TEU Latam & Beyond

In January 2017 Deloitte and Touche Turkey published the Turkey M&A Report for 2016. The section of the report that disclosed data for outbound M&A activities revealed that the total dollar amount FDI originating from Turkey dropped to a five-year low to about USD2.3 billion, reflecting the recent internal and external political tension dominating the country and the resulting depreciation of the Turkish lira. However the results showed that despite all the difficulties, Turkish companies large and small are pursuing their long-term growth strategies as they position themselves as global players in their sectors. The main destination of the investments were the eurozone, which was followed by North America and Africa.

But the most interesting result was that the single largest deal of the year was realized in Ecuador. Turkish port operator Yılport, part of the Yıldirım Group, acquired the rights to Ecuador’s Bolivar Port in Machala with a 50-year concession for a value of USD750 million. This single deal represented one-third of the total dollar amount of the 42 deals executed last year.

The deal represents the largest Turkish investment to Ecuador and will be disbursed in five phases along with an ambitious development program targeting the creation of Latin America’s largest container terminal with 2.5 million TEU of handling capacity per year. Yılport will thus bring in its know-how from its terminal operating experience from 20 ports in eight countries around the world. An initial investment of USD230 million will be delivered for the first phase of the project, which will span over three years. The development and modernization project aims to dredge to deepen the draft from 10m to 14m and then to 17m gradually, construct a new 450m long quay, and equip the port with infrastructure capable of accommodating the largest container ships of the world, as they have been able to pass through the newly enlarged Panama Canal since June 2016.

Puerto Bolivar is Ecuador’s main banana shipment point, delivering almost half of the country’s banana exports to international shipping lines. The modernization investments of recent years have allowed the port to not only increase export volumes but also diversify content to include other fruits and also seafood. But with Ecuador being the world’s biggest banana exporter, the long-time established function of the port is the competitive advantage that Yılport wants to capitalize on, as it intends to keep the port as Latin America’s “banana port.”

After a period of heavy public investment, Ecuador’s government has been actively pursuing foreign investment for the much-needed modernization of its sea ports, which will be the main drivers of the economic growth potential presented by the expanded trade volumes allowed by the widening of the Panama Canal. Other major deals recently made within this context include the Manta Port concession to Chilean operator Agunsa, and the new deepwater Posorja Port investment by Dubai-based DP World.

As Latin America’s traditional trade partners recede their power and pave the way for a new mix of consuming and investing countries, especially after the apparent collapse of the TPP agreement, it should be no surprise to witness the growing importance of Chinese, or even Turkish investments in the years to come. According to the Turkish Dünya newspaper, the number of Turkish port investments abroad stands at 29, the majority of which are owned by Yılport, Ekol Lojistik, Arkas, U.N. Ro-Ro, as well as Global Liman for cruise ports. These companies are in the course of bidding on major tenders in North America, Latin America, and Europe. In a few years, the number of their international ports is expected to rise to 50.