There are few companies that understand the ports of Colombia — and the whole world — like Maersk. The shipping giant has a fleet of mega-vessels circling the globe at all hours of the day, transporting a never-ending supply of containers from sea to shining sea.
In Colombia, the ports have not been sending out as many exports as some projected considering the currency devaluation over the past two years. Opportunities are there, and should add economic growth in the years to come, but so far reality is lagging expectations.
To shed some insight on the logistics and challenges facing Colombian exports, Juan Camilo Vázquez, sales manager of Maersk Line, recently sat down with Finance Colombia Executive Editor Loren Moss. He details how the nation’s ports, infrastructure, and developing market segments underpin the shipping and transport world in Colombia.
Finance Colombia: Why does Maersk think that manufactured goods are not exporting at a higher rate than one would expect to see with an advantageous currency situation here in Colombia?
Juan Camilo Vásquez: To explain better, I would like to go back to what happened in 2015. We started with a devaluation that, in principle, should have been convenient for exports. But what happened was that this was a sudden devaluation at the beginning of the year that was not expected.
So most of the companies were waiting for the currency to recover. So in that case, in terms of our imports, we were waiting for new orders to be placed, waiting for the dollar to go down again. And in exports we were not that positive about the environment.
The other thing that we need to consider is that, for exports, the effect of the devaluation is not absolute. It’s not an absolute figure because — especially in the manufacturing industry — many of the raw materials that we use for exports are actually imported. We don’t see the total benefit of the devaluation. We also have an increase in some of the costs for the raw materials that we use in the manufacturing industry. That is specifically important for the food industry and for some in the textile industry.
Finance Colombia: I was talking recently with an executive in Barranquilla, and he said he gets a great rate for the exports because the containers come into Colombia full but leave empty. Colombia tends to import so much more than it’s exporting in containers. Is there traditionally an imbalance? Is Colombia bringing in more container goods than it’s sending out? And how does that create a challenge — and an opportunity — for you to fill those outbound containers?
Juan Camilo Vásquez: Absolutely, and that is a very good question. We definitely have a lot of imports in containers, and most of the exports that we have out of Colombia are not necessarily in containers. So definitely we have an imbalance here, and every week we have to evacuate some 90 pieces of equipment to the locations where they are needed.
Basically, we are handling the evacuation of pieces of equipment to Asia mainly, so when a customer has business opportunities to send to Asian destinations, we can be very competitive and support these kinds of initiatives. That is basically what we are doing with coffee and that is basically what we can do with minerals. And of course, that also applies to consumer goods if it goes in the right direction and if it matches our interest in evacuating equipment to those locations.
Finance Colombia: For manufactured products, where do you see growth? Beyond commodities, beyond agricultural products, beyond coffee — where do you see the growth in value-added products that are being manufactured in Colombia and exported to the rest of the world?
Juan Camilo Vásquez: It’s growing more to the neighboring markets that we have, especially with the new Pacific Alliance and some of the new trade agreements with different countries in Latin America. Those are the natural markets for that.
So what we see, for instance, in the glass industry — packaging, bottles, that kind of thing — is that that is something we export mainly to the west coast of Latin America. And that is basically the same case for the food industry and, basically, for Maersk. The manufacturing industry is mostly about the member markets.
What we are exporting to the United States, and what we have seen now to Europe growing more and more, is more related to agricultural products. Because of the level of value-added by different countries is different. But we see great opportunities with the new trade agreements in Latin America, especially in Chile, Peru, and Mexico. We have some issues with Ecuador based on the new barriers that we have for imports into that country. But other than that, those are the natural markets for manufactured products outside of Colombia.
Finance Colombia: How are Colombia’s ports? We know that Buenaventura has traditionally been the major Pacific port, we have Barranquilla, and there is, of course, Cartagena. What is the condition as far as the capacity of Colombian seaports right now and, in a perfect world, what kind of infrastructure investments would you like to see that would better position Colombia as an exporter?
Juan Camilo Vásquez: One of the main challenges that we have is that our production is largely in the inner locations in the country. We have Medellín, we have Bogotá, and we have Cali as the main production centers in Colombia.
