May 27, 2004

Trouble in Panama

Yesterday I drove from Panama City to Colon, crossing this narrow country in an hour and ten minutes driving parallel to the Panama Canal. My vehicle was never to return, I had my problems getting back too.

All shiny and clean my old Mitsubishi was bound for the port of Manzanillo, Colon to be stuffed into a twenty foot CMA-CGM container bound for the port of La Guaira, Venezuela aboard the vessel Torben Maersk.

Maersk is the largest shipping line in the world but even it sees the value in berthing its ships on both the Pacific and the Caribbean sides of the Isthmus. The average price of a canal crossing is sixty thousand dollars and takes one to two days. The alternative is to round the Cape of Good Hope or transport trans-isthmus by road or rail. Passing between Tierra del Fuego and Antarctica is no piece of cake; apart from the notorious weather, the cost in time and diesel to round the sub-continent of South America is a serious logistical factor. Road and rail options are a logistical nightmare.

But container ships are not the only vehicles that run on diesel; trucks, trains, buses and taxis do, too. Or rather, in my case, they sometimes don't.

The trip from Panama to Colon takes about an hour by road in a private vehicle or taxi. For most Panamanians private vehicles are not an option; they travel using public transport that used to compete with road or rail. The trans-isthmian rail line is now privatized like many of the ports on either side of the canal. The giant Hong Kong Taipan Hutchinson, the same conglomerate to be the first to bring third generation mobile phone service to many parts of Europe, has widely diversified interests but it still keeps an eye on international transport from China to the rest of the world. Hutchinson leases two of the four ports on either side of the Panama canal. Traveling between these ports by train now costs $50.00 for passenger service, my taxi driver used to pay $1.30 before privatization. If you earn $200 a month as many do in Panama, commuting by train to work would cost you five times more than you are paid.

You can squeeze four or more people into a taxi across the Isthmus for about $30 each way, cheaper than the train but still breaks the budget, so that leaves the old stalwart: the chicken buses.

These beautiful if somewhat uncomfortable old diesel buses began their lives transporting children to and from school in the United States (which explains the minimal leg room). They now belch their black fumes along the fifty mile trans-isthmian highway competing intensely for passengers. Their bizarre competitive tactics include racing each other to bus stops often cutting off the loser bus with great skill and admirable humor, shouting destinations at each stop and honking for passengers with increasingly elaborate and tuneful horns and spraying their vehicles in unique and somewhat non-PC artworks depicting busty women and macho Spanglish mottos. An economist desperate for examples of the beauty of the free market might hail this ingenuity but this 'free' market is in danger! The buses between Colon and Panama are on strike!

Many Colon port employees live in Panama City. Yesterday they sported a look of resigned concern. Many did not know how they were getting back home last night. I was lucky, I had enough cash for a taxi.

Ironically a full one third of all world shipping traffic is the transportation of oil. Many oil tankers are now too large to pass through the Panama canal (one of the reasons the Panamanians are spending close to $100 Million dollars to build a fine new bridge across to widen critical points) but thousands do. Even with all this available oil Panamanian gas stations charge about $2.30 for gasoline and $1.60 for diesel. Something's got to give and it is not going to be the availability of oil, at least not for long.

Only Tuesday this week the governments of the richer nations of the world (Panama doesn't qualify) pleaded with OPEC to raise production to reduce the upward pressure on oil prices, at least temporarily, which, they said, was endangering world economic recovery.

Have you ever wondered what this recovery is all about? And while we are on the topic, why do we find ourselves in such a cycle of hidden collapse and seemingly endless recovery? It seems like a lot of pain for relatively little gain. These topics are beyond the scope of a short essay like this but the price of energy does play a factor and the price of energy is going up! Why? Because it is still being produced from a finite and quickly collapsing supply. What do the rich countries of the world do? Instead of replacing the supply lines with something sustainable, they suggest foreshortening the demise of the supply. Where is the logic in that?

