PORT PRIVATIZATION IN DEVELOPING COUNTRIES: THE CASE OF CONTAINER TERMINALS

Abstract

This paper analyzes the characteristics of general cargo port operations in developing countries, and the process of privatization. A general analysis of the production characteristics of container terminals is made, giving special attention to market structure. It is posited that, given the magnitude of freight flows in developing countries, dispersion of operations in a number of terminals (to establish competitive conditions) is socially inefficient. Next, a cost model is developed considering private production costs, congestion externalities, and ship operating costs. A system of charges that internalizes external costs and makes the operator feel the social cost structure is proposed. In such situations, short and long run average production costs for the concessionaire are defined. The advantages of concentrating resources and increases in throughput capacity are shown, and main variables and bidding conditions, necessary to obtain an efficient assignment and operation of concessions, are analyzed.