Efficiency determinants of container terminals in Latin American and the Caribbean

Abstract

Extensive use of containerized cargo has caused technological changes in the maritime industry and consequently port transformations. To face these new challenges, port reform processes were designed, coming to Latin America in the 90s. The main objectives were the modernization of ports and the promotion of competition and efficiency. However, there still seems to be potential for improving port efficiency. To assess the potential of this margin, this article analyses the evolution of the efficiency of the main container terminals in Latin America and the Caribbean, and determinants of inefficiency. One question this paper seeks to answer is whether increases in efficiency resulting from port modernization subsequent to reforms in Latin America and the Caribbean have been maintained over time. In addition, and in order to contribute to the definition of economic policies, the main objective of this paper is to analyse the factors that are currently influencing container ports inefficiency – specifically inter-port and intra-port competition. The estimation of a Stochastic Production Frontier shows an average level of technical efficiency of 83% in the 2000–2010 period, and a technological change of 5%. These results show that port efficiency has evolved positively, although affected by the economic crisis. Our findings also indicate that container terminals located in Mercosur countries, and ports with three or four container terminals, are the most efficient, and that transhipment ports are less efficient than other type of ports. According to our findings, LAC decision-makers should consider promoting inter-port competition and strengthening intra-port competition.