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Este informe no está disponible en español. CARIBBEAN BUSINESS Ship It In, Ship It Out Once considered the ‘Crossroads of the Caribbean,’ Puerto Rico has implemented modern transportation technology to become the ‘Crossroads of the Globe.’ By MARIALBA MARTINEZ February 27, 2003 Opportunities on the fast track: Wherever an airplane can fly or a ship can sail, Puerto Rico can do business In the 1950s, when Operation Bootstrap was igniting Puerto Rico’s industrial development revolution, it often took 30 days for cargo to get to our "isolated" shores, another week or two to get it unloaded, and up to a week to get it to its final destination on the island. Today, the fastest U.S. vessels can travel between Puerto Rico and the U.S. mainland in three days, and next-day airfreight services are available from nearly every city in the U.S. as well as from Madrid, Panama City, and other international centers. Technological advances have placed Puerto Rico at the center of a global transportation network. In other words, wherever an airplane can fly or a ship can sail, Puerto Rico can do business. . .and can do it fast. Statistics from the Puerto Rico Ports Authority indicate a total 20.4 billion pounds of air cargo and maritime cargo were moved during fiscal year 2002. Maritime carriers handled approximately 19.7 billion pounds, or 96% of the total, while airfreight companies took care of the remaining 731.4 million pounds, or 4%. San Juan’s Port of Puerto Nuevo, the island’s principal maritime facility, is the fourth largest container port in North America and the busiest and largest commercial port in the Caribbean. Approximately 1.7 million TEUs (a TEU is a unit of measurement equivalent to one 20-foot container) passed through the Port of Puerto Nuevo in 2002, according to statistics gathered by CARIBBEAN BUSINESS. During fiscal year 2002, the island’s four U.S.-flagged maritime carriers--Crowley Liner Services (Puerto Rico), CSX Lines, Sea Star Lines, and Trailer Bridge--handled approximately 724,500 TEUs, a 5.7% increase compared with 685,500 TEUs in 2001. This translates roughly into 19.6 billion tons of cargo sailing in and out of the island’s largest maritime facility. Since cargo headed for foreign countries doesn’t have to transship through a U.S. port, international carriers are established on the island, many of them by local agents. International carriers may have handled an additional 975,500 TEUs, representing $5.36 billion in goods exported to foreign countries during fiscal year 2002, a 1.5% reduction from $5.44 billion the previous year, while the value of foreign imports increased 7.6% to $13.74 billion from $12.77 billion. Foreign carriers in Puerto Rico include Denmark’s Maersk Sealand, Norway’s Hual SA, Taiwan’s Evergreen Marine Corp., the United Kingdom’s P&O Nedlloyd, and Singapore’s NOL/APL. Planning Board trade statistics for fiscal year 2002 indicate the top foreign countries to which Puerto Rico exported goods were the United Kingdom, the Netherlands, the Dominican Republic, Belgium, Japan, Germany, Italy, France, and Ireland. South Korea, Argentina, and India are also rapidly emerging export markets for the island. Technology--such as electronic shipment tracking, gyroscopes, 9,000- to 20,000-horsepower engines, ships that travel at 20 knots, bowel and stern thrusters that provide savings in docking fees, state-of-the-art container units for all kinds of cargo, and gantry cranes to handle cargo on and off the ship--has slashed processing time onshore. New highways have made it possible to travel to any point on the island in less than three hours. The island’s importers and exporters depend on this transportation network to move freight reliably and safely in the shortest time and in the most cost-effective way. How is it done and, more important, how can you do it? CARIBBEAN BUSINESS asked the experts. "About 93% of our cargo is maritime and the rest travels via airfreight," said Jose Moran, purchasing manager of Aireko Construction Corp. "Modern technology provides certain advantages that weren’t available 20 years ago. We have fast communications and easy-to-read shipping information. However, real-time data sometimes isn’t available, which may mean delays when receiving shipping documents." The freight industry was revolutionized in the 1970s with the arrival of the fax machine, which enabled nearly instantaneous communication between different points in the world. Edmundo Rodriguez, president of customs broker Nestor Reyes Inc., calls it the backbone of his company and of the industry. "Before faxes, cargo would sometimes arrive before the shipping documents, adding warehousing costs to the client," said Rodriguez. "Faxes and now e-mail allow for