BUENOS AIRES PORT SELL-OFF A MODEL \ BOX TRAFFIC HAS RISEN 230 PERCENT SINCE THE SALE

BUENOS AIRES PORT SELL-OFF A MODEL \ BOX TRAFFIC HAS RISEN 230 PERCENT SINCE THE SALE

As Brazil and Uruguay prepare to give the private sector control of key ports, there is pride in neighboring Argentina at being first out of the blocks.

This port, to the satisfaction of its officials, is the model for South American privatization.Before the privatization in 1994, ''the port was in terrible condition and Argentina's economy depended heavily, as it does today, on its imports and exports. Something had to be done, so, the government sold it,'' Oscar Orlando Perez, the port's general manager, said in a recent interview.

The pride doesn't exist only at the top of the corporate ladder. One of the port's crane operators, a veteran of 12 years that has seen the port managed by both government and private hands, described it as a ''dirty port'' before the sale - referring to both its finances and management.

''Now we're proud to come to work, our jobs are clearly defined and we can see the results of our work,'' he said.

Before the transformation, the port suffered, like most of South America's government-run ports still do, from poor management and maintenance, lack of investment and outdated technology. The result was high costs and little earnings.

The transformation since the sale, which divided the port into five terminals sold to five groups, has been astounding. Container traffic has jumped by 230 percent, operating costs have been cut by as much as half, and the average period a container ship stays in port has fallen from three days to 1.5 days.

PRODUCTIVITY UP

Productivity per employee has more than tripled to 3,050 tons annually from 800 as the port cut the number of employees on its payroll by more than 80 percent. It now costs about $130 to handle an import container, compared with $450 in 1991.Traffic rose 35 percent last year, and is expected to jump another 15 percent this year. Cargo shipped inside the 1 million containers handled last year was worth more than $20 billion.

Port authorities from around the world are visiting what's been dubbed ''the model port of South America,'' located in the deep-water River Plate estuary just miles from the Atlantic Ocean. Brazilian investors and German engineers are trying to learn from the successful management of the private operators. Players from both countries recently won the bidding for Terminal de Containers in Santos, the largest box port in Brazil and Latin America.

''We offer technology and services like those found in the best European and American ports. It's the first modern port in South America,'' said Mr. Perez, who started working at the port a decade ago.

Under the agreement the government, which still owns the port and land, is bound to do all ''compulsory work.'' That has included beefing up freight platforms, adding a functional drainage system and deepening the waterways, as well as general supervision.

Meanwhile, the terminal operators are encouraged to do all ''optional work'' on their own terminal to help make their own operations run smoother. That may include improvements to gantry cranes pavement, warehouses, and the construction of garages.

Since the sell-off, the concession winners have spent more than $300 million to recover 222.4 acres of poorly used land and buy 10 new cranes, for a total of 13. The concession holders make the investments at their own pace. The system promotes better service as the companies compete with each other, said Jorge Francisco Marin, chief financial officer of Buenos Aires Container Terminal Services SA, or Bactssa.

''We spend a lot of money to make our customers happy. This is the key to doing business here,'' he said.

SOME PAIN, SOME GAIN

The transition to private operation hasn't been without some pain.

Argentine President Carlos Menem began rapidly selling inefficient government firms in the early '90s to revive the country's failing economy. Some say the sales happened too quickly. In the case of Buenos Aires port, the question of control between two different provincial governments was never resolved - causing differences in governmental regulations that distort the competitive playing field.

The companies that won the rights to operate terminals inside the city of Buenos Aires are Terminales Rio de la Plata of Australia and Argentina; Terminales Portuarias Argentinas, a U.S.-Argentine group; Gabriel of Argentina; Bactssa of Argentina and the Philippines; and Terminales Portuarias Argentinas, which is owned primarily by Argentine companies, although a U.S. company has a small stake in it.

In addition, Argentina's Exolgan won the rights to Doc Sur, which was built later to accommodate increasing traffic. It lies south of the city in Buenos Aires province. Under an agreement, the local government still owns the port and the land.

DIVIDED GOVERNANCE

Thus governance of the Buenos Aires port is divided between the city of Buenos Aires and Buenos Aires province. The city charges higher taxes on the port managers than does the province, allowing the southernmost terminal either to charge less for its services, or to pocket the difference.''When a ship enters my terminal, I collect some $3 per ton as a city tax, and I turn around and give it to the government,'' Mr. Marin said. ''At Doc Sur, Exolgan - the Argentine company operating Doc Sur - collects the tax and banks it. The playing field must be even. That is what we want. That is fair.''

The groups are trying to resolve the issue with the Argentine government.