Mr Folco Riccio Frojo Executive President of Puerto de la Mar
For World Investment News Ltd, October 23rd 2000.
Let’s begin by explaining the origins of the project, when the idea was started, who was involved and why Porlamar was chosen as the location?
Puerto la Mar is a development that started in 1991 when we decided where to locate the cruise ship port in Margarita. As an urban designer I obviously had a special interest in taking different opportunities to solve urban problems. It was very interesting assisting to the Seatrade Convention in Miami. This is the most important cruise ship convention in the world. In 1992 we found out that every proposal for new ports was conceived in a very technical manner, the problem was in the engineering, it was a technical and functional problem. What I did notice at that time in all the proposals was that no one was paying particular interest to the tourist. I was interested in finding out what the tourist had experienced every time they came to a port. All the companies that were participating were engineering companies; there were no architects, urban designers or so on.
When I came back I started working with a group of people in the States, The Enterprise Development Company, which is a subsidiary of the Rouse Company. Mr. Rouse is well known in The United States because he was very innovative in his concepts in order to recuperate abandon areas for the cities. One of his most important developments in this area was the Quincy Market Place in Boston. Mr. Rouse and Arch Benjamin Thompson understood that the old downtown was dying. We had all these situations in the United States where the cities were deteriorating; something similar was happening all around the world. So I began working with Enterprise Development, which is a company, that helps investors and developers in other parts of the world do projects like this one. The strategic concept of Puerto La Mar was worked out with Enterprise Development in 1992-1993. It has been a very long process, too long to tell you the truth. But Venezuela in the last ten years went through a very particular period of transformations. Therefore, if these are usually developments that already take years, in Venezuela it has taken longer.
We started this project with a company that eventually was involved in big financial problems when the banking system collapsed in Venezuela. I was working as a consultant for one of these companies and when they decided to leave the country; I was left in absolute bankruptcy. Then I tried to convince Venezuelan authorities that this port as well as another one I had been working on for years in Puerto La Cruz in the main land, were very important developments for the country. I told them they should not let the then financial mismanagement hinder two developments that were crucial for the tourism in Venezuela and to recuperate important areas of the waterfront of the country. It took me about three years in order to gain the confidence of the Venezuelan authorities in these projects.
Particularly in Margarita we have had in the last 21 months, nine governors, each of them with his own program, team and also his own idea for a port, so that at the moment we have probably seven ideas for ports that are popping around the island. This situation does not help the finishing of the project that we are working on. One thing is having free market, but another thing is that this free market has got to work under certain conditions and planning, otherwise things become chaotic. Instead of helping one another, we are destroying each other and that makes no sense. I constantly say that we must compete with the world, the Caribbean, eventually with the Mediterranean. The Mediterranean is a growing port market and every year the Caribbean loses market share to ports around the world that offer better infrastructure and prices. In Venezuela, there are lots of beautiful things that are already provided by nature so we must work hard in our urban designs, as it is something that has been forgotten and abandon.
We need to assume that with sun and beaches is not enough. We need to be able to provide a better package, including the outfit of the cities. This is the message that we try to deliver to our authorities. One of Puerto La Mar’s primary assets is that it not only acts as a cruise ship port in Margarita, but it tries to create a place for the people. A place where they can go to meet other people, have fun, it gives them different options of what to do after the beach. This is a place for people of all ages, with all levels of interactivity. The idea is to have a concentration of recreational activities. We have tremendous opportunities because Margarita is different from other islands. We have an important Venezuelan market that allows a development with such an intensity of activities. This eventually will create its own market; it will make the island more attractive to international tourist.
Could you provide our readers with some facts and figures regarding the financial aspects of the project, investment, shareholding structure. When do you expect the project to become profitable and what will be the main sources of income?
