Hernán Cuevas Valenzuela
Valparaíso is a port city located in the Pacific coast of central Chile (33°S, 71°W), 116 km (72 miles) north-west from Santiago, Chile’s overcrowded capital. Valparaíso was originally named by Spanish conquerors simply as ‘the port of Santiago’, and for centuries it was only a port village.
The bay was well known for its seasonal storms. In this regard, the French traveler Amadeo Frezier wrote circa 1713 the following illustrative lines:
Generally, anchorage is only performed in one area of the roadstead that is in front of the fortress so that trade can be carried out easier and for the safety of the vessels. However, after all, this roadstead is not useful at all during winter time because the north winds, that go in without resistance, turn the sea so rough that many times ships have been seen to be blown to the shore.
There are no details of the particular facilities of the original port, but it is likely that it was some kind of basic infrastructure for berthing ships.
During the period of mercantilism under Spanish colonial rule, the port’s commerce was limited to the Spanish dominated territories. Therefore, trade experienced a slow rhythm of growth and the port’s infrastructure had hardly any improvement. There are testimonies revealing that until the early 19th century ships still disembarked onto the sand and that the first pier was built as late as 1810.
Despite its poverty and slow increase of cargo transfer, Valparaíso contributed to the establishment of trade routes in the Pacific that would later become extremely important in the shaping of the global geography of capitalism. After the Chilean Independence, and mostly during the second half of the 19th century, Valparaíso became a prominent financial centre and a leading commercial port. This growth in demand required infrastructural improvements. In 1848 customs warehouses were built and in 1883 the first government pier was completed, including a large size gantry crane.
Despite these developments, the port of Valparaíso still had one significant limitation: every winter it faced inclement storms that forced ships to remain at sea until the bad weather conditions passed. This natural disadvantage impacted not only on vessels’ security but also on the functioning and competitiveness of the port. In 1912, after many years of debate, the government finally hired the British firm Pearson & Son to build up-to-date facilities for loading and unloading cargo and a one kilometre long and 50 meters deep seawall to offer protection to vessels. This breakwater, the so-called Molo de Abrigo, is a pharaonic work of infrastructure that required immense public investment. It also required strong political will to justify years of public spending on a risky infrastructure project.
The construction of the Molo involved an important transfer of public funds to facilitate trade and accumulation of private capital in the country. As a matter of fact, without the completion of the breakwater, the secure and stable logistics services provided by the port ever since would have been impossible. Paradoxically, the crucial function of the Molo and the strategic investment that made it possible has not been sufficiently acknowledged.
From another point of view, the construction of the massive breakwater reflects a desire of the Chilean political elite for integrating the country in the global capitalist world and, at a deeper level, its drive for controlling nature.
Only the tip of this enormous Molo protrudes above the waters. The largely obscured appearance of the Molo is a latent expression of the vested interests of the business sector and the oligarchic government that aim to make invisible the how and why of public infrastructure investment, which facilitates future private capital accumulation. One century later, a new ambitious development plan involving the construction of large scale port infrastructure has been put forward by a new elite.
The Valparaíso Port Development Plan
In 1997, Law 19542 on the modernization of public ports was passed. Its implementation produced the decentralization of the administration of the ten state-run ports entrusted to EMPORCHI (Empresa Portuaria de Chile). The reform consolidated the virtual privatization of port activity in the main state-run ports by establishing that port tasks had to be conducted by private companies under the principle of subsidiarity of the state. This strategy of privatizing port development couples with Chile’s neoliberal development strategy under global capitalism.
Along with maintaining state ownership of the ports and coastline, the Chilean state has promoted the autonomous and disjointed administration of public ports and has transferred a significant part of investment in port services, infrastructure and production to private entities. This policy has favored the creation of markets or quasi-markets in the area of port logistics, has contributed to the consolidation of a small number of private companies and large holdings in the area of logistics-port services provision. It has also defined a subsidiary role for the state in this area and privileged competition in the different phases of logistics chains. In other words, it has promoted competition as a structuring logic of port relations and principle for economic and social coordination.
In addition, in the bidding process for use of the port’s coastline, the Chilean government has privileged the creation of multi-operator ports and has sought to avoid the vertical integration of logistics services in order to promote competition among logistics companies, ports and logistics chains. In this way, the ports (private ports, publicly owned ports with terminal concessions and public ports without terminal concessions) compete over tariffs, quality of logistics services and investment. The same occurs in each port among concessionaires, logistics provider companies, transportation companies, contractor firms and even among workers.
The case of investment in infrastructure is exemplary. The state has promoted a public bidding policy for the port coastline in order to implement the principle of free competition where it cannot exist ‘naturally’. Similar to other cases of provision of public goods and services in Chile, in the case of port services the Chilean state assumes the superiority of market mechanisms and free competition to produce economic efficiency. Its explicit purpose has been to promote private enterprise as a driver of port activity, modernization, investment, and increased efficiency, and, in doing so, to favor the competitiveness of the Chilean economy.