shorter administrative cycles, with ships’ cargo ready to be unloaded as soon as it arrives at the port, lowering inventory costs." The island’s cargo transportation industry is connected worldwide through maritime and airline carriers offering a multitude of services. Cargo can arrive at overseas destinations overnight through aviation companies that specialize in freight transport or through passenger airlines that provide special cargo services. On the other hand, maritime carriers’ competitive rates and huge amounts of space are convenient for companies with bulk-cargo transportation needs. Statistics indicate the value of Puerto Rico’s total exports was $46.90 billion in fiscal year 2002, a 0.57% reduction in comparison with $47.17 billion in 2001. The value of imports also fell, from $29.15 billion in fiscal year 2001 to $28.98 billion in fiscal year 2002, a 0.58% contraction. Sailing the seven seas CSX Lines, as Maersk Sealand’s agent in Puerto Rico, has the most diverse itineraries of Puerto Rico’s four local carriers. In December 2002, it was sold by parent company CSX Corp. to Washington’s The Carlyle Group for $300 million. The transaction is expected to be finalized in summer 2003, when the ocean carrier’s name will be changed to Horizon Lines Ltd. "CSX Lines provides carrier services to domestic markets such as Puerto Rico, Alaska, Guam, and Hawaii," said Gabriel Serra, CSX Lines division vice president & general manager for Puerto Rico. "Each week we have three sailings to and from San Juan to Jacksonville, Fla.; one sailing to Elizabeth, N.J.; and another to Houston." Maersk Sealand was recently named 2002 Company of the Year by Containerisation International, a British magazine. The carrier’s financial reports showed its operation was financially successful and not cross-subsidized by parent company A.P. Moller’s considerable interests. The company operates 267 vessels, has a capacity of more than 700,000 TEUs, and offers 93 separate services worldwide. Sailing the U.S., the Caribbean & Latin America "Crowley’s barges make four southbound / northbound sailings from Jacksonville to San Juan and one southbound / northbound sailing from Pennsauken, N.J., every week," said Crowley spokesman Mark Miller. "With five sailings in each direction, there is almost a sailing a day." The New Jersey-based carrier also offers services between the U.S. mainland and the U.S. Virgin Islands, the Dominican Republic, and Eastern Caribbean islands. The carrier’s international services extend to Latin American countries such as Guatemala, Honduras, El Salvador, Colombia, Venezuela, Costa Rica, Panama, Nicaragua, and Mexico. It is also the only company with direct service to Cuba. Sea Star Lines also transports freight to and from the U.S. and Puerto Rico, the Dominican Republic, and the U.S. Virgin Islands, said Sea Star General Manager John Emery. The industry’s newcomer, Sea Star bought Sea Barge in 1998 and proceeded to switch its equipment to self-propelled vessels. "Sea Star is a regional carrier with agreements with other worldwide carriers to bring cargo to Puerto Rico, but our company deals strictly in domestic cargo," said Emery. "This is where we make our more direct effort. Of course, we can get a container to another carrier that delivers in the Caribbean and will accept cargo from the Far East to the Caribbean." Trailer Bridge has four vessels making two sailings each week between Jacksonville and San Juan. Trailer Bridge President John McCown said, "One sailing involves two of our tripledeck roll-on / roll-off barges, which at 736 feet are the largest such barges in the world. The other sailing involves two of our Triplestack Box Carriers, the newest vessels in the Puerto Rico lane and the first in the world built exclusively to handle 53-foot containers," said McCown. Trailer Bridge has another three Triplestack Box Carriers chartered out to operators for various nonlocal-project freight movements. In addition, the carrier owns more than 3,000 containers and 200 tractors, representing an investment of more than $100 million in Puerto Rico. Flying freight Most airfreight is made up of time-sensitive, temperature-controlled, or lighter-load cargo such as chemicals, food products, U.S. Postal Service mail, business documents, and miscellaneous packages. While airfreight accounts for only 4% of the total cargo volume entering and leaving the island, its value is estimated at $30.4 billion, or 40% of the total trade value ($76.1 billion). In manufacturing products alone, the value of chemical industry exports was $3.6 billion during fiscal year 2002, a 12.5% increase compared with $3.2 billion in fiscal year 2001. Chemical product imports were valued at $8.9 billion, a 25.3% increase over fiscal year 2001’s $7.1 billion. Carolina’s