loosen purse strings, arguing that Peru now has more than $35 billion in reserves, so it could spend some money modernizing ports that have been languishing for decades. The government has meanwhile denied that it has any plans to privatize Callao, something private operators say is a mistake, but it is interested in moving as quickly as possible to offer concessions for seven other shipping hubs. Privatization agency ProInversión calculates a minimum investment of $400 million in total. “The government has an ambitious plan to privatize regional ports, with the first phase concluded this year. Regional ports will certainly help alleviate the pressure on Callao,” says Alvaro Galindo, GM of Santa Sofía Puertos, which manages Peru’s only private port – Matarani in Arequipa – and is working on two port projects north of Callao. The first two ports, Piura in the north and Pisco on the south-central coast, should be offered in the final quarter of the year. Others up for privatization in late 2008 and early 2009 include Ilo, Salvarry, and the jungle river ports at Iquitos, Keeping Pace with Trade Investment, whether public or private, is needed urgently simply to keep pace with Peru’s international business expansion. Trade last year exceeded $48 billion, with exports at $27.6 billion and imports of $20.4 billion. Imports in 2007 grew 33% over the previous year, while exports grew 15%, according to the ministry of foreign commerce. This trend continued through the first four months of year. Exports were $10.1 billion, up 28% over the JanuaryApril period in 2007, while imports jumped 52% to $8.9 billion. Traffic should increase at an even faster pace now that Peru has signed free-trade deals with the US, Canada and Singapore, and is moving ahead at lightning speed on a deal with China. The García administration forecasts trade topping $80 billion by 2011. “Our ports are a bottleneck to international trade. We urgently need investment to close an infrastructure gap that has been widening for decades. Even the government estimates the gap at $22 billion,” Carlos Vargas Loret de Mola, president of the Peruvian Association of Port Operators, tells LatinFinance. He estimates that at least $200 million is needed in the short term to keep Callao from getting backlogged as trade increases. Another $500 million would be required for the port to handle estimated Pucallpa and Yurimaguas. The river ports are part of an ambitious project that will connect Brazil and Peru through river transportation corridors. However, unionized workers are blocking the privatization process and wield considerable strength. A 10-day strike in late 2007 over wages and working conditions caused an estimated $500 million in losses. The administration reacted quickly in April when workers stayed off the job for half a day to protest privatization. President García says he will militarize ports if unions strike. Aldo Granada, a member of Callao port’s union leadership, says the union is not opposed to private investment, but believes that ports should remain in public hands. The union favors the DP World model, because it injects capital and expands installation, while conserving the role of ENAPU. A number of private companies are avoiding the debate by positioning to develop their own ports. Galindo’s company was granted two temporary contracts in December 2007 to carry out feasibility studies – economic and environmental – for two ports, one in Ancon, not far from Callao, and Huacho, 130 kilometers to the north. Ancon, which would cost $60 million to build, will specialize in handling imports of grains and cooking oils. Végueta in Huacho would require $50 million and handle the export of mineral concentrates. There are also plans for two new ports located near Callao and a series of specialized hubs along the coast. Brazil’s CVRD is looking to develop a deep water port at Bayóvar to move phosphates from a mining concession it is developing nearby. State-owned oil company Petroperú is meanwhile considering a concession at a small petroleum depot it has near Bayóvar to transform it into a hydrocarbon storage hub that would rival the region’s largest facility of this kind, in Panama, claims Petroperú President César Gutiérrez. “There is going to be substantial change in the coming year as a result of the projects planned or underway at Callao and elsewhere. After decades of delays I think there is now a vision that will allow Peru to have world-class ports,” says Galindo. LF July/August 2008 LATINFINANCE 33

Table of Contents Feed for the Digital Edition of Latin Finance - July 2008

Latin Finance - July 2008 Contents Investment Banking Outlook Compensation Survey Colombia Investment Banking Borrowers vs. Investors Banorte Profile Braskem Financing Strategy Brazil Hydro Finance Peru Port Privatization Panama Money Flows Argentina Local Markets Guide to Banking Technology Who Said That?

Latin Finance - July 2008

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