Jan Hoffmann is the Chief of the Trade Logistics Branch at the United Nations Conference on Trade and Development (UNCTAD). The Branch is implementing multilateral transport and trade facilitation capacity building programmes, as well as regional and national projects in Africa, Asia and the Pacific, and Latin America and the Caribbean.
Jan is co-author and coordinator of the well-known annual UNCTAD Review of Maritime Transport. He also created and co-edits the quarterly UNCTAD Transport and Trade Facilitation Newsletter, and initiated the UNCTAD Maritime Country Profiles and the annual Liner Shipping Connectivity Index.
Previously, Jan spent six years with the United Nations Economic Commission for Latin America and the Caribbean (ECLAC in English, CEPAL in Spanish and Portuguese) in Santiago de Chile, and two years with the International Maritime Organization (IMO) in London and Santiago. Prior to this, he held part time positions as assistant professor, import-export agent, seafarer, translator, consultant and collaborator of family tramp shipping business Hoffmann Shipping.
Jan has studied in Germany, United Kingdom, and Spain, and holds a doctorate degree in Economics from the University of Hamburg. From 2014 to 2018, he was president of the International Association of Maritime Economists (IAME).
Throughout your career, you have gained a considerable experience in the maritime industry in developing countries, especially in Latin America. What are your memories from the region?
At the age of 21 I got married. Same marriage, same wife. We went on honeymoon to Brazil, so we started in Suzano, in São Paulo, where we had friends, and then we went by bus to Iguaçu, then Villa Carlos Paz in Córdoba, then we took a bus to Buenos Aires, and from Buenos Aires to Rio de Janeiro by bus again. All the time my wife made me carry a big rucksack with books because she thought she would be reading books during the honeymoon. In the end, I carried them back home unread, fortunately.
And then, while working for ECLAC, one of the most memorable experiences for me was in Rio de Janeiro. It was a big conference of the ITF, the International Transport Workers’ Federation. At that time, Kees Marges was in London in charge of the dockers. I’m talking about the end of the 1990s. There were people in London at the ITF who realized that port privatization – concessions of ports – could not be avoided. But they wanted to ensure that, in this process of privatization, the trade unions would not be killed. They wanted an amicable, better transition, while many of the fundamentalist trade unions, like the OGMOs in Brazil, they were totally against any private sector participation in ports. And in ECLAC, we had worked on this whole process of structural change in shipping. So, the leaders of the ITF invited me to their conference in Rio de Janeiro with 240 trade union members from all the Americas. I was the only one in the room who was not a trade union member, and I was put on the podium with this sixty-minute presentation, playing the devil’s advocate, explaining what was happening. Containerization, the whole thing. It was really amazing. Who knows if our work at ECLAC at that time on port reform, port privatization, really helped a little bit to advance port reform, to change the attitude? We made our little contribution to this.
Over the last few years, we have seen many changes in the world’s main maritime clusters. Hamburg, for example, went down somewhat, while Singapore went straight to the top. However, cities in developing countries, including the ones throughout Latin America, usually are not featured in such rankings. How do you view these trends in shipping clusters?
One way to describe this is that we are moving back to more maritime clusters grouping together, instead of just standalone maritime countries. Historically, you had maritime countries – mostly OECD countries – who had maritime dominance.
When I grew up, my father was an officer at Hamburg Süd. People would work on a German flagged, German owned, German based ship. He was German, moving German cargo from South America to Hamburg, for example.
We had a maritime cluster where everything was German. The shipping, the insurance, the seafarers, everything.
Then you have more of this dispersion, like our own Hoffmann Shipping. I often tell this little joke story, true story. Later on, my father bought his own little ship. Now we are talking about the late 1980s. The owner was German, but the flag we used was Antigua and Barbuda, the seafarers we had were Polish, they were employed by a crew manager in Cyprus, the cargo agent was in Amsterdam, the insurance was a P&I Club in the UK, and we would get cargo from Turkey to Canada, have the vessel fueled in Algeciras or Gibraltar, have it repaired in Portugal. So that is something like ten countries. And then the captain’s favorite drink was whisky from Ireland, so eleven countries were involved in Hoffmann Shipping.
