Latin American Ports: Results and Determinants of Private Sector Participation

Abstract

The Latin American major ports are no longer inefficient state-run public monopolies. Common user ports tend to be concessioned under a landlord scheme, whereas specialised ports and terminals are more often privately owned or leased. New infrastructure is still being constructed, and regional and international private port companies participate in the port operations. The most renowned successes are Panama, Argentina, Mexico, and Colombia, but not all countries have advanced equally. The demand for private sector participation depends on the desire of the public sector to promote foreign trade and the need to reduce its fiscal burden. The supply of private sector participation by port operating companies appears to depend on the port's hinterland and the perceived country risk. Perceived corruption, illiteracy, and a pending broader structural reform seem to have a negative impact on both demand and on supply. The same socio-economic situation that, up to now, has acted as an obstacle to port reform in the poorest Latin American countries should be considered as motivation to proceed with the necessary reforms in the future. Privatised port operations may help the urgently needed general structural reform of the economy, including better education and more stable public institutions – which in turn will reduce the remaining obstacles for port privatisation. The challenge for policy makers is to initiate this virtuous cycle.