Identifier
Created
Classification
Origin
05SANSALVADOR2659
2005-09-23 22:38:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy San Salvador
Cable title:  

DESIRES OUTWEIGH ACTION AT SALVADORAN PORT

Tags:  ETRD EINV EWWT ENRG ES 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 SAN SALVADOR 002659 

SIPDIS

SENSITIVE

USDOC FOR 4332/MAC/WH/MSIEGELMAN, USDOC FOR
3134/USFCS/010/WH/MKESHISHIAN/BARTHUR

E.O. 12958: N/A
TAGS: ETRD EINV EWWT ENRG ES
SUBJECT: DESIRES OUTWEIGH ACTION AT SALVADORAN PORT
AUTHORITY


(U) Summary: Econoffs met on August 30 with Juan Jose Llort
Choussy, the President of the Comision Ejecutiva Portuaria
Autonoma (CEPA),which administers El Salvador's ports and
airports. Llort discussed CEPA's overall structure and
activities they are undertaking, specifically running the
railroad and administration of the two airports and the two
seaports. The meeting gave insights into CEPA's plans and
highlighted projects which the U.S. government and firms
should monitor as potential business opportunities. End
Summary.


UNCLAS SECTION 01 OF 03 SAN SALVADOR 002659

SIPDIS

SENSITIVE

USDOC FOR 4332/MAC/WH/MSIEGELMAN, USDOC FOR
3134/USFCS/010/WH/MKESHISHIAN/BARTHUR

E.O. 12958: N/A
TAGS: ETRD EINV EWWT ENRG ES
SUBJECT: DESIRES OUTWEIGH ACTION AT SALVADORAN PORT
AUTHORITY


(U) Summary: Econoffs met on August 30 with Juan Jose Llort
Choussy, the President of the Comision Ejecutiva Portuaria
Autonoma (CEPA),which administers El Salvador's ports and
airports. Llort discussed CEPA's overall structure and
activities they are undertaking, specifically running the
railroad and administration of the two airports and the two
seaports. The meeting gave insights into CEPA's plans and
highlighted projects which the U.S. government and firms
should monitor as potential business opportunities. End
Summary.



1. (U) During econoff's August 30 introductory call with
the Economic Counselor, Autonomous Executive Port Commission
(CEPA) President Juan Jose Llort Choussy laid out his goals
for CEPA infrastructure development. Llort's briefing
indicated that there will be a number of potential
opportunities over the coming few years for US companies or
public agencies interested in El Salvador. See paragraph 10
for comment.

--------------
Railways
--------------


2. (U) Llort said first, he would like to see two sections
of the now idle railroad be reactivated for passenger service
to alleviate commuter traffic on heavily travelled routes.
CEPA suspended service on the last operating segment of the
railways in 2002, although a short portion in metropolitan El
Salvador was reactivated from October 2004 until May 2005.
One segment would be the section from Apopa, a northern
municipality of San Salvador to central San Salvador, and the
other segment from Ilopango, a municipality east of San
Salvador, to central San Salvador. These lines are
currently narrow gauge tracks, and CEPA is looking at earning
money to rehabilitate these lines through the sale of old
rolling stock as scrap.


3. (U) Another upgrade would be the rehabilitation of the
rail line from the port of Acajutla to the Guatemalan border
at Anguiatu. This would require the addition of standard
gauge track to the existing narrow gauge line in order to
carry heavier loads of freight traffic but would allow
containers to be shipped by rail to the Guatemalan Caribbean
port, Santo Tomas, or the Honduran port Puerto Cortes. The

rail lines within Guatemala and Honduras would need to be
upgraded as well, something Llort thinks both countries would
be willing to do. He does not see the resulting Acajutla -
Santo Tomas rail link to be the basis of a dry canal or
alternative to the Panama Canal. He says costs for
transiting the Panama Canal are about $75.00 per container,
while unloading costs in Acajutla alone are higher than that,
not even counting the costs for rail freight and reloading.
Llort does, however foresee the rail link being used in
conjunction with logistics centers set up in the Acajutla
area, which would provide transit
times of six days to U.S. East coast ports. Comment: The
upgrade of the rail line would be dependent upon the
Guatemalans and Hondurans upgrading their rail
infrastructure, as well as investments in creating logistics
centers. Logistics centers are a development target for the
Salvadoran government, which believes that its
infrastructure, geography and institutional advantages would
make it competitive in offering merchandise transhipment and
related services in the region. Both of these other projects
would require large capital outlays, for which the planning
and financing have not yet begun, and are out of the control
of CEPA. End Comment

--------------
Seaports
--------------


4. (U) CEPA's main goal is to improve productivity at the
port of Acajutla, which has improved immensely over the past
four years but still lags behind other ports in the region.
Productivity is hampered by the lack of cranes specifically
for unloading of containers, so ships that call at the port
must be self-loading. In 2001 CEPA attempted to increase
productivity at the port, and doing so chose to fire dock
workers and hire new labor, leaving it with costs of $13
million in severance pay. In 2004 CEPA attempted to get a
private operator for the port, but only received one bid that
was determined to be non compliant with the requirements of
the tender. Llort attributed the lack of bidders to the
unfavorable terms required by CEPA, including a payment to
CEPA to cover the $13 million severance payout. In addition,
20 percent of profits would have been taxed, and requirements
for investing in the port would have totaled up to $20
million.