However, we have seen some of the companies moving to the north coast, so that is the reason why Barranquilla is growing a lot, and that is the reason why we are becoming a little bit more competitive. On the other hand, we are still going to have some companies that are going to stay in Bogotá, in Medellín and Cali. We cannot move all the companies near to the ports.
So the country is making investments in connectivity to make our infrastructure more competitive. In international port infrastructure we have seen a lot of investment in recent years. Barranquilla built a new terminal that is now operating. In Cartagena we also see some new investments. In Buenaventura we have seen a new terminal that is being built and that is going to be ready at the end of this year.
We also have a terminal — which is the one that we operate — that has been in operation now for five years. This changed the productivity and the competitiveness that we were reaching. It has changed what we used to see on the Pacific side for the last 20 or 30 years. The connectivity and the infrastructure is coming in the way of new roads and port infrastructure. And that is supporting the exports that we have in all different directions.
Finance Colombia: Could companies that become exporters have a tremendous trade advantage for the foreseeable future? Simply because of shipping costs? Because of those containers that a company like Maersk does not want those containers to go out empty?
Juan Camilo Vásquez: Yeah, that is the case, but again we need to compare those destinations that the market is requiring for the containers that we have. For instance, we have some other countries that are also surplus areas. So even if we have the equipment in Colombia as a surplus area, moving the equipment to another surplus area could not be the best idea.
So I think equipment is only a small part of the equation. What we have in Colombia is that we have a very comprehensive network, not only by Maersk but also by different carriers, to connect Colombia to different markets in the Caribbean, in North America, in other countries in Latin America. So we definitely have a better competitive availability of services to connect our product.
The main challenge that we have today to reach those markets — with a competitive price and with a competitive offer — is more about the internal infrastructure that we have. And that is something that we have been solving in the last few years. We have seen some improvement in port infrastructure, in roads, and in different things. So definitely we are becoming more and more competitive.
And with the new rate of exchange, actually the country becomes much more competitive and the cost of producing in Colombia is very attractive to reach those markets. So that is the growth that we expect for the coming years.
Finance Colombia: So the 4G infrastructure roads project — the highway upgrade that’s taking place in the coming years — should alleviate the challenges as far as the ground transportation within Colombia? It will help get that product to the port from a place like Medellín or Bogotá?
Juan Camilo Vásquez: Yeah. That is the thing. When you have more dynamic ports — if you have port facilities with more capacity — then you are able to bring bigger vessels to the country. And bigger vessels represent economies of scale, and that means we can be more competitive in different products, and connect the country better. In that sense, that is something that is going to alleviate the situation that we have with the other components of the competitiveness of the country.
What we have seen in the development of the new roads — the plan that we have seen from the government — is actually improving the infrastructure costs and the internal transportation costs. So we are becoming more and more competitive.
One example of that is the avocado. In the past, the avocados that we were consuming in the country were not the same variety that we are seeing today, and some others were actually imported from Mexico. What we see today is that, because of the production cost that we have — because of the investment that we have, and the development — this is a new industry that is developing in the country. And it perfectly matches the global demand for avocados.
The global demand for avocados is growing a lot and there is not one single producer country today that can satisfy the demand that is growing in Europe and different markets. So that is definitely a good opportunity for us. It is something that we have to be growing.
It’s the same with pineapples. In the past, the variety of pineapple that we had was completely different and was only for the local market. But now we are competing with different countries that are the leaders in this industry. We are positioning our products in the market. So that is a sign that new industry is coming urgently even despite the infrastructure and internal transport limitations that we have.
Finance Colombia: Is Colombia ready for New Panamax? Does Colombia have ports that are already prepared the New Panamax vessels?
Juan Camilo Vásquez: Yeah. One example of that is Santa Marta. Maybe it’s not as big as some of the other ports, but we have a natural berth there that can receive those kinds of vessels. Actually, Santa Marta is already operating some coal vessels today that satisfy the demand and the specifications of the new post-Panamax.
Then, if you go to Cartagena, we have seen a lot of investment in new equipment, expanding the port facilities and getting ready for the New Panamax vessels. The government has also been working on the dredging of the actual channels to the terminal. Then in Buenaventura, we have seen some new investments. We are prepared for that in Buenaventura.