The massive plan has been conceived to be very organic. The idea to have a massive plan as such is to spread the risk and to get the most possible out of every phase. The development is made up of phases. The development in its self can reach 300 million dollars. The first phase is 50 million dollars; we are already looking in the second phase and its financing. For this, we are working with the BID, Banco Interamericano de Desarrollo. We went to Washington two years ago and they came to meet us four months ago; they are very excited with this development and they understand that even if this is a private enterprise it has a tremendous public repercussion. It will create an incredible amount of employment. The initial phase will began providing 700 direct jobs and 3500 indirect jobs. Because it is in the heart of the city and its tourism industry, it will create 3000 connected jobs. This is only in the first stage, so imagine how many will be created along the entire development.
We are looking for investment, at the moment we are considering four strategic associations. One is the association for the development of the hotel and casino; it is an investment close to 60 million dollars. This will depend on the operator. All the ideas are very flexible now. Everything has been conceived to be adapting along the years according to the market, needs and investors. You have certain parameters that are fundamental, but you can shift from one thing to another according to the political situation, market conditions and so on. The other strategic development we are working on is the entertainment center, this will included movie theater, fast food centers, arcade rooms, discotheque, etc.. We are also in the process of developing a bingo-casino on a the water; this is done again thanks to the comparative advantage of having the waterfront development.
In terms of financing, the structure is the following: it is a private enterprise made up of three companies, one being a very important retailer in the island that is Rattan. Another one is Conferry, which is the most important maritime company in the island. Then, there is my company, Urbana, which is the founder and developer of the project. Together we joined the municipality that has a 25 percent share in the deal. This development, being in the middle of city and waterfront of Porlamar, we believed it was necessary to have the active participation of the municipality. We recently received strong support from the Venezuelan government. Up to now we have invested more than 6 million dollars, that is private investment and the government has lend us 6 million dollars for finishing this first phase.
One important thing is the way the development has been structured, the cruise ship industry is booming. The last report we have is that average spending is 300 dollars per person per port or destination. There are places like Bahamas were there is a passing of 1,800,000 passengers. One of the islands we are competing with, Aruba, will be receiving 475 thousand cruise ship passengers this year. In Margarita we only receive 200 thousand international passengers by air, and only about 120 thousand cruise passengers last year that came through the cargo port. We believe that in a few years we should be above the 400 thousand and in five years over the 600 thousand passengers, that is 600 percent of what we are receiving today. This will be an incredible impact on the economy of the island and the region. This will definitely position Margarita on the map.
However the operation of the port is not very profitable. What could make it profitable is what the tourist could eventually spend, and this will depend on what you are offering him. There are places where they are spending eighty dollars and others where they spend five hundred dollars. We are turning this operation into a real estate operation, with the placing of all these specialize retailers that are located throughout the Caribbean, as well as those retailers that can respond to the Venezuelan market, the casinos, restaurants and entertainment centers. We will provide a cash flow that will pay off the investment. If you invest in the port thinking that you will have a return on the investment through the operation of the port, you are mistaken.
In this respect you have a very well defined and particular concept, you mention before that you have seen how other ports have been handled and the services they have provided market wise, you said they have mistakes on different concepts, could you explain that to us?
We are coming late to this market. It is almost unconceivable that Venezuela, having 3000 kilometers coastal line and so many islands has not even one cruise ship port of call. We have a cargo port, but we do not have a cruise ship port. When we traveled studying the different locations we discovered what they had done right and what they had missed to do. Now we have the opportunity to develop a new port that is an innovation in the market of ports. I believe that Puerto La Mar is coming with a completely new concept in the industry. In some places they are already beginning to take after Puerto La Mar and perhaps even faster than us.
A friend of mine told me that in Mexico, they studied our project two years ago, they are already done and functioning and we are still working on it. We are creating scenery to welcome the passenger to have fun here, to have a destination within the destination. The island is an incredible place that has five national parks. We still have to make the people understand the importance of the tourist for the island. The government is working very hard trying to help get this message across, in creating consciousness, so people know just how fundamental tourism is.
