Chapter 1: Overview

"... FREETRADE, WITHOUT SUBSIDIES OR UNFAIR PRACTICES, ALONG WITH AN INCREASING STREAM OF PRODUCTIVE INVESTMENTS AND GREATER ECONOMIC INTEGRATION, WILL PROMOTE REGIONAL PROSTPERTY, THUS ENABLING THE RAISING OF THE STANDARD OF LIVING, THE IMPROVEMENT OF WORKING CONDITIONS, OF PEOPLE IN THE UNITED STATES, AND A BETTER PROTECTION OF THE ENVIRIONMENT."

-Final Declarations, Summit of the Americas, 2001

Introduction

Not surprisingly, in a world increasingly connected via the global market, international trade is often a cornerstone of a strong national economy. Many national economies, such as those of Mexico and Panama, have become strongly dependent on international trade. Although the United States is not as much a trading nation as other countries on a percentage of gross domestic product (GDP) basis, the relative importance of international trade to the U.S. economy has increased steadily over the past three decades. At $16 trillion, international trade was responsible for half of the world's GDP in 2001. The relative contribution of trade to global economic activity has increased steadily over the past several decades. Since 1950, for example, the world's GDP has increased by 680 percent, while the value of goods traded has increased by 2,100 percent. The capability of a nation's transportation system to handle increased trade will be an important factor in the ability of shippers and customers to take advantage of the reduced tariffs and a more favorable market environment that will likely result from increasing trade connections.

The nature of trade relationships is such that countries often establish strong partnerships with certain regions of the world that reflect the exchange of resources needed for the production process and the markets desired for finished products. For the North American Free Trade Agreement (NAFTA) countries-the United States, Canada, and Mexico-Latin America is one such region. To better understand this market, the Federal Highway Administration (FHWA) and the American Association of State Highway and Transportation Officials (AASHTO) cosponsored an International Technology Scanning Program study of selected Latin American countries. The purposes of the study included the following:

• Identify international freight issues in Latin America and the roles of individual countries that trade with NAFTA countries.
• Determine future trends in logistics and trade infrastructure that could affect such trade.
• Assess whether the trade projections made during Phase 1 of the Latin American Trade and Transportation Study (LATTS) were still valid.
• Identify issues related to freight security concerning imports and exports to the NAFTA countries.
• Determine Latin American countries' experience with such things as interoperability, standardization, equitable taxation and pricing, and planning and financing of trade-related transportation infrastructure.

This scanning study was important and timely for several reasons. The NAFTA countries are negotiating with all of the countries of the Western Hemisphere (except Cuba) to create a Free Trade Area for the Americas (FTAA). This agreement, scheduled for a 2005 vote, will create the world's largest free market zone (see Figure 1). The United States, Canada, and Mexico have already established bilateral free trade agreements with numerous Latin American countries, which could serve as an important indication of what might be expected with a trade zone at the hemispheric scale.

One of the purposes of this scan was to provide input into Phase 2 of the Latin American Trade and Transportation Study (LATTS). Phase 1 was a first-of-itskind study of the Latin American market and its impact on the U.S. transportation system, particularly in the southeastern United States. The timing of the scan allowed Phase 2 of this study to be informed of the economic and political factors that might affect future trade flows with this important market. This assessment also could provide input into the formulation of initiatives considered by the U.S. Congress as it reauthorizes the Federal transportation program.

Finally, global market competition and the changing characteristics of the logistics chain suggest that understanding the capability of the transportation system to handle commodities and products could have an important economic effect on NAFTA. China and the European Union, for example, have made inroads into the NAFTA market primarily by investing in Mexico and Central American countries. The changing economics of competition could have a long-term impact on the type and scale of transportation infrastructure needed to handle trade flows in the NAFTA countries. The timing of this scan provides an important snapshot of this changing dynamic.

