Determinants of Maritime Transport Costs

Recent literature has emphasized the importance of transport costs and infrastructure in explaining trade, access to markets, and increases in per capita income. For most Latin American countries, transport costs are a greater barrier to U.S. markets than import tariffs. The authors investigate the determinants of shipping costs to the U.S. with a large database of more than 300,000 observations per year on shipments of products at the six-digit HS level from different ports around the world. In addition, the authors find that efficiency of ports is an important determinant of shipping costs. Inefficient ports also increase handling costs, which are one of the components of shipping costs. The authors try to explain variations in port efficiency and find that they are linked to excessive regulation, the prevalence of organized crime, and the general condition of the country's infrastructure. Finally, the authors present a number of success stories in Latin America to show that private involvement in port management leads to efficiency and lower costs whenever it is accompanied by labor reform, and when monopoly power is reduced through either regulation or competition.