Off the Waterfront.

Despite planned improvements, some shippers have cooled to Chile's privatized ports.

THE BEST WAY TO VIEW THE CHILEAN PORT OF VALPARAISO IS to take one of the old cable cars to the hilltops that stand sentry over the country's major cargo gateway. From this high perch, the scene resembles a postcard of the typical South American port of call. The blue bay, red-and-orange containers, black merchant ships, white cruise ships and a Lego-like jumble of homes and business buildings present a perfect picture of maritime harmony.

But many port companies here could not be more out of tune. "Companies will disappear," says Francisco Lobos Basauri, president of shipping agency Maritima Valpara[acute{i}]so.

Basauri is one of many discordant company executives who say Chile's recent port privatizations may actually reduce competition. In turn, the port's days of being competitive--or even Chile's time as viable shipping stop--will soon draw to a close. As a result, importers and exporters will be left with fewer alternatives. "There will be a restructuring," says Gonzalo Blanc S[acute{a}]nchez, commercial manager for Valparaiso shipping company Somarco.

The Chilean government only started shedding terminals late last year, with the private companies taking control in January Chilean company Inversiones Cosmos chipped in with German investors to win the Valparaiso port for about US$91 million, while U.S.-based Stevedoring Services of America teamed with Sudamericana Agencias A[acute{e}]reas y Mar[acute{i}]timas (SAAM) to win rights to operate terminals in San Vicente for $47 million and San Antonio for $121 million. A group of seven Chilean companies won another San Antonio terminal for $8.4 million. The northern ports will probably get new owners this year.

Port privatization is aimed at boosting productivity down on the docks. In Chile, like most Latin American countries and many around the world, the ports had become havens of cronyism and sluggish service. The country's proactive trade policies demanded efficient shipping, and that was far from what was to be found at many terminals that were ruled by labor bosses and outdated working policies. Sometimes ships would wait more than a month to get a berth.

Nonetheless, port reform was a long time in coming to the country's terminals. Union chiefs don't give up power easily. Many thought that the Chilean government of the 1990s would be unable to sell the piers. "A lot of people thought that was not possible," says Andrew Hardy, director of Cross Pacific Chartering, a ship-brokering agency.

One big operator. Quite a few people now wish that it had not happened--especially the losers in the port concessions. They say that too few companies are being given too much control over the country's largest ports. "When you give so much to one company you have to indemnify the others," Mar[acute{i}]tima Valpara[acute{i}]so's Basauri says. "Our concern is that, in two to three years, you will have one operator, one union."

Executives for the concession winners and the port authorities say the new system will make the ports more efficient--and more competitive. "We'll get new shipping lines," Puerto Valpara[acute{i}]so spokesperson Mar[acute{i}]a Isabel Ruiz dos Santos says. "We'll invest in new equipment. Efficiency will go up." Adds Alejandro Barthold, an agent for Ultraport, the name taken by one of the companies now running the private terminal in Valparaiso: "We're getting a new crane and we'll have new toplifters by the end of 2000."

But even B[ddot{a}]rthold admits there's more to be concerned with than just equipment. "It's not only a problem of cranes,' he says. "It's a problem of infrastructure and general planning, of better access and customs."

That's exactly Basauri's objection. He says Chile can't afford to just ramp up its ports terminal by terminal. "We need a country plan, not just a port plan," he says. If conditions don't improve, Basauri says his company will not be able to retain the 800 workers it has historically hired for stevedore services in Valpara[acute{i}]so. Once the companies that won the terminal concessions take over, the work at the other piers in the area won't be enough for Basauri to keep the full workforce.

Dockworkers, already smarting from the political defeat on port priovatization, fear job losses as the industry consolidates into just a few players. Even before the concessions were granted, one worker captured the general sentiment by etching on a building near a shipping line office the equation: "Privatizaci[acute{o}]n Cesant[acute{i}]a," or "Privatization = Unemployment." The unions went a step further earlier this year, striking for back wages for son 900 waterfront laborers who were "retired" in late 1999.

Now, with socialist President Ricardo Lagos in office, so wonder if the new Chilean chief will labor back the power it once had in the ports. "Sure, there are people concern about Chile and its history with socialists," Cross Pacific's Hardy says. "A lot of people are saying we don't want to go back to what it was in the 1970s. I think it's totally different from the way it was 25 years ago."

Of more concern to executives is the newly concentrated power in the hands of a few private operators. While most believe they can stay afloat, it will require a great deal more creativity "We will not be able to compete on the same terms," says Somarco's S[acute{a}]anchez, adding that his company will have to look at expanding into warehousing, barging or even logistics. "The opportunities will be there, just maybe not the traditional ones."