Consider my vehicle passing from Colon to the port of Caracas, Venezuela. The charges of such container transport depend on a myriad of factors including: twenty foot dedicated or forty foot shared, customs and documentation costs, competition on the route including freight forwarding distortions and an obscure little charge listed on my bill as "BAF". The BAF charge on my twenty foot container for this trip is $125.00, BAF is an obscure term for the price of diesel for the ship. Separating it from the cost of the freight protects CMA-CGM line from fluctuations in oil prices but as my saleswoman in Maersk pointed out: "It keeps going up!"

So BAF bears a direct relationship to the cost of the energy to drive the ship. If we continue with the insanity of using diesel the price of BAF will do more to end the globalization of world trade than any protest in Washington or revolution in Iraq.

As I rode back to my hotel in Panama today I asked the driver why his window was smashed. He blamed the demonstrations in the city the night before. Seems an angry demonstrator had attacked taxis with stones as they drove by presumably because they had yet to join the strike.

An omen of things to come?

Posted by Tony Phillips at 06:07 PM | Comments (0)

May 11, 2004

Car Shopping in Costa Rica

So I'm stopping by to pick up my clean clothes from the launderette called Lava Splash in Barrio Los Yoses in San Jose, Costa Rica and what do I spot on the corner of the street but a new car dealership for Great Wall SUV's. Strange name; I had to have a look-see.

As a child in Ireland in the 70's I remember the brand name Great Wall was used for cheap imported plastic toys from British Hong Kong. At that time the cars on sale in Ireland were mostly made locally in the Ford assembly plant in Cork county or in nearby Great Britain where Rover, Austin, Rolls Royce and other firms manufactured their world famous vehicles. The Irish Ford plant is long since defunct and for many years now all British car manufacturers have been assimilated into larger transnational conglomerates. What remains: the manufacturing plants, the designers? Hardly! Rolls Royce and Rover have become the marketer's dream, pure brands; minis with BMW engines under the hood.

Have you ever really considered what is in a brand? Well I decided to check out the "Great Wall" range. The name hardly has the sophistication offered by Toyota, Range Rover, or Hummer for that matter, a quality bought by advertising. These luxury leaders in the burgeoning Sport Utility 4-WD markets may sneer at the brand but it doesn't mean that they don't talk turkey when it comes to selling parts.

I decided I would take a look at the vehicle in the Great Wall range that most closely resembles my own Mitsubishi Montero. The is called simply 'Safe'. Again I felt that the name needed some work but I got the message, blunt but effective. So what exactly is a Great Wall 'Safe'?

Tailored to this market by engineers in Shanghai, 'Safe' is an inexpensive, efficient, and simple 4-WD. Costa Rica is a small country, but with many opportunities for off-road driving. Gasoline is also the most expensive in Central America; to fill the Montero's 23 US gallon tank costs 22,000 Colones, or about US $50. That's a lot of money in Costa Rica where US $4 an hour is not considered a bad wage for a graduate starting off and where a bus fare is about 25˘.

The salesman was sensitive to the fact that he was fighting a brand war but he knew how to reassure me. I fancy myself as a bit of a mechanic so I asked to see the engine; "Claro que si! Seńor". It is a very simple 2.2-liter, four cylinder engine, which gets about 25MPG. The 'Safe' on display was the 'loaded' one (with all the extras!). By western/Japanese standards it was a fairly bare bones engine, sporting fuel injection and AC, but little more. I liked its simplicity. The fuel injectors and the CPU are both Bosch branded, the motor Toyota, all made in China. The salesman added that the pickup comes with an Isuzu 2.8L diesel for more power. I felt strangely reassured by the brands, but at the same time wary of the 'Made in China' label.

