Logistics in the Caribbean

Current Trends and Future Prospects

Caribbean Growth ForumJune 19th, 2012

Kingston, Jamaica

Jordan SchwartzGözde IsikWorld Bank

Logistics is a driver of competitiveness

Sources: World Bank, Guasch (2004, 2008)

0

5

10

15

20

25

30

Merchandise losses:Share of primary goods that do not arrive at market

Logistics costs as share of

market value

Levels of Inventory

Pro

du

ctiv

ity loss

es

(%) OECD LAC

Sha

re o

f H

H B

udg

et s

pen

t o

n f

oo

d

GDP per capita (log)Source: Dessus, et al, World Bank (2008); data from household surveys.

Logistics and transport costs are 2 to 10 times higher than import tariffs for basic goods.

These basic goods represent 20% to 30% of household income

For the poor may represent up to 70%

Logistics costs affect the poor

Logistics costs are a driver of firm prices

29.4

11.36 10.636.9

12.7

6.28 7.3111

0

5

10

15

20

25

30

35

40

45

Less than US$ 5 M US$ 5 M to US$ 50 M US$ 50 M to US$ 500 M More than US$ 500 M

Inventory Management & Warehousing Transport & Distribution

42

18 18 18

LAC Logistics Costs: % of Total Value of Firm Sales

Logistics burden: Pineapple exports from Costa Rica to St Lucia

0

0.2

0.4

0.6

0.8

1

1.2

0.339037830660939

0.187055354847415

0.0197847009934766

0.356067436688051

0.0584547983898171

0.0395998784203017

US$ C

t/K

Margins

Warehousing costs

Transport Costs

Duties, customs fees and phi-tosanitary certificates

Handling and conditioning, pack-ing, and other admin. Costs

Farm gate price

In the Caribbean, connectivity costs remain high…for exports too

Developed country average

Jamaica

St Lucia

Grenada

Bahamas

Dominica

Belize

Barbados

Dominican Rep

Haiti

Guyana

Antigua & Barbuda

0% 3% 6% 9% 12% 15% 18%

to US

Suriname

Haiti

St Vincent

Grenada

Bahamas

Jamaica

Antigua & Barbuda

Belize

Trinidad & Tobago

Caribbean

Barbados

Dominican Rep

Dominica

Cuba

Guyana

0% 5% 10% 15% 20% 25%

to South America

Maritime transport costs as a share of Containerized Exports to the US and South America (% FOB value)

Source: UNECLAC 2009

Caribbean Transshipment Triangle Location: At the

intersection of the major east-west and north-south trade routes

Lack of natural hinterlands and small domestic markets

Lack of scale economies: negative trade balances and related backhaul problems

Emergence of the hub and spoke system in liner services as larger ships were introduced over time for major routes

Infrastructure Location Depth Reliability Competitive rates Security Critical mass

Competing for transshipment traffic: Must-haves to be in the game

The Caribbean transshipment market is competitive

Cartagena

Rio Haina/Caucedo

Port of Spain/Point Lisas

Colon

Kingston

Freeport

40%

50%

60%

80%

90%

98%

Colon 26%

Kingston 19%

Freeport 21%

Caucedo; 8%

Cartagena 13%

Port of Spain 4%

Other 9%

Source: Contecar 2011 Source: McCalla 2009

Large domestic markets

Transshipment hubs have grown faster than the rest…but also more volatile

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201050

100

150

200

250

300

Kingston Freeport Port of Spain Bridgetown Castries

Economic recession

Source: Containerisation International

Maersk leaves

Not all countries face the same costs when it comes to transshipment…hubs reduce costs through better global connectivity

Dominica

Saint Kitts and Nevis

Grenada

Guyana

Suriname

Haiti

Cuba

Mauritius

Bahamas

Jamaica

Egypt

0 20 40 60 80 100 1200 5 10 15 20 25 30 35 40

0

500

1000

1500

2000

2500

3000

3500

4000

Kingston

ColonBridgetwon Cartegena

CaucedoPOS

Paramaribo

St JohnsPAP

Castries

KingstownSt Georges

Roseau

Basseterre

Liner shipping Connectivity Index 2011

Connectivity index

Cost

to s

hip

20

ft c

on

tain

er

from

Mia

mi (U

SD

)

Source: UNCTAD and shipping lines

Transshipment hubs

Geographic distance

Economic distance

Transshipment is good for some non-transshipment countries too…but it all goes back to scale economies

350

mile

s

700

mile

s

Has the transshipment and the hub and spoke system increased intraregional connectivity?

Intra-Regional fleet deployment

Source: CI

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

0

100

200

300

400

500

600

700

TEUs Vessels

Nu

mb

er

of

vess

els

Tota

l n

um

ber

of

TEU

s

…or port efficiency?

Roseau

Fort Vieux

Bridgetown

St Johns

Caucedo

Belize City

Rio Haina

Kingston

Point Lisas

Havana

Port of Spain

Cartagena

Colon

Balboa

Freeport

San Juan

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source: World Bank 2012

In terms of utilization of equipment and yard and berth areas, some ports have room to grow while other do not…something to think about when considering expansion

Efficiency scores based on utilization of infrastructure

In conclusion…Logistics is central to boosting the region’s

competitiveness

The widely accepted prognosis is that the Panama Canal expansion will increase transshipment traffic in the Caribbean

Not entirely clear if capturing more transshipment traffic will help reduce logistics costs and increase efficiency of logistics services in the region as a whole (including connectivity of small non-transshipment ports)

Logistics bottlenecks must be removed in order to fully reap the benefits of the Panama Canal expansion