Logistics in the Caribbean Current Trends and Future Prospects Caribbean Growth Forum June 19 th , 2012 Kingston, Jama

1. Logistics in the Caribbean Current Trends and Future Prospects Caribbean Growth Forum June 19th, 2012 Kingston, Jamaica Jordan Schwartz Gözde Isik World Bank

2. 30 OECD LAC 25 20 Productivity losses (%) 15 10 5 0 Merchandise losses: Logistics costs as share of market value Levels of Inventory Share of primary goods that do not arrive at market Logistics is a driver of competitiveness Sources: World Bank, Guasch (2004, 2008)

3. Logistics costs affect the poor • 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%

4. Logistics costs are a driveroffirmprices LAC Logistics Costs: % of Total Value of Firm Sales

5. Logistics burden: Pineapple exports from Costa Rica to St Lucia

6. In the Caribbean, connectivity costs remain high…for exports too Maritime transport costs as a share of Containerized Exports to the US and South America (% FOB value) Source: UNECLAC 2009

7. 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

8. Competing for transshipment traffic: Must-haves to be in the game • Infrastructure • Location • Depth • Reliability • Competitive rates • Security • Critical mass

9. The Caribbean transshipment market is competitive Large domestic markets Source: Contecar 2011 Source: McCalla 2009

10. Transshipment hubs have grown faster than the rest…but also more volatile Maersk leaves Source: Containerisation International

11. Not all countries face the same costs when it comes to transshipment…hubs reduce costs through better global connectivity Liner shipping Connectivity Index 2011 Cost to ship 20ft container from Miami (USD) Transshipment hubs Connectivity index Source: UNCTAD and shipping lines

12. Geographic distance

13. Economic distance

14. Transshipment is good for some non-transshipment countries too…but it all goes back to scale economies 350 miles 700 miles

15. Has the transshipment and the hub and spoke system increased intraregional connectivity? Intra-Regional fleet deployment Number of vessels Total number of TEUs Source: CI

16. …or port efficiency? Efficiency scores based on utilization of infrastructure 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 Source: World Bank 2012

17. 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