Caribbean Basin Supply Chains: Part II

Puerto Rico looms large for ocean carriers calling Florida's ports, too. Crowley Puerto Rico Services recently announced that it is continuing to invest there with the execution of an additional $21 million construction contract for improvements and upgrades at its Isla Grande port terminal in San Juan.

According to spokesmen, it's the latest in a series of investments in support of the trade that will make Crowley's terminal and shipping operations the most modern and efficient in all of Puerto Rico. Emerging market analysts note, however, that the troubled island continues to have serious solvency problems.

The construction Crowley contract was awarded to Del Valle Group, S.P. of Toa Baja, Puerto Rico, and includes expanding the terminal's capacity for handling refrigerated containers; paving 15 acres to accommodate container stacking; installing a new electrical substation to provide power for three new ship-to-shore gantry cranes; constructing a new seven-lane terminal exit gate; and installing hardware required for a new, state-of-the-art terminal operating software system.

The contract is the third awarded that is associated with Crowley's investment in its Isla Grande terminal in preparation for the arrival next year of the first of Crowley's two new LNG-powered Commitment Class ships now under construction in Pascagoula, Miss.

“This contract represents the last major contract to be awarded in our $500 million investment in our Puerto Rico Jones Act service,” says John Hourihan, Crowley's senior vice president and general manager for Puerto Rico. “With construction of both Commitment Class ships underway, dredging at Isla Grande completed, and pile driving operations associated with the pier ongoing, we are beginning to see the results of our investment taking shape.”
Alec Lee, an analyst with Washington DC-based Frontier Strategy Group, an emerging markets consultancy, is less bullish on investment prospects there.

He notes that just weeks after passing a debt moratorium law, the government of Puerto Rico defaulted to the island's Government Development Bank. In doing so, it has essentially chosen to prioritize current spending on key social services, rather than service its interest and amortization payments that fell due last May.

“The decision follows months of negotiations in the U.S. House of Representatives where lawmakers had attempted to cobble together a deal that would facilitate the restructuring of Puerto Rico's nearly $70 billion in debt, while also providing a federal oversight board to insure the island puts its fiscal house in order,” observes Lee.

Other Caribbean Basin ports may have financing challenges as well, say World Bank analysts who contend that, for the fifth consecutive year, the Latin American & Caribbean region (LAC) faces a continuing decline in growth for exporters.

As a result, LAC didn't grow in 2015 and is expected to contract by 1% in 2016. According to the World Bank, the region's growth average is weighed by the slowdown in important economies such as Venezuela and Brazil.
“Policy makers worry that the constricted prospects may jeopardize the social gains of the past decade, pushing Latin American economies into the so-called middle-income trap,” says World Bank trade analyst Oscar Calvo-Gonzalez.
According to the World Bank reports, Caribbean countries are struggling to find a balance between reducing spending and minimizing its effects on economic activity and hard-won social gains. “Over the last decade, the region experienced a deep economic and social transformation, which lifted millions out of poverty and swelled the ranks of the middle class,” says Calvo-Gonzalez.

Strong economic growth—driven by both domestic reforms and a favorable global economic environment—was responsible for this progress. Complementary social programs, made possible by growing fiscal space, helped support the poor and disadvantaged.

However, the region's deceleration is beginning to dent such expansion, according to recent findings. Kurt Nagle, president and CEO of the American Association of Port Authorities, believes that the Panama Canal expansion may the catalyst for more positive change.

“With the opening of the new set of locks that can accommodate much larger vessels, the canal will provide new trading opportunities for U.S. ports as well,” Nagle notes. “This may be a transformational event for the entire Basin.”

Next: Cuba’s Potential

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