Heralding a 'new era,' Chile approves cabotage for foreign-flag cruise ships

At a keynote address in Valparaíso in 2013, Carnival Corp.'s Giora Israel urged Chile to amend its cabotage laws. That has finally happened At a keynote address in Valparaíso in 2013, Carnival Corp.'s Giora Israel urged Chile to amend its cabotage laws. That has finally happened PHOTO: Anne Kalosh

Taking an important step toward becoming a regional player in the mainstream cruise business, Chile has approved cabotage for foreign-flag ships of 400 or more passengers.

This caps a years-long effort by cruise industry proponents, particularly the Southern Cone Ports Corp. (Cono Sur) and the Agunsa Group, manager of the Valparaíso Passenger Terminal.

'A new era in Chile'

'I hope we can start a new era in Chile,' Cono Sur executive director Sebastián Montero Lira told Seatrade Cruise News on Thursday.

The Chamber of Deputies voted unanimously, apart from one abstention, to modify Article 3 of Decree Law No. 3,059, of 1979. This will allow foreign-flag ships with capacity for at least 400 passengers to begin and end cruises at Chilean ports without calling at a foreign destination. The 400 threshold protects Chile's domestic cruise industry while giving it plenty of room to grow; its largest vessels now carry around 200 passengers.

The legislation is expected to be signed into law within 30 days.

This could give a significant boost to Chile's cruise aspirations by taking a course similar to how Brazil—across the continent—fostered a sizable domestic market by allowing cabotage for foreign-flag ships.

Cruise lines have long urged the cabotage change.

Giora Israel planted a seed

Five years ago, addressing Seatrade South America in Valparaíso, Carnival Corp. & plc SVP Giora Israel delivered a powerful message to the high-ranking government officials there.

'What should Chile do to become a cruise region?' he said.

'Amend its cabotage laws. Amend its cabotage laws. Amend its cabotage laws,' Israel repeated three times for emphasis.

While Chile currently draws ships on long voyages, this adds up to just a sliver of the worldwide cruise sector. Some 90% of the cruise business consists of sailings seven days or shorter.

Back in 2013, Israel pinpointed Chile’s greatest challenge as developing viable week-long itineraries—the bread and butter of the business—due to the country’s extremely long coastline. Foreign ports are too far away to reach in seven days, so international operators couldn't meet cabotage requirements.

New itineraries

If Chile were to allow foreign-flag ships to sail coastwise, several attractive weeklong itineraries could be developed, Israel said then. For example, he suggested a round-trip Valparaíso cruise that starts with a sea day, then calls at Robinson Crusoe Island, Chiloe’s Castro and Puerto Montt before another sea day. Or, a round-trip Valparaíso cruise could start with two sea days before calling at Chacabuco, Castro and Puerto Montt, followed by a sea day.

Israel made no promise that easing cabotage would bring overnight success but said it ought to be Chile’s first, second and third priority. Other challenges to tackle include uniform port regulations and a globally competitive cost structure.

Contacted recently, Israel said he stands by his 2013 remarks.

Besides the cabotage news, various other developments are positives for Chile's cruise business, Cono Sur's Montero said.

Cooperation with Panama

Among those are the nation's plans to develop and promote a South Pacific route together with Panama, whose new cruise homeport at Amador near Panama City is due to begin operating later this year. Following talks between the presidents of Chile and Panama last year, in December Undersecretary of Tourism Mónica Zalaquett and Panama Maritime Authority Administrator Jorge Barakat signed a letter of intent to cooperate in this cruise development initiative.

Recently Panama President Juan Carlos Varela also spoke about the cruise sector with his counterparts in Ecuador, where a new cruise terminal has opened in Manta, and Peru, where there are plans for a new cruise development in Lima. Peru has also approved cabotage for foreign-flag cruise ships, with the related regulations still to come.

As an example of the possibilities, Montero noted that Celebrity Cruises during the 2019/20 season will operate an itinerary starting in San Antonio (Chile) and featuring two Peruvian ports on the way north and two ports northern Chile on the way south.

Another reason for optimism, in Montero's view, is that Chile anticipates a record cruise season, which is expected to surpass the prior high of 455,000 passengers and crew in the 2008/09 season.

The cabotage change has been a long haul.

'We are very pleased,' Montero said. 'I applaud what the new [tourism] undersecretary has done. They have been nine months in office and achieved what had been [stalled] for years.'

Posted 10 January 2019

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Anne Kalosh

Editor, Seatrade Cruise News & Senior Associate Editor Seatrade Cruise Review