South East Shipping News

International Trade Swells at Florida’s Seaports; Trading at a Deficit with China

By: Jim Turner | Posted: May 30, 2012 3:55 AM

Jaxport, Port of Miami tunnel construction project and Port of Panama CityHide

Florida’s effort to increase international trade spawned an 18.3 percent growth in the value of traffic through its seaports last year, according to the Florida Ports Council.

The overall goods traveling through Florida’s ports in 2011 totaled $149 billion, of which more than half -- $82.7 billion -- were exports. The majority of the trade was going to or coming from South America (37.4 percent), Asia and the Middle East (18.8 percent), Europe (15.7 percent), Central America (12.7 percent) and the Caribbean (9.5 percent), the council reported in its annual five-year outlook released on Friday.

"We're just thrilled we're talking growth in the industry, considering the global economic downturn," said Doug Wheeler, Ports Council president.

But he later added, "There are still a lot of empty containers leaving Florida ports. We can still do a lot better at getting these containers filled up leaving Florida's ports than we're doing now."

Getting more Florida exports would require expanding Florida's manufacturing base, as well as completing a number of prioritized projects -- such as the Port Miami tunnel -- to shorten the time cargo can move from shipping lanes to railroad tracks and interstate highways.

See port by port import-exports totals here.

Still, the overall totals were the most since 2008, which continue to outpace the trade shipped via air -- $63.8 billion in value in 2011.

The hook for bulking up the state's ports in advance of the anticipated growth in trade has been the Panama Canal expansion, to be completed in 2015. However, a big reason for the recent growth has been the rise in free-trade agreements with Central and South American countries, some of which have been natural maritime trading partners with Florida. 

See Florida's top trading partners here.

The report notes that since the U.S. signed such a pact with Chili in 2004, Florida’s annual trade with the South American country has grown from $1.8 billion to $6.9 billion.

Similarly, trade with Peru has grown from $1 billion in 2007, when a free-trade agreement was signed, to $3.2 billion last year.

However, while the state continues to pump more goods to its trading partners to the south, the state still trades at a deficit with Asian nations, part of the reason Enterprise Florida is working on plans for a business development mission to Japan, Korea or other Asian nations in 2013.

For every $8 worth of imports from China, the state returns $1 in goods sold to the Asian nation.

The West Coast of the United States has been the beneficiary of trade with China, but that is something that could change with the canal expansion.

"The Panama Canal is at least changing the dynamics of that conversation," Wheeler said. 

"We by no means have touted the Panama Canal as the Meccas of all trade routes and this will be the end-all for Florida ports," Wheeler added. "But certainly there will be new opportunities as shippers and freighters go 'Huh, there is a cost savings in going through the canal, coming out on the East Coast and throwing the cargo onto a truck or a train for a shorter haul to the heart of the country.'"

The report does highlight efforts by the council to combat competition from ports in Georgia, South Carolina and Virginia as more foreign markets open and expand.

“Opportunities missed will be opportunities lost to Florida’s competitors,” the report states

 

 

 

 

 

 

See nation's top ports list here.

To meet the expected increase in trade, the 15 individual seaports in Florida -- both cruise and cargo -- have projected $2.7 billion in capital improvement needs over the next five years.  

Channel and harbor deepening, along with new and rehabbed cargo terminals, are among the primary needs. The majority of the work is projected at Port Miami, Port Everglades and JaxPort.

See priority projects here.

The Florida Ports Council forecasts the projects would create 12,000 construction jobs and 13,000 full-time jobs.

To help fund a few of the projects, legislators in the 2012 regular session increased the nondesignated port funding from $117 million in the current year to $135 million for the next fiscal year, and created a $35 million port investment initiative.

See the Sunshine State News series "The Ports of Florida" here.



Reach Jim Turner at jturner@sunshinestatenews.com or at (772) 215-9889.

Attachments: 

Port by Port Import-Exports

Florida's Top Trading Partners

Nation's Top Ports

Priority Projects

 

 

The impending return of the PRI to power and what it means for business in Mexico

 

 

 

Despite ruling country for 71 years between 1929-2000, Mexico’s Partido Revolucionario Institucional (PRI) has been out of power for almost 12 years and has only recently regained its footing in national politics.

 

The right-of-center Partido Acción Nacional (PAN) has been at the helm since taking over the presidency in 2000 in what was declared to be Mexico’s first democratic elections. While the PAN has been in power for two consecutive terms, first under Vicente Fox Quesada (2000-2006) and then under Felipe Calderón Hinojosa (2006-2012), Mexico’s Presidency is likely to revert back to the PRI in this year’s presidential elections.

 

The PRI’s candidate, Enrique Peña Nieto, a former Governor of the State of Mexico, is the clear favorite among the top three contenders, and the election is his to lose. How did the PRI regain prominence after over a decade out of power and what would a return to the presidency mean for the country and the economy?

 

The resurgence of the PRI under Enrique Peña Nieto

The prospects of the PRI’s return to power in July’s presidential elections has as much to do with the erosion of support for the other two main parties—the PAN and the leftist Partido de la Revolución Democrática (PRD)—as it does with the strong candidacy of Enrique Peña Nieto.

 

The erosion of support for the ruling PAN party

In the case of the PAN, there is an overall feeling of disappointment in the way the party has led the country for the past 12 years. Mr. Fox, whose campaign promised a "government of change," was in effect a lame-duck president who lacked the ability and political shrewdness to pass Mexico’s most needed structural reforms, which languished in the opposition-controlled Congress. Mr. Calderón scraped into office on the narrowest of margins in what remains a highly controversial election against his then-rival, Andrés Manuel López Obrador of the PRD. Calderón chose to focus his term on the fight against organized crime, and has been highly criticized for his administration’s tactics against the country’s principal drug cartels, which have yielded mixed results at best and have coincided with a rise in violence in several parts of the country (not to mention a significantly higher death toll than in years past, which has included many civilians).

 

The growing feeling of insecurity within the country has been compounded by a perceived increase in poverty and unemployment. And while nominal GDP growth reached 4% in 2011, Mexico needs much faster growth to absorb the sizeable number of unemployed workers and new job applicants entering the labor market every year—not to mention to make a dent in the sizeable informal sector. Moreover, the Calderón administration has been equally as unsuccessful in passing key reforms Mexico depends on to grow at its full potential and enhance its economic and business environment, mainly due to a lack of consensus among parties and the PAN’s lack of congressional majority.

 

Stalled reforms include, among others, much-needed changes to the tax system (to broaden the tax base and reduce reliance on PEMEX for government revenue); labor markets (to ease expansion and contraction of the labor force and reduce the influence of certain unions); the energy sector (to enable PEMEX to operate like a business and collaborate with private-sector firms); market competitiveness (to reduce the influence of monopolies and remedy critical skills shortages); and law enforcement (to improve the professionalization of the police, prison, and court systems in particular). As a result, it is unlikely that Josefina Vazquez Mota, the PAN candidate, will be able to keep her party in Los Pinos.

 

The decline of López Obrador

Meanwhile, Mr. López Obrador returns as the candidate for Mexico’s PRD. While Mr. López Obrador is a formidable campaigner and has traveled extensively across the country to canvas support for his candidacy after being declared the runner-up in 2006, his chances of getting elected this time around remain slim. He lost much goodwill and political capital with his harsh reaction to losing the 2006 election—which included condoning the takeover and organized sitin on Mexico City’s Paseo de la Reforma (one of the capital’s most prestigious and symbolic avenues) with paid protestors for over a month, and declaring himself the “legitimate president” in defiance of Calderón’s swearing-in as the new head of state. His actions at the time left him looking a like a sore loser and compromised political figure in the eyes of swing voters—a key electoral constituency in the upcoming vote (comprising an estimated 20% of voting-age adults in the latest polls). Furthermore, while Mr. López Obrador has recently—and somewhat belatedly—begun courting the private sector and key business leaders, many question how some of his political promises will withstand economic scrutiny and the pressure to honor longstanding trading relationships and open market principles.

 

The rise of Peña Nieto

In contrast to the relative weakness of the PRD and PAN campaigns (which were the two leading parties who fought a neck-to neck race in 2006), The PRI has returned from the political wilderness with a strong, focused, and politically unified campaign centered around Enrique Peña Nieto as the sole, undisputed standard bearer of the party’s fortunes in the upcoming election. Bringing a rejuvenating face to the party that ran Mexico for over 70 years, Mr. Peña Nieto rose through the ranks of the PRI as the protégé of powerful party leaders, and has been groomed for high office ever since rising to prominence as Governor of Mexico State from 2005- 2011. Under the guidance of the PRI’s power brokers and the party elders he is aligned with, Mr. Peña Nieto has rallied other factions to his cause—in an unusual show of party unity—with the sole purpose of bringing the party back to power. Moreover, his staggering good looks, his marriage to a popular Mexican soap-opera actress, and his tightly scripted public appearances have made him into a celebrity public icon. His campaign staff quickly came to realize that these assets, combined with smart positioning of their candidate as the antidote to the general disappointment with the ruling PAN party, are the PRI’s best allies for a winning campaign.

 

So far, Mr. Peña Nieto has been shrewd about not making outlandish commitments; he remains at the top of the polls, with a 20-point lead over his nearest rival. Barring some dramatic missteps in the final 2-month stretch, he is likely to win by a significant margin. The question is, what will happen once the PRI returns to power? Can Mexico expect a return of old-school PRI politics or will Mr. Pena Nieto assert himself and chart a new course for the country?

 

 

What to expect under the PRI

That the PRI will return to power is not in and of itself indicative of the economic policies that a PRI administration would likely adopt for the coming six years. Indeed, no single economic philosophy defines the party: during its 71-year rule, the PRI—and the country—experienced a dramatic shift from left-wing, socialist economic orthodoxy to business-friendly, market-opening politics typically associated with right-of-center parties. President Lázaro Cárdenas del Río (in power from 1934-1940), for instance, promoted the nationalization of the oil industry and the creation of Petróleos de México (PEMEX)—the state-run oil company, which to this day still account`s for 33% of the federal government’s revenues. At the other end of the spectrum, President Carlos Salinas de Gortari (in office from1988-1994) promoted the privatization of state-run companies such as Teléfonos de México (Telmex) and the banking services, as well as Mexico’s entry into the North American Free Trade Agreement (NAFTA). That said, it must be noted that Mr. Peña Nieto is very close to Mr. Salinas de Gortari, who is commonly referred to as his political godfather, which may suggest he will remain aligned with the market-oriented policies of the former president (and his successors from both the PRI and the PAN in Los Pinos).

 

 

Policy areas likely to remain unchanged

Indeed, in many regards, a Peña Nieto administration would mean continuity for general economic conditions and the prevailing business environment:

•From the macroeconomic perspective, Mexico will likely experience continuity of its current policies, favoring a positive economic environment, low inflation rates, and an autonomous central bank.•As per foreign policy, the fight against organized crime and drug cartels would remain the center of bilateral relations between the United States and Mexico. The United States will remain Mexico’s leading trade partner, though Mr. Peña Nieto’s administration will likely seek to diversify exports, notably to other Latin American countries as well as China and Europe. He will rely on Mexico’s wide network of free trade agreements and will likely urge greater investment by China to facilitate the recovery of exports, especially as consumer demand strengthens in the United States. His administration will continue to reduce tariff and non-tariff barriers, but quotas will most likely persist for sensitive products such as clothing, footwear, the publishing industry, and agricultural products

 

.•Mexico will continue to have open policies towards foreign investment, especially in manufacturing. The financial services industry is likely to continue growing, attracting foreign direct investment, especially from private pension funds, as well as in debt and equity markets.

 

•While Mr. Peña Nieto recognizes the shortfalls of the education system, his administration would offer little-to-no prospect of substantive education reform, mainly because of the continued political clout of the powerful teachers’ union. The result will be continued skills shortages, favoring the proliferation of low-skill manufacturing jobs at the expense of R&D or other jobs requiring highly skilled workers.

 

•Mr. Peña Nieto also recognizes the need for comprehensive labor reform, and has campaigned for broadening social security, pensions, and unemployment insurance. However, his administration is unlikely to address such a politically sensitive reform.Select changes that could affect business

The more likely changes would likely come in select sectors and would be consistent with Mr. Peña Nieto’s previous priorities as Governor and representative of his ties to specific business interests:

 

•Infrastructure development will likely play a key role within Mr. Peña Nieto’s agenda, as his administration would seek to collaborate with private firms for the construction of multimodal infrastructure corridors, replicating an approach he widely used during his tenure as Governor.

 

•On the business front, Mr. Peña Nieto could well direct the competition commission to crack down on monopolistic practices, on the grounds that it will promote higher levels of competitiveness. Yet, in truth, his administration’s priorities in this regard would be dictated by his strong ties to select business interests. If he chooses to focus on breaking up monopolies, Mr. Peña Nieto will likely begin with an incremental liberalization of the telecommunications industry, which is currently dominated by TELMEX for landlines (80% market share) and Telcel for mobile lines (71% market share), but given his close ties to Televisa, the liberalization of media—and, specifically, television—markets will likely be a second-tier priority. It is unlikely that Mr. Peña Nieto will confront PEMEX; however, he may push for a greater degree of collaboration with foreign firms towards the end of his term (but only if he has sufficient political capital to warrant it).

 

•With regard to stimulating the business environment, there is good chance that Mr. Peña Nieto will press to reduce bureaucratic procedures for business startups, cutting back on red tape and promoting the expansion of fast-track schemes. This would be part of a more complete fiscal package that would seek to simplify the tax system, broaden the tax base, and place greater emphasis on VAT collection. Nevertheless, short-term tax collections will continue to rely on large companies and revenues from PEMEX.Continuity is more likely than dramatic change

 

The PRI is unlikely to secure a congressional majority within the next six years, which means that just like his two PAN predecessors, Mr. Peña Nieto will have to negotiate passage of key reform bills with opposition parties—most likely the PAN (especially on the economic front). Yet while the PAN may agree with some of these reforms on ideological grounds, the party may choose to obstruct Mr. Peña Nieto’s agenda on political grounds—just as the PRI itself has done repeatedly with presidents Calderón and Fox. The result would be further gridlock and watered down bills that Mexico can ill afford. Mr. Peña Nieto’s political maneuverability will be put to the test.

 

In general terms, should the PRI win the 2012 presidential elections on July 1st,

the next administration will hold more of the same for Mexico. Substantial changes in the business and economic environment will be slow to take hold. Nevertheless, “slow and steady” is sometimes welcome news, especially in a global market with high volatility.

 

 

 

Guillaume Corpart is the Managing Director of Americas Market Intelligence and a veteran of Latin American competitive intelligence and strategy consulting.

Written testimony of U.S. Coast Guard Commandant Admiral Robert Papp Jr. for a Senate Committee on Appropriations, Subcommittee on Homeland Security hearing addressing the President’s Fiscal Year 2013 budget request for the U.S. Coast Guard

Release Date: May 9, 2012

138 Dirksen

Introduction

Good morning Madam Chair and distinguished members of the Committee. Thank you for the continuing support you have shown to the men and women of the United States Coast Guard, including the funding provided in the Fiscal Year (FY) 2012 Consolidated Appropriations Act to recapitalize the aging fleet and sustain front-line operations.

