Un Vistazo al Comercio Marítimo en Centro América

Robert West

Bob.West@Duaga.com

+1 617 309 0521

28 de Agosto 2019

Antigua, Guatemala

Soc. Port. de Buenaventura

1

27 Years of industry experience…

Outsourcing of labor intensive engineering services at hourly rates 45 % - 65 % lower than U.S commercial rates.

Specialized consulting for infrastructure with an emphasis in ports and harbors.

Processing Big Data to provide international trade business intelligence to increase your market share, with two successful products, DuPort Data for ports DuTradeData for enterprises

2

Clients & Collaborators

Commonwealth Trading Partners

JHConsultants

3

The world economic outlook is . . .

Strong & steady

Source: IMF July 2018 World Economic Outlook

2016 2017 2018 2019

Real GDP (%) 3.2 3.8 3.9 3.9

Inflation Not an issue in generalEurope More stable, but still a museumChina Continued strength, but slowerUSA 2.3% but ?????

REPICA – Dominican Republic 2018

4

The world economic outlook now is . . .

“Still Sluggish Global Growth”

Source: IMF July 2019 World Economic Outlook

2017 2018 2019 2020

Real GDP (%) 3.8 3.9 3.2 3.5

Inflation “Subdued” in generalEurope More stable, but still a museumChina Continued strength, but slowerUSA 2.3% but ?????

5

Reasons for caution

• World TEU trade growth in 2018 was 4.0%• We had predicted 6.5%• 2019 should improve to 4.8% - response to tariffs

• Latin America• Real GDP = 0.6% in 2019, then 2.3% in 2020• TEU trade = 6.0%

• Caribbean and Central America economic outlook• Caribbean = 3.4% in 2019• Central America = 3.9% in 2019, perhaps 4.0% in 2020

6Sources: HIS Markit, IMF, Duaga

Big picture

• North America and Europe are pulling the train, for now, but they are slowing down (quickly, in the case of the US)

• China exports will soon slow to NA because of the trade war

• Hence, exports from Latin America to China have slowed

• Asia’s incomes are still very low and not big enough to fill the shoes of a slowing NA and EU

• LAC has not developed a manufacturing base and an internal consumption market – this should be a long term strategic goal for the region

In the short term, the economic outlooksare fairly positive – some optimism

8Sources: IMF July 2018, LatinFocus, TradingEconomics,BBVA, FocusEconomics. DUAGA Nicaragua Central Bank,The World Bank, Bureau of Economic Analysis

Colombia 2.0% 1.8% 2.5% 3.0%Chile 1.7% 1.5% 3.5% 3.2%Costa Rica 4.2% 3.2% 3.4% 3.5%Dom Rep 6.6% 4.6% 5.0% 4.0%Mexico 2.1% 2.1% 2.2% 2.3%Panamá 5.7% 5.5% 5.0% 5.2%Peru 3.9% 2.7% 3.8% 3.7%USA 1.6% 2.1% 2.8% 2.4%Argentina -1.8% +2.9% +2.0% 3.2%Brazil -3.5% +1.0 % +2.3% 2.5%Nicaragua 4.7% 4.9% 1.0% ?Venezuela -16.5% -14.0% -15.0% -6.0%

Po

siti

veW

eak

2016 2017 2018 2019

In the short term, the economic outlooksare lower than forecast at REPICA, 2018

9Sources: IMF July 2019, LatinFocus, TradingEconomics,BBVA, FocusEconomics. DUAGA Nicaragua Central Bank, The World Bank, Bureau of Economic Analysis

Colombia 2.7% 3.0% 3.2%Chile 4.0% 3.1% 3.1%Costa Rica 3.4% 2.8% 2.8%Guatemala 2.8% 2.6% 2.7%Mexico 2.2% 1.5% 1.8%Panamá 5.0% 4.9% 4.8%Peru 3.8% 3.6% 3.7%USA 2.8% 2.6% 1.9%Argentina +2.0% 1.3% 2.1%Brazil +2.3% 1.4% 2.3%Nicaragua -3.8% -5.2% -0.9%Venezuela -15.0% -24.6% -3.8%

Po

siti

veW

eak

2018 2019 2020

3.0%3.2%3.5%2.8%2.3%5.2%3.7%2.4%3.2%2.5%1.0%-6.0%

2019 –Last Year

Central America economic growth outlook

10

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

Costa Rica El Salvador Guatemala Honduras Nicaragua Panama

Central AmericaReal GDP Growth Forecast

2019 2020

BCIE foresees 3.0-3.4% for 2019 and 2020, not including Panama.