“It might be a good idea to keep some seafaring capabilities. The same previous captain would afterwards work in your classification society, or become the harbor master”
So, you came from a system like “German, German, German”, to totally dispersed. What we do see now is, again, a bit more of synergies in a broader cluster. It’s not just maritime, but also in logistics. When you share benefits from financial services, insurance services, then industry benefits.
For example, Hyundai or Daewoo, they build cars but they also build ships, and then they also start becoming a port operator and they become a shipping line, so again, we are moving back somehow to some clusters.
Still, it might be a good idea to keep some seafaring capabilities. The same previous captain would afterwards work in your classification society, or become the harbor master.
Another big trend is the participation of developing countries in maritime trade. On the supply side we now have port operators like PSA from Singapore, or Hutchinson from Hong Kong or DP World from Dubai. We have the Filipino seafarers, we have the shipbuilding in Korea – which officially self-declares as a developing country – and China, of course.
What about the demand side?
On the demand side, we also see that we have a totally different geography of trade. In the first UNCTAD data, when you look at our Review of Maritime Transport (RMT) data about who is trading with what, developing countries were exporting much more volume then they were importing. That’s because they were exporting raw materials: iron ore, oil, grains, and importing low volume manufacturing goods, but high value. Today, actually developing countries as a group, are also importing a lot. They are the destination of 2/3 of the seaborne trade. So, in the beginning, in 1970 when we started, developing countries were importing 17 to 18% of the volume, because they were high value. Today, it’s 2/3 of the imports.
So, it’s a totally different geographic trade and the whole traditional difference between developed countries who import raw materials and export manufactured goods and provide shipping services, that is the old thing. That is when UNCTAD was created, that was our mindset when we started the RMT. So, today, the developing countries have their maritime clusters and they contribute as providers of different port services, transshipment services, ship scraping and so on and so forth. And also, as a destination of maritime cargo.
Also, in Latin America there are some very successful flags, like Panama, or the Bahamas.
Exactly.
So maybe they have to focus on a particular segment, like you mentioned the Philippines in the case of the crew members, and Panama with the canal, transshipment and the ship registry. But what has been discussed for the last few decades in Latin America is also the disappearance of the big shipping companies. Some of the last ones were Vale’s dry bulk owned fleet and the Chilean container lines CCNI and CSAV. Do you see Latin American countries developing again their shipping capability that they used to have in the past?
When you look at who has the cargo and who has the shipping companies, this is more and more divorced, more and more separate. The second biggest and soon biggest container shipping company in the world is right here in landlocked Switzerland: MSC.
“When Hamburg Süd was bought by Maersk, I confess that I was sad. I was not happy. Same for Germanischer Lloyd”
The only sector where you still have some sort of positive correlation between ship owning and the cargo is oil. Because it’s easier to say, “OK, it’s my oil and I will transport it”. In terms of ownership of oil tankers, Kuwait, Saudi Arabia, and some others, they are relatively high on the list.
For containerships, it’s not just, say, the Brazilian or the Chilean ship owners. The United States has no major line. The company that is associated with the creation of the container – Sealand – is owned by Maersk.
And I must say, as I mentioned earlier, I grew up with my father working for Hamburg Süd, I have friends in Hamburg Süd. It was like the beautiful German company and there you have me traveling in South America and telling everybody “it’s not important to have your own national company, it’s the free market, you just want the most efficient access to imports, that you have choice and competition”. But when the German Hamburg Süd was bought by Maersk, I confess that I was sad. I was not happy. Same for Germanischer Lloyd. When we had our little Hoffmann shipping, our classification society was GL. Then it became DNV GL and since this year, in March, DNV dropped the GL.
So, admittedly, I was melancholic, I was not happy about it.
But would you say there is no way around it?