Luis Muñoz Marin (LMM) International Airport, at 1,600 acres, is the largest air cargo and passenger terminal in the Caribbean and Latin America and ranks among the 20 largest airports in the U.S. LMM, a hub for major and feeder airlines carrying cargo and passengers to the island’s 10 regional airports and the Caribbean, moved 731.4 million pounds of cargo during fiscal year 2002, a 6.2% reduction in comparison with 780.1 million pounds in fiscal year 2001, a reflection of the weak economy. According to data from the Puerto Rico Ports Authority, nearly 40 airlines offer direct or indirect airfreight services from Puerto Rico to most major cities in the U.S. and Canada. In the Caribbean, frequent service is available to the U.S. Virgin Islands, the Dominican Republic, Jamaica, and Haiti as well as to other British, Dutch, and French islands. Regular airfreight transportation to Latin American countries is also available, with direct services to countries such as Mexico and Panama. From there, transshipment services are available to more than a dozen countries, including Colombia, Costa Rica, Guatemala, Nicaragua, Honduras, and El Salvador. Iberia has daily flights to Madrid, from where it transships cargo to dozens of other cities in Europe. U.S. hubs in New York, California, and Florida provide cargo service transfers to countries in Asia and the Middle East. Express air carriers such as FedEx Corp., UPS, the U.S. Postal Service, Emery Worldwide, DHL Worldwide, Airborne, and Amerijet handled 243.8 million pounds in fiscal year 2002, 33% of the total 731.4 million-pound market. FedEx clearly dominated the segment, carrying 101.3 million pounds, 41.5% of the 243.8 million pounds. UPS followed with 34.9% (85.2 million pounds). Airfreight services include overnight transport (one-and two-day delivery), door-to-door, airport-to-airport, station-to-station, priority mail, and, in some instances, electronic document transfer. Today’s information technology makes it imperative that companies also offer customers electronic services such as package traces, invoicing, and even package destination changes. Most carriers have networks throughout the Americas, Europe, and Asia. Passenger airlines have also benefited from carrying the lighter freight-loads that used to be transported on cargo vessels. American Airlines’ cargo division handled 62 million pounds of cargo in fiscal year 2002, or 8.5% of the total 731.4 million-pound market, making it by far the largest transporter of passenger cargo. "American Airlines moves freight all over the world, in addition to our direct flights and connections in the U.S.," said Russell Santiago, American Airlines cargo sales manager. "After 9/11 domestic freight-loads decreased in light of the affordability of maritime transportation, so our company began focusing on international markets. American Airlines is able to provide next-day service to San Francisco as well as to London, Paris, Brussels, Amsterdam, and even Tokyo, thanks to our frequent connections between San Juan and New York." The airline also offers competitive airfreight connections to destinations not on its itinerary through its OneWorld partners. Interairline agreements provide cargo transport services to Zurich, Bombay and New Delhi in India, and China. Another alternative is international airlines such as Iberia and Copa, which provide daily or weekly cargo transportation services to specific regions. Established in Puerto Rico since 1949, Iberia, Spain’s official airline, opened the doors to most countries in Europe, Africa, and the Middle East. "Iberia’s daily flights from San Juan connect through Madrid to almost all of Europe," said Iberia Cargo Supervisor Maria Carmona. "We can deliver packages to France, the United Kingdom, Italy, Portugal, Ireland, Israel, and Germany, in addition to cities like Brussels, Luxembourg, and Vienna. Other destinations include Casablanca, Morocco; Malabo, Equatorial Guinea; Johannesburg, South Africa; Dakar, Senegal, and Cairo, Egypt." Copa’s twice daily flights to Panama extend to 29 cities in 19 countries throughout the Americas and the Caribbean. Based in Tocumen International Airport, the airline flies at least twice a week from Panama to North America, the Caribbean, Central America, and South America. Copa also has a strategic code-sharing alliance with Continental Airlines which enhances its reach to nearly 500 cities around the world. Several domestic airlines in Puerto Rico also extend cargo services to the U.S. mainland and internationally. Among them are US Airways, Delta Air Lines, United Airlines Cargo, and Martinair Cargo. "US Airways flies to Philadelphia, Pittsburgh, and Charlotte [N.C.] three times a week," said US Airways Manager Jose Pla. "On Feb. 15 we added a direct flight to Boston. Through our international network, however, we fly daily to Madrid; Rome; Paris; London and Manchester, United Kingdom; Frankfurt and Munich, Germany, and Amsterdam, Netherlands. In May we will add Shannon and Dublin in Ireland." United Airlines Cargo provides freight transportation services from nine U.S.