Air Cargo, Trade, and Transportation

Topics: South America, International trade, European Union Pages: 15 (5177 words) Published: March 11, 2013
e, Journal of Air Transport Management 14 (2008) 324–328

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Air cargo, trade and transportation costs of perishables and exotics from South America Henry Vega
Center for Transportation Policy, Operations, and Logistics, School of Public Policy, George Mason University, Fairfax, VA 22030, USA

a b s t r a c t
Keywords: South America Air cargo Airfreight Trade Transportation costs Perishables Exotics

Exporting time-sensitive perishable and exotic products is one of few alternatives that producers in less-developed countries have to compete in international markets. While export performance is generally linked to these producers’ ability to take advantage of their geographic location and access to low labor costs, concerns about the sustainability of these economic activities encompass complex supply chains and high transportation costs. There is an increasing interest in understanding the reliability of such supply chains and the implications of high transportation costs, particularly airfreight costs. Using South America as a case study, we investigate trade and air transportation costs of perishables between 2000 and 2006. Descriptive trade statistics are complemented by an assessment and comparison of airfreight rates. The results are mostly consistent with producers’ concerns. Among the inconsistencies, producers in some countries face higher transportation costs than far more distant neighbors; while in others transportation costs have decreased in the period of time examined. Ó 2008 Elsevier Ltd. All rights reserved.

1. Introduction This article examines the legal commercial trade of perishable products that are moved by air from the agriculture, livestock, and fisheries sectors of the countries of South America. These products are often referred to as ‘‘perishables and exotics’’ (P&E) in the sense that their cool supply chains require fast delivery, usually by air; and grow under natural conditions only in the exporting countries or can be grown seasonally in the importing countries under controlled environmental conditions. The list of exotics is extensive including tropical fruits and vegetables, ornamentals, fresh herbs and spices, wild mushrooms, fish and seafood. The growth in trade of P&E has been driven by increases in demand and supply. On the demand side, globally, consumers have been requesting a larger variety of exotic fruits and vegetables such as mangoes and papayas; as well as more traditional, out-of-season produce such as fresh carrots, apples, and oranges. Consumption started increasing significantly in developed countries in the 1980s. The broader ethnic diversity of the population in certain regions of the world has further helped expand the consumption of P&E by locals who are more willing to try new food items because of the interactions with ethnic populations. As a result, in the US and European markets starfruit, jicama and plantains are common on people’s tables while anthuriums and orchids are common in homes’ flower bases. Reflecting this market growth, the supermarket

produce department has become larger in the last 30 years, doubling in size between 1987 and 1997 (Litwak, 1988, 1998). On the supply side, exports of perishables originating in South America, particularly fresh produce and flowers, have been recognized as among the finest in the world. In this regard, innovations in the industry have translated into quality predictability, which is no easy task when doing business with perishable goods.1 High quality is the result of a combination of production factors including ideal ecological zones, relative proximity to their largest market, the US, and abundant low-cost labor. Firms producing perishables in South American countries range from very small to very large, vertically integrated operations. The industry’s value chain also includes...

References: Button, K.J., 2008. Air transportation infrastructure in developing countries: privatization and deregulation. In: Winston, C., de Rus, G. (Eds.), Aviation Infrastructure Performance: A Study in Comparative Political Economy. Brookings Institution Press, Washington, DC. Cai, J., Leung, P., Loke, M., 2007. Do Hawai’i Producers Pay Higher Freight Costs for Agricultural Shipments to the US Mainland Market Than Their Foreign ¨ Competitors? University of Hawai’i at Manoa College of Tropical Agriculture and Human Resources, Honolulu. von Heereman, R., 2006. Air Transport of Perishables – Economic Challenges in a Highly Competitive Market. ICAO/ATAG/WB Development Forum Maximizing Civil Aviation’s Economic Contribution, Montreal. Hirshleifer, J., 1958. Peak loads and efficient pricing: comment. Quarterly Journal of Economics 72 (34), 451–462. Litwak, D., September 1988. Annual Consumer Expenditure Study Supermarket Business New York. Litwak, D., September 1998. Annual Consumer Expenditure Study Supermarket Business New York. Vega, 2008. Transportation Costs of Fresh Flowers: A Comparison Across Major Exporting Countries. Background Paper for the IDB Report Unclogging the Veins of Latin America and the Caribbean. Inter-American Development Bank, Washington, DC. Yeats, A.J., 1989. Do Caribbean Exporters Pay Higher Freight Rates? The World Bank Policy Research Working Paper 244, Washington, DC.
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