Buenos Aires – back to the bad ol days

The previous problems were all about approving too many concessions too soon with the latter ones approved being given more favourable terms than their predecessors. This, coupled with an economy in freefall, created what one terminal operator at the time called a “shipowners’ paradise” with excess capacity flooding the market and presenting the terminal operators involved with little chance of realising a return on their investments.

Today, ironically, the problems the port of Buenos Aires faces are almost the reverse. The economy is strong, the container terminal operating sector, which had contracted in the previous negative climate, is in positive growth mode and there is a strong case to be made for new capacity. Indeed, the actions of the port authority reflect this with the launch of a tender calling for qualified operators to operate a new container terminal concession at Terminal 6. In recent days, however, the port authority, having launched a full international tender and attracted the interest of many well-known international terminal operators, appears to have commenced “playing a game” which amounts to it backtracking on opening the door to new industry participants in the Port of Buenos Aires. That is to say it is maintaining the status quo of the number of container terminal operators active in the port, presently including Hutchison, P&O Ports/DP World, APM Terminals and the local operator Exolgan.

There have been several signals to this effect, one of the most notable being that the port authority has challenged the bid of International Container Terminals Services Inc (ICTSI) on the basis that, “ICTSI’s bid is not convenient as it does not safeguard the competitive balance between the terminal operators in Buenos Aires”.

Naturally, in the light of the past problems and the port authority’s seeming blind spot in this area, it is good that the authority has this issue in mind but what this statement seems to be in real terms is something of an excuse to steer the concessioning process in a given direction. ICTSI has made the point in the international trade and technical media that it has responded to the tender in an orthodox way, has met all the qualifying criteria, and that there is no tenable basis on which it can be removed from the bid process. Specifically: “no basis associated with any of the rules and guidelines laid out in the tender documentation”, according to Marcelo Suarez, senior vice president, ICTSI.

ICTSI, therefore, understandably still sees itself as very much a player in the ongoing concessioning process for Terminal 6. Other obstacles?

Other news just breaking in Buenos Aires is that this seeming steering of the concessioning process may also now extend to excluding some of the existing terminal operators in the port. “Don’t be surprised,” says one prominent figure within the local shipping sector, “if you see the port authority announce the elimination of one well-known global operator with an existing terminal in the port on the basis of a technicality.”

So what lies behind this apparent divergence from the spirit of the international tender launched for Terminal 6? Many fingers are pointed in this area at the announcement in August of DP World’s intention to develop a “megaport and three free trade zones” in Argentina as well as upgrading its existing P&O Ports’ facilities in Buenos Aires. This followed talks between Sultan bin Sulayem,chairman, DP World and Argentina’s Minister of Planning & Public Utilities Julio De Vido and Transport Secretary Recardo Raul Jaime.

Other speculation centres on Exolgan, whose existing container terminal operation while in the Buenos Aires area is in a different port jurisdiction from those of the existing terminal operators referenced above. It is this company that, history records, had a big hand in creating the former excess of capacity in the Buenos Aires container terminal market. It was basically set up shortly after the original terminals were established on more favourable terms and as such has been a virtual continual thorn in the side of its competitors, enjoying as it does the advantage of a competitive environment tipped in its favour.

Given this situation, local interests ask, why would it want to bid for a terminal where the cost base is higher than that of its existing facility other than to exercise control over the marketplace and particularly with regard to eliminating new competition?

Further spice is added to this theory through the bid process for Terminal 6 being something of a leaky bucket and as a result the rumour mill suggests that Exolgan is looked upon in influential government circles as the favoured bidder despite the fact that its bid contains a significantly lower offer in terms of investment than the other two.

Progressively, industry insiders are asking has the container terminal concessioning process underway in Buenos Aires been derailed as a result of undue influence? “It is not just broadening the competitive platform in a growth environment – the economy grew by 9.2% last year and 7.3% growth is forecast for this year – that is at risk,” says Luis Lajous, managing director, Mediterranean Shipping Company, Buenos Aires branch. “but also servicing the existing traffic volume in a more efficient manner. For instance the concessionaire for the dredging of the main River Plate channel has just announced completion of the works taking the depth down to 34ft but only one bidder – ICTSI – has submitted a bid that foresees taking the draught down alongside the quay at Terminal 6 to 34ft. This therefore represents a major impediment to taking advantage of economies of scale.”