FHWA and AASHTO jointly sponsored this scan. Scan participants reflected a diverse set of interests and concerns for both national and international freight movement. In addition to FHWA and AASHTO officials, the panel included representatives from the national ministries of transportation for Canada and Mexico; the departments of transportation (DOTs) for Florida, Louisiana, and Mississippi; the metropolitan planning organization for the San Diego metropolitan area; the U.S. Transportation Security Administration (TSA); the LATTS study; and academia. These panel members represented a wide range of interests and expertise in the areas of policy, planning, security, freight logistics, and economic development.

The panel targeted government agencies, terminal operators, logistics providers, and shippers to gain a broad understanding of how selected Latin American countries deal with trade issues and transportation infrastructure, and how shippers and producers respond to market conditions. (See Appendix A for a list of the questions that were asked of the participants and Appendix B for participants in scan meetings.) From October 30 to November 17, 2002, the panel visited Freeport in the Bahamas, São Paulo and Santos in Brazil, Buenos Aires in Argentina, Montevideo in Uruguay, Santiago and the Port of San Antonio in Chile, and Panama City and Colón in Panama. From December 3 to 7, 2002, several members of the panel visited Mexico to discuss trade issues with government and industry representatives, as well as to participate in a scan implementation event. Two pre-meetings were held in New Orleans, Louisiana, and Miami, Florida, to meet with both U.S. shippers and government officials with experience in Latin American trade.

Figure 1. North America and Latin America will form one of the world's largest trading blocks in the future.

The limited time of the scan constrained the number and representation of those who met with the panel. The panel did not meet with groups that could have provided a broader perspective on the issues facing the development of the Latin American market, such as national railways, inland water and coastal shipping firms, and manufacturing and industry trade groups. In addition, the panel did not meet with non-government organizations representing environmental protection and sustainability issues. Instead, the scan participants focused on meeting with more than 120 people who provided a good cross section of the organizations that would be most involved with increased trade with the NAFTA countries.

The Mercado Commún del Sur (Mercosur) countries of Argentina, Brazil, Paraguay, and Uruguay were of particular interest to the scanning team because they represent many of the largest and wealthiest countries of Latin America. Originally conceived by Brazil and Argentina in the 1980s as a means of developing a common market, Mercosur now includes Argentina, Brazil, Paraguay, and Uruguay as full members, and Bolivia and Chile as associate members. The market concept of Mercosur is that specified goods entering any of the four member countries are subject to a uniform tariff. Each country is allowed to select certain commodities that will be exempt from this tariff for a time period. Bolivia and Chile have entered into free trade agreements with Mercosur covering many of the same provisions, but differing in some cases on tariffs on certain commodities. Although economic difficulties have slowed economic growth, the creation of Mercosur seems to have had a stimulating effect on trade. Between 1990 and 1998, for example, Mercosur exports doubled from $46.4 billion to $81.4 billion, a 6 percent annual growth rate. Imports grew at an even more impressive rate of nearly 15 percent a year.

U.S. Trade The United States is the world's largest merchandise-trading nation, accounting for 12 percent of global merchandise exports and 19 percent of merchandise imports in 2000. By 2001, U.S. international merchandise trade was more than 20 times greater than in 1970, while total economic output was about 10 times greater. From 1990 to 2001, the value of U.S. international merchandise trade more than doubled, from $891 billion to more than $2 trillion (in inflation-adjusted dollars).This represented an 8 percent average annual growth rate, while the GDP annual growth rate was 3 percent. The ratio of U.S. merchandise trade to the value of GDP reached about 22 percent in 2001, compared to 13 percent in 1990. A more relevant measure of the importance of goods exports to the U.S. economy is the percentage of merchandise exports to goods GDP-which was 43 percent in 2000 compared to 15 percent in 1970. In 2001, the U.S. transportation system carried $736 billion in merchandise exports and $1.2 trillion in merchandise imports. Source: U.S. Bureau of Transportation Statistics, U.S. International Trade and Freight Transportation Trends, Feb. 2003.