This year marks our 222nd year of protecting Americans on the sea, America from threats delivered by the sea and the sea itself. Throughout this period, our unique authorities, capable assets and determined personnel have adapted to meet the Nation’s evolving maritime safety, security and stewardship needs. We are locally based, nationally deployed and globally connected.

I am here today to discuss the Coast Guard’s FY 2013 Budget Request. Before discussing the details of the request, I would like to take this opportunity to discuss some of the Coast Guard’s recent operational successes, our value and role in the Department of Homeland Security, and in service to the Nation.

Over the past year, Coast Guard men and women – Active Duty, Reserve, Civilian and Auxiliarists alike – continued to deliver premier service to the public. In the Midwest, Coast Guard Disaster Assistance Response Teams were among the first responders to residential areas impacted by severe flooding. In the Western Caribbean, Coast Guard Medium Endurance Cutters and Seagoing Buoy Tenders interdicted and supported the multi-agency recovery of Self- Propelled Semi-Submersible vessels. These “drug subs” are designed for one specific purpose – to deliver multi-ton loads of pure cocaine bound for our shores, streets and schools. While the use of drug subs is increasingly popular in the Eastern Pacific, these interdictions mark the first time we have encountered drug subs in the Western Caribbean. In the Arctic, the Coast Guard icebreaker HEALY and her crew broke their way through 800 miles of Bering Sea ice to enable the Motor Vessel Renda to deliver 1.3 million gallons of fuel to the 3,600 people of Nome, Alaska after extreme weather and ice formation precluded safe delivery of this vital commodity.

Last year, the Coast Guard responded to 20,510 Search and Rescue cases and saved over 3,800 lives; seized over 75 metric tons of cocaine and 18 metric tons of marijuana destined for the United States; seized 40 vessels, detained 191 suspected smugglers; conducted over 10,400 annual inspections of U.S. flagged vessels; conducted 6,200 marine casualty investigations; conducted more than 9,000 Port State Control and Security examinations on foreign flagged vessels; and responded to 3,000 pollution incidents.

I am pleased to advise you that the Coast Guard recently accepted delivery of the lead Sentinel Class Fast Response Cutter, the BERNARD C. WEBBER. Sixty years ago, on February 18, 1952, Boatswain's Mate First Class Webber and his three-man 36-foot motorized lifeboat crew rescued 32 souls, one by one, from the 503-foot Tank Vessel Pendleton after it broke in two in a Nor’easter off Cape Cod featuring 60-foot seas, 70-knot winds and blinding snow. Petty Officer Webber’s seamanship, courage and leadership serve as an enduring reminder of the Coast Guard’s value to the Nation.

The FY 2013 Budget represents a critical inflection point – the ships, boats and aircraft we are investing in today are vital to ensuring the Coast Guard remains ready to respond to maritime threats and hazards, well into the future. Indeed, these resources will not just shape, but in a large part will define the Coast Guard’s next fifty years of capability. We are also exercising resource and operational stewardship while simultaneously preparing for the future. We recently completed a review of doctrine, policy, and our operations and mission support structure to ensure we are focusing resources and forces where they are most needed. This prioritization is reflected in our FY 2013 budget submission, which focuses on balancing current operations with our need to recapitalize for the future. However, we must do so in a manner that sustains our capability to safeguard lives, protect the environment and facilitate safe and secure commerce throughout our Maritime Transportation System – a system which carries 95 percent of all U.S. foreign trade and accounts for nearly $700 billion of the U.S. gross domestic product and 51 million U.S. jobs.

The Coast Guard’s value and role: We protect those on the sea: leading responses to maritime disasters and threats, ensuring a safe and secure Maritime Transportation System, preventing incidents, and rescuing those in distress. We protect America from threats delivered by sea: enforcing laws and treaties, securing our ocean resources, and ensuring the integrity of our maritime domain from illegal activity. We protect the sea itself: regulating hazardous cargo transportation, holding responsible parties accountable for environmental damage and cleanup, and protecting living marine and natural resources.

 

FY 2013 Request

In recognition of the current fiscal environment, the Coast Guard’s FY 2013 Budget strikes the optimal balance between current operations and investment in future capability to sustain the Coast Guard’s ability to execute its missions, and address the most pressing operational requirements. This budget request includes investment in new assets which are critical to ensure the Coast Guard remains capable of carrying out its missions today and well into the future. Accordingly, the Coast Guard’s FY 2013 Budget priorities are to:

• Responsibly Rebuild the Coast Guard
• Efficiently Preserve Front-line Operations
• Strengthen Resource and Operational Stewardship
• Prepare for the Future

 

Highlights from our request are included in Appendix I.

The Coast Guard Cutter WAESCHE conducts at-sea refueling operations for the first time in the ship's history.

Responsibly Rebuild the Coast Guard
The Coast Guard continues to focus resources on recapitalizing cutters, boats, aircraft, and Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance systems, critical to sustaining the ability to accomplish missions well into the future. This budget request fully funds the sixth National Security Cutter, strengthening the Coast Guard’s long-term major cutter recapitalization effort to replace its aged, obsolete High Endurance Cutter fleet as quickly as possible. The FY 2013 investments are critical to replacing and sustaining aging in-service assets, and are key to maintaining future capability.

Efficiently Preserve Front-line Operations
To ensure the Coast Guard remains ready to meet the Nation’s safety and security requirements, the FY 2013 Budget request provides a balance between sustaining front-line operational capacity and rebuilding the Coast Guard. The FY 2013 Budget provides funding to operate and maintain Coast Guard assets and sustain essential front-line operations. Key investments include funding the operation of new assets delivered through acquisition programs and investment in military workforce pay and benefits.

Strengthen Resource and Operational Stewardship
The FY 2013 Budget meets essential mission needs while simultaneously preparing for new and exigent demands. Through a comprehensive internal review of doctrine, policy, operations and mission support structure, the Coast Guard has focused resources and forces where they are most needed, while recognizing the current fiscal challenges. The FY 2013 budget also proposes administrative and programmatic reductions to improve efficiency and service delivery, while continuing investment in Coast Guard activities that provide the highest return on investment.

Prepare for the Future
The Coast Guard continuously identifies and prepares for emerging maritime threats facing the Service and the Nation. The FY 2013 Budget request recognizes the criticality of the Arctic as a strategic National priority, given increasing presence and interest by other Nations, the preponderance of natural resources available in this region, and increasing maritime commercial and recreational activity.

Conclusion

The role of the Coast Guard has never been more important. As we have done for well over two centuries, we remain “Always Ready” to meet the Nation’s ever-broadening maritime needs, supported by the FY 2013 request. I request your full support for the funding requested for the Coast Guard in the President’s FY 2013 Budget. Again, thank you for the opportunity to testify before you today. I am pleased to answer your questions.

Appendix I - Fiscal Year 2013 Budget Request

RESPONSIBLY REBUILD THE COAST GUARD

Surface Assets
$879.5M (0 FTE)

The budget provides $879.5 million for surface asset recapitalization and sustainment initiatives, including:

• National Security Cutter (NSC) – Provides production funding for the sixth NSC; NSCs will replace the aging fleet of High Endurance Cutters, first commissioned in 1967. The acquisition of NSC-6 is vital for performing DHS missions in the far off-shore regions, including the harsh operating environment of the Pacific Ocean and Bering Sea, as well as providing for robust homeland security contingency response.
• Fast Response Cutter (FRC) – Provides production funding to procure Fast Response Cutters (FRC) 19-20. These assets replace the aging fleet of 110-foot patrol boats, and provide the coastal capability to conduct Search and Rescue operations, enforce border security, interdict drugs, uphold immigration laws, prevent terrorism, and ensure resiliency to disasters. Hulls #17 - 20 will be procured in FY 2013 using FY 2012 and FY 2013 funds, maintaining FRC production at the current rate.
• Offshore Patrol Cutter (OPC) – Continues initial acquisition work and design of the OPC. The OPC will replace the Medium Endurance Cutter class to conduct missions on the high seas and coastal approaches.
• Medium Endurance Cutter (MEC) – Completes the Mission Effectiveness Program for the 270-foot MECs at the Coast Guard Yard.
• Survey and Design – Initiates survey and design work for a mid-life availability on the 175-foot Coastal Buoy Tender class.

Air Assets
$74.5M (0 FTE)

The budget provides $74.5 million for the following air asset recapitalization or enhancement initiatives, including:

• HC-144 – Funds production of the 18th HC-144A Maritime Patrol Aircraft. The HC-144A fleet will provide enhanced maritime surveillance and medium airlift capability over the legacy HU-25 aircraft that they replace. The HU-25s will all be removed from service by the end of their planned service life, in FY 2014.
• HH-65 – Funds sustainment of key components requiring recapitalization.

Asset Recapitalization – Other
$76.5M (0 FTE)

The budget provides $76.5 million for the following equipment and services:

• Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (C4ISR) – Deploys standardized C4ISR capability to newly fielded NSCs, C-130s and MPAs, and develops C4ISR capability for other new assets.
• CG-Logistics Information Management System – Continues development and prototype deployment to Coast Guard operational assets and support facilities.
• Nationwide Automatic Identification System (NAIS) – Continues recapitalizing the existing interim NAIS system in 58 ports and 11 coastal areas by replacing it with the permanent solution design and technology via the core system upgrade.

Shore Units and Aids to Navigation (ATON)
$69.4M (0 FTE)

The budget provides $69.4 million to recapitalize shore infrastructure for safe, functional and modern shore facilities that effectively support Coast Guard assets and personnel:

• Station New York Boat Ramp – Constructs a boat ramp for launching small boats at Station New York, NY, for both the Station and Maritime Safety and Security Team New York.
• Air Station Barbers Point – Constructs an aircraft rinse rack facility to properly and effectively rinse C-130 aircraft at Air Station Barbers Point.
• Major Acquisition Systems Infrastructure – Commences construction of piers and support facilities for three FRC homeports; construction of an MPA training facility at Aviation Technical Training Center in Elizabeth City, NC; construction of MPA maintenance facility hangar at the Aviation Logistics Center at Elizabeth City, NC.
• ATON Infrastructure – Completes improvements to short-range aids and infrastructure to improve the safety of maritime transportation.

Personnel and Management
$117.4M (842 FTE)

The budget provides $117.4 million to provide pay and benefits for the Coast Guard’s acquisition workforce.

EFFICIENTLY PRESERVE FRONT-LINE OPERATIONS

Pay & Allowances
$88.9M (0 FTE)

The budget provides $88.9 million to fund the civilian pay raise and maintain parity of military pay, allowances, and health care with the DoD. As a branch of the Armed Forces of the United States, the Coast Guard is subject to the provisions of the National Defense Authorization Act, which includes pay and personnel benefits for the military workforce.

Annualization of Fiscal Year 2012
$54.2M (260 FTE)

The budget provides $54.2 million to continue critical FY 2012 initiatives.

Operating and Maintenance Funds for New Assets
$47.6M (139 FTE)

The budget provides a total of $47.6 million to fund operations and maintenance of shore facilities and cutters, boats, aircraft, and associated C4ISR subsystems delivered through acquisition efforts. Funding is requested for the following assets and systems:

• Shore Facilities – Funding for the operation and maintenance of shore facility projects scheduled for completion prior to FY 2013.
• Response Boat-Medium – Funding for operation and maintenance of 30 boats.
• Interagency Operations Center (IOC) – Funding for the operation and maintenance of the Watch Keeper system.
• Rescue 21 (R21) – Funding for the operation and maintenance of the R21 System in Sector Sault Ste. Marie and Sector Lake Michigan.
• FRC – Operating and maintenance funding for FRCs #8-9 and funding for crews #9-10. These assets will be homeported in Key West, FL. Funding is also requested for shore-side maintenance personnel needed to support FRCs.
• HC-144A MPA – Operating and maintenance funding for aircraft #14-15 and personnel funding to operate and support aircraft #15-16.
• Air Station Cape Cod Transition – Funding to complete a change in aircraft type allowance, and programmed utilization rates.
• Training Systems for Engineering Personnel – Funding to support NSC and FRC training requirements at Training Center Yorktown.
• HC-130H Flight Simulator Training – Funding to support aircraft simulator training for HC-130H pilots, flight engineers, and navigators.

St. Elizabeths Headquarters Consolidation
$24.5M (0 FTE)

Provides funding to support the Coast Guard’s relocation to the DHS consolidated headquarters at the St. Elizabeths Campus in Washington, DC. Funding supports the systematic move of equipment, employees, and work functions to the new headquarters location, beginning in the third quarter of FY 2013.

STRENGTHEN RESOURCE AND OPERATIONAL STEWARDSHIP

ASSET DECOMMISSIONINGS

In FY 2013, in addition to the planned decommissioning of legacy assets, the Coast Guard will make targeted operational reductions to prioritize front-line operational capacity and invest in critical recapitalization initiatives.

High Endurance Cutter (HEC) Decommissionings
-$16.8M (-241 FTE)

The Coast Guard will decommission the fourth and fifth of the original fleet of twelve HECs. With the average cutter age at 43 years, the HEC fleet has become increasingly difficult to maintain and sustain operationally. The decommissioning of two HECs is critical to support ongoing major cutter recapitalization efforts. National Security Cutters, including the sixth NSC which is fully funded by this budget request, replace the aging HEC fleet.

110-ft Island Class Patrol Boat Decommissionings
-$2.0 M (-35 FTE)

The Coast Guard will decommission three 110-ft patrol boats in FY 2013. The 110-ft patrol boats are being replaced by the FRC.

High Tempo High Maintenance Patrol Boat Operations
-$33.5M (-206 FTE)

The Coast Guard will terminate the High Tempo High Maintenance (HTHM) operations program that facilitates augmented operation of 8 in-service 110-foot patrol boats. Termination of this program coincides with commissioning of new FRCs which will mitigate this lost capacity.

Close Seasonal Air Facilities
-$5.2M (-34 FTE)

The Coast Guard will improve the efficiency of domestic air operations by closing Seasonal Air Facilities and realigning rotary wing capacity to provide three medium-range H-60 helicopters to the Great Lakes region to replace the H-65s currently in service. Due to limited demand for services and improved endurance from the H-60, the Coast Guard will discontinue operations at two seasonal Coast Guard Air Facilities at Muskegon, MI, and Waukegan, IL.

HU-25 Aircraft Retirements
-$5.5M (-20 FTE)

The Coast Guard will retire the three remaining HU-25 aircraft assigned to Coast Guard Air Station (CGAS) Cape Cod to allow for the transition to HC-144A aircraft. In FY 2013, the Coast Guard will deliver and place in full-operational status three HC-144A aircraft at CGAS Cape Cod.

MANAGEMENT EFFICIENCIES

The budget proposes administrative and programmatic efficiencies to improve service delivery, while continuing investment in Coast Guard activities that provide the highest return on investment.

DHS Enterprise-Wide Efficiencies
-$56.3M (-24 FTE)

The Coast Guard will seek efficiencies and cost reductions in the areas of IT infrastructure, government vehicles, professional services contracts, non-operational travel, GSA leases, permanent change of duty station relocation costs for military personnel, and logistics services by consolidating/centralizing functions in geographically concentrated areas.