Hence, the really existing neoliberalism in Chilean public ports has been built by the state. This economic regime has been constituted as a hybrid that has been installed in a socio-cultural and economic context that facilitated active intervention on the part of the state after 1997 to promote: a) private investment and logistics enterprise, b) the regulation of the sector, c) the creation of a logistics services market or quasi-market, and d) a public-private alliance. In short, state policy has favored a pragmatic neoliberalization of the ports, applying measures that are less aligned with neoclassical orthodoxy but that certainly continue to be coherent with market fundamentalism and with the principle of competition as the best mechanism for introducing economic efficiency and promoting the country’s competitiveness.
The axial principles of neoliberal public policy – competitiveness, market fundamentalism and the subsidiary role of the state – favor the type of articulation in competition that exists in Chile’s port system. In keeping with this public policy perspective, the aim of the national port policy is to promote competition among ports and within each port, incorporating the private sector to increase both efficiency and investment. Instead of promoting strategies of cooperation among national ports, competition is understood as the main driver of port policy in Chile and is seen as the best way to ensure constant progress in the ports.
The state gives each public port company the role and function of serving as a port authority. Each public port company manages the coastline concession contracts for private operators and carries out a strategic planning function through the development of a port development plan with short-, medium- and long-term measures. The coastline bidding process for port use is the main instrument of port policy in Chile. Based on the development strategy of each port, every public port company defines the terms of references and bidding guidelines for granting port terminal concessions within the scope of their jurisdiction of the coastline.
In addition to the search for competitiveness, experts have highlighted the increase of international trade and maritime traffic, the preferences of the shipping industry for larger vessels, and the containerisation of international trade to justify the need for producing port and infrastructure improvement in Valparaíso. The so-called Plan de Desarrollo del Puerto de Valparaíso comprises several infrastructure megaprojects of many hundreds of millions of US dollars. Some of these megaprojects have been completed, such as: Camino La Pólvora, a renewed motorway for cargo transport; the southern access to the port area and its modernization; ZEAL, a new extra-port logistical zone to handle and consolidate freight; and the modernization of Terminal 1 in several phases (between 2000-2014). Others are still debated and constitute matters of public controversy. The latter is the case of the currently undergoing expansion of quays in Terminal 2, and the new shopping mall and public spaces for leisure, the practice of sports, and a promenade in the Muelle Barón area.
Currently, the port of Valparaíso has two cargo and passenger terminals. Two private concessionaires handle cargo transfer: South Pacific Terminal (TPS), which specializes in containerized cargo, and Hills of Valparaíso Terminal (TCVAL), a specialist in fractioned cargo (it also plans to specialize in containerized cargo). In addition, both /terminals receive cruise ships managed by the concessionaire Valparaíso Passengers Terminal (TPV). These companies have made investments that have revolutionized the operation of the port.
Given the lack of supporting space in Valparaíso, a logistics model was implemented that privileged the formation of an area external to the port (dry port). The new external areas for cargo stockpiling, which are known as ZEAL, have been connected to the port and land transport circuits through a cargo computerization and management system (SILOGPORT). Between 1998 and 2000, TPS made a series of modernizations to the infrastructure in the Terminal 1 sites. It also replaced the machinery and acquired five gantry cranes and two mobile Gottwald cranes.
Terminal 1 (TPS) in Valparaíso. 2017. Photograph provided by EPV.
In addition to this updating of technology, machinery and berthing areas, the authorities and EPV argued that the logistics model of Valparaíso, which connects the port to the ZEAL area located outside of the port zone allows for high levels of cargo transfer efficiency and partially relieves the pressure on the city created by modern port activity, which is intensive in land use and cargo traffic.
ZEAL in Valparaíso. 2017. Photograph provided by EPV.
But in order to make this model feasible, significant public investment was required that no private entity would provide. In other words, government officials and EPV leadership view this public investment as a requirement for attracting and facilitating private investment in the port. In its subsidiary role of the private sector, the Chilean state made a very significant investment in the La Pólvora highway, including building several bridges and one extensive tunnel under Artillería hill and Playa Ancha. As a result, this logistics model has involved an important transfer of public funds to facilitate the activity and accumulation of private capital in the port.
Tunnel under Artillería in Valparaíso. 2017. Photograph provided by EPV.
The Valparaíso Port Development Plan, put forward by the Valparaiso Port Company EPV seeks to modernize the port. The purpose of this public policy has been to achieve high standards of competitiveness and productivity in ports to enhance Chile’s competitiveness. Governments have thus favored competition among ports and among private port operators. The latter, in two areas: 1) bidding for coastline concessions for port use and 2) port management.
Four principles inform this port policy. First, the active promotion of private initiative to provide efficient and high quality port logistics services that favor the Chilean economy’s international engagement. Second, the promotion of private investment in port infrastructure in order to procure resources that allow for the sector to be modernized and also allow for the focusing of public spending on socially profitable areas in which private entities do not invest. Third, the promotion a private-public partnership model that facilitates private solutions for public problems whenever possible. Fourth, consolidating the development of private enterprise in ports with the state playing a subsidiary role.
Figure 4. Map of Valparaíso and public and private investment in infrastructure (map provided by Mabel Alarcón).
Nowadays the port of Valparaíso shows a combination of private and public investment in infrastructure. The relevant point is that public investment has been made to create the conditions under which long term profitability is secured for private investment. Similar to the construction of the breakwater or seawall a century ago, which created the necessary conditions for securing the accumulation of private capital in the port, today the subsidiary role of the state secures the conditions of profitability for the business sector.