Mercosur is the third-largest trading block in the world after the European Union and NAFTA. Mercosur countries:

• Include 63 percent of South America's population at 217 million.
• Represent 76 percent of South America's GDP at $1.4 trillion.
• Contain significant industrial and natural resources important to world commerce, such as 26 percent of global cattle stocks, 14.4 percent of global forested areas, 10 percent of global steel exports, and 28 percent of global soy production.
• Are important trading partners to NAFTA countries (14.3 percent of non-intra NAFTA imports by value- 35.6 percent by volume-originate from Mercosur countries, and 19.8 percent of Mercosur exports by value-12.9 percent by volume-are destined to NAFTA countries).

Not only is Mercosur an important trading partner for NAFTA, but as the hemisphere debates a Free Trade Area for the Americas (FTAA), Mercosur also represents a trading block with potentially different concepts and concerns about how such an agreement should evolve. Understanding Mercosur and its members' positions in trade and economic policy is an important point of departure in understanding much of the debate that will likely occur over creating an FTAA.

Lessons from this scan could be relevant to the United States, Canada, and Mexico in developing a common North American market. In addition, these lessons are important for national and sub-national investment decisions as they relate to changing freight movement in response to competitive forces. For example, the possible expansion of the Panama Canal could have significant impacts on the competitive market for the flow of agricultural commodities at the global scale. The effects would most likely be felt in the U.S Gulf Coast ports and in inland transportation systems that bring U.S. agricultural products to the ports for worldwide distribution.

The Latin American Context

In the context of this report, Latin America consists of all the countries south of the U.S-Mexican border, a market of just over 500 million people. Understanding this market involves understanding several important observations about trade relationships with the United States and NAFTA, and the economic, political, and social characteristics of the countries that make up this market. The following observations are important points of departure for the conclusions and lessons learned from this scan.

Latin America is an important market for the United States and Canada. Latin American countries have for many years been important trading partners for both the United States and Canada. For example, 11 of the top 50 U.S. trading partners in 2001 were Latin American countries. Of the countries visited on this scan, Mexico represented 63 percent of all U.S. Latin American exports in 2001 (measured in dollars). Mexico's strategic position with the United States contributed to this high volume. Among other countries, Brazil represented 10 percent, Argentina 2.4 percent, Chile 2 percent, Panama 1 percent, and Uruguay 0.3 percent. The remaining 28 Latin American countries constituted 21.3 percent of U.S. exports to Latin America. When considering just South American (countries south of Central America) exports, Brazil represents 43.6 percent of U.S. 2001 exports, followed by Venezuela (15.5 percent), Argentina (10.8 percent), Colombia (9.8 percent), and Chile (8.6 percent). Seventy-two percent of Canadian imports from Latin America come from Mexico, 9 percent from Brazil, 8 percent from Venezuela, 4 percent from Chile, and 2 percent from Argentina. In addition, Latin America represented 19.5 percent of total U.S. private investment overseas from 1997 to 2001, demonstrating the importance of this region to the investment community.

Container movements for the most active trade routes between Latin America and the rest of the world in 2001 (measured in 20-foot equivalent unit (TEU) container carrying capacity) also indicate the important trade relationships between Latin America and North America. The largest movements were Panama-Asia (21 services, 100 vessels, 285,520 TEUs), Panama-East Coast of North America (19 services, 92 vessels, 263,740 TEUs), Mexico-West Coast of North America (18 services, 72 vessels, 166,296 TEUs), and Caribbean-East Coast of North America (37 services, 92 vessels, 129,928 TEUs). (L. Boske, Maritime Transportation in Latin America and the Caribbean, Report 138, Lyndon B. Johnson School of Public Affairs, University of Texas, Austin, Texas, 2001.)