Programmatic Reductions

In FY 2013, the Coast Guard will make targeted reductions in base program areas. These base adjustments recognize changes in requirements for selected activities and redirect resources toward higher-priorities, including critical recapitalization projects and essential frontline operations.

Headquarters Personnel and Support Reduction
-$12.7M (-131 FTE)

The Coast Guard will eliminate 222 Headquarters positions through attrition and implementation of a civilian hiring freeze in the Washington, D.C. area. This reduction preserves the Coast Guard’s critical capabilities to conduct front-line operations; mission support; and development and implementation of national policies and regulations.

Recruiting Program Reduction
-$9.8M (-39 FTE)

The Coast Guard will make reductions to the Recruiting program and Selective Reenlistment Bonuses, which are not needed based on the current employment outlook.

Other Targeted Program Reductions
-$6.2M (-62 FTE)

The Coast Guard will make targeted reductions to the Intelligence workforce, Organizational Performance Consultants, and non-reimbursable Detached Duty billets.

Targeted Operational Reductions
-$3.7M (-32 FTE)

Based on an internal review and assessment of operational risk, the Coast Guard proposes to make targeted operational reductions by reorganizing the international Mobile Training Team, consolidating PWCS Airborne Use of Force (AUF) capability at Elizabeth City, NC; and San Diego, CA, and eliminating the Vintage Vessel National Center of Expertise.

PREPARE FOR THE FUTURE

Polar Icebreaker
$8.0M* (0 FTE)

Initiates survey and design of a new Polar Icebreaker to ensure the Nation is able to maintain a surface presence in the Arctic well into the future.

Alaska Shore Facilities
$6.1M* (0 FTE)

Provides funding to recapitalize and expand helicopter hangar facilities in Cold Bay, AK, and recapitalize aviation re-fueling facilities at Sitkinak, AK. These investments will sustain the Coast Guard’s ability to establish effective presence in the Bering Sea and Aleutian Chain - the “gateway” to the Arctic.

* Note: Funding amounts within this section are included in totals listed within the Responsibly Rebuild the Coast Guard section.

As states seek funds for deeper ports, will ships come in?
 

 
By Curtis Tate | McClatchy Newspapers
By Curtis Tate McClatchy Newspapers
WASHINGTON — A wider, deeper Panama Canal will open in 2014, meaning that bigger cargo ships filled with more containers of consumer goods can move directly to the population centers of the East Coast instead of stopping on the West Coast and sending the goods across the country.
States with seaports along the Atlantic are asking for hundreds of millions of federal dollars to deepen their harbors and shipping channels to accommodate the bigger ships and capture a slice of the growing traffic.
But some global supply-chain experts say the optimistic pre-recession projections of a huge shift in cargo from West Coast ports to East Coast ports no longer add up. Even the U.S. Army Corps of Engineers, which conducts feasibility studies for such projects and often does the dredging, expects little change in cargo volume at those ports.
John Lanigan, the chief marketing officer for freight rail hauler Burlington Northern Santa Fe, which runs dozens of double-stacked container trains every day from West Coast ports to the Midwest and Southeast, said he didn’t expect a major diversion of cargo to the canal.
“The opening of the canal is not going to make it any faster for freight to get to the East Coast,” he said. “The only thing that really changes is that bigger ships will be able to go through the canal.”
Even so, Republican governors in South Carolina, Georgia and Florida, who were elected on platforms of fiscal conservatism, are still hoping that the federal government will pay for some of the cost of the harbor-deepening projects. But just in case the federal funding doesn’t come through, these states have a backup plan: Spend state taxpayers’ money.
Currently the biggest ships that can fit through the Panama Canal can carry only about 4,000 containers, metal boxes full of consumer goods that can be transferred from ship to train to truck. The new, so-called post-Panamax ships will carry double or triple that volume. But because the ships are bigger and heavier, they also require water depths approaching 50 feet.
The ports of Norfolk, Va., Baltimore, and New York and New Jersey have that depth now or will soon. Farther south, the ports in Charleston, S.C., Savannah, Ga., and Miami don’t want to see the bigger ships pass them by.
“I don’t know too many ports that have gambled on shallow water that have stayed in the game,” said Kevin Lynskey, the assistant director for seaport business initiatives at the Port of Miami. “If we didn’t dredge and other people did, we certainly would lose more containers.”
Proponents of harbor-deepening projects say they’re vital for local and state economies and will create thousands of jobs in a country that’s still reeling from the deepest economic downturn since the Great Depression.
“It’s the biggest strategic issue for South Carolina today,” said Jim Newsome, the chief executive of the South Carolina Ports Authority, which needs $300 million to deepen the 45-foot harbor in Charleston to 50 feet by 2020. “Businesses locate near ports; that’s the bottom line.”
But Jean-Paul Rodrigue, a transportation scholar at Hofstra University, said it didn’t make sense for Charleston, Savannah and Miami all to have deeper harbors without more business.
“You need a lot of volume,” he said. “It’s not certain those ports can generate that level of volume.”
Several factors make a significant shift from one coast to the other unlikely. The first is speed. It’s less expensive for a ship to go the all-water route to the East Coast instead of docking on the West Coast and offloading containers onto trucks or trains, but it also takes at least a week longer. For consumer electronics and other high-end goods that need to get to store shelves quickly, retailers will pay more for faster transit times.
Second, ports in Los Angeles, Long Beach and Oakland, Calif., and Seattle and Tacoma, Wash., are deep enough to handle the bigger ships. They have warehousing space for containers, and they have highly developed rail connections to the Midwest and Southeast.
“Why not just unload all of it here?” asked Art Wong, a spokesman for the Port of Long Beach, which is second only in volume to Los Angeles in the U.S. “We hope to maintain those kinds of advantages.”
Third, the Panama Canal authority must pay off billions of dollars in construction costs, and it’s unknown how much the canal will charge the bigger ships in tolls. Last, the Suez Canal can handle any size ship, and some cargo ships bound from Asia to North America already use it.
“Depending on what Panama Canal charges in fees, it still makes economic sense to hit LA-Long Beach and be in Kansas City, Chicago or Louisville pretty darn quick,” said Charles Clowdis, the managing director of North American markets at economic forecaster IHS Global Insight.
Rodrigue said the Atlantic states were using the canal as a rationale for their own port expansion plans.
“If I was a port authority, I would be doing the same thing,” he said. “They want to do what they perceive is best for their own ports.”
Newsome is banking on Charleston’s strategic position in a growing Southeast market, and he says the port could feed the region’s bigger population centers such as Charlotte, N.C., and Atlanta.
“We think we’re the only harbor in the Southeast where it makes sense to go 50 feet or deeper,” he said.
South Carolina Republican Gov. Nikki Haley has lobbied President Barack Obama for $120 million for the Charleston harbor but received only enough to complete a study of the project. The state Legislature is considering a bond issue to pay for the federal portion in case the funds don’t come through.
“Gov. Haley has been working on securing funds to dredge Charleston since she was elected governor,” said Rob Godfrey, a spokesman, “and she is confident we will get our federal match and that Charleston will be as deep as necessary to make it the best port in the Southeast."
Georgia also isn’t waiting. Republican Gov. Nathan Deal’s budget now includes about $180 million in state funds for the port of Savannah. He said the state would pay for all of it if necessary, then seek a reimbursement from Washington.
Savannah is 100 miles south of Charleston and boasts the busier of the two ports, but it also has a shallower channel depth of 42 feet. Dredging the Savannah River would cost more than twice as much as Charleston, and would give the port only a 47-foot depth, though the river’s high tides would help accommodate bigger ships, as they do now.
“If you compare the cost of the two projects, they have a lot more to fund,” Newsome said.
Much of the $650 million cost is environmental mitigation. Billy Birdwell, a spokesman for the Army Corps of Engineers Savannah District, said that included the impact on marshes and a wildlife refuge and protecting endangered sturgeon. History also gets in the way: A sunken Confederate vessel that’s in the channel would have to be removed.
An Army Corps of Engineers study, released in January, concluded that the cost of deepening the channel to the port in Savannah is justified in part because it would generate $174 million in annual economic benefits. However, the report also said that no changes in cargo volume were expected as a result of the deeper channel.
Birdwell said economic benefits would come from the efficiencies of the larger ships. Larger ships mean fewer ships, and less congestion getting in and out of the port.
Stephanie Mayfield, a spokeswoman for Deal, said Georgia supported the expansion of both Savannah and Charleston.
“Both ports are of regional and national significance, and there is plenty of business to go around,” she said. “Gov. Deal is committed to funding the state’s share of 40 percent and expects that the federal government will live up to their commitment and fund the remaining.”
Florida Republican Gov. Rick Scott didn’t wait for an answer from Washington on the state’s request for $77 million for the Port of Miami. Just two months after he took office, Scott decided that the state would pick up the tab.
“We chose to self-fund,” said Lynskey, the assistant director at the Miami port. “We do want to get reimbursed by the federal government, but we’re going ahead without knowing.”
On Florida’s west coast, Port Manatee is nearing the end of a decade-long, $200 million expansion and has dredged to accommodate ships that have passed through the Panama Canal.
Miami’s project is less expensive than Savannah’s or Charleston’s, and it might be complete by the end of 2014, Lynskey said. A rail link to the port was rebuilt recently, and a $1 billion road tunnel to reach the harbor will be finished soon. Last month, the port authority reached a deal with environmental groups that had opposed the dredging project out of concern for its impact on coral reefs. Lynskey said the construction bid for the project should be ready by August.
Lynskey said that 60 percent of Florida-bound consumer goods from Asia didn’t come through the state’s ports, instead reaching Florida through Southern California or Savannah. With the deeper port, Lynskey expects Miami cargo volumes to double in the next decade.
“If we get no more than recapturing Florida, we’re going to get our investment back,” he said.
Copyright 2012 McClatchy Newspapers. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
 
Email: ctate@mcclatchydc.com; Twitter: @tatecurtis

Read more here: http://www.mcclatchydc.com/2012/05/02/147455/as-states-seek-funds-for-deeper.html#storylink=cpy

TESTIMONY-BY: PAUL COZZA, PRESIDENT CSL International

AFFILIATION: CSL INTERNATIONAL

 

 

Statement of Paul Cozza President CSL International

Committee on House Transportation and Infrastructure Subcommittee on the Coast Guard and Maritime Transportation

April 26, 2012

I. Introduction

Good morning Chairman LoBiondo, Ranking Member Larsen, and distinguished members of the Subcommittee. Thank you for inviting me to testify. I am Paul Cozza, President of CSL International. We are a U.S.-based shipping company, concentrating in Self Unloading Bulk ships on international Short Sea routes. We are headquartered in Massachusetts, and are a subsidiary of Canada Steamship Lines based in Montreal.

CSL International specializes in the marine transportation and handling of dry-bulk. We also have offices in the U.K., Norway, Singapore, Australia, Indonesia, and Canada. We own and operate the largest fleet of self-unloading vessels in the world, serving clients in industries ranging from building and construction to agriculture. Self-unloading vessels serve a special sector of the dry-bulk shipping industry, with their self-contained and automated equipment offering high levels of speed, efficiency and environmental advantages.

I appreciate the opportunity to appear before you today to make two main points:

First, I will demonstrate the economic contribution and environmental value of the Short Sea Shipping industry. In summary, Short Sea Shipping is the coastal movement of cargo on the water that does not cross an ocean and could also in some instances be served by rail or truck transportation. We are able to transport cargo more efficiently and with far lower environmental impacts than trucks or trains. For instance, while a truck can carry one ton of cargo approximately 155 miles on a gallon of diesel fuel, and a train can transport that same cargo 413 miles, an average CSL vessel can outperform both, moving the cargo an impressive 1100 miles on that same gallon of fuel. Nevertheless, CSL is presently engaged in a major effort to recapitalize our fleet to make it even "greener."

Second, I would like to bring to the Subcommittee's attention the impact the North American Emission Control Area ("EGA.") will have on our industry and offer a solution that achieves equivalent environmental goals without sacrificing the environmental benefits that Short Sea Shipping provides. Implemented under Annex VI of the International Convention to Prevent Pollution from Ships ("MARPOL"), the ECA establishes sea- going vessel air quality standards for a 200-mile area around the coastline of the U.S. and Canada and sets limits on the sulfur content of fuel used within the ECA. The ECA standards are far more strict than will be imposed anywhere else in the world, both in terms of the distance the ECA extends from shore and the level of permitted fuel sulfur content. We are concerned the 200-mile ECA is too stringent for some vessels and may not provide any appreciable environmental benefit beyond 50 miles for lower horsepower ships, such as CSL's and those of other Short Sea Shipping companies.

More specifically, by August 1, 2012, sea-going vessels operating in the ECA must use fuel with no more than a 1% sulfur content. We at CSL are prepared to meet and support that standard despite the resulting, not insignificant, increase in operating costs. The 2012 fuel price impacts, for CSL as an example, while sustainable, will still be measured in millions of dollars.

By August 1, 2015, in accordance with the aforementioned Annex VI agreement, vessels operating within the ECA will be required to use an ultra-low 0.1% sulfur fuel which is a marine diesel. Significantly, prices for this ultra-low sulfur fuel to the extent the fuel is available will raise our cargo rates and challenge our business and more importantly the customers we serve. Marine diesel fuel has different flash point specifications than road diesel which means we can't simply adjust to a "generic" low sulfur diesel fuel. Because we trade in near-shore routes, typically not beyond 100 miles from the coast, our vessels must use the reduced sulfur fuel nearly all the time, as opposed to trans-ocean-going vessels which only need this fuel when transiting the ECA on the way into and out of port, which in many cases only represents less than 10% of a voyage. Outside the ECA, ships may use up to 3.5% sulfur fuel.

Although well-intended, flaws in current ECA regulations will jeopardize the Short Sea Shipping sector. Indeed, based on supply issues, we are concerned that compliant North American marine fuel prices could nearly double in 2015. The anticipated increase in 2015 fuel costs using the ultra-low sulfur fuel will hamper marine competition and could cause a modal shift from energy efficient short sea ships to higher emitting shore-based rail and truck modes, with the unintended consequence of creating more congestion (in systems that, in many cases, are already stretched to their breaking points) as well as increased air pollution closer to population centers.

CSL, working in concert with our customers, also forecasts that the resulting higher transportation costs in 2015 will negatively affect their businesses. Approximately two-thirds of the cargo that we ship is in support of the construction industry in the U.S.; therefore, this regulation mandated cost increase has strong potential to negatively impact both commercial and residential economic development in the U.S.

CSL fully recognizes and supports the value of reducing its carbon footprint as well as emissions of other pollutants associated with marine transport. To better understand the self- unloading vessel's impact on air quality, we commissioned a study to analyze our ships' emissions using the emissions modeling approach (the "CALPUFF" model) that the U.S. Environmental Protection Agency ("EPA") itself used in the ECA development process. The study indicated that air quality impacts from lower horsepower ships diminished as the ships moved further away from the coast - with a sharp drop in impact at about 39 miles offshore.

