Friday, September 11, 2015

Who Pays for the Infrastructure Needs of ZEDEs?

Potential ZEDE developers seem to be risk-averse when it comes to developing the infrastructure needed for them to succeed.

Juan Orlando Hernandez recently traveled to Asia, picking up the slightly overdue feasibility report for a ZEDE in southern Honduras from the Korean International Cooperation Agency, (KOICA).  The project being studied is to develop a deep water port in the city of Amapala, on El Tigre island two km off the Honduran Pacific coast, as well as a logistics center in the municipality of Alianza on the adjacent mainland.

Why develop a port at Amapala?

For years the Panama Canal has been a bottleneck to shipping from Asia to the Atlantic coast ports of the US and Europe.  The largest ships today cannot fit in the locks, and the canal simply has insufficient capacity, even for existing ships which do fit in the locks. There's often a one to three day wait to go through.

The delay and size restrictions have prompted three projects along the Pacific coast of Central America.

The Panama Canal authority itself is building a new set of locks that can accept larger ships, but its overall capacity is limited by the amount of fresh water available in drought years, as at present.  Under current conditions only 17 cargo ships a day can transit the canal.

There is a separate Chinese project to build a new sea level canal across Nicaragua underway.

Honduras' southern ZEDE is yet another alternative, in which container ships would dock in Amapala and unload their cargo to be transported and sorted and stored in the logistics area. It would then get trucked over a new road from Nacaome to Puerto Cortés where it would be matched with container ships docked there for delivery to Atlantic ports.

Hernández says the feasibility report was entirely positive. Despite this, there was no announcement of the proposed ZEDE being formed.

Instead, Hernandez announced an agreement for cooperation between the port of Busan in South Korea and the port of Amapala to improve their training and port procedures.

At Hernández's very next stop, in Japan, he solicited something never before discussed as a Honduran government infrastructure project.  He asked the Japanese International Cooperation Agency (JICA) to finance the building of a bridge from the island of Zacate Grande to Amapala.

Zacate Grande is itself connected via a bridge to the mainland, and houses many vacation ranches owned by wealthy Hondurans.

There's no reason to develop the port at Amapala without also connecting it to the mainland to take advantage of the port facilities.  Previous discussions of the Amapala port had always included development of the bridge as part of the ZEDE development.

Now the government of Honduras is seeking to get someone else to pay for the development of this critical piece of infrastructure for the ZEDE, rather than have the ZEDE itself fund it.  Was this change dictated by the feasibility report?  Did that report separate the bridge from the port development and say Honduras should provide it as part of the infrastructure?  JICA did not commit to building the bridge, but agreed to study the project.

On his return from his Asian trip, Hernández signed contracts with Mexican companies for development of two more sections of the new highway to connect the south coast of Honduras with the Caribbean coast port of Puerto Cortés. The funds for this construction are borrowed from Mexico.

This roadway is also a strategic piece of infrastructure to enable planned ZEDEs in the south of Honduras.  Without easy transport between the Pacific and Caribbean coasts there is no reason to develop the port of Amapala.  This new roadway is scheduled to open in 2017.

For all the hype of a ZEDE as a way to develop Honduras, the current proposal seems to be requiring a large outlay in infrastructure development from the host country before there is even a commitment  of ZEDE development.

Hernández promises ZEDE announcements soon...

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