IFC is providing financing for a new container terminal in the Port of Santos—Brazil’s main port and the largest in Latin America—that will help address congestion and strengthen Brazil’s port sector. This is critical for competitiveness because about 90 percent of Brazil’s international trade is handled through ports. The new terminal will help address capacity constraints and will remediate an existing landfill at the project site. The company that will develop and operate the new container terminal, Brasil Terminal Portuário S.A. (BTP), will employ around 3,000 workers during construction and is expected to create about 1,500 direct jobs and 9,000 indirect jobs during operations. IFC structured the financing and is providing a long-term loan of $97 million to BTP, and also mobilized $582 million for the $908 million project through its syndication program. The financing represents IFC’s largest syndication and port investment globally. BTP will spend about $105 million to clean up the landfill at the project site, providing a significant environmental benefit to the area.
Brazil granted the first private container concession in the Port of Santos in 1997, and today there are six private operators with container concessions. Volumes have grown from 772,313 TEUs in 1996 to more than 2.9 million TEUs in 2011.
As part of the Government of Pakistan’s ports privatization program, in 2002 the Karachi Port Trust (KPT, the Port Authority) awarded a 21-year Build-Operate-Transfer (BOT) concession to Pakistan International Container Limited (PICT) for the development and operation of a container terminal at Karachi Port. IFC financed the three phases required, as well as a fourth phase driven by higher than anticipated growth in container traffic. IFC provided total loans of about $33 million and assisted in raising the remainder of the debt financing. PICT was the second container terminal to be built in Karachi, after Karachi International Terminal. The two facilities compete directly with Port Muhammad Bin Qasim, Pakistan’s original container port, located only 35 kilometers to the east. Karachi Port Trust terminals now handle roughly 60 percent of traffic between the two ports.
When the market is large enough to support sustainable operations, this multi-terminal approach can provide competition so users have several options, and the private operators are compelled to provide good service to retain customers. Multi-terminal operators also ensure that there is price competition, and often this diminishes the need for the government to regulate prices, since the market can accomplish this instead.
Manzanillo International Terminal-Panama S.A. (MIT) operates the Manzanillo container terminal, adjacent to the Colon Free Trade Zone on the Atlantic side of the Panama Canal, under a concession agreement. Prior to MIT’s entry as a container terminal in 1995, the former U.S. seaplane base was utilized as a storage facility for handling cars for distribution in Panama and Latin America. MIT’s investment and management transformed the facility into a key transshipment hub for shipping lines. MIT’s efficient operation allows shipping lines to concentrate their calls at Manzanillo and use smaller, less expensive feeder vessels to transport cargo from Manzanillo to their final destinations. The resulting hub-and-spoke system provides greater market coverage and lower transportation costs, critical components to increasing trading activity. IFC provided long-term financing with a back-ended repayment schedule that was not available from the commercial market at the time.
Colombo, Sri Lanka
By the mid-1990s, growth at the large deep water port of Colombo was slowing due to inefficiencies and delays caused by outdated systems and equipment. Projections showed traffic volume leveling off, and estimates at the time indicated that around 40 percent of west-to-east traffic was being diverted from Colombo Port to more competitive ports outside of Sri Lanka. Colombo Port was slowly losing its competitive edge to newer, more modern port facilities.
To remain competitive, the South Asia Gateway Terminals (Private) Limited (SAGT partnership) was created by the Sri Lanka Port Authority and several private companies to improve, expand, operate, and manage the Queen Elizabeth Quay (QEQ) terminal through a 30-year BOT concession. IFC and three other institutions financed $144 million in loans, and construction for the expansion of QEQ was completed in August of 2003. Throughput for QEQ increased by 350 percent from 2000 to 2004, leading to a 30 percent increase for Colombo Port.
Colombo’s geographical position boosts its usefulness as a transshipment hub because it is located on the trade lanes between China and the Middle East/Europe. It also serves as a transshipment hub for India because Indian cabotage laws prevent non-Indian shipping lines from carrying intra-Indian cargo.
The Aqaba Special Economic Zone (ASEZ), established in 2001, includes 27 km of coastline that borders Egypt, Israel, and Saudi Arabia. It includes a main seaport, a container terminal, and an industrial port, along with an international open-skies airport, land resources, water supplies, and tourist attractions. The ASEZ Authority gives the SEZ autonomous powers, regulatory independence and controls, customs, taxation, business registration, environmental regulation, land use, and building regulation. It reports to the Prime Ministry with five commissions (Administration and Finance, Revenue and Customs, Investment and Economic Affairs, Land Infrastructure and Services, and Environment and Heath Control). The seaport alone has attracted nearly $235 million in expansion investment and directly employs over 700 personnel.
In 1978 the government of Brazil’s State of Pernambuco embarked on an ambitious multi-year plan to develop a new port and industrial zone. In 1999, IFC was engaged to bring in a private firm to finance and manage a dedicated container terminal in the port. The successful transaction attracted $98 million in investment, and TECON Suape, the container terminal, is now an efficient operator that employs over 400 people and contributes $9.4 million annually to the government. The container terminal contributes to the productivity and competitiveness of the firms in the area; without it, many firms would have to send containers overland 800 km to the Port of Salvador, adding around $1,900 to the cost of each container shipped.
Annual movement capacity at TECON Suape has increased from 75,000 to 400,000 containers in seven years, transcending predictions, and in 2006, Suape was certified as one of the safest ports in the country. In this case, a well-structured public-private partnership has profound economic development effects when conducted as part of an integrated plan: the port was critical for bringing in raw materials for the manufacturing industries and for their export.