The Latin American market is important to many States. Many people consider Latin America important to those States that either border Mexico or have large ports that serve as gateways to the Latin American market. Latin America is also important, however, to many non-border, non-gateway States because of the market it represents for their goods. Figure 2 shows different ways of representing the importance of the Latin American market to individual States. As shown, over 65 percent of the movement of cargo through the 14 public ports in Florida is exports to or imports from Latin America. Figure 2b shows the implications of increasing trade flows on the U.S transportation system, in this case a more than doubling of cross-border vehicle movements at the two most important border gateways in California. Many States have strong economic ties to Latin America, as shown in Figure 2c. Thirty States exported more than $400 million in goods to Mexico in 2001, while 19 exported similar levels to South America. As this figure shows, the Latin American market is important to a large number of States.

The Latin American market also is important to other trading blocks. Although the NAFTA countries, and the United States in particular, are important trading partners to Latin America, they are not the only important customers for Latin American trade. From 1994 to 1998, for example, 27 percent of the imports into South America (by value) originated in North America, 26 percent in Europe, and 16 percent in Asia. Clearly, such trade flows vary by country. For example, just over 27 percent of Argentina's imports come from Brazil, a similar amount from Europe, and 22.5 percent from North America (excluding Mexico). For exports, 25 percent of Argentina's exports are destined to Brazil, 23 percent to Europe, and 11 percent to North America. Table 1 shows regions of the world with which selected Latin American countries have the greatest trade. Except for Chile and Mexico, North America (mainly the United States) is not the primary trading region for these countries. In addition to trade relationships, European and Asian investment in Latin America has been growing significantly over the past five years, both in private business and public infrastructure.

The statistics suggest that the NAFTA countries cannot take the Latin American market for granted. Indeed, the European Union has been negotiating for a free trade agreement with Mercosur (Argentina, Brazil, Paraguay, and Uruguay), and many Latin American countries already have such agreements with both European and Asian countries. Mexico has free trade agreements with 33 nations.

Statistics show the importance of the Latin American market to the United States.

Figure 2a. Over 65% of trade using Florida ports is related to NAFTA/Latin American countries (FFSTEDC, 2002).

Figure 2b. Daily California cross-border trips (SANDAG, 2002)

Figure 2c. State exports to selected regions of Latin America (http://ese.export.gov).

Latin American population and economic activity are concentrated in a few countries. Table 2 shows the size and state of the economy for the countries visited during the scanning study. Several characteristics of these countries merit special attention:

• Brazil dominates the region in population and South America in economic production (Mexico still has a higher GDP when compared to all of Latin America). Almost 33 percent of the Latin American population lives in Brazil and 19 percent in Mexico. Brazil is recognized by other South American countries as the major player in continental trade and economic policy.
  
• Mexico dominates Latin America in exports and imports, which is not surprising given its location next to the United States and its participation in NAFTA. It is expected that Mexico will account for more than half of Latin American trade by 2020. Panama is expected to experience the fastest growth rate in exports, given the attraction of the Panama Canal and the country's specialization in value-added re-exporting.
  
• In most cases, the GDP of Latin American countries grew impressively during the 1990s. Much of this had to do with liberalization of trade laws and adoption of privatization strategies for providing infrastructure. Recent data, however, shows that the economic recession has slowed this impressive growth.
  
• Several countries have adopted trade strategies aimed at increasing its importance in their national economies. Exports, for example, represented only 16.4 percent of Chile's GDP in 1981, while in 2001 this figure had risen to 34.7 percent. In Mexico, exports grew from 10.4 percent to 27.6 percent of GDP over the same period.
  
• Heavy reliance on trade makes all of Latin America, and some Latin American countries in particular, vulnerable to economic downturns in the world market. Since the United States is a major trading partner, a slowdown in the U.S. economy is felt throughout Latin America, and usually with more significant effect.
  
