Liner Shipping Connectivity and Port Infrastructure as Determinants of Freight Rates in the Caribbean

Abstract

The Caribbean basin lies at the cross roads of major east-west and north-south liner shipping routes. A number of regional ports have been able to take advantage of their geographical position. In other ports, however, the limited scale of hinterlands and the de facto monopolistic situation of ports in Small Island States have had a detrimental effect on port development. Port infrastructure endowment varies between highly equipped global transhipment hubs and rudimentary ports with wooden quays. By the same token, the supply of regular shipping services ranges between highly interconnected routes on the one side, and Small Island States that are heavily dependent on a few limited feeder services on the other. At the same time, freight rates in the region dispose of a high variability. The paper analyses the impacts of port infrastructure and liner shipping connectivity on intra-Caribbean freight rates. The structure of liner shipping services, port infrastructure endowment and liner shipping freight rates are closely related to each other. The paper will analyse these relationships. The empirical methodology includes principal component analysis and ordinary least-squares regressions.