Sources: The World Bank, BCIE

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

Costa Rica Panama Nicaragua El Salvador Honduras Guatemala

2018 TEUs and Growth %

Container volume is dominated by Panama, 2018

11

-0.4%

0.2%

1.2% 10.0%2.0%

10.0%

Source: CEPAL

Biggest traders are at each end of the isthmus

12Opportunity for short-sea shipping

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Costa Rica Nicaragua El Salvador Honduras Guatemala

2018 TEUs

Source: CEPAL

Short sea shipping in the regionPacific

13APL’s Mexico - Central America Service

ONE – Cen Amer & DR

14

HOUSTON

Short sea shipping in the region

15

PORTS - Drivers of expansion

8/30/2019

Economic Growth

Trade Growth

Maritime Trade

Bigger Ships

Bigger & Better Equipment

4.1%/yr in emerging economies

8-10%/yr in value terms ($$$)

5-7 %/yr in volume terms (TEUs)

24,000 TEUs (MSC). Lower costs

Faster, more TEU/hour

Fewer port callsMore transshipment

PORTSSource: IMF

Dark clouds of the trade war

• Cost to the world economy could be $585 billion• US-China tariffs could hit 4+ million TEUs of trade

• All kinds of products

• TransPacific TEUs will grow 4% in 2019• Slower in 2020 if tariffs remain, which is likely

Bloomberg, Aug 19 201917

US Agriculture exports to China

18Source: American Farm Bureau Federation

2017 2018 2019 2020

$19.5 $9.1 $5.0 $0.0?

Billions of USD

+$12-16bn in one-time hand-out to farmers

H1/2019

Grains ($647)

Cotton ($245)

Tobacco ($158)

Dairy ($100)

Livestock ($87)

Non-Ag Prods ($32)

Oilseeds ($19)

These products are in over-supply.

Prices are falling.

This could be a buying opportunity forCentral America.

The trade war may be good for Central America, in some ways

19

• China tariff on cars and parts (September 2019)

• Good for Nicaragua as an alternate source

• Central America may get agricultural products at low prices from the US

• China investment in CA may start to pay off

• Costa Rica (SJO)

Central America & the Caribbean

20

• The CAC region has a GDP of almost $00 billion (2017)

• 19th largest economic in the world

• Great potential for growth if:

• Formalize large sectors: Construction, Agriculture and Trade

• Education – formal and vocational

• Make it easy to start small businesses

• Build stronger connections with multinationals

Source: McKinsey & Co.

New port capacity in CA+DR

MOIN - new+.8 million TEUs

Central America = 25 portsPacific 11Caribbean 14

BLUEFIELDS - new+75,000 TEUs

CORTES+650,000

1.8 million TEUs

CAUCEDO+210,000

1.65 million TEUsv

QUETZAL - APMT+340,000 TEUs

Over 5.6 million TEU of new capacity planned, under development, or operational

RODMAN +1.550,000 TEUs

2 millionv

New COLON +1 million TEUs

Central America = 25 portsPacific 11Caribbean 14

BLUEFIELDS - 75,000 TEUs but multipurposeStart small – grow with the marketImproved logistics – lower costsDirect (truck) to Pacific centersProsperity to RAAS economyExports: African palm, meat, cocoa, seafood, fruits (bananas)Imports: Energy, consumer goods, general cargo, reefer, dry bulks

New Bluefields Port – Why it makes sense

Decisions when things are uncertain

Ports

Don’t be afraid to invest because

trade volumes will grow

Attract the private sector through PPPsfor money, credibility, and efficiency

Get on the LNG bandwagon if you are in a good location

What will happen?

Competing will become more difficult, but there can be “niche

winners” like Nicaragua

23

Conclusions – For us

24

• More pessimistic now• The US market will be weaker in

2020 – be cautious• Central America – pivot more to

Asia, but don’t forget the US because the US will eventually “get it right”

• Improve efficiency, and don’t build what is not needed

FINAL MESSAGE

25

THIS IS OUR HOME

LET’S SAVE IT

PALE BLUE DOT

Carl Sagan

26

February 14, 1990. from Voyager 1 at 6,000,000,000,kilometer