• Countries with the highest average income include Argentina, Chile, Uruguay, Mexico, and Venezuela. These countries represent the most appealing consumer market for trade (in addition to Brazil because of the size of its population). Given the economic downturn in many of these nations, more recent income data will most likely be lower than that shown in Table 2.

Source: J. Hoffman, G. Perez, and G. Wilmsmeier, International Trade and Transport Profiles of Latin American Countries, Year 2000, ECLAC, Santiago, Chile, Feb. 2002.
Table 1. Origins and destinations of imports and exports, selected countries, 2000.

Even though many Latin American countries have faced economic and political uncertainties over the past 10 years, Latin America is still expected to show an economic performance higher than many other parts of the world in the future. For example, between 1997 and 2020, total real GDP in Latin America is expected to grow 4.4 percent annually, compared to 3.6 percent in Asia and 2.8 percent globally. Nominal GDP per capita in Latin America is also higher than other parts of the world. In 1997, average annual income in Latin America was $3,478, compared to $2,593 in Asia.

The geographic challenges of Latin America and the location of population centers result in heavy reliance on maritime transportation for trade. Many Latin American countries are located far from major global trade routes and face formidable transportation challenges in competing in the international market. Given the geography of Latin America, it is not surprising that, except for a few countries, the majority of foreign trade is handled by ship. Figure 3, for example, shows the market share of international trade for selected countries by mode of transportation. Except for Mexico, which shares a long land border with the United States, and Bolivia and Paraguay, which are landlocked, over 60 percent, and in some countries over 80 percent, of international trade is handled by sea transportation. The long distances involved in transportation make South American trade goods more costly in the world market. For example, the average international transport cost from Latin America and the Caribbean to the United States is a much greater percentage of the cost of production than for other regions of the world.

This dependence on maritime transportation is reinforced by an historic pattern of development based on colonial port cities (a major exception being Mexico City). Most of today's major Latin American urban centers, and therefore the major centers of economic activity, are found in port cities or in cities close to the coast (e.g., São Paulo, Rio de Janeiro, Buenos Aires, Montevideo, Santiago, Panama City, Vera Cruz, etc.). The types of commodities and products shipped through these ports are also the type of goods most easily transported via ships (e.g., ores, petroleum, grains, and manufactured goods).

Geographic barriers in South America add to this dependence on maritime transportation. The Andes Mountains, for example, provide formidable challenges for cross-continent rail and highway connections. The South American rail network is heavily oriented toward the coasts, emanating from either side of the Andes Mountains. A land bridge connecting the Atlantic and Pacific coasts is found in only a few locations, although several expensive projects have been proposed to provide improved rail and highway facilities across the continent (between Argentina and Chile, for example). The Darien Gap in Panama, a dense jungle and swamp area that separates Panama from Columbia, historically has been a major obstacle to land transportation between Central and South America. To this day, the Pan American Highway ends at the Darien Gap because of the difficulty of extending it through such terrain.

Many types of trading partnerships and relationships have been established among Latin American countries. Countries can establish a variety of institutional mechanisms and economic agreements that liberalize the exchange of trade. In this case, the term "liberalize" means lowering tariffs and removing customs barriers at the borders to reduce the cost of trade among the participant countries. By lowering this transaction cost, national economies can become more efficient and more competitive in the world market. Major types of trade arrangements found in or being considered by Latin America include the following: (L. Boske, Maritime Transportation in Latin America and the Caribbean, Report 138, Lyndon B. Johnson School of Public Affairs, University of Texas, Austin, Texas, 2001.)

• Tariff Preference-Agreements among countries to provide preferential tariffs on specified products.
  
• Free Trade Agreement-Agreements among countries to reduce or remove tariffs on specified commodities and products. A free trade agreement usually entails agreements to foster the movement of these commodities across national borders (an example is NAFTA). No common external tariff for trade with other countries exists, and individual countries must resolve disputes individually because no institution is established for this purpose.
  