-based gateways to 29 countries on five continents. It flies four times a week from San Juan to Chicago, Washington, and New York. Martinair has 11 weekly flights from San Juan to its U.S. hubs in Miami and Orlando, Fla. From there it flies cargo to the Netherlands, Costa Rica, the Far East, Africa, and the Mediterranean. It has 180 destinations in Europe alone. Over the years, the island has woven a carefully constructed network of routes and connections to hundreds of direct destinations and thousands of cities worldwide. In these uncertain times, when global economies are waiting to see if the world’s superpowers reach agreements that will bring peace and an end to economic recessions, Puerto Rico’s connectivity to destinations across the globe is one of the island’s most appealing competitive traits. Impact of war on Puerto Rico hangs by a wing and a sail Cargo volume continues to dictate freight rates in most trade lanes, which means a military strike on Iraq could reduce the number of vessels available for maritime and freight cargo and impact our freight rates. However, cargo transportation companies interviewed by CARIBBEAN BUSINESS say they aren’t worried about service schedules affecting the island’s trade movements. Economic Development & Commerce Secretary-Designate Milton Segarra says the Puerto Rico government has already finalized an interagency contingency plan that includes private-sector representatives and should be ready for implementation if war with Iraq breaks out. "We have produced an all-encompassing plan to minimize the economic impact of a war," Segarra said. "It includes strategies in the energy, tourism, manufacturing, commercial, agricultural, public works, infrastructure, maritime & air transportation, price control, and job market sectors." Still, if war does break out, the estimates for its impact on the island’s economic growth are inauspicious. "If the war lasts a short time and the price of petroleum averages $31 per barrel or less, the impact on Puerto Rico’s economic growth in 2003 would be 1.6% to 2.2%," said Segarra. "If the war lasts longer than six months and the per-barrel price of petroleum averages between $32 and $38, it would have an economic impact of between 1% and 1.5%. A prolonged war, where the price of petroleum averages $41 per barrel or more, would bring almost zero growth." By February, the U.S. Maritime Administration (Marad) had activated 36 Ready Reserve Ships (out of 72 useful ships on reserve) to carry Military Sealift Command cargo related to the military buildup in the Middle East. While it is unlikely any of Puerto Rico’s freight vessels or airplanes will be called into service, cargo transportation companies could be affected by Marad’s use of their vessels elsewhere around the globe. "Various Crowley companies maintain, crew, and operate ships for Marad," said Crowley Liner Services spokesman Mark Miller. "These ships are owned by the government and aren’t used commercially. "While it is conceivable Crowley barges could be used in a time of war, we don’t expect that to happen because to use the vessel effectively, you would need a triple-deck shoreside ramp to load and discharge cargo," continued Miller. "Such ramps don’t exist outside of Crowley service areas. In the event of war, we expect no disruption of our service to the people and businesses of Puerto Rico." The airfreight industry, however, is perhaps more susceptible, since U.S. Federal Aviation Administration regulations dictate that all U.S. airplanes may be used during a time of war, whether to transport cargo or military personnel. Accordingly, to ensure a domestic air fleet is available at all times, foreign investors aren’t allowed to own more than 30% of a domestic airline. American Airlines Cargo Sales has been preparing for a military conflict by implementing contingency plans throughout its worldwide network. "If a war breaks out in Iraq, there are emergency plans ready to be implemented," said American Airlines Cargo Sales Manager Russell Santiago. "The airline has been focusing on international cargo business since 9/11 because we noticed a sustained reduction in domestic airfreight transportation. Adjustments to our itineraries, if any, will depend on the length of the war." US Airways Manager Jose Pla remembers the effects of the Gulf War and labor strikes on the airline and is optimistic. "In the past, our contingency plans have prevented any disruptions to our flight