Well, this is also linked to some extent to the other side of this consideration which is the ship sizes. Ships are getting bigger and bigger, you simply have less space for more companies. If you want to have these ships full, OK, you can form alliances, but overall, remember Hanjin, some companies went bankrupt, but overall, yeah, first Hamburg Süd buys CCNI from Chile, and then Maersk buys Hamburg Süd, right?
“It’s not like Intel, or going to Mars, or artificial intelligence. This is an industry that is mid-level technology”
So, the point is, if you have the right setting, and you make money from having a shipping company, it’s a good thing. But it’s not for me so much to think about developed or developing countries. I mean, that’s not rocket science. It’s not like Intel, or going to Mars, or artificial intelligence. This is an industry that is mid-level technology, so you will also have ship owners, shipping companies from Malaysia, from Korea, from China, while not of the most advanced in terms of high-tech technology, but they are getting there. But this is not like the Silicon Valley.
So, in that sense, that part of the shipping cluster – ship owning and ship operation I would consider the one for the middle-income countries. Then you have some segments that are more sophisticated like insurance, financing, some of this, yes, they last very much in London and other developed regions.
The same for the equipment manufacturers, right?
Exactly. You see, even China, sometimes says “well, maybe I’m not big enough”, and they try to get the cluster for shipbuilding together with Korea, maybe even Japan, to compete for some of the more sophisticated equipment, engines, turbines, new energy, and so on.
“I’m absolutely convinced that it would be in the interest of South America to have a regional cabotage market”
So, you cannot do this on your own. And when I was working in Latin America, I was always promoting regional collaboration. If ever you want any regional cluster, please, please, make it Mercosur! Don’t try just Brazil, just Argentina. Please try at least Mercosur. If you want some shipbuilding cluster, for example. Same for coastal shipping.
I’m absolutely convinced that it would be in the interest of South America to have a regional cabotage market. But not in the sense of limiting trade between Argentina and Brazil, or Brazil and Chile, to those two flags. But the other way around. Allow, Chilean, Argentinian, Brazilian flags, to do cabotage within their whole countries, then the three countries. And then, you can combine cabotage regionally.
Just as the European Union. In the European Union, you have a German flagged ship moving cargo from Le Havre to Marseille in France. But you cannot have an Argentinian flagged ship moving cargo from Santos to Fortaleza in Brazil. This is not allowed, but it should be.
I’ve seen, in Brazil, ships carrying empty containers from Vitória to the south, doing repositioning, because that was allowed. For empty containers, it was allowed. For the full containers, it was not allowed, because it was considered cabotage, even if it was feeder. So, you have trucks going two, three, four thousand kilometers moving cargo. It’s absurd. In parallel, you have ships of whatever, Maersk, MSC, going from Buenos Aires, then Santos, maybe Sepetiba, and they are not allowed to take the boxes, although they go parallel to the trucks. I understand the Brazilian truck driver doesn’t want to compete with the Filipino seafarer. So, I understand that the trade unions are not happy, but you would make your own foreign trade more competitive. Because then, you could have a higher load factor at the end.
“I understand the Brazilian truck driver doesn’t want to compete with the Filipino seafarer”
You know, at the end, you always have the load curve, like a bus. Between the second but last and the last stop of the bus, or the train, it’s always almost empty. So, between Santos and Buenos Aires, you have spare capacity. And it only fills up when you go further north and then you cross the Atlantic. So, there is spare capacity, why don’t they let us use it, please!
Well, the mentality of supporting your local industry is everywhere, right? And it’s very hard to change. There are various reforms being discussed in the region, including new cabotage laws in Argentina, Chile and Brazil, but progress is slow, unfortunately.
There are two things I’m suggesting. One thing is this regional cabotage. The other one is when there is at least one way port. New Zealand, for example, has applied a similar solution. If the ship afterwards continues with overseas trade – and this is really mostly for container shipping – then it is allowed to carry cargo between the two islands in New Zealand. But only if afterwards it continues abroad.
So, something similar could be done here and if with this you combine the regional cabotage, you might even possibly gain some ships, some lines. Might say, “OK, if in that case I can also transport cargo between two Brazilian ports, maybe I use Mercosur flag for the haul”. Who knows?
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