MENA Port Infrastructure and Connectivity Challenges with Mexico

During the COVID-19 pandemic, day-to-day activities had to be adapted under the global policies of lockdown and social distancing. Economies continue to deal with the effects of this pandemic slowdown by taking steps to reactivate local economies but the fact is that during the outbreak, trade synergies have continued.

To discuss trade flow, it is necessary to refer to the infrastructure that allows such operations, connecting countries across the globe. Moreover, the last few years have demonstrated the important role of ports and logistics, which were key to reducing the impact of disruptions in supply chains, as around 90 percent of the world trade is by sea.

In this regard, Asia and countries in the Middle East and North Africa (MENA) were relevant as they have handled over 60 percent of the world's port traffic of standard containers (TEUs) since 2019.

The ports of the MENA region have been of historical relevance, as their strategic geographical location allows them to be the gateway between Europe and Asia, making it easier to access more markets. Of all trade recorded by Arab countries in 2020, 47 percent of total imports and 50 percent of exports were trade with Asia; 34 percent and 21 percent with Europe; and 12 percent and 6 percent with North America.

In addition to the geography and accessibility to markets, Arab countries have busy port activity as their economy is based on exporting hydrocarbons resources. They also are highly dependent on food imports to meet the needs of their domestic demand. As a result, the region has experienced a steady increase in port investment, developing faster and efficient transport and logistics services, and making it a strategic sector. This sector has enabled them to position themselves as important platforms for international trade and doing business.

Port Said in Egypt in the north of the Suez Canal, Tanger-Med in Morocco, Jebel Ali in the United Arab Emirates, Jeddah in Saudi Arabia and Salalah in Oman are some of the most important ports in the region, ranking among the Top 50 global container ports. It is, therefore, relevant to mention some of the advantages offered by their wide infrastructure, which allows them to play an important role in maritime trade for container handling.

First, looking at the Gulf Cooperation Council (GCC) region, where the port industry has a container throughput six times higher than the world average, the port of Jebel Ali in the United Arab Emirates is one of the most attractive logistics and trade hubs.

The port is the largest container port in the region and the 11th-largest in the world, contributing 33.4 percent of the emirate's GDP, with a handling capacity of 13.5 million TEUs in 2020. A key part of its success is its integration into business and industrial areas with the Jebel Ali Free Zone (JAFZA) established alongside the port and where more than 8,000 companies from over 100 countries operate. Jebel Ali has contributed to Dubai's positioning as a leading logistics hub connected to more than 150 ports worldwide and with unprecedented facilities.

As for Saudi Arabia, the country ranks Jeddah as the most important container port in the Kingdom, with a 12 percent increase in the number of containers processed in 2020, even in light of the pandemic. In this country, port investment has been boosted significantly in recent years to comply with its Vision 2030, where diversification from the energy sector is one of the goals, as well as to increase petrochemical exports, where substantial infrastructure is required.

Salalah in Oman is another major port in the GCC. Oman's long maritime tradition has been translated into its world-class port activity, which allowed it to rank as the sixth port in global efficiency for 2020, with a capacity to handle a total of 5 million TEUs annually and with connectivity to 50 international ports.

North Africa is also home of two of the most important ports in the Arab region with Port Said in Egypt and Tanger-Med in Morocco. In both cases, their privileged positions, with the Suez Canal for Egypt and the Strait of Gibraltar for Morocco, make them a crossroad of continents and in fact a crossroad for global trade. In both cases, during the pandemic, cargo transport through these ports increased by 23 and 20 percent respectively. It should be noted that around 19,000 vessels transit the Suez Canal annually, representing 13 percent of world trade. As for Tanger-Med, it became the leading port in the Mediterranean, accounting for 47 percent of Morocco's total port throughput.

The intention of mentioning the most prominent ports in Arab countries is to show the regional capabilities in logistics and their large infrastructure as ports have a significant impact on economies. COVID-19 highlighted the importance of ports, and with the increase in container handling reported, it also highlighted the continuous efforts that governments of Arab countries have made to guarantee access to a wide range of products, from agricultural industry and foodstuff to medical supplies, as well as to diversify their economies and strengthen their position as interconnection platforms not only with other Arab countries but also with Asia and Europe.

Connectivity With Mexico

One of the most recurrent questions from Mexican exporters regarding the connectivity of the ports of the MENA region with Mexico is how to get their products to these countries.

Geographical proximity is a factor in trade. However, continuous port and logistical innovations are reducing the distances between markets and increasingly improving connectivity and access between regions.

Between Mexico and the Arab countries, there is still no shipping company that operates a direct maritime route. For cargo to arrive, the container requires a transshipment operation through the ports of Europe if crossing the Atlantic, with Altamira or Veracruz as the departing ports in Mexico, and if crossing the Pacific, a transshipment through Chinese ports is needed if departing from the Mexican ports of Manzanillo or Lázaro Cárdenas. In all the scenarios, the average total transit time is between 36 and 53 days. 

In general, all Latin American cargo requires an intermediate destination before reaching any Arab port. Even Brazil, which is the Latin American country with the highest volume of exports to these countries (55.4 percent of total Latin American exports to the Arab market in 2020), does not have a direct maritime line to the region. Therefore, regionally and particularly in the case of Mexico, one of the challenges when talking about connectivity with Arab countries is the creation of a sea route that will reduce the cost of transport and the delivery time of goods.

While Mexico has made significant progress in air connectivity with the arrival in 2019 of Emirates and Qatar Airways, which have had a positive impact on the flow of passengers and cargo at airports, a direct sea route with the Middle East and North African region would encourage even more businessmen to look to these markets. In many cases, shipping costs are an important factor to consider when targeting new markets.

The MENA region has a broad path in the development of port infrastructure, proving its efficiency with the growth in container handling even in the face of the pandemic. Therefore, these markets should be seen as maritime hubs and platforms for global trade that are already among the most competitive in the world and that undoubtedly offer great opportunities for Mexico and its companies.