Our goal should be an improved regional integration

Free Trade Zones (FTZs) dynamize today’s economic development. Logistics hubs, present in all life stages of a product through its final destination, are no strangers to this phenomenon. FTZs can serve as storage and distribution centers located close to transport nodes, reducing operational and logistics costs.

We talked to Mauricio Papa, General Manager at Costa Oriental, the largest FTZ regional distribution logistics center in Uruguay, about how FTZs attract investors, diversify exports, and promote innovation from knowledge transfer.

How does Costa Oriental operate in Zonamerica?

Costa provides logistics services to companies engaged in, or aimed at, regional supply activities through FTZs. Companies outsource their logistics activities to us. This requires us to come up with rapid and flexible responses for companies that face unstable demands, with steep peaks and troughs. The challenge is being able to provide solutions in complex contexts subject to really quick changes in product lines and the ways of doing businesses. Costa Oriental has the capacity to deal with these situations, at very competitive costs.

Which are the main logistic challenges for trading across borders?

Cross-border trade faces many obstacles. Trade is always subject to new restrictions. For instance, just think about the years of the pandemic. Entire countries were closed off, no transport was possible, and tight sanitary control measures were implemented. After all this, prices of international freights rose to unthinkably high levels, which were feared to never go back down. Another example is the new restrictions on imports in Argentina. So, all these hassles and difficulties are best dealt with at a FTZ close to the market and through a logistics supplier that offers more flexibility.

Why does flexibility make the difference?

Clients do not need to have an operation of their own with their own staff and facilities. To give an example, certain products require an import license, and there is no certainty as to when this license will be obtained. The shipping of a given product manufactured in Asia cannot wait for the clearance of a particular government. So, the product is brought to Uruguay and then sent to its destination once cleared and authorized. Meanwhile, the bulk inventory is kept at a FTZ on a flexible basis.

In Uruguay, FTZs are very swift and adaptable, and products can be redirected to countries other than the ones originally intended. At Costa Oriental, we contribute to this process on the back of Uruguay’s free trade regime and the socio-economic stability of the country, and also due to the value added by us as a logistics supplier in absorbing the fluctuations of the demand. On this note, we offer the possibility of adapting products as required to be sold in a given country. In electronics, for instance, cords used in each country are different. Most of these products require a change of plug, voltage, and packaging. These tasks are performed at Costa Oriental on a daily basis to make products compliant with the technical specifications of the country of destination.

What policies make Uruguay a logistics hub?

Many years ago, being a small country meant having no weight, no market, and no chances to develop a local industry. This situation hovered over Uruguay for a long time. In past years, different Administrations succeeded in transforming the country into a logistics hub. We are located next to the two largest countries in South America, in a geographically privileged position, and with access to landlocked Paraguay. If you ask me what Uruguay did right, the first thing is offering stability. Rules do not change here with different Administrations, there is no risk of companies installing in Uruguay and then having to face changes in the rules of the game. In the case of FTZs, there is a law that sets forth and protects the rights of the companies that operate here.

At the same time, the different stages of logistics chains were streamlined and modernized (the airport, the port, roads). The container terminal, vital for trade purposes, is being expanded. Uruguay has a reliable customs regime, which is critical for the operation of a distribution center. In this context, it does not matter who wins an election. These are the advantages of Uruguay, a country that had the vision of assuming that despite it will never have the scale and weight of its neighbors, they can complement each other.

Which are the next steps to follow in order to improve commercial and logistic integration?

Mercosur is a treaty with barriers among member countries, with obstacles, with duties and tariffs. The difference with Europe is staggering. Logistically, the theory is the same. Europe is supplied thanks to distribution centers located in small countries, like Belgium or the Netherlands. This model is possible. Our goal should be an improved regional integration.