Given these facts and objectives, CSL International believes efforts should be made to align the environmental goals of the ECA with the U.S. Maritime Administration's ("MarAd") 2010 Marine Highway Program. This program seeks to "use the waterways to relieve landside congestion and attain other benefits that waterborne transportation can offer in the form of reduced greenhouse gas emissions and energy savings."

As Mar Ad further explained, "From an environmental perspective... short sea shipping can offer air quality improvement, reduce traffic and mitigate noise pollution."1

Accordingly, we urge policy makers, namely Congress and the EPA in consultation with the U.S. Coast Guard and MarAd, to revisit the ECA boundary and reduce the 200 nautical mile ECA to 50 miles for 0.1% sulfur fuels (in 2015) for lower emitting ships of 20,000 horsepower and below. This revision will move away from the current "one size fits all" regulation and align with scientifically based approach which achieves the same environmental protection goals.

In summary, CSL supports and endorses environmental initiatives in marine transportation. For over 150 years, the CSL Group has pioneered technology that makes seaborne dry-bulk transportation more environmentally efficient. We are investing millions of dollars in a fleet renewal program that will significantly reduce our environmental footprint. We also firmly believe that the aforementioned ECA regulations, as presently prescribed, need to be modified as outlined. Through scientific testing, our proposal does not have a negative environmental impact on the coast and will not contribute to a modal-shift impacts or negative economic impacts to the building and construction industry.

If you would like further information, I have left our full report and additional details in a longer written testimony. Thank you very much for this opportunity. I will be pleased to answer any questions that you have.

II. CSL International

CSL International has been permanently established in Beverly, Massachusetts since 1992. CSL International owns, co-owns, or manages through a pool agreement, 41 ships, most of which operate in North America. In addition to managing the extensive North American fleet, CSL International also oversees its international operations with offices in the United Kingdom, Norway, Singapore, Indonesia, Australia and Canada. Through Short Sea Shipping routes, CSL serves major North American industrial customers such as U.S. Gypsum, National Gypsum, GP Gypsum, Martin Marietta, Vulica, Polaris Materials, and RG Steel, to name a few.

Recognizing the environmental benefit, CSL has also already started using fuels with lower sulfur well ahead of international requirements. Last year, CSL's fleet averaged fuel sulfur levels under 2.2% when the world standard was 4.5%. We are still ahead of the curve even with a recent global fuel sulfur reduction to 3.5% which started in January of 2012.

Moreover, to improve our efficiency and further reduce our environmental footprint, we are currently recapitalizing our fleet with nine new state-of-the-art "Trillium"-classed ships. They will be equipped with the latest environmental protection technology and the lowest available emission engines. Our first new vessel will start trading on the East Coast this Fall. It will be among the cleanest-operating vessels on the market. The massive new building project is relatively unprecedented, especially in our current economy, but we think the time is right to enhance the efficiency and sustainability of our fleet.

III. Short Sea Shipping's Environmental and Economic Value

CSL also founded the Short Sea Shipping Coalition in 2011 to promote the environmental benefits of short sea trade. The informal coalition is comprised of industry leaders who depend on Short Sea Shipping, as well as short sea providers and non- government agencies. The coalition promotes tough, performance- based air emission standards for smaller and efficient vessels in the short sea trade. Current partners in the Short Sea Shipping Coalition include:

CSL International Martin Marietta

Polaris

Vulica

U.S. Gypsum

Desgagnse Transport

 

Short Sea Shipping's Environmental Value

Sometimes referred to in the U.S. as the "marine highway," Short Sea Shipping is the movement of people and cargo on water routes that do not cross an ocean that, in some instances, could also be served by truck or rail. Due to its coastal nature, North American Short Sea Shipping is commonly comprised of vessels Panamax size and smaller (can transit the Panama Canal (approximately 60-80,000 deadweight tons and 800+ feet in length)), typically not exceeding 20,000 propulsion horsepower. Short Sea Shipping is an important component of the global strategy to improve air quality by reducing land based congestion and subsequent air pollution from less efficient truck and rail carriers.

Policymakers have undervalued the inherent environmental value in transporting people and cargo via ship in the creation of the North American ECA. Marine transport offers three main environmental benefits: (1) increased energy efficiency, (2) decreased carbon and sulfur dioxide emissions, and (3) reduced congestion, especially in urban areas.

Modal Comparison

Regarding energy efficiency, according to Maritime Administration's 2011 Report to Congress: "Trucks, on average, can carry one ton of freight for approximately 155 miles on a gallon of diesel fuel (i.e., 155 ton-miles of freight per gallon - equivalent to 842 British Thermal Units (BTU) per ton-mile); Rail achieves 413 ton-miles of freight per gallon (i.e., 316 BTU per ton-mile); and A tug-and-barge operation can get as much as 576 ton-miles of freight to a gallon of fuel (227 BTU per ton- mile)."

Additionally, self-propelled oceangoing vessels, such as short sea ships, can have significant energy efficiencies over land- based modes beyond those achieved by tug and barge. Specifically, our vessels achieve rates in excess of 1,100 ton-miles of freight per gallon . This mode of transport is thus seven times more efficient than truck and two-and-a-half times more efficient than the rail industry.

While the aforementioned was offered in the Maritime Administration's 2011 Report to Congress, the below image represents a separate analysis by CSL which shows the same trends.

Further, as "the most energy-efficient means of moving cargo between two points," marine transport "offers corresponding reductions per ton-mile in greenhouse gas (GHG) emissions." In fact, examining the range of typical CO2 efficiencies for various loaded cargo carriers; bulk ships produce an average of 2.7 grams of CO2 per ton-mile while trains range from 10-119 grams per ton- mile. Trucks, by comparison, are the most inefficient of the transportation options ranging from 80-181 grams of CO2 per ton- mile (data excerpted).2 Overall, "international shipping is currently estimated to have emitted 870 million tons of CO2 in 2007, no more than about 2.7% of the global total of that year."

According to the Maritime Administration's report to Congress delivered in April 2011, water transportation "is available to bring significant freight congestion relief along certain corridors. A study for U.S. Department of Transportation estimated that there were a total of approximately 78.2 million trailer loads of highway and rail intermodal cargo that moved between origins and destinations 500 miles apart along the United States contiguous coasts in 2003. This long-haul coastal truck and intermodal traffic accounted for 15 percent of total 527 million trailer loads of United States intercity truck and intermodal rail traffic in 2003."

C. Short Sea Shipping's Economic Value

In addition to its environmental benefits, the short sea shipping industry is also an important contributor to the North American economy. Based on an October 18, 2011 study titled: "The Economics of the Great Lakes - St. Lawrence Seaway System."

Short Sea Shipping on the Great Lakes alone annually contributes -

$33.6 billion in economic activity;

227,000 United States and Canadian jobs; and

$4.6 billion in United States and Canadian tax revenue

Additionally, Short Sea Shipping services many important domestic trade routes, moving a wide range of dry bulk cargo efficiently and affordably. Some of these trade routes are set forth below:

IV. Regulatory Background MARPOL Annex VI and the ECA

MARPOL Annex VI seeks to minimize airborne emissions from ships including Sulfur Oxides (SOx), Nitrogen Oxides (NOx), Ozone Depleting Substances, Particulate Matter (PM), and Volatile Organic Compounds.

Annex VI has been implemented along the following timeline:

1997: Annex VI (Regulations for the Prevention of Air Pollution from Ships) was added to the MARPOL Convention.

2005: The requirements of Annex VI internationally entered into force on May 19. Among the various technical and operational emission reducing measures outlined in Annex VI is the option for member states to establish ECAs in their domestic waters.

2005: Canada domestically ratified Annex VI allowing domestic enforcement and the eligibility to apply for any ECA.

2008: The United States ratified Annex VI.

2009: Annex VI entered into force domestically on January 8, making the United States eligible to domestically enforce the Annex and also to apply for an ECA. In the United States, Annex VI is applied via the Act to Prevent Pollution from Ships, 33 USC. 1901 etseq. ("APPS").

2010: The International Maritime Organization (IMO) approved a joint application by the United States and Canada for the creation of an ECA via Marine Environment Protection Committee (MEPC) 59/6/5 entitled "Proposal to Designate an Emission Control Area for Nitrogen Oxides, Sulfur Oxides, and Particulate Matter."

As explained above, the North American ECA is designed to reduce air pollution from shipping beyond the scope required for most portions of the globe. Strict 1% sulfur in fuel requirements will take effect in the new 200 nautical mile North American ECA on August 1, 2012. Starting in 2015, however, the ECA fuel sulfur limit is mandated to be not more than 0.1 percent. By comparison, a world-wide fuel sulfur limit of 0.5% takes effect in the year 2020.

In comparison, the U.S. adopted an ECA for the Caribbean Sea area around Puerto Rico in July 2011 with a geographical area of approximately 40 x 50 nautical miles. The U.S. used very similar environmental and health statistics to justify the 50 nautical mile ECA for this region as it did when justifying the 200 nautical mile North American ECA on both coasts of the United States and Canada.

V. Independent Study

In an effort to best understand the ECA-related air quality issues, the Short Sea Shipping Coalition commissioned Drs. Ranajit Sahu and H. Andrew Gray to formally study low horsepower ships as a demographic of the larger maritime community for which the ECA was designed. (Dr. Sahu's and Dr. Gray's curriculum vitae are included in Exhibit A of the Report, and a copy has been formally submitted to the Subcommittee for the record.) The resulting report, entitled Modeling the Air Quality Impacts of Short Sea Shipping Emissions and the Implication for the North American Emission Control Area (ECA), analyzes short sea ship emissions using the same CALPUFF and meteorological modeling the EPA used to justify the current 200 nautical mile ECA. Additionally, 12 ships were selected to represent the "typical" short sea shipping vessel (from a propulsion horsepower perspective and therefore emissions basis). The study analyzes the impact of "worst case" short sea shipping vessels' emissions data on shore air quality.

The study indicates that the smaller ships (with corresponding lower horsepower propulsion systems) used in short sea trades, have virtually no environmental impact on the East or West Coasts of North America beyond 50 miles. More specifically, the results indicate that ships fitted with propulsion systems of 20,000 horse power (14,913 kW) or less had no (or negligible) air quality impact on the coasts even when using fuel with a sulfur content of 2.6% (i.e., with concentrations that the fuel CSL International currently uses) at 50 miles and beyond.

In addition to the greenhouse gas emissions discussed above, our sponsored study focused on sulfur dioxide (SO2), the major pollutant whose emissions will be affected by the fuel sulfur requirements in the ECA.

The S02 Standard

As background, the U.S. EPA has promulgated various National Ambient Air Quality Standards (NAAQS)3 and thereby defined acceptable levels of major air pollutants, including for SO2 in the ambient air to which the public has general access. The purpose of the NAAQS is to protect the public health, including the health of "sensitive" populations such as asthmatics, children, and the elderly. The SO2 NAAQS were recently (June 2010) modified to add a 1-hour average standard of 75 parts per billion (ppb). This corresponds to a concentration of 196 micrograms per cubic meter. It is currently the most stringent SO2 standard in the U.S.

Analysis

Our analysis conservatively predicts that SO2 concentrations are well below the numerical value of the 1-hour SO2 NAAQS even when ships are at port. Moreover, this prediction is based on applying a fuel sulfur level of 2.6%, which, as stated above, is expected to drop to 1% fuel sulfur level in August 2012. The study also indicates that SO2 concentrations along the coasts drop off dramatically as the distance from the ship to shore increases. Thus, based on the modeling analysis, the outward extent of the ECA could be much smaller (on the order of 50 miles or smaller), while still not adversely impacting coastal air quality.

1. Eastern Domain

The largest ship (in terms of rating) used in the study for the eastern domain has an engine size of approximately 12000 kW. For a 12000 kW engine, the maximum hourly SO2 emissions using 2.6% sulfur in fuel is 9.91 * 12000/1000 = 120.6 kg/hr. The S02 emission rate using 1% sulfur in fuel is 3.81 * 12000/1000 = 46.4 kg/hr.

The calculated SO2 rates above are also conservative in that the engine load is typically 75% of its maximum power during a voyage (as opposed to 100% assumed in the study), and which is even lower as the ship approaches port. While in port, engine power may be a small fraction (20% to 40%) of its maximum power. Thus, the actual SO2 emission rates would be 20% to 75% of the rates calculated in the study or in the range of 24 kg/hr - 95 kg/hr for a 12000 kW ship with 2.6% sulfur in fuel and in the range of 9 kg/hr - 35 kg/hr for this same 12000 kW ship with 1% sulfur in fuel.

2. Western Domain

Similarly, the largest ship studied in the western domain is rated around 11500 kW. Using the same types of calculations above, the range of S02 emissions from a ship of this size will be 23 kg/hr - 91 kg/hr (maximum of 114 kg/hr) with 2.6 % sulfur in fuel and in the range of 8.6 kg/hr -34 kg/hr (maximum of 44 kg/hr) with 1% sulfur in fuel.

3. Results

Using the highest expected SO2 emission rate discussed above of 120.6 kg/hr (for the largest ship, at maximum power, emitting at exactly the meteorological conditions that would provide the highest impact, and assuming a fuel sulfur content of 2.6%), the highest modeled port 1hour SO2 concentration would be 1.156*120.6 = 139.4 micrograms/cubic meter: far lower than even the numerical value of the EPA SO2 NAAQS of 196.

The results demonstrate how insignificant the impact of these short-sea ships is on coastal air quality.

East Coast Offshore SO2 Dispersion

VI. Creating a "Win-Win"

The anticipated significant fuel cost increase in 2015 may trigger a modal shift, causing an unintended increase in land- based congestion and emissions that far exceed current short sea emissions.

This can be avoided by reducing the 2015 ECA to 50 miles for 0.1% sulfur fuels in 2015 for smaller ships.

A reduction in the ECA boundary for the 0.1% sulfur fuels in 2015 will deliver the same environmental benefits suggested while supporting an industry which is already a greener alternative. The flexibility in fuel options will assure economic sustainability to those companies already under strain from the recent recession.

Maximize the Marine Highway Program

The North American ECA, as currently defined, stands as an obstacle to realizing the environmental and economic potential of the Marine Highway Program. Again, referencing MarAd's 2011 Report to Congress, "Between 1980-2003 the tons per mile moved by inter-city truck increased by 128%. Also during this period, vehicle miles in the United States have increased by 50% creating more road congestion and noise than ever before."

Considering an average long haul truck can carry 26 tons of cargo and a Handy Size (approximately less than 60,000 dead weight tons with a length of 550-650 feet) short sea vessel can carry a pay load of over 50,000 tons, the short sea trade removes 1,923 trucks from American and Canadian roads, easing congestion and the emissions they produce. Similarly, the same ship would remove 819 rail cars, assuming a capacity of about 61 tons per rail car.

Enhanced Short Sea Shipping has the potential to keep additional low efficiency trucks from the road; lessen higher emitting rail volume; and improve social benefits including reduced road congestion and noise - all while maintaining the improved marine air quality standards called for in Annex VI. Unfortunately, this potential will not be realized if the industry is forced to comply with the ECA as it currently exists.

