Logística e Infraestructura de Transporte: Clave de la Competitividad

(1)

Logística e Infraestructura de

Transporte:

Clave de la Competitividad

Presented to:

XV Congreso Anual

Latinoamericano de Puertos

28 de junio, 2006

Hilton Colón Hotel

Guayaquil, Ecuador

Presented by:

Robert West

Managing Director

Global Trade & Transportation

Global Insight

781-301-9078

robert.west@globalinsight.com

(2)

Agenda

•

Global issues and trends affecting the

world and U.S. economic outlooks

•

Implications for sea trade in the U.S. and

Latin America

•

Are we ready – can we compete?

(3)

Key Global Issues and Trends

• Will higher oil prices derail the recovery?

• Will the dollar crash?

• China: Hard or soft landing?

• New and important players?

NO - Not at $70-75

NO, but . . .

SOFT

(4)

Has world economic growth peaked? - - - yes, but…

0

1

2

3

4

5

6

7 ₉₈

₉₉

₀₀

₀₁

₀₂

₀₃

₀₄

₀₅

₀₆

₀₇

₀₈

9

0 (Percent change, real GDP)

(5)

Container trade normally grows faster than the

world economy. This year should be very healthy.

0

2

4

6

8

10

12

14 1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

World

TEUs

2006

GDP 3.7%

TEUs 8.2%

2006

GDP 3.7%

TEUs 8.2%

(6)

While all regions have increased trade,

growth is uneven

Trade growth is influenced by factors beyond the

underlying demand for consumption goods.

• Global logistics sourcing by industry

• Emergence of global trading blocks

• Growth of regional trade facilitation

• Harmonization of trade and regulatory policies

• Trade security standards and information flows

• Increasing freight traffic and congestion along trade

corridors and at ports and border crossings

(7)

Trade is linked to real GDP growth - uneven across the

world – and emerging markets grow fastest.

0

2

4

6

8 NAFTA

Other

Americas

Western

Europe

Emerging

Europe

Japan

Other Asia Mideast &

Africa

2004

2005

2006

2007

(8)

Europe in the long term – a great museum?

(9)

Growth is not uniform: Market shifts are coming

and will affect U.S. trade and transportation

(Country GDP Rank in Billions of Real (2003) U.S. Dollars)

Italy

Brazil

Russia

France

Brazil

Italy

Russia

India

Germany

France

Russia

India

Brazil

U.K.

Germany

France

Italy

China

Russia

Brazil

U.K.

India

France

Italy

Brazil

Russia

U.K.

China

France

Japan

India

Germany

U.K.

India

Japan

Germany

U.S.

China

Japan

China

U.S.

2050

2040

2030

2020

2010

2000

(10)

Asia is 2/3 of global container trade.

TRANS

-

PACIFIC

19.3 million TEU

10.8 % Growth

ASIA

-

EUROPE

12.1 million TEU

12.2% Growth

TRANS

-

ATLANTIC

5.4 million TEU

5.7% Growth

INTRA

-

ASIA

26.2 million TEU

(including Australia,

Indian Subcontinent and

Middle East)

10.0% Growth

(11)

The U.S. expansion is entering a new phase –

a significant slowdown is here.

• The U.S. economy had strong momentum entering 2006.

• 5.3% in the first quarter

• Just 2.7% in the second!

• Consumer spending growth will slow in response to higher

interest rates, high energy prices, and a weak housing market.

• Home sales and construction are declining as affordability

deteriorates; hurricane rebuilding will cushion the fall.

• Business investment is now leading the expansion, supported

by record profits and global market growth, especially Asia.

• Non-residential construction is poised to grow, at last.

• Further dollar depreciation is expected, so exports will

improve.

(12)

(Annual percent change, 2000 dollars)

(Unemployment rate - %)

The U.S. economic expansion is slowing quickly.

-2

0

2

4

6

8 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2

3

4

5

6

7 Real GDP Growth

Unemployment Rate

Real GDP

2006: 3.4%

2007: 2.6%

(13)

A Record U.S. Current Account Deficit – over $800 billion

as far as the eye can see.

-1,000

-800

-600

-400

-200

0

200 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

-8

-6

-5

-3

-2

0

2 Current Account Deficit

Deficit as % of GDP

(14)

The U.S. dollar will depreciate further – steady declines

through 2008, due to huge current account deficits.