• Customs Union-Agreements among countries to rationalize customs procedures and requirements, and to establish a common external tariff on specified products. A Latin American example is Mercosur, in which Argentina, Brazil, Paraguay, and Uruguay have adopted a common external tariff (CET) that
  ranges from 0 to 20 percent of the value of a commodity and covers about 85 percent of all traded goods. No governmental institutions direct trade block policies, and individual countries do not have to integrate or harmonize their economies to that of the trade block.
  
• Common Market-Similar to the European Union, national boundaries are removed for trade flows and the movement of labor, capital, and natural resources. No customs or other inspections occur at entry points into individual countries, except in those countries that serve as external gateways. A full economic union implies the creation of an organizational structure and jointly held policies that guide the activities of individual countries.
  

The creation of many trade blocks is one reason for rapid growth in the Latin American economy over the past decade. These relationships often vary in their intent to develop economic, social and, in some cases, political integration among member countries. The box on the following page describes the key trade organizations and relationships in Latin America.

Figure 3. Mode of international trade for selected countries.

The most common arrangement is the creation of a free trade agreement (FTA) between individual trading partners that reduces tariffs on selected goods. For example, Chile and Canada established an FTA in 1997 that eliminated tariffs on almost 80 percent of traded goods. In addition, the agreement covered topics relating to environmental protection, labor rules, and protection for investors. The United States concluded negotiations for a similar FTA with Chile in December 2002. Mercosur has signed FTAs with Chile and Bolivia, and is negotiating one with the European Union. The largest FTA in the Americas is the North American Free Trade Agreement (NAFTA) established by Canada, Mexico, and the United States, which took effect in January 1994. This agreement eliminated many tariffs and liberalized trade and investment restrictions in the three countries. As discussed in the section on Mexico, some challenges have been encountered in implementing parts of this agreement, especially concerning movement of vehicles across the Mexican-U.S. border.

Key Trade Relationships Andean Community-A customs union designed to remove external tariffs and coordinate industrial and infrastructure policies, with a goal of eventually creating a common market. A 1996 agreement established an office of general secretary to arbitrate inter-country disagreements. Member countries include Bolivia, Columbia, Ecuador, Peru, and Venezuela. Caribbean Common Market (CARICOM)-A customs union involving most of the Caribbean islands, Belize, Guyana, and Suriname. The intent is to evolve to a common market. Tariff-free imports of selected merchandise can be imported into the United States. Free Trade Area for the Americas (FTAA)-An agreement being negotiated by all the countries of North and South America (except Cuba) to develop a free market in the Western Hemisphere. If successfully negotiated, the FTAA would be the largest in the world. Latin American Integration Association (Asociación Latinoamericana de Integración or ALADI)-Created in 1980, its purpose is to promote economic cooperation and arrange for preferential trade agreements among member countries. Member countries include Argentina, Bolivia, Brazil, Chile, Columbia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela. Plan-Puebla Panamá-An agreement among Mexico and Central American countries to coordinate national policies to foster economic development in Central America. The intent is to develop joint infrastructure and human resource development plans to raise the standard of living of the area's 60 million people. Mexico has taken a lead in this initiative. Mercado Común del Sur (Mercosur)-A customs union designed to reduce tariffs on commodities within the Mercosur market, and to apply a common external tariff on the majority of traded goods. The intent is to develop a common market, but progress has been slow. Member countries include Argentina, Brazil, Paraguay, and Uruguay. Free trade agreements have made Chile and Bolivia associate members. North American Free Trade Agreement (NAFTA)-Agreement among Canada, Mexico, and the United States to create a free trade area by removing regulatory barriers and reducing tariffs on selected commodities. The FTA became effective in 1994, although the implementation of many provisions has been staged over a multi-year period.