5. (U) CEPA will try again in 2006 to privatize the port.
They will first ask possible investors to come and study the
port and offer suggestions on how to improve productivity and
operations. Llort expects more favorable results, noting the
terms of the deal will be better, as the operator will not
have to pay the $13 million severance package which has
since been paid off.

6. (SBU) Comment. In a later conversation Jorge Gomez, who
is in charge of physical security for CEPA, said there are a
lot of unanswered questions surrounding the possible
privatization of the port, such as who will be responsible
for port security - CEPA or the private operator. He said
he raises these questions with superiors at CEPA, but does
not get answers. This highlights an underlying theme with
the CEPA administration: they have big plans but have not
worked out the details very well. End Comment.


7. (U) CEPA is also building a new port at La Union; work
started in May on the first phase of construction. They plan
to let a tender for the operation of the first phase of the
port in 2006, which will allow the winner 18 months to
purchase and install equipment with which to operate the port
by its opening in 2008. The development of the port will be
in phases, with separate tenders for the rights to operate
each phase. Llort said they would prohibit the same operator
from running both the Acajutla and the La Union ports in
order to stimulate competition. He said he thinks La Union
will develop into primarily a container port, and Acajutla
will be focused on bulk cargoes such as grain. In addition
to traditional transportation activities, CEPA has signed
leases or options for land it owns at the port for
construction of a 200-220 megawatt coal fired electricity
generating plant, and a potential 500 megawatt natural gas
powered electric plant and a terminal for liquified natural
gas carriers. Work on these projects is still pending
environmental studies and financing. Llort admitted that
work in the ports is going ahead without a master plan. They
are receiving technical support for port development from
Spain, specifically the Port of Valencia.


7. (U) Comment: Work at the ports, particularly La Union,
may be opportunities for the USG to provide technical
assistance, environmental studies or trade development
assistance that fall under USG international programs. They
also present opportunities for U.S. companies to take part in
the privatization of the ports. By asking for companies to
provide a study on how to improve the port of Acajutla, the
bidder will be able to customize their bid focusing on the
specific capabilities they will bring to the improvement of
productivity at the port. It will also allow the bidder to
become more of a partner with CEPA earlier in the bidding
process. End Comment.

--------------
Airports
--------------


8. (U) Llort spoke about CEPA's administration of the two
airports in El Salvador: Comalapa International Airport and
Ilopango. CEPA has a master plan for development of
Comalapa, the commercial airport, but has deviated from it.
His goal for Comalapa is to increase cargo load capacity,
which will tie into plans for developing El Salvador as a
regional logistics hub. He would therefore like to build up
airport infrastructure, including development of a new cargo
terminal to replace the antiquated, 'Mickey Mouse' (sic)
terminal now in use. They are looking at options for the
development of the airport, including possible French
investment, to take over the the cargo business.


9. (SBU) The airport at Ilopango is used for civil aviation
and military purposes, and the Civil Aviation Authority has
not certified it for commercial passenger transport. CEPA
does not own the land that the airport is on, so a priority
is to try and gain control of the land so they can administer
the airport and provide upgrades. Llort hopes that
improvements in infrastructure would allow it to be used as a
cargo airport, attracting parcel carriers such as DHL. It is
not known when improvements in infrastructure would take
place to make this happen.


10. (SBU) Comment: CEPA is continuing down a path
supporting the development of El Salvador as a logistics hub
for the region. Improved efficiency at the Port of Acajutla
has brought liner services back to the port, but the port
still lags behind others in the region in costs and
efficiency. U.S. companies have opportunities if they are
interested in bidding on the future concession of the ports
at Acajutla and La Union. Due to the decision to not let one
company operate both seaports, El Salvador may lose some
economies of scale, but they hope that competition will
improve efficiency. By focusing on the future of La Union as
the container port for El Salvador, it appears that CEPA is
trying to muddle through the next couple of years at Acajutla
without making large improvements in infrastructure required
to make it a true container port, with associated
improvements in efficiency. U.S. companies may face
competition from foreign entities such as the Port of
Valencia who are already working with the GOES. It appears
that while CEPA has an overall idea for improving
transportation infrastructure the details are still
incomplete. CEPA is tasked to provide infrastructure
improvements, but does not have the funding to build large
scale infrastructure projects on its own. There is still a
gap between what CEPA plans to do and the actual commitment
to these plans. This may hinder implementation, as seen in
the delays in starting construction of the port at La Union,
but may be an advantage to firms attempting to land business
here in El Salvador by allowing them to have a stake in the
early development of these plans. End Comment.
Butler