Precedents for Effective Alternatives

There have been several other examples of recent practical solutions entertained by the EPA, Transport Canada and Environment Canada in achieving mutual clean air goals.

1. Steamship Exemption

Following the adoption of Annex VI and the creation of the ECA, the United States recognized, the unique challenges faced by older steamships. The older vessels' obsolete technology proved to be incompatible with using ultra low sulfur marine distillate fuels. Thus, the United States formally exempted the entire demographic of steamships from the ECA requirements until 2020.

The United States' submission4 to the IMO was adopted at the 62nd session of the Marine Environmental Protection Committee in July of 2011.

Great Lakes Steamship Repower Incentive Program

Again, as the environmental and economic realities of the North American ECA continued to be assessed, the EPA recognized the environmental advantages of waiving the lower sulfur fuel requirements for Great Lakes steam ships [that were] repowered with more efficient modern diesel propulsion. In January of 2012, the EPA amended Title 40 Code of Federal Regulations Part 1043 to incentivize Great Lakes steamship owners "to repower those steamships with cleaner marine diesel engines. The simplified program will automatically permit the use of residual fuel, through December 31, 2025, in a steamship if it has been repowered with a certified Tier 2 or later marine diesel engine, provided the steamship was operated exclusively on the Great Lakes and was in service on October 30, 2009."5

Fleet Averaging

Transport Canada, in an effort to ease devastating impacts to Canadian Great Lakes ship owners, proposed a Fleet Averaging Program which provides an alternative to improving air quality. The Fleet Averaging Program requires Canadian Great Lakes vessels to gradually reduce their fuel sulfur content from 2012-2020. The program permits a company's fleet of vessels to collectively meet pre-established annual fuel sulfur targets through the use of lower sulfur fuels, exhaust gas treatment, or a combination of measures. Transport Canada will oversee and monitor the industry to assure compliance. By 2020, each ship must individually meet the ECA 0.1% fuel sulfur content standard.

C. Recommendation

As responsible carriers, CSL and the Short Sea Shipping Coalition proudly support and promote the North American ECA. If properly drawn, it can serve as a valuable tool to reduce maritime contributions to global emissions. For the reasons set forth above, we seek to align the 2015 ECA to a sustainable size while exceeding air quality goals set by the EPA and Environment Canada through a performance-based approach.

Our study indicates that vessels of 20,000 horsepower are capable of meeting and exceeding desired air quality goals when using fuel with sulfur content of 2.6% at a distance of 50 miles.

Therefore, we recommend:

-- a 200 nautical mile ECA for 1% sulfur fuels, effective August 1, 2012 (as currently accepted);

-- a submission to the IMO Marine Environmental Protection Committee; an amendment to reduce the North American ECA to 50 miles for 0.1% sulfur fuels on vessels of less than 20,000 horsepower in 2015; and

-- a mechanism to indemnify vessel owners who are unable to purchase low sulfur (0.1% sulfur) fuel due to regional unavailability.

This alternative dovetails with the Maritime Administration's 2010 Marine Highway program and will best serve the coastal environment by comprehensively improving air quality while reducing risk, hazard, and inconvenience of over-used road and rail systems.

Copyright 2012 Congressional Quarterly, Inc.
All Rights Reserved.

 

 April 12, 2012 - 01:18am

Reactions to Corps' announcement on Savannah harbor deepening

STAKEHOLDERS REACT TO CORPS’ DECISION

 

While sentiment predominantly positive, jury still out in some S.C. and environmental circles

 

Wednesday’s release of the U.S. Army Corps of Engineers’ long-awaited final reports on the Savannah Harbor Expansion Project — or SHEP — prompted reactions from as far away as Central America and as close as the Garden City Terminal docks. Following is a sampling:

 

 

 

• “Considering the importance of the Port of Savannah and its Savannah Harbor Expansion Project in the logistics chain and in shipping via the all-water route, we look forward to seeing their infrastructure project completed and continuing our partnership.” — Panama Canal Administrator/CEO Alberto Alemán Zubieta

 

• “This project threatens to harm forever one of our country’s most valuable natural resources, the Savannah River, at great cost to the American taxpayer. We will be examining the Corps’ studies to make sure that the interests of the Savannah River and taxpayers are heard loud and clear.” — Chris DeScherer, senior attorney with the Southern Environmental Law Center

 

• “Under the SHEP project it creates some 30-mile-long, single-lane channel at depths that would not make it feasible to build a Jasper Ocean Terminal. We’ve concluded for that terminal to be successful, you need dual-lane traffic of at least a depth of 50 feet, which I believe is completely possible. Most of the issues involving the SHEP project are the 16 miles from the Jasper site to the Garden City Terminal.” — S.C. State Sen. Larry Grooms

 

• “As one of the leading exporting firms of U.S. poultry and meat products, we depend upon the Port of Savannah’s strategically located facilities to reach our global markets. Achieving this historic milestone in the deepening of the Savannah River enables U.S. companies to successfully compete internationally. Ours is a price-sensitive global industry and the deepening will facilitate economical transport of products to customers worldwide. It means the difference in USA goods, producers and workers being able to fulfill international customer needs.” — Stephen Isaf, CEO, Interra International Inc.

 

• “The Savannah Port is critical infrastructure as we work to attract new business investment and jobs to the South Carolina lowcountry. Being prepared to accommodate post Panamax ships in Savannah is a job-creation game changer for this region.” - Kim Statler, Executive Director, South Carolina LowCountry Economic Alliance

 

• “There’s no other port (for mega ships) like Savannah where they’ve developed a long circuitous river route to get up to the port, not in the last 200 years. In fact, three of the biggest ports in world — Shanghai, Rotterdam and Haiphong — had river ports and when they realized they had to cater to big ships they built new ports on the ocean.” - Steve Willis, president of the board for the Center for A Sustainable Coast and chair of the Sierra Club Coastal Group.

 

• “In a nod to environmental concerns, the corps today announced that the river could be deepened to just 47 feet. That 1 foot difference is significant as East Coast ports race to dredge their harbors in preparation for a wider and deeper Panama Canal. A rule of thumb is that for each additional foot of depth, shippers can load on cargo vessels an additional 100 cargo containers. The Port of Charleston is seeking the go ahead for its plans to dredge to at least 50 feet.” — S.C. Lt. Gov. Glenn McConnell

 

• “The deepening of the Savannah harbor is a critical step to ensure competitive access to the Southeastern U.S. for our industry, and we are encouraged to see this action taken by the Corps of Engineers.” — Al Gebhardt, vice president, North America Liner Operations, Maersk Line Agency

 

• “We’re still very concerned with the ‘iron lungs’ and the impact they’ll have. And we’d like a regional impact analysis that’s looking at other ports. You do look at the massive amount of money that has to go into deepening. It’s taxpayer money, and you think, ‘does this still make sense?’” — Tonya Bonitatibus, Savannah Riverkeeper

 

• “The No.1 priority of the Georgia Chamber is to grow our state’s competitiveness, and few projects are more important to that mission than deepening the Savannah Harbor. Once completed, this project will secure Georgia’s position as a global gateway — supporting the export of domestic products worldwide and facilitating the receipt of goods to be distributed throughout the nation. As the state’s leading business advocacy organization, our Chamber has supported the Savannah Harbor deepening project since its inception and we will continue to do all that we can to assist the Georgia Ports Authority as they work to bring this project to fruition.” — Chris Clark, President & CEO of the Georgia Chamber of Commerce

 

• “The study released today clearly shows that the deepening of the Savannah port will produce powerful economic benefits to the nation and to Georgia.” — Georgia Gov. Nathan Deal.

 

• “This has been a model of collaboration among a wide array of stakeholders — at local, state, and federal levels. It has been a great pleasure to be on this team as it worked diligently through difficult issues to come up with a plan that balances the complex engineering, economic, and environmental aspects of the Savannah Harbor Expansion Project. It is an impressive achievement.” — Maj. Gen. Todd Semonite, commander, Corps of Engineers’ South Atlantic Division

 

• “Today’s announcement brings to an end 15 years of exhaustive due diligence. With this important step forward, we are closer to putting in place infrastructure that will create economic opportunities across many industries and state lines. Companies relocate to and expand in the Southeastern United States knowing that the Port of Savannah is the fourth busiest and single largest container terminal in the U.S.” — Alec Poitevint, chairman, GPA board

 

• “The Port of Savannah is a vital part of the supply chain for Target and many other companies. The announcement that Savannah’s harbor deepening has taken an important step toward construction is great news for the U.S. economy, Target and our guests.” — Rick Gabrielson, director of International Transportation, Target and president of the Coalition for Responsible Transportation

 

• “We are pleased to see the Savannah Harbor Expansion Project continue to proceed. The success of the port is critical to jobs in our county and surrounding areas. We hope to see this project completed as soon as possible and ultimately, we very much want to see a successful port of our own in Jasper County to compliment the ports of Savannah and Charleston.” — Samuel Gregory, chairman, Jasper County Council, S.C.

 

• “This is good news for ILA members and their families who live in both Georgia and South Carolina. Deeper water will keep us competitive and make it possible to deliver economic opportunities to the men and women of the waterfront.” — Willie Seymore, President, International Longshoremen’s Association Local 1414

 

• “The Savannah Harbor Expansion Project is significant because it makes the movement of time-sensitive goods and materials more efficient and provides reduced time-to-market costs. Because of this unique connection between the City of Memphis and the Port of Savannah, the Greater Memphis Chamber applauds this milestone in the deepening process and encourages the timely completion of the Savannah Harbor Expansion Project.” — Dexter Muller, Senior Vice President, Greater Memphis Chamber

 

• “This is great news for our region. We know that companies considering moving to the Southeast are paying close attention to this process. They will be encouraged today by this crucial next step for our country’s single largest container terminal.” — Steve Grable, Senior Vice President, Jones Lang LaSalle

 

• “The Savannah Harbor Expansion Project is an important part of continuing the growth of Georgia’s current and future industries. At Kia Motors Manufacturing Georgia, we’ve experienced the value of this port firsthand and realize how critical of a resource this is for the state. This project will benefit KMMG and our suppliers, which combined, employ more than 10,500 in this region alone.” — J. Randy Jackson, vice president of human resources and administration, Kia Motors Manufacturing Georgia, Inc.

 

• “The USA Poultry & Egg Export Council continues to be a strong advocate and supporter of the Savannah Harbor Expansion Project. It’s no coincidence that Savannah is America’s single largest gateway for poultry exports and that Georgia is the nation’s leading producer of chicken. The strategic location of the Georgia Ports has helped to empower Georgia to be one of the largest exporters of poultry, benefiting the entire U.S. industry. The importance of the Savannah Harbor Expansion project was made apparent during our recent international marketing conference in Panama. We saw firsthand the importance of the canal to global commerce. The Port of Savannah needs to be ready for the post-Panamax containerships as they begin transiting the Canal. As 96 percent of our consumers live outside the United States, to miss this opportunity would be unthinkable.” — James H. Sumner, president, USAPEEC

 

• “As one of the largest exporters in the United States, the Savannah Harbor Expansion Project is critical to Caterpillar by providing world class infrastructure to a cost effective and high velocity port. Like other needed transportation infrastructure investments in the United States, this project is crucial in providing supply chain efficiencies that create jobs and enable us to remain competitive in world markets.” — Tom France, Director, Global Transportation, Caterpillar

 

• “The Savannah harbor deepening project is critical to the economic well-being not only of Georgia, but of the entire Southeast. Norfolk Southern is greatly encouraged to see this action taken by the Corps of Engineers. Completion of this project will contribute substantially to maintaining a vibrant and competitive port in a key region of our country.” — Dr. Robert E. Martínez, vice president, business development, Norfolk Southern Corporation

 

• “The Georgia Ports Authority’s Savannah Harbor Project is a great example of enabling efficient global supply chain solutions for the future. We look forward to seeing this infrastructure project come to fruition as it will increase capacity and support expansion, significantly benefitting shippers, the freight community, and U.S. commerce.” — Bill Clement, Vice President, Intermodal, CSX Transportation

 

• “When the Panama Canal is completed in 2014, it is critical that the East Coast be prepared to serve larger vessels. The efforts by the U.S. Army Corps of Engineers and the Georgia Ports Authority to advance its deepening project in Savannah is good news for commerce and international trade. For the U.S. to become increasingly competitive in the international marketplace it is critical that we deepen our harbors.” — Jerry Bridges, Chairman of the Board, American Association of Port Authorities

 

• “Global shippers, such as retailers and manufacturers, will migrate to the most efficient and expedient options as a matter of necessity, so the Savannah port expansion is absolutely critical for Georgia to maintain its standing as one of the world’s most important shipping corridors for the years to come.” — Mark Holifield, senior vice president, supply chain, The Home Depot

 

• “As one of the largest customers of the Port of Savannah, we support the port’s efforts to improve the efficiency of port operations. With the completion of the SHEP, Lowe’s will be able to get products to our customers faster and more efficiently.” — Mike Mabry, Executive Vice President, Logistics and Distribution, Lowe’s

 

• “A vibrant, modern port that can meet the current and future demands of ocean-going commerce is critical to the state’s forest product industries. That is why the Georgia Forestry Association signed on as a SHEP Ally. The economic well-being of many Georgia communities and thousands of Georgia jobs depend to a great extent on access to global markets for Georgia timber and forest-related products. Deepening the Savannah Harbor must be a priority and the citizens and businesses of the state must step up and do their part to keep one of the state’s most robust economic engines growing.” — Steve McWilliams, president, Georgia Forestry Association

 

• “A crucial project for the competitiveness of the U.S. took a major step forward today. The deepening of the Savannah harbor is critically important for our company and all companies engaged in global trade.” — Terry L. Bunch, director, Logistics and Customer Service, Rayonier

 

• “Congratulations to the Georgia Ports Authority on this momentous announcement. International Paper depends on our port partners to help facilitate our export program. Infrastructure improvements such as the SHEP project are key facets in this strategy. This announcement gives us the confidence that the Savannah port will be there for International Paper far into the future.” — Vito J. Ciaccia, Director, International Distribution Operations, International Paper

 

• “We are very pleased to see that needed investments in port infrastructure such as SHEP are moving forward. The deepening of our ports to accommodate larger vessels that offer more cost efficient movement of cargo and economies of scale will continue to help drive costs from the supply chain and further support our ability to sustain growth in our exports.” — Fred Cox, International Logistics, JBS, USA, Swift Beef Company, Swift Pork Company & Pilgrim’s

 

• “As Volkswagen AG continues its quest as the world’s No.1 auto manufacturer, Volkswagen Group of America will continue growing here in the Southeast. The Savannah Harbor Expansion Project will provide not only VW but other manufacturers the access of larger vessels as well as supply chain enhancements for one the fast growing industrial regions in the United States.” — Fabio Freccia, General Manager of Logistics, Volkswagen Group of America

 

• “The Savannah Harbor Expansion Project is a critical component of increasing the efficiencies of our country’s supply chain infrastructure by leveraging the economies of scale associated with the larger vessels transiting the Suez Canal today and the Panama Canal in 2014.” — Stephen W. White, Chief Logistics Officer, Dollar Tree, Inc.