Scanning Study Preparation

As part of its preparation for the Latin American visit, the scanning team held meetings with State DOT and port officials, shippers, and Latin American investors. A meeting in New Orleans focused on shipper and investor perspectives on Latin America's challenges and future prospects. A meeting in Miami focused on the challenges facing U.S. ports and transportation systems if increased trade with Latin America were to occur.

New Orleans pre-departure meeting-The Port of New Orleans and the Louisiana Department of Transportation and Development hosted a September 20-21, 2002, meeting that provided an opportunity for the scanning team to meet with investors, shippers, and port operators with a working knowledge of Latin American trade. Several important points were made at this meeting. Perhaps most important was an assessment of the current economic and, in some cases, political state of several Latin American countries. Several countries have been experiencing severe economic challenges, changes in government, and largescale transitions to privatization of infrastructure over the past two decades. Brazil, Uruguay, and Argentina, in particular, have been hit hard by economic conditions and a lack of investment capital. Many Latin American countries have depended on natural resources (e.g., iron and copper) to generate foreign exchange, and have been subject to the fluctuations in world market prices. Others have tied their currency to the U.S. dollar and experienced rapid devaluation when the respective currencies were revalued. Still others have a tradition of businesses owned by families who tend not to reinvest in the company and the economy. Although the participants generally concluded that the Latin American market would continue to fluctuate, they expect trade with this market to increase over the long term.

Observations from meeting participants included the following:

• Latin America has been important for many years to southeastern U.S. ports.
  
• Brazil dominates the economic market of South America.
  
• New Orleans and other U.S. ports expect increased trade flows because of future free trade agreements.
  
• The economic woes of Latin American countries have affected international investment in infrastructure and economic activities.
  
• Political uncertainty in some countries (e.g., Brazil and Argentina) has caused some concern among members of the investment community.
  
• Convenient and easy-to-use distribution systems that connect internal markets to seaports are desirable for Latin American ports.
  
• Development of the agricultural hinterland of Brazil served by the Rio Paraña and connected to the Atlantic by the Rio de la Plata will have a significant effect on the U.S. agricultural industry, especially in the production of soy.
  
• Security measures at U.S. ports have been heightened since the events of September 11, 2001, and will continue, especially for Latin American trade.

It was interesting to learn that U.S. investors were funding improvements to inland water transportation facilities in the Rio de la Plata basin serving Brazil and Argentina. The intent of this project is to expedite the transport of goods from the interior of Brazil and Paraguay to Mississippi River ports. Insufficient road infrastructure is available to handle increased movement of agricultural products. Investments in the Paraña River have reduced the roundtrip barge time from the interior from two-to-three months to 23 days. This improvement in internal distribution will likely have a significant impact on trade flows in this part of South America.

From an investment perspective, the attitude of the investment community is to be cautious. The Latin American economic market is huge, and progress has been made in democratization over the past two decades. With lowered trade barriers associated with a Free Trade Area for the Americas (FTAA), the future is expected to be bright. Interestingly, a Port of New Orleans representative stated that the benefit of NAFTA has been to the United States as a whole, not only to the Gulf seaports. This is not surprising, given that NAFTA trade is primarily landbased. With the creation of an FTAA, however, ports will likely be the greatest beneficiaries because most of the trade will have to come to NAFTA countries via ships. A key question facing the United States is which ports will benefit the most. In anticipation, the Port of New Orleans is investing heavily in container-handling capacity.

One speaker suggested that the United States should adopt a strategic action plan to further the progress of Latin America. This action plan should encourage democratization, lower trade barriers, improved access to capital markets, and technology sharing to improve the efficiency of logistics and freight movement.

Miami pre-departure meeting-The Florida DOT and the Florida Ports Council hosted this meeting on October 30, 2002. While the New Orleans meeting focused on shipper, investor, and port operator perspectives on Latin American trade, the Miami meeting emphasized the concomitant need for investment in U.S. trade-related transportation infrastructure.

