Smith International Legal Consultants, P.A.

Recently, we have looked at some of the different industries in Brazil, providing an overview of the sector and some of the important legal aspects. Today, we look at ports, especially in light of the expansion of the Panama Canal.

Port re-construction from Moìn, Costa Rica to Miami, Florida is underway with an eye on the Panama Canal. The expansion of the canal is planned for 2014, and with the expansion comes a new driving force for ports across the hemisphere that see the major economic opportunities of an all-water route for oversize ships transiting from Asia to the Atlantic.

Over the last few years, the canal’s present size has hindered the movement of large ships, causing a loss of an estimated 15 percent of seaborne shipping opportunities. Now, as the canal expands to accommodate the “post-Panamax vessels, ports throughout the region are racing to expand to handle post-Panamax vessels in time for the canal opening.

What Does this Mean for Businesses?

·         Increased port construction. The countries expected to move quickly to widen their ports include Peru, Chile, Ecuador, and Costa Rica. Other ports in the Caribbean are expanding as well, with plans underway in the Dominican Republic’s Causedo, Jamaica’s Kingston, Trinidad’s Point Lisas, and France’s Guadeloupe Island.

·         Increased container traffic in Miami. As the closest US port to the Panama Canal, the Port of Miami expects to be the first port of call for fully laden post-Panamax vessels. The State of Florida plans to complete construction on the Port of Miami project by May 15th, 2014. With this project bigger ships from the Panama Canal will be able to move cargo to Miami from the Caribbean, Latin America, and straight to China.  Locally, the Miami expansion will create 30,000 new trade-related jobs in international trade and commerce. Additionally, the State of Florida is overseeing a $1 billion tunnel project which will maintain truck/cargo movement at twice today’s capacity out of the Port of Miami.

·         Increased investment related to maritime shipping combined with the increasing demand for goods throughout Latin America,

·         The demand for warehouse space in South Florida will likely expand. Investors are looking at industrial space, especially near the Port of Miami. As an example recently from Brazil, the conglomerate Vale announced it will invest 3.5 billion reais in the coming years to expand its port-related activities in Santos, near São Paulo.

What Are Some of the Legal Implications?

·         Arbitration should increase. International arbitration remains the only reliable way to get an enforceable judgment in multiple countries. With increased sales involving many different countries, businesses should be looking to international arbitration to resolve the disputes that arise. Even in purchase and sale contracts with limited terms, adding a binding arbitration clause is simple.

·         Increased use of the CISG (United Nations Contract for the International Sale of Goods). The CISG is a treaty offering uniform international sales law for contracting parties. The CISG governs contracts for the international sales of goods between private businesses, excluding sales to consumers and sales of services, as well as sales of certain specified types of goods. It applies to contracts for sale of goods between parties whose places of business are in different Contracting States, or when the rules of private international law lead to the application of the law of a Contracting State. Contracting Parties are countries that become signatories to the treaty. China as well as several countries in Latin America are signatories to the CISG, and the convention could apply, even when the parties have not contemplated it.  

·         Further “internationalization” of legal issues. As volumes expand, it is highly likely more international businesses will be investing in ports and related facilities. These international deals will require companies to consider proper business entities for investing in different countries, collection on guarantees and assets in the event of default, and the balance of different legal systems and how they can affect international contracts.

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