 

• “Eastman Chemical Company is excited to hear about the next, significant step in harbor deepening efforts for the Georgia Ports Authority. In order to remain competitive for shipments into export markets around the world, this project needs to be finished as soon as possible. Bigger ships mean less per unit cost which will allowt both exporters and importers to remain competitive in today’s global markets.” — Klaus Schnede, manager, marine, air and facilities procurement, Eastman Chemical Company

 

• “CMA CGM is pleased to announce our support on behalf of the GPA in their efforts to deepen the Savannah River channel in order to accommodate larger new generation class container vessels.” — Frank J. Baragona, President, CMA CGM (America) LLC

 

• “MSC welcomes the news of the Savannah Harbor Expansion Plan. We need deep water at all U.S. Ports to handle the vessels that are already calling today on the East and Gulf Coasts to insure that we have an efficient and cost effective transportation network for our industry, the Southeast region, and the nation.” — Christopher J. Parvin, vice president, marine operations, Mediterranean Shipping Company

 

• “As a major exporter of goods manufactured in the Southern United States, we are pleased that the Savannah River expansion will allow Savannah to remain a vital port for both inbound and outbound shipments. Enabling the larger class ocean vessels of the future will ensure the port remains both competitive and relevant in our global economy.” — F. Gray Carter, vice president, purchasing & logistics, Buckeye Technologies Inc.

 

• “Today’s announcement marks a vital milestone in the ongoing process of deepening the Port of Savannah. This project is critically important to ensure Savannah is able to accommodate global shipping traffic once the expansion of the Panama Canal is complete in 2014. This would bring more jobs and businesses not just to Georgia, but to the entire Southeast.” — U.S. Sen. Saxby Chambliss

 

• “I am delighted to see the Savannah Harbor Expansion Project continue to move forward with today’s milestone. Preparing the Port of Savannah for the vessels of the future is absolutely critical to our economy at both the state and national levels, and I will continue to do all that I can to see this project through to its completion.” — U.S. Sen. Johnny Isakson

 

• “The Port of Savannah is already a strategic national interest that has promoted economic growth across our country. Expanding our harbor is critical to ensuring its continued vitality for generations to come by laying the groundwork for tomorrow’s economy today. After more than 12 years and the most comprehensive environmental study by some of the country’s leading experts, we know we can expand safely. The expansion of the Panama Canal gave us a rare opportunity to look into and prepare for the future. We need to make sure we are taking advantage of that chance and not getting left behind.” – U.S. Rep. Jack Kingston

 

• “We’ve got to get the Savannah port deepened. Deepening this port has been one of my top priorities, because it’s vital for long term job growth in Georgia. I’m happy to see any additional progress for this project, and I’ll continue to work with every member of Georgia’s delegation to see that we complete this project.” — U.S. Rep. John Barrow

 

• “This important step moves us ever closer to ensuring that the City of Savannah, the region and our entire country have the infrastructure we need to compete globally in this new century. A deeper Savannah Harbor brings in more business, creates more jobs and is good for the hundreds of local companies that rely on the imports and exports of the country’s single largest container port. We are excited and are looking forward to this becoming a reality.” — Savannah Mayor Edna B. Jackson

 

• “The Savannah Harbor Expansion Project is arguably the most critical economic development project for the Southeastern United States. The Coastal Empire and Lowcountry of South Carolina are dependent on the ongoing success of this port for sustaining employment and creating new opportunities. Today’s announcement is welcome news and we look forward to project construction being underway later this year.” — David Paddison, Chairman, Savannah Economic Development Authority

 

• “The Savannah area business community has been waiting for this day for a long, long time. We finally get to see the results of a lengthy, $41 million study process in which every interested party had a chance to address their concerns over the last 15 years.” - Trip Tollison, COO, Savannah Area Chamber of Commerce

 

• “Stratford Land is a big believer in the Georgia Ports Authority and the deepening of the Savannah Harbor. Through projects including Westport, Northport, and RiverPort, Stratford has invested $100 million in industrial parks in Chatham County, Georgia as well as Jasper County, South Carolina. This important recommendation from the Army Corps moves us closer to ensuring that our country and region will have the infrastructure we need to compete globally in this new century.” — David Moore, Director of Investments, Stratford Land

 

• “The Savannah River Pilots are pleased to see the project move another step closer to construction. The SHEP will enable more efficient movement of all vessels that call the port by reducing the tidal restrictions around which we operate. This deepening is critical to ensuring our port’s future success as the vessel fleet calling the East Coast becomes larger.” — Thomas Browne, Jr., Master Pilot, Savannah Pilots Association

 

• “As both an importer and exporter, a competitive and cost effective port would continue to enable us to export raw materials and import finished quality food in and out of the United States, which is key for success in today’s global economy. The American consumer is the ultimate beneficiary, consuming quality foods and affordable prices.” — Ulises J. Carrillo, vice president, global logistics, Dole Food Company, Inc.

 

Cuba could be key to Caribbean basin

by Patrick Burnson

With the Panama Canal expansion on schedule for completion in 2014, supply chain specialists are anticipating a logistical hub to surface in the Caribbean Basin.
For those investors and traders eyeing opportunities in Cuba, the timing couldn’t be better. As noted in the Wall Street Journal recently, money managers are “optimistic” when it comes to finally eliminating this nation’s 50-year-old trade embargo. And initial barriers to entry should not include logistics, say industry experts.

Furthermore, Cuba may not need outside expertise to cope with immediate supply chain problems. According to some leading scholars and practitioners, Cuba is a sterling example of how to manage “scarcity.” They note that operating under resource scarcity already exists there, with businesses facing daily lack of food, medicine, electricity, and raw materials. View MarketWatch slide show, “The revealing faces of today’s Cuba.”

Despite this, the resourcefulness of Cuba’s people has triumphed to some extent. Reverse logistics experts observe that Cuba has created supply chains that re-use and recycle almost everything, despite the lack of government-mandated recycling programs. Indeed, such adaptation may augur the type of closed loop supply chains needed by other emerging nations in the future.

The long-term challenges around opening trade with Cuba would revolve around the issues of customs and export compliance, in particular the infrastructure to support the safe and fully documented movement of those goods.

With a drive to increase levels of electronic clearance and export documentation, the lack of investment in computerized systems — and the integration of those systems into the U.S. import/export world — would represent a complication, albeit a surmountable one, say compliance experts.

This could be ameliorated, however, by leveraging systems already in place through Cuba’s trade with the EU and Latin America, since our trade embargo with Cuba is increasingly unique.

To the extent that it has the hard currency to support trade at all, Cuba gets most of its imports from the EU and its neighbors to the south. But this can change in a hurry. Automotive parts, technology and manufacturing materials, as well as luxury items particular to the U.S. market are likely to be in high demand.

That said, it is likely that over the long term, U.S.-based producers would seek to build their own infrastructure within Cuba’s boundaries in order to better embed their business into the U.S. market.

According to the World Bank’s Logistics Performance Index, Cuba already performs in the median range. Cuba’s economy is mostly state-controlled, meaning most of the means of production are owned and run by the government.

The London-based Economist Intelligence, meanwhile, ranks the Cuban business environment as one of the world’s worst. In recent years, it was placed as number 80 of 82 nations surveyed, with only Iran and Angola rated lower. However, some forms of foreign investments and private enterprise are allowed. The main sectors of the Cuban economy are industrial production and sugar cultivation. In recent years, tourism, biotechnology and pharmaceutical industry are also gaining importance.

Finally, U.S. investors might wish to look to another hemispheric partner as a model for doing business with this tiny island nation: Canada. Our northern neighbors figured out Cuba’s supply chain long ago.

Canada’s investment, trade and cultural links with Cuba are substantial. In fact, Canada is the second-largest foreign investor in Cuba (after Venezuela) and the third-ranking country in terms of joint ventures. Canada is also Cuba’s fourth-largest merchandise trade partner, behind Venezuela, China, and Spain.

Analysts in Toronto report that a discernible pattern in Canada-Cuba commercial relations to date is that trade has tended to follow investment. In other words, a significant share of Canadian exports to Cuba targets sectors with notable Canadian investments. This is typically the result of an existing synergy between traders and investors that provides clear advantages in the home country and makes commercial sense, not necessarily because of a particular preference for Canadian suppliers.

“Have a Havana?” The supply chain seems ready to oblige. But while rum supplies are likely to meet U.S. demand, tobacco growers and cigar manufacturers are likely to be overwhelmed with orders. As a consequence, industry experts are forecasting a surge in that other great Cuban export: counterfeit Figurados.

The dangers of space weather

By Christie Nicholson | March 11, 2012, 1:31 PM PDT

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The most powerful solar storms in the last five years threatened to wreak havoc with our digital systems on Earth last week. To find out just what solar storms are, why they are in the news recently and why we are more vulnerable to them than ever before, Smart Planet turned to space weather expert Bill Murtagh, program coordinator for the NOAA Space Weather Prediction Center.

SmartPlanet: So what is a solar storm?

Bill Murtagh: Solar storm is loose term to capture the bigger picture of what we call space weather. From the solar flare we get emissions of radiation that affect the Earth environment and then there is an eruption associated with that flare that causes a geomagnetic storm. The whole thing we call a solar storm or space weather.

SP: Are the emissions the coronal mass ejection?

BM: Yes, the coronal mass ejection blasts the billions of tons of plasma that escapes out from the sun sometimes impacting Earth creating geomagnetic storming. This is all part of the solar storm, also known as our space weather.

SP: Presumably other events can be a part of what we call space weather?

BM: From our perspective it is just from the sun. We do get high-energy radiation from deep space. We use the term galactic cosmic radiation, but that doesn’t vary much. It does vary over the 11-year solar cycle but we don’t get pulses and events based on the galactic cosmic radiation. So essentially all the space weather we are interested in has its origin right there, on the sun.

SP: Why do we need to study space weather?

BM: It’s largely because of our reliance on advanced technology for everything we do today. We’ve always had some concern with space weather for as long as we’ve had technology. Back in 1859 we had a big solar flare that impacted the telegraph system of the day.

But consider what has happened on Earth in the last 10 or 15 years. Our reliance on cell phones. Our reliance on GPS, which now pervades society. Our reliance on satellites for so much of what we do. It is these very technologies that are vulnerable to space weather. We have to understand the space environment and understand what we need to do to mitigate the effect of it on the technology we rely on. Because when we lose this technology for any length of time it can be anywhere from a little bit bothersome to bordering catastrophic.

SP: How do we mitigate space weather’s impact?

BM: Well it depends on which sectors are impacted. Take one technology, like aircraft. If you are going to fly from the United States to Asia typically you will fly over the north pole. Last year we had 11,000 flights over the polar regions. The radiation from these solar storms flows in along Earth’s magnetic lines concentrated at the polar regions. And it really impacts the communications of the aircraft and even the navigational systems. So the airlines, when they get the storm warnings, they reroute the flights, and get them away from the polar regions. That’s happened several times over the last couple of days.

SP: How do you measure the seriousness of space weather?

BM: We use a solar radiation scale of 1 through 5, with 5 being extreme. This week we’ve been at the 3-level. And a 3-level radiation storm is a threshold where airlines will reroute flights away from the poles.

SP: Was there anything really that unusual about the storms that happened this week? Or was it just a media frenzy? I don’t recall this much attention being paid to the solar cycle 11 years ago.

BM: Yes, good question. There’s nothing really exceptional about this week’s event. There are three different types of space weather that we measure and we did hit the 3-level on each of the three types with this particular outbreak. Now that is the first time that’s happened during this solar cycle.

But today, as opposed to over a decade ago, we have a whole new media landscape for this cycle, with the web and blogs. So people are just a lot more aware of things that are happening and there is a lot more communication across the globe, period. There has been a lot of attention paid to space weather in the last four or five years.

Because we started looking back at the big events in 1859 and 1921 and recognizing they were much larger than anything we’ve seen in recent history and should one of them occur today the impact could be very significant on the nation. So it’s got the attention of the highest levels of government. Consequently it’s getting a lot more attention.

SP: You mentioned there are three types of space weather? What are the three types?

BM: The first is the R-scale which is the solar flare radio blackouts. The electromagnetic emission from the flare is impacting Earth, at the speed of light. We have 93 million miles from the sun to here, and it takes only 8 minutes to get here and we’d feel certain types of effects. It can impact GPS devices.

Within about an hour or two after that we start looking for particle radiation. We call this our S-scale, the solar radiation scale. This would affect satellites and this is what NASA would be worried about regarding astronaut protection. And it also impacts the airlines.

And the third type of space weather is the geomagnetic storm, the G-scale. Which is caused by the enormous blasts of material from the sun. It usually takes a couple of days before it impacts the Earth. And that is what we had Friday morning, the G-3 conditions, with Aurora Borealis [Northern Lights] visible in the northern states.

SP: NOAA seems to have a long history of studying space weather, you mentioned the 1859 event. How far back do the records go?

BM: It depends on what we are measuring. One of the oldest records, by far, is the sun spot records. If you could look at the sun with a welder’s mask or look at it during sun set you can see sun spots. So even 2,000 years ago the Chinese records make references to sun spots. And we have excellent observations and drawings of sun spots dating back to the 16th Century. Galileo sun spot drawings are kept in the Vatican. So it’s very useful for us to see the sun spot cycles dating back hundreds of years.

We could measure the Earth’s magnetic field back in the mid-19th Century because during that big 1859 storm—we refer to it as the Carrington Flare—we had magnetometers in place at observatories in London that detected the disturbance in the Earth’s magnetic field.

The other big record of these storms and when they occurred is records of the Northern Lights and the southern extent of the Northern Lights. Our friends in Canada and Alaska are used to seeing the Northern Lights, but picture what happened in 1921 with a geomagnetic storm so strong that the Northern Lights were visible in Cuba and Jamaica.

So we have records from the mariners of old who kept the records of weather conditions and sightings of the aurora, so we have a good sense of how strong these storms were, dating back hundreds of years. More modern satellite measurements only date back to the 60s.

SP: And when was the most recent largest geomagnetic storm?

BM: The one in 1989 was the most significant one in the last 50 years. The 1859 and the 1921 were quite a bit stronger than this one. But it was the 1989 one that brought the electric power down in Quebec and caused disturbances as far south as Virginia.

SP: So is it really an exact pattern of an 11-year cycle?

BM: Sometimes that 11-year cycle can mislead people. It’s an 11-year cycle but we only need one rogue group of sun spot activity to cause the potential problems on Earth. Some of the biggest ones occurred in October of 2003, December of 2005 and January 2006. So even four or five years after the maximum peak of the cycle things can happen. There was little actively in 2008 or 2009. Big things can happen anytime over a seven year period.

SP: So the number of solar storms doesn’t necessarily mean more danger? All it takes is one bad storm at any point during the cycle?

BM: Yes, correct.

SP: What causes the 11-year cycle? What causes frequency and what causes severity of the storms? Do we have any idea?

BM: Not really. The differential rotation of the sun and the fact that it’s one big plasma ball. We don’t understand why it’s an 11-year cycle and not 21 or 41 or 51. That is not understood.

