News / DP World unveils $1billion project to develop greenfield container port in Ecuador

The port of Guayaquil

DP World has won a concession to develop and operate a new container facility in Ecuador, a Latin America’s country that has proved most resistant to international terminal operators.

The Dubai-headquartered operator today said it been awarded a 50-year concession to develop the port of Posorja, located around 65km from its largest port of Guayaquil.

DP World said it had drawn up a $1bn investment plan for the project.

An initial $500m will be ploughed into buying land, dredging an access channel, building a 20km access road and constructing a 400-metre container and general cargo berth with annual handling capcity of 750,000teu.

Construction is set to start sometime between now and end of the first quarter of next year, and will take two years to complete.

Beyond that there are plans to invest a further $500m – ultimately, as much as 2km of berth could be developed as well as a logistics zone.

The water depth of the port is 15 metres, compared with the 10 metres Guayaquil offers.

DP World has partnered with local companies Consorcio Nobis and Grupo Vilaseca.

Roberto Dunn, executive director of Consorcio Nobis, said: “DP World Posorja will offer Ecuadoran importers and exporters a unique deep-water alternative that will dramatically improve the competitiveness of their products in world markets and has the potential to transform the Ecuadorean economy.”

The economy appears to be in some trouble. According to FocusEconomics, its GDP is set to contract by 2.8% this year, the third-worst performer in South America after Venezuela and Brazil, And a recent Maersk Line trade report says imports from Asia in 2015 slumped 12%, and from Europe 15%, while exports, primarily driven by bananas, grew just 1%. It says the early indications from 2016 are that this year will be little better – export growth of 8% was offset by a 22% decline in imports.

The report also notes: “A dip in demand for cars, furniture, and electronic appliances accounts for the import slump which can be related to the country’s lower spending power as result of inflation.

“Looking to the rest of 2016, it is expected that Ecuador will maintain a similar growth trend as registered in 2015, due to the steady decline in oil prices. The ‘El Niño’ weather phenomenon is likely to impact exports, especially tuna, during 2016.”

In addition, Ecuador has proved to be difficult investment terrain for overseas port developers. Hutchison won a concession to develop nearby Manta in 2007, but quit the project a couple of years later, following what the US consul general Doug Griffiths described as “six weeks of turmoil over the concession’s future”, according to a leaked government cable that is part of the Wikileaks cache.

“President Rafael Correa threatened, during one of his weekly radio addresses, to expel the company from Ecuador. Allegedly, in response to the unilateral changes to the concession terms imposed by Correa, Hutchison announced that it would abandon the country.

“The government of Ecuador and Manta Port Authority officials then insisted that the concession remained valid and scrambled to find a way to keep Hutchison in Manta. Hutchison’s managing director told us that the change in the global economic environment, and the mercurial, anti-market behaviour of the Ecuadorean government made the concession no longer viable,” Mr Griffiths wrote.

He added: “President Correa may have overstepped his game when he threatened to expel HPH in January, not really believing that the company would abandon the concession. Indeed, the president has used similar public bullying techniques to negotiate better terms with multinational firms such as cell-phone operator Porta, and several European oil companies.”

President Correa, a left wing politician who came to power in 2007, has also engineered the departure of several international companies that were not willing to play this game.

Less controversial has been the 20-year concession won by Filipino port operator ICTSI to manage the container and general cargo terminals at Guayaquil under a privatisation arrangement, and where throughput across the overall port reached nearly reached capacity of 1.75m teu last year.

Under the agreement, ICTSI agreed to invest $170m initially in facilities, with total investment over the period amounting to $800m. According to Port Strategy, it is also agreed to pay the port authority a royalty of $10.43 per container handled – “well over the US$6 amount set in the bidding rules”.