Efficiency and productivity changes for Peruvian and Chilean ports terminals: A parametric distance functions approach

The aim of this paper is to assess and compare the efficiency and performance of Peruvian and Chilean ports terminals. In order to do so we estimate total factor productivity (TFP) growth by applying Stochastic Frontier Analysis (SFA). A distance function was used on a sample of 14 ports terminals observed over the period 2004-2010 to evaluate their efficiency levels and to decompose productivity into technical efficiency, scale efficiency and technical change. We also decompose technical change - also known as technical progress or technological change - into several components. We find that the terminals improved their technical efficiency during the period of analysis, with Chilean terminals being more efficient than the Peruvians. This was influenced mainly by increased agility in the process of reforms implemented in Chile compared to Peru, which has allowed greater investment in infrastructure and technology in recent years. On average, TFP in the Chilean terminals declined while in Peruvian terminals it increased. The component “change in pure technical efficiency" and “scale changes“ contributed positively to improvements in productivity in both countries, but the technological change component decreased. The latter result is related to the international financial crisis of 2008, which had a larger impact on the terminals of Chile, and is similar to results reported by other authors when analyzing TFP evolution in a period which included an international crisis. Moreover, the decomposition of the technological change shows that it was biased toward the capital input. These results have regulatory and economic implications, which are outlined.