Pierfrancesco Vago - CEO MSC Cruceros

Good day, honorable ministers, this is hot Mr. O'Reilly, fellow speakers, ladies and gentlemen. It's a great pleasure to be here today with this distinguished panel and to discuss the opportunities and the role of cruise tourism in South America, by far one of today's most enticing global destinations. As we just heard, this is the second edition of the City Train South America Cruise Convention. Last year, as we heard from Chris, we were in Sao Paulo; today we are in Buenos Aires. First of all, I would like to thank Citrade for their constant effort to bring key people together and to encourage dialogue and discussion like here today. These events are of the utmost importance in making the cruise sector known and to make regulators, legislators, tourism authorities, and a wide range of stakeholders understand how this industry works, what benefits it brings, and we will develop some numbers in a minute. What are the merits of this industry and what are the peculiarities of this industry? I also like to take the opportunity to briefly thank Abrama, the Brazilian Association of Cruise Companies, represented here today by Mr. Amara. This organization is significantly contributing to regulate, promote, coordinate, and expand the cruise activity in South America, helping to shape the political and regulatory framework in order to ease cruise business operation as we need, and as we are from Mr. Johnson's presentation. So let's have a look at these numbers. So let's do some recap of the history of the cruise industry here in the South American region. It has been moving in South America for the last 10 years. We are speaking about an increase of nearly 3,000 percent, from less than 50,000 passengers in the 2000-2001 season to close to 1.5 million passengers last season. During the time, we saw the market move from an exuberant infancy phase to a more mature and sustainable position. The consistent expansion of cruising as a valuable holiday option has been mainly driven by a favorable political and economical context, as well as by the growing spending power of the middle class, which has propelled the economy and by consequence tourism in the region. So despite such a positive picture, current challenges were introduced and concern also exists. While the size of ships deployed in South America is growing, the number of ships we heard is gradually decreasing, and the number of calls is being reduced, leading to a slowdown in growth rate compared to the rapid increases seen in the previous years. It is vital that we analyze the last decade's stunning growth and its components together, that we also understand what fueled this growth, and carefully, possibly try to evaluate what could slow growth rate and what would threaten growth in the future. As our city today, we are here in Buenos Aires, the tremendous potential Argentina still has to unlock in terms of cruising. Let's consider some of the Argentinian numbers: almost 300,000 passengers took a cruise in Argentina last season 2011-12, with passenger prices going from 54,000 in 2006-07 to 244,000 in last season 2011-12. The more relevant in-market passenger raising nearly 40,000 in 2006-07 to nearly 145,000 in last season 2011-12. We also heard that for Mr. Bradley, because Buenos Aires has almost tripled from 54 to 142. These are interesting and promising figures from a sector that is developing in two main directions. On one side, cruise tourism is expanding all along the east coast of South America, from Tierra del Fuego to Colombia and Venezuela, bringing tourists to areas and regions that would be difficult to reach other than by sea. On the other side, more and more international tourists, mainly coming from Europe and North America, are considering exploring South America by ship, indulging in comfort and service and attracted by its unique value for money. I am number four confident that the Argentinian government, together with the regulators and port stakeholders, will not risk missing the occasion and will understand what an incredible opportunity the cruise business represents in terms of direct, indirect, and induced economic impact. Maybe as we had some numbers study in Brazil that I think and encourage the people that it would be a study time, my political set of followers to see what these impacts are in Argentina. I'm also confident that they will do what is in their power to defend and develop a business that, according to the Tourism Observatory in the city of Buenos Aires, brought in 2010 and 2011 an average passenger expenditure of over 900 pesos per visit to the city, which corresponded to 195 million US dollars. So we see the potential of the tourist that brings to the city and to the region itself. However, just to give you a rough idea of what is at stake, we learned from an excellent study, we learned from the words of Mr. Nara last year, then in 2010 and 2011 Brazil alone, the industry generated almost 814 million US dollars and was responsible, we heard before, for over 21,000 jobs. In order to seize this immense opportunity to become the new rising star of cruising in South America, Argentina should carefully consider this number and should work with cruise lines and other stakeholders to figure out how we can remove the major obstacles the business is still struggling with. Some examples: we heard already, nice infrastructure dedicated exclusively to cruising in order to speed up embarkation and disembarkation and transit procedures, lower operational costs that are unreasonably high and often increased with short notice, offer additional ports of calls. We saw that apart from Buenos Aires, there are only two ports that can really receive large cruise ships along Argentina's 5,000 kilometers of coastline. And finally, open cruise terminals for fair and more efficient competition by allowing more than one operator to invest in the ports. As far as Brazil is concerned, we gain at the 7,400 kilometers long coastline, over 40 ports of call, and this makes this country probably the fastest expanding market for cruise studies in the world, as we saw from the figures. As far as I may see, just to give you some numbers, since 2002, since we opened our office in Sao Paulo, guest numbers ever operated from 8,000 to 200,000, with an increase of 2,500 percent. In fact, this year we will employ a large size ship, the Fantasia, on the Brazilian coast, and we alone will expect 260,000 passengers. Remember also that Brazil is poised for a further surge in tourism, and hopefully the cruise stories in the lineup for the 2014 World Cup and 2016 Summer Olympic Games. So what an opportunity! We saw that the countries ever invest in rebuilding its infrastructure from airport terminals to port berths and terminals, and all of these efforts are going to make cruise ships an even more valuable hospitality option in a country with a limited number of hotels. Before closing, we should also take a look at the rest of the continent. Chile, Uruguay, Venezuela, Colombia, they also have witnessed growth in cruising in the last years. Colombia leads the way with 270,000 ports, more than 160 calls recorded last season, and 310,000 passengers expected for this season to come, 2012-13, an increase of 16 percent. Uruguay follows with almost 200,000 passengers in 2011-12, around 120 calls at Punta del Este and Montevideo, and all this despite strict regulation about compulsory local tank reviews that certainly does not ease cruise line operation and referring to put the device there. All in all, the cruise market in the region is flourishing, mature, and most importantly still unsaturated. The opportunity certainly comes from extending the length of the season to a year-round business, and we have Mr. Ghost and mentioned that, and from a more dynamic approach to cruising. South America should start thinking as one, and this is the invitation that we want to give to cruise operators, leaving behind the unrealistic or nationalistic divisions, sharing knowledge and tools, encouraging studies and data on the cruise sector, and work to define a clear, transparent, and reliable regulatory framework. I am personally convinced that this is not a question of if, but when this will happen. So thank you very much, thank you.