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Latin American Container Trade Estimated TEUs, 2001

Brazil 2,207,019
Central America 1,081,087
Caribbean Basin 1,077,238
Mexico 992,447
Chile 846,500
Argentina 838,652
Venezuela 517,706
Colombia 482,615
Peru 247,585

Top 13 Container Ports in Latin America, TEUs, 2000

*Colón, Panama 1,210,852
*Santos, Brazil 1,047,685
*Buenos Aires, Argentina 1,011,748
Kingston, Jamaica 983,400
Puerto Cabello,Venezuela 618,195
Limón-Moin, Costa Rica 577,621
*Freeport, Bahamas 570,000
*Vera Cruz, Mexico 543,327
Callao, Peru 480,706
Haina, Dominion Republic 465,944
*Manzanillo, Mexico 457,946
Guayaquil, Ecuador 453,646
*San Antonio, Chile 410,796

*The scanning team met with representatives of these ports

Source: http://www.eclac.cl/transporte/perfil

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Southern Florida considers itself the gateway to Latin America, and its ports and the shipping lines they serve as the superhighway to the Americas. Much of the freight movement through Florida ports originates in or is destined for Latin America (65 percent of the movement through the 14 public ports in the State). Some 40 shipping lines offer regularly scheduled service between the Port of Miami and 100 countries, serving 250 ports around the world. During fiscal year 2001, close to 1 million TEUs were handled in the port. An economic study for Florida ports predicts that trade will double in five years, and that passenger cruises will increase between 8 and 12 percent a year. Most of the increase in trade and passenger cruises will be in the Caribbean basin.

The Port of Miami, home to 18 cruise ships, is the world's largest cruise port, providing service to 3.4 million passengers in 2001. Just over $60 million is being invested by the port to upgrade and expand passenger terminals. About $120 million has been targeted for other port improvements.

A key challenge for Florida ports is rail and highway access, an issue many port officials pointed to as one of the most important constraints to increased freight movement through Florida ports. In response to these and other needs, Florida has created a Transportation Finance Commission that provides funding for port improvements with a local match provision (see box below).

Representatives at this meeting strongly recommended the development of an international trade policy for the United States that ties trade flows into market and transportation investments.

Innovative Financing For Florida Ports The State of Florida has developed an institutional structure for financing capital improvement projects at seaports. The Florida Seaport Transportation and Economic Development (FSTED) Council consists of representatives of the 14 publicly owned seaports and the State DOT, Department of Community Affairs, and Governor's Office of Tourism,Trade, and Economic Development.The councils' major responsibility is to select improvements projects. The Florida Ports Council is a non-profit organization that is the professional association for Florida's seaports. By law, the council provides support services to the FSTED Council.The Florida Ports Financing Commission issues bonds to finance the capital projects. Two types of funding programs have been established to provide state-supported capital improvements at Florida's seaports.A grant program, requiring a 50 percent local match, was established in 1990 at a level of $10 million per year. Of this, $8 million comes from the State Transportation Trust Fund and $2 million comes from the State DOT budget. Since 1991, $110 million has been made available through this grant program.Types of projects eligible for this grant money include: Transportation facilities in the port Dredging Construction and rehabilitaion of wharves, docks, etc. Crane acquisition Land acquisition Environmental protection measure Acquisition, improvement, and enlargement of facilities Intermodal access projects in plan Construction and rehabilitation of port facilities Seaport security measures The other type of financing program is based on revenue bonds, where the guaranteed receipts for debt service come from the State's motor vehicle license tax.A 1996 bond issue provided $222 million for the same types of port infrastructure improvements eligible for the grant program.A 50 percent local match is required for this program.A 1999 bond issue provided $150 million for capital improvements on a 50-50 match basis and for intermodal access projects on a 75-25 match basis. Intermodal access projects are defined as dredging or deepening of channels, turning basins, or harbors and rehabilitation of wharves, docks, or similar structures. Source: http://www.flsenate.gov/Statutes

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