Trujillo, L. and Nombela, G. - _Privatization and regulation of the seaport industry_

# _Box_ 7. **Levels of port development**

- **_(1)_** _Small local ports:_ They serve small communities and therefore through them passes all kinds of general cargo and containers, usually transported by relatively small ships _(short sea shipping)._ Facilities are basic: berths for general use with some storage areas nearby.

- _(2) Large local port:_ When traffic reaches a given level, it is profitable to invest in specific equipment, like for example a dry-bulk terminal, with berths able to serve deep-draught ships. It is also likely that some investments are dedicated to improve land access and to buy equipment to handle containers, although they would still be moved through general cargo berths.

- _(3) Large regional port:_ A seaport which handles a significant level of longhaul traffic starts requiring large investments in specialized terminals, as for example container terminals, or facilities specialized in some goods (coal, oil, wheat, etc). This type of ports have capacity to serve huge ships of more than 60,000 GRT, used in the long-haul bulk transport.

- _(4) Regional distribution centers:_ The largest world ports (e.g. Rotterdam, Hong Kong or Singapore) are a collection of highly specialized terminals that only serve particular traffics. These ports have excellent equipment for transport interchange between all modes (railways, road, inland navigation). The role of these ports is to act as hubs, where huge long-haul ships call at, mainly to make transshipment operations. From the hubs, smaller ships or other transport modes distribute cargoes to the region

_Source:_ Stopford (1997) However, this need for regulation is less strict if there is competition _between_ ports. In cases where a region offers alternative ports to shipping companies, there is less need to regulate prices charged at the terminal, since the market mechanism would make the private operator keep prices low or lose traffic. On the contrary, if those alternative ports do not exist, the private operator enjoys some market power that must be controlled by regulation. As an illustrative case, users of the Mexican ports of Veracruz and Manzanillo have repeatedly complained about high tariffs, and they are asking for a regulatory institution to be created in order to limit the monopolistic position of terminal operators.

In the case of seaports of large size - types (3) and (4) - there exists a volume of traffic large enough (e.g. bigger than 100,000 TEUS) to allow for the existence of competition _within_ the port. If a large port is divided into several independent terminals, it is possible to induce competition between operators for the traffic that calls at the port. In this way, regulation of prices is less of an issue, since if the market mechanism works reasonably well, private operators will restrain price rises themselves. However, some form of supervision would still be needed, since the situation is prone to collusion between competitors (due to the usually small number of parties involved).

As an example, the port of Buenos Aires (Argentina) was recently split into six different concessions to operate its terminals by independent companies. Although there were some 20