(2000=1.00)

0.7

0.8

0.9

1.0

1.1

1.2

1.3

19

98

199

9

200

0

200

1

200

2

20

03

200

4

20

05

200

6

200

7

20

08

20

09 Industrial Countries

Developing Countries

This could be 10-30%

drop in the dollar.

(15)

The U.S. was the engine of growth, but in 2006 this will

shift to Asia. Asia is supporting world growth.

• Inflation remains under 4% in most Asian economies

— exceptions include Indonesia, India, and the

Philippines.

• High saving rates mean these economies will

continue to be capital exporters - investors in ports

and transportation infrastructure (even Canals?).

• China will have a soft landing.

• Exchange rates across Asia will rise as part of a

global trade adjustment.

(16)

U.S. TEU imports will still grow by 8% in 2006, and by

6.2% in 2007. Chinese imports will grow fastest.

China

Other Far East

US TEU Imports

0 2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

China was 1/3 of US imports

in 2000 and will be ½ by 2010.

_China

(17)

India could align with China and create a powerhouse

from toys to high tech.

$800 billion GDP

8%/year total TEU growth to 2010

6.8% GDP growth this year (2006)

1.1 billion population is growing 1.5%

annually

India and China Real GDP Growth Rates

0.0 2.0 4.0 6.0 8.0 10.0 12.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

(18)

China’s momentum is hard to slow down, but the

government is trying - - - soft landing most likely.

1980

2004

Real Per Capita GDP (2004$)

$171

$964

Real GDP as $ of US Level, 2004$

3%

14%

Real GDP growth in previous 20 years

5.3%

8.6%

Population (millions)

981 1,300

Trade's share of GDP

15%

85%

Number of Supermarkets

0 70,000

Current Account Surplus ($ billions)

1

266 Agriculture's share of GDP

30%

15%

(19)

As China expands its markets, the U.S. becomes less

important.

US Share of China Exports

0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TE U s 29.0% 30.0% 31.0% 32.0% 33.0% 34.0% 35.0% 36.0% 37.0% 38.0% 39.0% 40.0% US S h a re

(20)

Market penetration in some sectors is reaching

saturation …

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Footware Electrical Appliances and Houseware Textiles

Footwea

r

Electrical Appliances

(21)

But look at China’s penetration of new market

segments.

0% 10% 20% 30% 40% 50% 60% 70% 80%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Semi-conductors, Electronic Tubes,etc

Office and Computing Machinery

Office and Computing

Equipment

Semi-conductors,

Electronic parts, etc.

(22)

China Economic Summary

• There appears to be little risk at the

macro-economic level. Even with a “soft landing’ we will

see growth in excess of 8% GDP through 2010.

• The exchange rate will revalue smoothly.

• The financial markets, although not exactly stable,

are also not seriously in danger of toppling.

• So long as Foreign Direct Investment continues, we

will see the continuation of an export driven

(23)

Agenda

•

Global issues and trends affecting the

world and U.S. economic outlooks

•

Implications for sea trade in the U.S. and

Latin America

•

Are we ready – can we compete?

(24)

China’s container exports continue to grow at

double-digit rates – NAFTA’s share has hit 45%.

0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

NAFTA World Total

TEU exports climb by

14.3% in 2006.

(25)

Mexico joins China’s million-TEU club

2010

2006-10

United States

12,084,640

9.8%

Japan

3,778,186

9.1%

Mexico

2,798,144

15.5%

South Korea

1,862,507

11.4%

Germany

1,554,331

10.1%

United Kingdom

1,447,126

11.2%

China/HK - Largest Export Markets

Mexico already imports 1.5 million full TEUs from

China (2006).

(26)

Punta Colonet

Some Mexican alternatives are being discussed – to

serve the US market. Even more attention if the Panama

Canal is not expanded.

Lazaro Cardenas

Manzanillo

• Container volumes will continue to

grow.

• USWC port and rail congestion could

return – 5 years?

• All-water service costs may go up.

(27)

Latin America’s sea trade is expected to grow in line with

general world sea trade growth. Imports will outpace

exports.

0 2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Latin America Imports

Latin America Exports

2006

Cr% 06

2005-10

2005-20

Imports

4,429,737

6.1%

4.9%

4.4%

(28)

When Mexico is added, the growth is enormous in the

future. Imports from the Far East – shown below.