The geography of the island is very interesting, and even though it is an island in the Caribbean it is still part of South America. When you come to Margarita you are faced with the locals that can actually be separated into the original locals of the island who are very traditional, good-natured people and the Venezuelans in general. So I would say another comparative advantage we have is the population. Culturally we have the Spaniard background, but Venezuela is a cosmopolitan society. The Venezuelans are people who traveled a lot and many of them have studied abroad, so they understand the outside mentality. Thanks to that they are able to identify the needs and comforts tourist from other regions might demand.
The cruise line passengers you are targeting. What is the nationality of the passengers you are expecting to come? Knowing that you have already negotiated with some cruise liners, will you tell us about those negotiations?
We have been marketing the island for already four or five years, We have met with every level of every cruise ship company. There are great expectations towards the day when Puerto La Mar will open. Our opening has taken more time than expected, but what is more important is that we are coming out with a good project. We had interviews with Carnival Corporation, which as you probably know has sixty percent of the market. They are the ones that made cruises popular together with Royal Caribbean, Celebrity and other companies that mostly work in Europe, but during the winter come to the Caribbean.
Puerto la Mar will be one of the only ports in the Caribbean that can receive 3 large megacruise ships at the same time. The cruise ships have now doubled in size, and not many ports in the Caribbean are ready to receive this large structures. We are coming out with a state-of-the-art facility for anchoring. Every company is very interested in coming to Puerto la Mar. Last year without having an appropriate port we received 80 cruise ships, this is almost a hundred twenty thousand people, and we expect in three years to triple that number.
The market is mainly from the United States companies, Florida and San Juan. San Juan is the homeport from where we are going to receive most of the cruise ships. One thing that is crucial is having a homeport in the Southern Caribbean. For this we have been insisting to the Venezuelan authority on the need to have a homeport in La Guaira. That way, someone from Argentina, Paraguay or Colombia would not need to fly to Puerto Rico or Miami to get this cruise ship. They could fly to Maiquetia and be in La Guaira in twenty minutes. That would reinforce the whole cruise ship industry in the southern Caribbean. Most of the operations right now are in the northern part of the Caribbean. We are still weak in this area. Luckily, Puerto La Mar is located in what could be the first destination and then the ship could continue its trip to other islands.
You mention before that you are an urban designer, what is going to be the development that this project is going to bring not only for the area where the port is located, but for the island as a whole? Everybody knows that tourism in Venezuela for many years has been neglected, such initiative what can it bring to the industry?
Our philosophy is, and that is what I would if I was governor, that no permits should be given for any new construction, involving waterfront or beaches because I think that it is the most important asset we own, specially if we are looking ten to twenty years ahead. An European tourist is looking for virgin beaches in the Caribbean not one that is filled with buildings. We believe that we should continue the process of building but only in those areas that a have already been built in. This way instead of encouraging a process of dispersion and occupation, we can offer one of recovering and renovation. This is exactly what Puerto La Mar is, the beginning of a process of rediscovering of the sea and the waterfront of Puerto la mar that has been neglected for years. The new investments over the last years have been concentrated in the east of the city. Now, there is an area that has followed an urban pattern, but is not really the most attractive pattern for the tourist, because it is disperse. We need cities that are more compact.
What Puerto La Mar pretends through its strategy in one hand is to recover the old structure of the city, to establish a connection with the memories they bring.
We need to stress the differences that make us stand out from the other islands in the Caribbean. Our urban context should reflect that. It is very difficult to understand just what is the identity of Margarita. We insist on the rediscovering of our roots. Even though one must keep up with what is happening around the world, and all that state of the art, one must also keep a relationship with his roots. We are using local materials because this is the basic element to start with. We are flexible and might use some materials coming from the Caribbean, but again we try to relate to our region. We are building a lot thinking of the Spaniard influence, like patios, corridors. I think that it is important we give strength to these issues. Along the waterfront we have the vision, if we lack vision we do not go anywhere. We envision that all the waterfront of Porlamar can become La Riviera of Margarita.
NOTE: World Investment News Ltd cannot be held responsible for the content of unedited transcriptions.
VENEZUELA
