U.S. trade with Latin America is poised to expand in the coming years, which highlights the need to accelerate port and infrastructure development in the region.
In fact, if Latin American nations don’t address their transportation infrastructure deficiencies soon, inadequate port, road and rail capacity could place an artificial cap on the region’s rapidly growing trade volumes with the world.
U.S. imports from Central and South America in 2014 are projected to increase faster than U.S. exports to Latin America, according to JOC Economist Mario Moreno.
Imports from the west coast of South America increased about 8 percent in 2013 and should expand approximately 12 percent this year. Agricultural-based products such as fruit, vegetables and wines are some of the larger product categories, Moreno said.
Imports from the east coast of South America will drop 1.5 percent year-over-year in the first quarter of 2014, but will accelerate by double digits for the remainder of the year, according to projections by PIERS, the data division of JOC Group Inc.
U.S. imports from Central America increased an estimated 3.6 percent in 2013, less than half the 7.9 percent growth recorded in 2012, in part because of falling demand for menswear and underwear. Imports from Central America should return to about 6 percent growth in 2014, Moreno said.
U.S. exports to the east coast of South America will remain below 4 percent through 2015. Exports to the west coast of South America grew 6.9 percent in 2013, but will drop to just above 1 percent in 2014 and 2015, Moreno said.
Exports to Central America will take a hit over the next two years because reduced earnings from commodities and tourism will limit income in the region, he said.
Carriers in the coming years could reshuffle port calls in Latin America as they introduce ever-larger vessels into their services linking the region with Europe, Asia and North America. Juergen Pump, senior vice president at Hamburg Sud, told the South Carolina International Trade Conference in September that vessel sizes have almost doubled over the past decade. Container ships with capacities of about 7,000 20-foot-equivalent units are common today, and it won’t be long before 9,000-TEU ships are calling in Latin America.
These larger vessels call for deeper harbors, larger marine terminals and the use of modern cranes and yard equipment. Because carrier assets are mobile, lines will bypass those ports that can’t efficiently accommodate the mega-ships in favor of those ports that have invested in modernization.
Of even greater significance is the need for massive investments in inland road and rail infrastructure in South America. The region’s unique geography means minerals and agricultural products sourced in the continent’s interior are separated from the seaports.
Commodities of all types are especially sensitive to transportation costs, and the cost of transporting these products to the coast reduces the competitiveness of South American exports in the global marketplace. Brazilian farmers, for example, are at least as efficient in growing soybeans as their competitors in the U.S. are, but inefficient transportation prices them out of some markets.
The high cost of inland transportation and excessive spoilage of products because of longer transit times have kept Brazil from expanding its market share in the agricultural sector.
Brazil, by far the largest economy in Latin America, in 2010 announced a massive capital program of $880 million, including $53 billion for highway and rail projects. Governments in other nations also have embarked on infrastructure development programs commensurate with their size.
The transportation sector in many Latin American nations is racing against time because ocean carriers have accumulated so many mega-ships that they can deploy the vessels only in the larger east-west trades.
Shipping lines, then, will continue to cascade large vessels from the Asia-Europe and trans-Pacific trades to Latin America. The carriers have been blunt about the fact that some ports will be winners and some will be losers as this scenario plays out.