By Jose Luis Guasch, Former Head of the World Bank Global Experts Group on PPP and Logistics, Professor Emeritus University of California, San Diego
Pedro, a small farmer in the Andes, spends another sleepless night worrying about how to feed his family. He wonders how to improve the productivity of his small crop of vegetables and how to reduce time cost and losses (spoilage) in the process of taking his produce to the market. George is a small and medium enterprise (SME) entrepreneur, who exports his products. He has to face poor and bumpy roads, delays and red tape in securing permits and certifications, cumbersome custom and/or cross border procedures, lack of cooling facilities, losses due to spoilage and even theft, deficient packaging and scale consolidation, low productivity etc. That is the common plight of most SME farmers and producers in emerging economies. The costs of bringing their products to the market hover around 30% of product value, when it should and can be below 10%.
Weaknesses in transportation and logistics are a recurring theme in numerous diagnostic studies analysing the obstacles to productivity, trade and economic growth in most Latin American and African countries. Particularly burdensome are deficient trade corridors and the dismal conditions of feeder roads connecting markets, borders and ports, as well as the lack of effective logistics services.Continue reading