<p><strong>CHILE’S FORESTRY PORTS</strong></p><p><strong>A Story of Success</strong></p><p><strong>ABSTRACT: </strong>This paper has been prepared by Mr. Raimundo Montt, Executive Director of FLAGSHIP – International Logistics Consultancy. Mr Montt is also ALEXANDER GLOBAL LOGISTICS (AGL) representative in Chile and IFPTA member and was a guest speaker on occasion of the 22<sup>nd</sup> PPI Transport Symposium held at Savannah, Georgia in 2017, where he gave the presentation that forms the basis of this paper, which the author has updated when appropriate to reflect relevant changes occurred from the time of the presentation to the current situation. In the paper, the author summarizes the reasons why Chile’s Forestry Ports can be considered a true history of success, as they have been key in allowing Chile to be among the top world producers and exporters of wood pulp, as well as the challenges they face to keep playing their crucial part in the supply chain.</p><p><strong>CHILE: A NATURAL LONG PORT</strong></p><p>If you look at the world’s map, you will find a narrow strip of land at the southern tip of South America. This is Chile, a country that, flanked by the Andes mountains in its east border, has the longest coastline in the world, with over 4.200 kms of coastline in the Pacific Ocean, thus it can be considered as a “natural long port”.</p><p>Chile is a small country, with about 18 million people and a GDP of about 300 thousand US$ million by 2018, has based its economy on exports, Mining in the first place, followed by Fresh Fruit and Forest Products in the third place. Given the geographical distance from Chile to the main markets for its products, it is obvious that ports play a key role in Supply Chain Logistics, as 95% of exports and 93% of imports pass through its maritime ports.</p><p>Furthermore, Chile is blessed by a particular geographical distribution of its natural resources, with mineral resources highly concentrated in the northern part of the country, the fresh fruit industry in the central part and forestry at the south, making efficient use of the country’s 57 ports which form a mixed system of state-owned ports (25 ports, of which 10 are for public use and 15 for private use) and privately owned ports (32 ports, of which</p><p>21 are for public use and 11 for private use). According to the World Bank Logistics Performance Index, in 2016 Chile was ranked 46<sup>th</sup> in the world, occupying the first place in South America. The Global Competitiveness Report made by World Economic Forum for that same year also ranks Chile in the first place in South America and 35<sup>th</sup> worldwide.</p><p><strong>A VIRTOUS CIRCLE IS CREATED BETWEEN FOREST INDUSTRY AND PORTS</strong></p><p>As mentioned before, forest products rank 3<sup>rd</sup> among Chile’s exports, with over 14 million tons/m3 that are primarily produced and exported through the ports located in Concepción bay at Chile’s VIII Region.</p><p>This region, located between 36° and 38° Latitude South, benefits from a very favorable logistics environment, as the region’s GDP accounts for a 7% of the country’s total GDP, its population represents over a 6% of the national population, it has 3 competitive multi- purpose ports in a radius of less than 30 nautical miles, which can be accessed by rail and/or truck by mills that are located between 100 to 200 kilometers from the ports.</p><p>The ports aforementioned are the following:</p><p><strong>a) Port of Lirquén:</strong></p><ul><li>Largest Private Port for Public Use in the country, in operation since 1953</li><li>Recently acquired by Dubai Ports (DP), previous shareholders were related with both major forestry companies in Chile.</li><li>Multipurpose Terminal, capable of handling Breakbulk, Container, Bulk Cargo and Project Cargo</li><li>2 Finger Pier with 6 berthing sites, draft between 7,4 m and 16,2 m</li><li>000 m2 of warehouse and 330.000 m2 of paved yards</li><li>6 shore cranes, 14 reach stackers, 30 port trucks and 31 chassis</li></ul><p><strong>b) Port of San Vicente:</strong></p><ul><li>State Owned Port for Public Use. State remains as Landlord and Operation is done by Private under concession since 2000</li><li>Shareholders of Concessionary are not related with forestry industry</li><li>Has specialized in Containers but is capable of handling Breakbulk, Bulk Cargo and Project Cargo</li><li>1 Linear Pier 600+m long, with 12,2 m draft, allowing berthing of vessels up to 347 mt length</li><li>000 m2 of warehouse and support area for container stacking</li><li>9 shore cranes, 26 reach stackers and 44 tractors</li></ul><p><strong>c) Port of Coronel:</strong></p><ul><li>Private Port for Public Use, in operation since 1996</li><li>Major shareholder is related to one of the major forestry companies in Chile</li><li>Multipurpose Terminal, capable of handling Breakbulk, Container, Bulk Cargo and Project Cargo</li><li>2 Finger Pier with 8 berthing sites, draft between 11,4 m and 14,1 m plus 1 Bulk Cargo Pier with 14,5 m draft</li><li>000 m2 of warehouse and 100.000 m2 of paved yards</li><li>7 shore cranes (2 of them Gantry cranes), 19 reach stackers, 35 port trucks and 35 chassis</li></ul><p>Thus, a virtuous circle has been created between the forest industry and the ports in Chile. The unique logistic environment in Chile’s VIII Region allows for open alternatives for shipping lines and shipping modes (Breakbulk and Containers), provides conditions for port specialization (as the case of San Vicente with containers) and reduces the risk of bottlenecks and congestion.</p><p>More importantly, modernization and competition in ports drives efficiency and helps reduce natural disadvantages for Chile’s forestry exports. A study made by Chile’s Maritime and Port Chamber has calculated that the costs of exporting forest products have dropped by 50% from 1986 to 1991, which equates to make the destination of markets about 4.300 miles closer, roughly the distance between the Chilean forestry port to the US East Coast.</p><p><strong>CHALLENGES AHEAD</strong></p><p>In spite of the successful track record, Chile’s forestry ports face challenges both in a local scope and a national scope.</p><p>Locally, the biggest challenge the ports mentioned in the above section face today has to do with attracting new cargo to them, primarily import cargo to reduce the imbalance between cargo going out (exports) from cargo coming in (imports). Also, increasing labor costs and regulations is forcing a redefinition of the port’s business model to increase profitability and sustainability in time to keep the virtuous circle continuing.</p><p>On a national scale, the challenge is to keep increasing the competitiveness of the country’s port system, as this cannot be considered as a given. This means the country will have to address issues such as new ports, especially in the central region, that can accommodate and efficiently attend to new generations of vessels, especially container carriers. Other infrastructure challenges such as new roads, railway usage, etc. are also to be addressed as to improve the global efficiency. But the biggest challenge of all has to do with what model of development will the country adopt to face these challenges, as a state-oriented model versus a private oriented model (concessions for example) is becoming a political issue that can hinder investors in the sector.</p><p><strong>DISCLAIMER</strong></p><p>This report has been prepared by its author</p><p><strong>Raimundo Montt </strong>upon request made by <strong>Geetika Bhargava Knowledgeridge.com</strong></p><p>and may be posted by Knowledgeridge as an Expert View</p><p>without making changes and citing the author’s name and credentials as indicated in the Abstract section above</p><p>Santiago – Chile March 2021</p>
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