Investment in port infrastructure, capacity-building and climate resilience is necessary to tackle challenges linked to supply chain disruptions and maritime connectivity.
UNCTAD’s Review of Maritime Transport 2024 reveals severe challenges facing the maritime sector in Latin America and the Caribbean. Climate disruptions, geopolitical crises, and trade imbalances have significantly impacted the region, with disruptions in the Panama Canal serving as a stark example of the wider issues.
Climate disruptions impact trade
Severe drought in 2023 and early 2024 reduced water levels in the Panama Canal, forcing ships to take longer, more expensive routes. This hit trade from the Americas to Asia particularly hard.
The shift led to a 31% increase in sailing distances and a reduction in cargo volumes, exposing the Panama Canal’s vulnerability as a vital maritime route. While improved water management helped in mid-2024, transits remained down by about 20% compared to 2023. UNCTAD’s Review highlights the pressing need for climate-resilient port infrastructure across the region.
Freight rate fluctuations and trade shifts
Freight rates across the region fluctuated throughout 2023. Rates on Europe-to-South America routes dropped by 36%, while Africa-to-South America routes saw a 20% increase. This volatility has been fueled by geopolitical shifts, including Egypt’s decision to source grain from Brazil and the U.S. instead of Ukraine.
Small island developing states (SIDS) face additional challenges with a 9% decline in maritime connectivity over the past decade, resulting in higher costs and reduced competitiveness. While Trinidad and Tobago serves as a key hub, smaller ports struggle with inefficiencies, further driving up costs. Without action, these connectivity gaps will deepen trade inequalities.
Freight rate fluctuations and trade shifts
Freight rates across the region fluctuated throughout 2023. Rates on Europe-to-South America routes dropped by 36%, while Africa-to-South America routes saw a 20% increase. This volatility has been fueled by geopolitical shifts, including Egypt’s decision to source grain from Brazil and the U.S. instead of Ukraine.
Small island developing states (SIDS) face additional challenges with a 9% decline in maritime connectivity over the past decade, resulting in higher costs and reduced competitiveness. While Trinidad and Tobago serves as a key hub, smaller ports struggle with inefficiencies, further driving up costs. Without action, these connectivity gaps will deepen trade inequalities.
Caribbean ports under pressure
Ports in the Caribbean are facing mounting operational challenges. Port handling charges are two to three times higher than in similar ports globally, worsened by inefficient processes, poor management, and infrastructure shortages. The competition between cruise ships and cargo vessels adds to the strain, further limiting trade efficiency.
For SIDS, whose economies rely heavily on maritime transport, these inefficiencies present a serious development challenge. The imbalance in trade flows, where inbound vessels arrive fully loaded and leave empty, exacerbates the problem, driving up costs and reducing the viability of maritime services.
Urgent action needed
At UNCTAD’s Global Supply Chain Forum held in May 2024 in Barbados, stakeholders discussed the region’s connectivity crisis, identifying inefficiencies in customs processes, a lack of infrastructure, and limited competition as key issues. The forum’s recommendations focused on consolidating cargo volumes, fostering collaboration among shippers, and boosting port infrastructure through private investment.
The forum also stressed the need for climate adaptation and resilience-building, particularly for ports vulnerable to extreme weather events. Increased financing and capacity-building for these initiatives are critical to safeguarding the future of the region’s maritime sector.
UNCTAD’s Review of Maritime Transport 2024 calls for urgent reforms to address these challenges. A long-term strategy focused on climate resilience, port efficiency, and fair access to maritime services is essential to ensure sustainable development in the Latin America-Caribbean region. Without action, the region’s maritime sector risks further strain, undermining trade and economic growth.
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This story was first published by UN Trade and Development (UNCTAD).