SP: Are we curious about that? Or is it not that important?

BM: Well, what we would like to know is the magnitude of the sun spot cycles. One interesting fact when we look back on the historical record. Series of very low sun spot cycles 1640-1715. For 75 years they were practically non-existent. That period happened to coincide with the coldest period of the mini-ice age. So the outputs of the sun being diminished for an extended period will influence climate. How much is the big question.

But we would like to know if that could happen within the next 50 years. We’d like to be able to predict when the cycles will be big or small.

SP: What can you predict today?

BM: When I look at the sun today and point to a narrow sun spot group we know there is potential for eruption. We have ways of measuring that sun spot group and its complexity and I can put out a prediction indicating a 60 or 70 percent chance of a big flare.

What is missing is that we cannot tell from the sun spot if it will be a big solar flare or not. So I can’t give immediate warning of a flare. Now the other two types of space weather, yes I can provide some warning but all I can give is some probabilistic warning, based on the size of sun spots, that something is likely.

SP: It’s a good thing the sun is so far away then.

BM: Yes we have that 93 million mile distance and over time we have fortunately developed the Earth’s magnetic field and it and our atmosphere provides tremendous shelter from this harmful radiation.

SP: All of this reminds me of our vulnerability to terrorist attacks in the form of a nuclear explosion in the atmosphere just above the U.S.

BM: A nuclear device detonated in space above us could be a very significant thing. Could have a much bigger consequence than one detonated downtown in a city. Because of what that electromagnetic pulse does to our technology would be very significant. There are three phases of pulsing from such a nuclear device detonated in space. And the sort of emissions that would be emitted are the key emissions that we don’t get from the sun down here on Earth. Those would knock out our sensitive electronics here. Over the U.S. it could impact all sorts of systems. The third emission is somewhat similar to the impact from a geomagnetic storm. But from the sun’s emissions we do not have to build those cages and lead shields to protect our data equipment. Our electrical grid may be vulnerable to the sun. But we are not going to see the same kind of pulse that we can see from a nuclear device detonated over the country.

March 2, 2012

Business as Government: Capitalizing on Disaster in Post-Earthquake Haiti

by DeepaPanchang

by Deepa Panchang and Beverly Bell

“I am optimistic that in 18 months, yes, we will be autonomous in our decisions. But right now I have to assume... that we are not.”[i] With these words, Haiti’s Prime Minister Jean-Max Bellerive watched a swath of his government’s decision-making power shift into foreign hands in early 2010.

• Sign from a Port-au-Prince protest in October 2011, declaring “IHRC = Occupation. Long live a sovereign Haiti.” Photo: Ansel Herz. •

It's one thing to privatize government services. Since the earthquake, US firms have actually been involved in privatizing governance – in fact, the governance of another country. Corporations with little to no knowledge of Haiti were brought in as volunteers to plan, kick off, and even staff the team with the single greatest operational influence over shaping the reconstruction model for the year after the quake, the Interim Haiti Reconstruction Commission (IHRC).

The IHRC was created by the Haitian parliament in April 2010 to direct post-earthquake reconstruction. Its mandate was to oversee rebuilding efforts through the $11 billion in pledges of international aid, including approving policies, projects, and budgeting. The World Bank was to manage the money. In creating and investing this body with its broad power, Parliament conducted a constitutional coup on April 15. Whereas the constitution mandates shared governance by an executive, a parliament, and a judiciary, the IHRC shifted it to the executive and the international community. The Parliament voted to give the IHRC the power to do, effectively, whatever it wanted. The only oversight measure left the Haitian government was veto power by the president.[ii]

Given the corporate philosophies of the firms that designed it, the resultant features of the IHRC were hardly surprising. The IHRC’s 26 board members were elected by no one and were accountable to no one. Half were foreign, including representatives of other governments, multilateral financial institutions, and non-governmental organizations. An international development consultant contracted by the IHRC, speaking with the Haiti Support Group, said, “Look, you have to realize the IHRC was not intended to work as a structure or entity for Haiti or Haitians. It was simply designed as a vehicle for donors to funnel multinationals’ and NGOs’ project contracts.”[iii]

McKinsey and Company, a US management consulting firm, was one of the firms that came in to help "design" and "launch" the IHRC.[iv] A background interview with an official very close to the process showed the Haitian government at the beck and call of McKinsey as it structured the commission and determined membership and decision-making processes. (All these aspects later received vehement criticism from Haitian civil society.) At the very first meeting, according to official minutes, it was McKinsey’s lead consultants who “made a presentation to the Board regarding the mission, mandate, structure, and operations of the IHRC.”[v] The consultants sat in on subsequent meetings as well.[vi]

McKinsey & Co. performed its services pro bono. Whether paid or not, the post was a lucrative one; it well-positioned the firm both to influence future contracts and to shape a climate favorable to business. A 2010 World Economic Forum document explicitly stated that “McKinsey helps coordinate with partners to channel interest from the private sector and connect would-be donors and investors to opportunities in Haiti.”[vii]

McKinsey was a natural choice for the job because of its former managing director’s long-time personal and political ties to Bill Clinton, who serves as UN Special Envoy to Haiti and was co-chair of the IHRC board. The firm was also a prime candidate because it advances the paradigm of ‘government as business,’ serving many governments around the world.[viii] As one example, McKinsey played a key role in developing the framework for the reconstruction commissions in Indonesia and Sri Lanka after the Indian Ocean tsunami which, as with the IHRC, involved infusing foreign private sector individuals into policy-making. This was another case in which the local population was excluded from having a say in its own future following another disaster; civil society groups denounced the Rehabilitation and Reconstruction Agency (BRR in Bahasa) for being extremely centralized and discounting civil society voices.[ix]

McKinsey came under fire again after Hurricane Katrina and the flood of New Orleans for work it had done prior to the storm. McKinsey helped major insurance companies develop tactics that stalled court proceedings and delayed payments that, in practice, allowed them to avoid paying out claims to their clients who suffered in natural disasters or accidents. Lawsuits against insurance companies asserted that McKinsey’s pre-Katrina advice, particularly to Allstate, effectively helped insurers cheat their customers.[x]

Another US firm, Korn/Ferry International, came on board to head-hunt the executive director of the IHRC. This was to replace the initial staffing that had been provided by the Clinton Foundation, International Development Bank, and the governments of the US and Canada.[xi] Korn/Ferry circulated a job announcement, in English, through politically connected circles in the US and Haiti, as though it were hiring for any profit-oriented business instead of for a team that was making major decisions in the name of a nation and its well-being. The announcement noted that, “Leadership experience in highly efficient and structured organizations, such as the military, is an advantage.”

Korn/Ferry provides recruitment services for both corporate and government positions, and keeps its finger on the pulse of the increasing overlap of the two. It even published a report encouraging companies to hire leadership with government and policy backgrounds and vice versa, in what it called a "new marriage between business and government.”[xii]

Vesting foreign enterprises with political power is fundamentally anti-democratic. If US firms’ performance in post-earthquake governance is any example, it is a frightening indicator of what might emerge with even greater participation in decision-making, as mandated by the redevelopment blueprint published in March 2010 by the Haitian government and international community.

As ineffectual as the Haitian government may be, its functions can’t be outsourced. Haiti needs a government with responsibility to the citizenry who elected it and the ability to protect their rights. The pursuits of foreign firms – making governance decisions about rebuilding, paving the way for other firms’ Haitian debuts, racking up humanitarian clout – have been at the expense of Haitians still struggling for basic needs and democratic power.
The public good requires a public sector which can guarantee health, education, adequate food, water, housing, employment, agriculture, and civil liberties. It requires more than unaccountable foreign agencies and private business that can and do pull out when they like.

Deepa Panchang is the Education and Outreach Coordinator for Other Worlds. She has worked in advocacy for human rights in Haiti since the 2010 earthquake.

Beverly Bell has worked with Haitian social movements for over 30 years. She is also author of the book Walking on Fire: Haitian Women's Stories of Survival and Resistance and is working on the forthcoming book, Fault Lines: Views across Haiti’s New Divide. She coordinates Other Worlds, which promotes social and economic alternatives. She is also associate fellow of the Institute for Policy Studies.
You can access all of Other Worlds’ past articles regarding post-earthquake Haiti here.

Copyleft Other Worlds. You may reprint this article in whole or in part. Please credit any text or original research you use to Deepa Panchang and Beverly Bell, Other Worlds.

Release Date: 3 February 2012

Monthly Economic and Financial Developments

December 2011

In an effort to provide the public with more frequent information on its economic surveillance

activities, the Central Bank has decided to release monthly reports on economic and financial

sector developments in The Bahamas. The Bank monitors these conditions as part of its monetary

policy mandate, to assess whether money and credit trends are sustainable relative to levels of

external reserves required to protect the value of the Bahamian dollar and, if not, the degree to

which credit policies ought to be adjusted. The main data source for this surveillance is financial

institutions’ daily reports on foreign exchange transactions and weekly balance sheet statements.

Therefore, monthly approximations may not coincide with calendar estimates reported in the

Central Bank’s quarterly reports. The Central Bank will release its “Monthly Economic and

Financial Developments” report on the Monday following its monthly Monetary Policy Committee

Meeting.

Future Release Dates:

2012:

February 27, April 2, April 30, June 4, July 2, July 30, September 3, October 1, October 29,

December 3, December 24.

Page 1

Monthly Economic and Financial Developments

December 2011

1. Domestic Economic Developments

Indications are that the domestic economy maintained a positive, although mild, growth momentum, during

the month of December. More favourable foreign investment activity, alongside ongoing public sector

infrastructure projects, buoyed construction output and the tourism sector benefitted from stronger seasonal

hotel earnings. The central Government’s overall deficit contracted over the first five months of FY2011/12,

occasioned by an increase in revenues and a marginal decline in expenditures. In the monetary sector,

liquidity and external reserves rose modestly, supported by net foreign currency inflows arising partly from

foreign investment and Government’s financing activities.

Preliminary evidence suggests that tourism sector output continued to strengthen in December. The 28.5%

surge in sea passengers, alongside a more moderate 7.7% advance in air arrivals, led to higher growth of

23.8% in overall tourists, relative to 1.7% in 2010. The Family Island market showed the largest increase in

visitors (34.1%), buoyed by gains in the sea (38.3%) and air (4.3%) segments. Visitors to New Providence

firmed by 21.4%, with a greater rise of 27.4% in the sea component; compared with the 7.5% hike in air

visitors. Grand Bahama recorded a more modest 9.8% improvement in arrivals, reflecting gains in air

passengers and sea tourists, of 15.9%, and 8.6%, respectively.

For 2011, growth in total visitor arrivals slackened to 6.3% from a 13.1% hike in 2010, with the 9.1%

expansion in the larger sea segment outweighing the 2.1% reduction in air visitors. In terms of the major

markets, tourists to New Providence—which accounted for the bulk (53.8%) of total arrivals—rose by 2.8%,

due entirely to a 5.0% gain in sea traffic, as air passengers fell by 1.6%. Similar conditions prevailed in

Grand Bahama (14.6% of the market), as the 7.7% expansion in sea arrivals offset a 12.2% falloff in the air

component, for a 4.8% upturn in the total. Visitors to the Family Islands—at 31.6% of overall arrivals—

strengthened by 13.7%, extending the 11.7% increase of the prior year, as sea passengers advanced by

15.5% and air arrivals rose by 1.2%.

Consistent with the gains in stopovers, hotel performance data from a sample of properties in Nassau and

Paradise Island showed room revenues for December advancing by 6.5% over the comparable period a

year earlier. Underpinning this outturn was a 3.3 percentage point gain in the occupancy rate to 58.3%,

accompanied by a $3.55 increase in the average daily room rate to $270.65. Similar gains were reported

for the entire year, with the 3.1% hike in room revenues linked to a 1.3 percentage point advance in

average occupancy rates to 63.9%, and a 1.9% firming in the average daily room rate to $236.26.

However, the growth was not broad-based, as only half of the properties recorded improvements in

earnings, and total room revenues were still 8.9% lower than the comparative 2008 level.

Data on the central Government’s fiscal operations for the first five months of FY2011/12 showed a $38.8

million (20.1%) reduction in the deficit to $154.0 million, relative to the comparable period a year earlier.

Total revenue grew by $18.6 million (4.0%) to $485.0 million, the bulk of which was attributed to tax

revenue. In particular, higher excise tax receipts supported an $8.7 million (3.6%) upturn in taxes on

international trade; business & professional fees firmed by almost two-thirds to $17.6 million, owing to an

increase in “general” business fees; and tax receipts from property sales elevated other “miscellaneous”

taxes, by $2.3 million (1.7%). Non-tax revenue rose marginally by $0.2 million (0.4%) to $58.8 million.

Page 2

Total expenditure contracted by $20.2 million (3.1%) to $693.0 million, as a public corporation’s partial

repayment of outstanding debt lowered the Government’s net lending to public bodies, by $24.8 million in

contrast to a year earlier increase of $19.8 million. Capital spending decreased by $7.2 million (10.6%) to

$60.5 million. Outlays for asset acquisitions, which fell by $8.6 million (56.5%), reverted to trend levels,

following a one-off land-related increase a year earlier. In contrast, current expenditure grew by $31.5

million (5.5%) to $603.3 million, buoyed by a $29.3 million (28.4%) advance in purchases of goods &

services—driven by higher outlays for insurance-related payments—and more modest increases in wages

& salaries, by $3.4 million (1.5%). Transfer payments were lower by $1.2 million (0.5%).

2. International Developments

On the international front, economic conditions were mixed during the review month. In the United States,

the recovery remained relatively subdued, while the euro area continued to be adversely affected by the

ongoing fallout from the region’s sovereign debt crisis, and growth in China showed signs of a modest

slowdown from previous robust levels. Against this backdrop, the IMF, in January 2012, revised

downwards its 2012 forecasts for global growth, by 0.7 of a percentage point to 3.3%. The expectation is

that the euro area would fall into recession, with a 0.5% decline in overall output; while growth in China is

expected to slow by 0.8 of a percentage point to 8.2%. In a positive development, the forecast for the

expansion in United States’ real GDP remained unchanged at 1.8%.

Indications are that output growth in the United States strengthened to an annual rate of 2.8% in the fourth

quarter of 2011, from 1.8% in the prior three-month period, buoyed by an uptick in personal spending and a

build-up in inventories. Manufacturing output firmed by 0.4% in December, compared to a 0.3% falloff in

the prior month. Similarly, retail sales edged up by 0.1%, after a 0.4% expansion in November. Despite

the general improvements, the housing sector remained weak, with housing starts and building permits

falling by 4.1% and 0.1%, respectively, over the prior month. The employment situation improved in

December, as nonfarm payrolls increased by 200,000, resulting in a 0.1 percentage point reduction in the

unemployment rate to 8.5%. Prices were stable for the second consecutive month during December, but

rose by 3.0% on an annualized basis. In a bid to further encouraging economic growth, the Federal

Reserve maintained its accommodative monetary policy stance, with key interest rate kept within the 0-

0.25% range.