Automobile branding has become a strangely flexible phenomenon. I had noted that the rugged style of my own 1990 Mitsubishi Montero though long since unavailable under the Mitsubishi brand were still sold new in Central America where the terrain demanded it. Here the new name is 'Galloper'. When I enquired about these strange beasts in Nicaragua, the Mitsubishi salesman explained, a little apologetically, that the Galloper is a Hyundai with a Mitsubishi engine, manufactured not in Japan, as was my Montero, but in Korea. Hyundai had simply bought the molds and the robots. The Hyundai Galloper, like the Great Wall 'Safe' in front of me, was both the thrifty and the rugged option. Costa Rican taxi drivers in remote mountain towns favor the Galloper where 4-WD is often required. Unlike my V-6 gasoline they choose 4 cylinder diesel engines. Much to my chagrin, Monteros with diesel engines were not available in the US. I guess they don't use enough fuel for that market J

A pure brand is nothing but a name. Names are infinitely flexible but this is also their weakness. The name can be used to sell any variety of products [c.f. Porsche sunglasses] but means nothing and as a brand it has a limited lifetime. Given time all brands must eventually cease to exist. But worse, the concept of a brand, divorced as it has become from reality, will also eventually lose its meaning and then branding itself shall be a lost art. It is happening already.

As transnationals like Daimler-Chrysler subsume brands over time the utility of the brands themselves becomes so marginal that eventually some become unworthy of advertisement. In many cases the brand was once the name of a healthy company. Mergers and the logic of eternal growth mean that the company is subsumed and its name becomes a pure brand, that sooner or later will be retired. One such retirement happened recently with the once revered Plymouth brand in the US. No more Plymouth Satellites!

In a similar vein, as the smokers of an older brand of cigarettes slowly die off, the transnationals that own the brands must make a decision. British American Tobacco, J.R. Reynolds and Philip Morris must evaluate the value of marginal brands in their extensive ranges and retire some even as they subsume new ones. Such is pure capitalism; Mercedes and Marlboro will survive for who knows how much longer while Plymouth and Players may not.

Assuming the unlikely but inevitable by implosion of the 'brand', what next? How can we consumers be taught to trust the offerings of our increasingly transnational and nebulous suppliers? In a handful of generations we have 'developed' from hunter-gathers to Internet shoppers growing fat on free delivery. As our new 'needs' rise in complexity to meet increasingly multifarious product offerings, how can we learn to trust? We no longer know what is in the food, it's smell, taste, color and form are as artificial as its packaging. It takes longer to read the list of ingredients in an airplane snack than the 'world news' in a US newspaper and can be as equally uninformative. So how can we decide between the increasingly bewildering products offered?

Quality, price, taste and intangibles are the magical cacophony that spells success in the world of profit but these are the realms of the human. Humans behave in unpredictable and changing ways that are constantly studied and ed. As the anarchic actors in the capitalist system, they are the one true source of the great God profit. For our spending years on this earth we are very important to the Powers-That-Be. Our tastes, our fads, and our moods are twisted, manipulated and feared by the advertising industry. The creators and purveyors of their sole reason for being to convince us to exchange our money for brand named goods.

Who knows? But a few hints are emerging.

We're not stupid, not all of us anyway -- if we were we would not have made it thus far. We are attracted by stuff bearing some resemblance to what we need and desire but we are also programmed to survive. Most of us want to live long lives relatively free of illness and that usually applies doubly when we provide for our children. That curious fact limits our purchasing decisions in ways that are awkward to marketers.

Once the consumer is conscious they may start to look for symbols of trust rather than corporate brands: like FDA approval, Organic certification, Grüne Punkt, Dishwasher safe, Made in Japan, Cooperative produced, Recycled or whatever. Maybe somewhere out of this hodgepodge of trusted governmental and non-governmental organizations lies the seed of a better future standard. With trusted certification both the consumer and the producer have a simpler time producing and consuming and this simplicity might extend not just our short lives but the life of our planet.

We've got a long way to go from The Great Wall Safe!

Posted by Tony Phillips at 11:49 AM | Comments (4)