0 2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

TEUs to Latin America - West Coast

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Agenda

•

Global issues and trends affecting the

world and U.S. economic outlooks

•

Implications for sea trade in the U.S. and

Latin America

•

Are we ready – can we compete?

(30)

Why do countries fail? 3 main reasons

1. DICTATORS

• They cannot manage everything, especially people’s desire to eat

and be free

2. SHUTTING THE DOORS TO REST OF THE WORLD

• Domestic costs grow out of proportion

• Cannot take advantage of better products, lower prices, from

abroad

• Customers are not satisfied – product selection is limited

• Lack of foreign competition causes industries to stagnate

• Investments from outside disappear

3. DISEASE

(31)

Keys to competitiveness

• Open all the doors to trade –

• The more open, the better

• The ports and inland infrastructure must be made

more productive and expanded in some cases.

• Asian ports have increased productivity much

faster than European or U.S. ports.

1999

2004

CAGR

Asian Ports

9,272

16,595

12.3%

European Ports

4,284

6,396

8.3%

U.S. Ports

2,894

4,018

6.8%

Source: John Vickerman, TransSystems, CI Database,

Seaports of the Americas

(32)

Container vessel wait time at LA/LB – a short interruption

of service, affecting productivity, can cause . . .

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(33)

… a fast shift by carriers to alternate routes. Here, carriers

shifted to the US East Coast through the Panama Canal.

US Coastal Shares, from China, Japan, Taiwan, and S. Korea

46.0%

47.0%

48.0%

49.0%

50.0%

51.0%

52.0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

USEC

USWC

62% of the growth in US imports

from North Asia shifted to the

USEC in 2002 – fairly elastic.

And a $13 billion

impact on the U.S.

economy, in 10 days

(34)

Ports are potential bottlenecks in the supply chain.

Proveedor

Fabricante

_Fabricante

Puerto

_Puerto

Puerto

_Puerto

Almacén

_Almacén

Distr.

Final

Distr.

Final

Información

Proveedor

Fabricante

_Fabricante

Puerto

_Puerto

Puerto

_Puerto

Almacén

_Almacén

Distr.

Final

Distr.

Final

(35)

There is a severe need to expand port capacity and

throughput capability.

• By 2010, there will be a shortfall of 4.1 million

TEUs just in the U.S.*

• LA/LB is headed for a capacity crunch

• If port productivity remains unchanged, we

will need 405 Ha of new container terminals.*

• Even if the Panama Canal is expanded, we

will hit the capacity crunch before 2014.

(36)

If more capacity is not provided in the ports in all of the

Americas,

•

Cost of containerized goods will rise.

•

“Just in time” will become a term used in

textbooks only.

•

Shippers and carriers will look for new

routes.

•

There will be winners and losers in the

(37)

What can we do?

• Ports should expand the terminals and yards.

• This is difficult in many in-city ports

•

Productivity should be improved, to reach the

levels already achieved in Asia.

•

New technology should be introduced in the

yards.

• At the berth

• In the storage yard

• At the gate – better information and weighing technology

•

Labor and management should work together

to allow new technology to be used in the

ports.

(38)

All of the stakeholders should come together . . .

Freight Stakeholders Coalition

Inland Rivers Ports & Terminals Assoc.

American Trucking Assocs..

Association of American Railroads

Coalition for America’s Gateways and Trade Corridors.

Intermodal Association of North America (IANA)

Waterfront Coalition

International Mass Retailers Assoc.

National Assoc. of Manufacturers

US Chamber of Commerce

World Shipping Council

(39)

Agenda

•

Global issues and trends affecting the

world and U.S. economic outlooks

•

Implications for sea trade in the U.S. and

Latin America

•

Are we ready – and can we compete?

(40)

Bottom Line

• World economic growth will remain robust in 2006, but will

slow by year end. Enjoy it now.

• Emerging markets of Asia and Europe will experience the

strongest growth; the Eurozone and Japan will lag behind.

• Enormous growth in container traffic within the next 5 years

will push many ports to their full capacity limits.

• The key to competitiveness is to expand port and inland

infrastructure and make it more efficient.

• If the Panama Canal is not expanded, the entry points may

expand to Canada and Mexico.

• Latin America’s competitiveness starts, and ends, with

efficient infrastructure to move the containers that are

coming . . .and, they are coming!!!!!

(41)