schedules. As we face a possible war, we may lose a plane’s capacity somewhere within our entire system, though probably not in Puerto Rico. However, that loss would be made up for by using smaller planes." Security at Puerto Rico’s ports Since 9/11, Puerto Rico’s air and maritime transportation systems have had to contend with new, tighter security regulations and new federal laws. William Uberti, local U.S. Coast Guard captain of the port, has already activated a sea marshal program for the ports in Puerto Rico and in the U.S. Virgin Islands. Sea marshals use risk analysis to select vessels for boarding. U.S. Coast Guard cutters and smaller patrol boats provide escort to make sure vessel masters and their crew maintain control at all times. The U.S. Customs Service has reported no incidents in Puerto Rico’s cargo industry since the agency began enforcing its 24-hour advance manifest regulation Feb. 2. "So far, the program has taken off with no problems, probably because of the two-month adaptation period started in December 2002," said U.S. Customs spokeswoman in Puerto Rico Isabel Vazquez. "Since carriers are supposed to be automated by now, the information is electronically relayed to U.S. Customs headquarters in Washington." The regulation demands maritime carriers or nonvessel operating common carriers (NVOCC) provide U.S. Customs with detailed descriptions of a container’s contents 24 hours before the container heads out from a foreign port to the U.S., including Puerto Rico. Violators will receive a "Do Not Load" message from U.S. Customs with instructions not to load the container. If disregarded, the container won’t be allowed to be unloaded at any U.S. port. It is the price of fuel, though, which has the greatest impact on cargo carriers’ bottom line. Some companies estimated oil prices have increased 35% to 50% in the past six months and up to 200% in the past year. Most of them are imposing bunker surcharges on oil to try to recover some of the costs (CB Feb. 13). "With oil prices continuing to rise, we are paying more than $30 per barrel," said Sea Star Lines General Manager John Emery. "The cost of fuel per slot, or container, was $201 on June 4, 2002. When things started to heat up with Iraq and after Venezuela’s hike, the cost rose to $208 in November 2002. In mid-January, the cost of fuel per slot was $272. I don’t expect that trend will change any time soon." Maritime and air cargo companies have also invested millions of dollars to secure their terminals’ perimeters and warehouses throughout Puerto Rico, installing new lighting and new fences and adding security guards. Freight companies have implemented new technology to track cargo and deliver on-time manifests to federal authorities, to improve efficiency in loading and unloading freight, and to keep track of personnel entering or exiting cargo areas. These are just some of the measures that have been taken to safeguard U.S. borders. In November 2002 President George W. Bush signed the law creating the Department of Homeland Security, which oversees 22 federal agencies and more than 3,000 employees nationwide. Its four divisions include Border & Transportation Security; Emergency Preparedness & Response; Chemical, Biological, Radiological & Nuclear Countermeasures, and Information Analysis & Infrastructure Protection. Existing federal agencies were incorporated into Homeland Security, among them the Customs Service, Immigration & Naturalization Service and Border Patrol, and Animal & Plant Health Inspection Service. The recently created Transportation Security is responsible for securing all modes of transportation and directly employs airport security and law enforcement personnel. The Federal Protective Service (General Services Administration), meanwhile, safeguards government buildings. President Bush also signed the Maritime Transportation Security Act of 2002 last November, which may have prompted the largest restructuring of U.S. transportation, trade facilitation, and border security sectors of the past 50 years. Federal agencies such as the U.S. Customs Service and the U.S. Coast Guard may now take an active role in drafting security plans at each port. The act also mandates that all ports must create local security committees and design comprehensive security plans, individuals who enter secure areas on vessels or facilities must have background checks and ID cards, incoming vessels must file 24-hour advanced manifests (which began on Feb. 2), there must be a sea marshal program at each port, and the Coast Guard must assess the security at certain foreign ports to determine if vessels will be denied entry to the U.S. This Caribbean Business article appears courtesy of Casiano Communications.
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