In Europe, concerns over the potential spread of the Greece debt crisis to other economies in the euro

zone, along with the continuation of fiscal austerity measures in several nations, led to a broad-based

weakening in European economic activity. In the United Kingdom, decreased output in the mining and

quarrying sector contributed to a 0.6% fall in industrial production in November, following a decline of 1.0%

in the prior month. On the trade side, the external deficit widened to £2.6 billion from £1.9 billion in

October, as the £0.7 billion deterioration in the goods deficit to £8.6 billion outweighed the marginal £0.1

billion gain in the services account surplus to £6.1 billion. However, in December, retail sales rose by 0.6%

in contrast to a 0.4% reduction a month earlier. As a consequence, labour market conditions remained

challenging, with 118,000 jobs being lost during the three months to November, resulting in a 10 basis point

increase in the unemployment rate to 8.4%. With regard to prices, the inflation rate slowed on a monthly

basis, by 0.6 of a percentage point, to 4.2% in November, due mainly to lower costs for petrol, gas and

clothing. In monetary policy developments, the Bank of England decided to maintain the size of its asset

purchase programme at £275 billion, and kept the official bank rate at 0.5%.

Page 3

Industrial production in the euro area fell for the third consecutive month in November, by 0.1%, due to

declines in both durable and non-durable consumer goods’ production. Similarly, retail sales contracted by

0.8%, in contrast to a marginal increase of 0.1% in the previous month. Buoyed by a €7.7 billion

strengthening in exports relative to a €2.1 billion gain in imports, the trade surplus grew by €5.9 billion to

€6.9 billion over the month. With no improvement in the economy, the unemployment rate was unchanged

in November at 10.3%, while the growth in average consumer prices softened to an annualized 2.7% in

December from 3.0% a month earlier. Although inflation remained above the 2.0% target, concerns over

the state of the region’s economy led the European Central Bank to lower the key interest rate by 25 basis

points to 1.0%.

Over the review period, the rate of economic expansion within the major Asian countries slowed, but

remained considerably more robust than other regions. In China, preliminary data showed real GDP

growth easing to 8.9% in the December quarter, from 9.1% in the prior three-month period. The trade

surplus widened, on a monthly basis, by $2.0 billion to $16.5 billion in December, as exports grew

marginally by 0.1% to US$174.7 billion, while imports fell by 1.1% to US$158.2 billion. Retail sales also

increased by 1.4% over the month, following a 1.3% gain in November. Led by higher costs for food,

consumer prices edged up by 0.3% in December, in contrast to a 0.2% falloff a month earlier.

Indications are that economic conditions weakened in Japan over the review period. In particular, industrial

output declined by 2.6% in the penultimate month, reflecting decreased output in machinery production and

steel, after a 2.2% expansion in October. In trade developments, the deficit widened by ¥405.8 million to

¥687.6 billion, occasioned by a 5.6% narrowing in exports to ¥5,196.6 billion and a 1.6% gain in imports to

¥5,884.2 billion. In this environment, the unemployment rate steadied at 4.5% on a monthly basis. The

consumer price index declined by 0.6% from October’s level, due mainly to lower food costs. Given the

underlying weakness in the economy, the Bank of Japan decided to keep the uncollateralized overnight call

rate at the range of 0.0 to 0.1%.

Crude oil prices contracted by 2.5% to $107.62 per barrel in December, as OPEC’s oil production

advanced by an estimated 170,000 barrels per day (bpd), to average 30.8 million bpd. Similarly, the price

for gold narrowed by 10.5% to $1,563.70 per troy ounce over the month; however, silver prices advanced

by 15.1% to $27.84 per troy ounce.

During December, most of the major stock markets rallied, buoyed by signs of continued growth in the

United States’ economy, where the Dow Jones Industrial Average (DJIA) and the S&P 500 index rose by

1.4% and 0.5%, respectively. European bourses also registered gains, with the United Kingdom’s FTSE

100 and France’s CAC 40 growing by 1.2% and 0.2%, while Germany’s DAX fell by 3.1%. In Asia, Japan’s

Nikkei 225 index advanced by 0.3%; however, China’s SE Composite declined by 5.7%.

Amid the heightened uncertainty in Europe, investors increased their holdings of relatively “safe” US Dollar

denominated assets. In particular, the Dollar strengthened against the euro, by 3.8% to €0.7717. It also

firmed vis-à-vis the Swiss Franc, by 2.7% to CHF0.9376, the British pound by 1.0% to £0.6431, and the

Canadian dollar, by 0.4% to CND $1.0212. In contrast, the Dollar depreciated against both the Chinese

Yuan and the Japanese Yen, by 1.2% and 0.9%, to CNY6.3026 and ¥76.90, respectively.

Page 4

3. Domestic Monetary Trends

December 2011 vs. 2010

Money and credit trends for the month of December featured a build-up in liquidity and external reserves,

owing primarily to foreign currency loan receipts and other scheduled inflows, and in an environment of

subdued credit activity. Accretions to excess reserves more than tripled to $44.4 million from $13.8 million

a year ago, while gains in excess liquid assets accelerated by more than two-fold to $25.9 million.

External reserves firmed by $33.1 million to $892.0 million during the review month, a turnaround from a

$10.0 million contraction a year earlier. Underpinning this development, the Bank's net foreign currency

transaction with the public sector was reversed from a $10.6 million net sale in 2010 to a $20.8 million net

purchase during the review period, reflecting the receipt of proceeds from a multilateral loan and external

lease payments. Similarly, the Bank purchased a net of $12.4 million from commercial banks, a turnaround

from a $0.8 million net sale in the prior period. Banks, in turn, purchased a net of $15.0 million from their

customers, partly related to net foreign investment inflows, in contrast to an $8.4 million net sale a year

ago.

Growth in Bahamian dollar credit narrowed to $10.2 million from the previous period’s $41.8 million, as

accretions to credit to the private sector slackened to $6.6 million from $29.8 million in 2010. This outturn,

reflected a $5.9 million reduction in commercial loans, in contrast to a $28.3 million expansion in the prior

year, and a $4.4 million slowdown in consumer credit growth to $5.8 million. In contrast, mortgages firmed

by $6.7 million, a reversal from an $8.7 million reduction a year ago. Net claims on the Government fell

marginally by $0.4 million, relative to 2010’s $8.2 million accumulation; however, accretions to credit to the

rest of the public sector edged up by $0.3 million to $4.0 million.

Banks’ credit quality indicators remained elevated over the review month, although total private sector loan

arrears contracted by $34.4 million (2.8%) to $1,208.1 million, lowering the corresponding ratio of arrears to

total loans by 59 basis points to 19.3%. A disaggregation of delinquencies by age showed most of the

retrenchment in the short-term 31-90 day segment, which declined by $21.3 million (5.1%) to $392.0

million, alongside a 35 basis point softening in the attendant ratio to 6.3%. Similarly, non-performing

loans—those exceeding 90 days and on which banks have ceased accruing interest—fell by $13.2 million

(1.6%) to $816.1 million, with the corresponding ratio narrowing by 23 basis points to 13.0%.

The reduction in aggregate arrears was broad-based, led by mortgage delinquencies which fell by $13.2

million (2.0%) to $650.0 million, and with decreases in both the short-term ($10.7 million or 5.1%) and nonperforming

segments ($2.6 million or 0.6%), respectively. Similarly, commercial arrears moved lower by

$10.9 million (3.7%) to $286.7 million; delinquencies in the 31-90 day component declined by $4.7 million

(5.1%), while non-performing loans decreased by $6.2 million (3.0%). Consumer loan delinquencies fell by

$10.3 million (3.6%) to $271.4 million, with both the short-term segment and the non-accrual component

down by $5.9 million (5.3%) and $4.4 million (2.6%), respectively.

Amid the slight decline in delinquencies, banks lowered their total provisions for loan losses, by $3.5 million

(1.1%) to $299.6 million. As a consequence, the ratio of provisions to total arrears and non-performing

loans grew by 41 and 17 basis points, to 24.8% and 36.7%, respectively. During the month, banks wrote

off an estimated $8.4 million in loans and recovered $1.5 million in outstanding balances.

Page 5

Foreign currency credit expanded by $44.8 million in December, a reversal from a $32.8 million reduction a

year earlier. This outturn reflected a $49.8 million increase in claims on public corporations, mainly related

to a local utility company, a turnaround from the prior year’s $19.3 million contraction. In contrast, the

decline in net credit to the Government and claims on the private sector narrowed, by $0.9 million and $4.1

million, from $1.7 million and $12.4 million, respectively, a year earlier.

Growth in Bahamian dollar deposits accelerated by $17.3 million to $26.3 million, buoyed by a $16.8 million

firming in demand deposits, compared to a $4.8 million accumulation in 2010. Savings balances grew by

$12.5 million, up from $3.3 million in the previous year, while fixed deposits declined by $3.0 million,

following the prior period’s $0.8 million contraction.

In terms of interest rates, banks’ weighted average deposit rate softened by 6 basis points to 2.10%, with

the highest rate of 5.25% offered on balances of over 12 months. In contrast, the weighted average loan

rate firmed by 4 basis points to 10.72%.

January – December 2011

During 2011, both liquidity and external reserves expanded modestly, although intra-year levels attained

new peaks benefitting from several one-off public sector and foreign direct investment related

transactions—including the Government’s divestment of 51.0% of its holdings in BTC. Given the subdued

pace of the domestic recovery and the persistently high rate of unemployment, credit to the private sector

rose modestly, and banks’ loan delinquencies remained at elevated levels. In this context, excess reserves

grew by $45.4 million to $434.9 million, a slowdown from the $127.4 million expansion a year ago.

Similarly, accretions to excess liquid assets moderated by $226.0 million to $83.6 million.

External reserve gains slowed marginally in 2011 by $4.7 million to $30.9 million. The Bank's net purchase

from commercial banks contracted by over 50% to $91.2 million, as they in turn, recorded a fall in net

purchases by $123.6 million to $115.6 million. The Bank’s net sale to the public sector tapered by $125.9

million to $83.5 million, reflecting receipts from divestment activities and other modest one-off inflows.

Growth in Bahamian dollar credit fell sharply by $164.2 million to $222.4 million. This was largely explained

by an almost two-thirds reduction in gains to net claims on the Government, to $118.8 million, as budgetary

requirements were supplemented by extraordinary inflows. Given the modest improvement in economic

conditions, credit to the private sector strengthened by $114.3 million (1.9%), outpacing the 0.4% and 1.1%

increase for 2010 and 2009, respectively—although significantly below 2008’s 6.8% expansion. This

outturn, reflected gains in the commercial and consumer components––which accounted for 34.3% and

16.4% of total loans––by $78.9 million and $9.6 million, respectively, following declines of $3.0 million and

$35.7 million in 2010. In a modest offset, growth in the largest component mortgages—which accounted

for 49.3% of the total––was more than halved to $25.8 million from $64.7 million in 2010. Further, claims

on public corporations declined by $10.5 million, a turnaround from a $32.6 million upturn a year earlier.

Despite the ongoing recovery in the real sector, borrowers’ continued to face challenges in meeting their

debt obligations. As a result, banks’ credit quality indicators remained at relatively high levels over the

year. Total private sector arrears, although staying within the $1.1 billion to $1.2 billion range, rose by

$69.1 million (6.1%) to $1,208.1 million compared to a 4.5% rise in 2010; however, the rate of growth was

much slower than the 42.3% and 44.5% gains for 2009 and 2008, respectively, during the height of the

economic recession. As a percentage of total loans, arrears rose by 71 basis points to 18.3% and were

Page 6

above the 12.7% and 9.5% registered in the prior two years. A breakdown of total arrears showed that the

average age continued to lengthen. The increase in delinquencies was due solely to a $70.2 million (9.4%)

expansion in the non-performing component to $816.1 million, resulting in an 86 basis point uptick in the

corresponding ratio to 13.0%. In contrast, the 31-90 day component fell by $1.1 million (0.3%) to $392.0

million, with the attendant ratio declining by 16 basis points to 6.3%.

The increase in aggregate arrears was mainly attributed to the worsening in the mortgage and commercial

components. Mortgage delinquencies rose by $36.4 million (5.9%) to $650.0 million, as the $21.7 million

(9.8%) reduction in short-term arrears was overshadowed by a $58.1 million (14.8%) rise in non-accrual

loans. In addition, commercial arrears firmed by $34.2 million (13.5%) to $286.7 million, with both 31-90

day delinquencies and non-performing loans expanding by $28.3 million (47.9%) and $5.9 million (3.0%),

respectively. In contrast, consumer loan delinquencies declined by $1.5 million to $271.4 million, as a $7.7

million (6.9%) reduction in the short-term segment outpaced the $6.2 million (3.9%) uptick in arrears in

excess of 90 days.

Given the worsening in credit quality indicators over the year, banks increased their total provisions for loan

losses by $26.9 million (9.9%) to $299.6 million. Resultantly, the ratio of provisions to arrears rose by 86

basis points to 24.8%, while the non-performing loan ratio increased by 15 basis points to 36.7%. For

2011, loan write-offs totalled $176.5 million and recoveries amounted to $33.8 million.

During 2011, total domestic foreign currency credit contracted by $92.0 million, a turnaround from a $39.9

million increase in 2010. This outturn reflected a $68.3 million net reduction in claims on the Government,

a reversal from a similar increase a year earlier, as foreign currency receipts were utilised to repay

outstanding short-term debt. Claims on the private sector contracted by $40.6 million, following a $30.9

million weakening in the previous year. Buoyed by foreign currency borrowings by a local utility in the latter

half of the year, credit to the rest of the public sector grew by $17.0 million, following a $2.4 million rise in

the prior period.

Accretions to Bahamian dollar deposits advanced by $19.7 million to $144.3 million, bolstered by a $95.6

million build-up in demand balances, almost double the $49.3 million firming recorded in 2010. Similarly,

savings balances grew by $49.9 million, following a $21.3 million expansion a year ago. In contrast, fixed

deposits decreased by $1.3 million, after a $54.0 million gain in the prior year.

4. Outlook and Policy Implications

The pace of the domestic recovery in 2012 will depend heavily on global economic developments, in

particular the sustainability of the rebound in the United States economy, where recent economic indicators

have a favourable bias. It is expected that output and employment within the construction and related

industries will continue to benefit from Baha Mar and other large-scale foreign investment projects, which

are less sensitive to global developments, along with ongoing stimulus provided by Government’s

infrastructure improvement programmes. Tourism activity is poised to remain on an upward trajectory in

the near-term, supported by the sustained recovery in the key group segment of the market, along with

signs of an increase in overall hotel bookings during the important winter tourist season. In terms of prices,

domestic inflation is anticipated to remain moderate; however, geopolitical risks could adversely affect fuel

prices in 2012.

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On the fiscal sector side, improvements in the deficit and corresponding debt indicators will continue to

depend on the strength of the domestic recovery and the public sector’s ability to increase revenue and

curb expenditure growth.

On the monetary front, near term opportunities to support growth in both liquidity and external reserves are

expected to accrue from the ongoing gains in tourism and residual flows from various real sector activities,

in an environment of relatively mild consumer demand conditions. However, banks’ credit quality indicators

are projected to stay elevated for an extended period, until the recovery becomes more broad-based.