Shipping Wars: Uruguay and Argentina face off over rival port expansion plans

Argentina is a regional power in South America, the country is considered one of the more developed nations on the continent on-par with Uruguay (on paper at least, with a similar per capita income and Human Development Index rating) although the country occupies a majority of the continent with Brazil and presides over a massive coastline.

Uruguay’s disadvantage is its size, which is tiny in comparison to Argentina, and for this reason South American news reports often refer to perceived or actual bullying tactics being employed by Uruguay’s larger neighbor.

The friction between the two countries most recently has been over their rival plans to invest heavily in their major shipping ports in order to secure a greater share of container activity in South America.

The market is a huge one, millions of containers are shipped in and out of South America every year and by expanding their capacity and becoming regional hubs for shipping, either city could see major benefits, which would benefit the national economy through increased shipping revenues, taxes and investment by the private sector due to the easy access to major shipping routes.

Uruguay’s government supports plans for the Port of Montevideo (the harbor in the Uruguayan capital) to be expanded so that a greater capacity of cargo can be handled with more efficiency.

The plans call for the extension of the privately-owned terminal by 350 meters, as well as the dredging of a new berth and the reclamation of 11 hectares of land on which container transshipment infrastructure will be developed, such as handling cranes, as well as service networks and storage areas.

The major benefit of this expansion is that it will make Montevideo better-able to support the ever-larger ships plying the world’s shipping routes.

In recent years many cargo ships have been built to ‘Post-Panamax’ standard, which means their breadth and depth is too great for transiting the Panama Canal, the extra time and money spent sailing around Cape Horn is made-up in the greater quantities of cargo the ships can carry.

These gargantuan vessels require infrastructure such as Post-Panamax gantry cranes, which can reach out over the water far enough to retrieve cargo from the opposite side of the ship.

The container terminal is owned by Terminal Cuenca de la Plata SA and Nelsury SA, which are subsidiaries of the Belgium Katoen Natie group. Financing of the project was therefore secured through the European Investment Bank with South American news reports putting the value of the loan at around US$41 million, while the cost of the expansion is expected to be around US$150 million, with much of the funding coming from the public sector in Uruguay.

The new container terminal will also provide Montevideo with the capacity to act as a thoroughfare for trade with land-locked Bolivia and Paraguay, while the deeper draft is a direct challenge to Buenos Aires, which has already lost some shipping to Montevideo due to the draft capacity of its harbor.

A Delft University of Technology report in 2000 had pointed out that extensive redevelopment of the container port would be needed in order for the Port of Buenos Aires to remain competitive through to 2020.

The report, a master thesis by Van den Bosch, R.D, points out that the ports current capacity of 2 million TEU (twenty-foot equivalent) would be entirely eclipsed by demand in 2020 which is expected to be 4.2 to 6.6 million TEU. TEU is the term used to describe a unit of cargo based on a twenty foot long standard intermodal container.

In addition, the port is unable to accommodate Post-Panamax vessels as the port entrance on the Rio de la Plata is not deep enough and neither is the dredged access channel that extends to the open ocean, while the curved quays and shallow port basins do not lend themselves to the easy navigation of large Post-Panamax vessels.

For this reason, Argentina is also planning to redevelop their main port, most likely, according to South American news reports, through the dredging of a deeper channel and the development of a new container terminal on reclaimed land (as the current port has no more room for a second terminal).

Such work has not yet been undertaken, while ground-breaking has begun in Montevideo, giving Uruguay’s shipping hub ambitions a head start over Argentina, an advantage they accuse their larger neighbor of trying to destroy through anti-competitive legislation.

There are reports in South American news media, and particularly the Argentinean press, that a law may be passed by the Argentinean government barring Argentina ships from passing through ports without a bilateral trade agreement with the country, which includes Uruguay.

Uruguay has said that these measures taken against them will undermine their transit trade and have further accused Argentina of using delaying tactics to stall an agreement to dredge the Martin Garcia canal in the Rio de la Plata.

Uruguay wants to dredge the canal to provide access for larger ships to Nueva Palmira, a port integral to their grain and pulp export industries, but needs agreement from Argentina as the canal forms part of the access channel for the Port of Buenos Aires.

While both projects have been delayed due to the financial crisis of 2008, they are both proceeding and it is likely that the diplomatic sparring will as well.