It is the first time the Ecuadorean government has allowed foreign interests to develop its ports, which it considers strategic assets.

Executives from Hutchison are betting that Manta's location, two hours from major maritime shipping lanes, and its natural deep-water harbour will tempt shipping lines to make it their first port of call on the west coast of South America.

Hutchison will also be keen to capitalise on Manta's close proximity to the Panama Canal, about 1,200 kilometres to the north.

The company, which paid a US$1 million deposit last month to show its commitment to the project, agreed to build 1,250 metres of quay length out into the open sea for year-round operations.

The dock length indicates Hutchison's intent to develop at least three deep-water berths, or enough to handle about 1.5 million teu (20-foot equivalent units) each year, although no ultimate capacity target was given. The Manta project will be Hutchison's ninth in the Americas and will help strengthen its west-coast presence, according to group managing director John Meredith.

'Being the closest port to Asia, the new terminal will benefit from the growing trade activities between the two regions,' Mr Meredith said yesterday.

Hutchison, which will be the sole container operator in Manta, will take 95 per cent of the US$550 million venture, with the remainder held by the state-owned Manta Port Authority.

The port of Manta, about 250km from the Ecuadorean capital of Quito, is a small publicly owned container port. It handled just less than 40,000 teu last year, its highest volume this decade.

Trade was evenly split between imports and exports, but about 30 per cent of the boxes it handled were empty, generating minimal revenue. It saw virtually no transshipment traffic - cargo transiting the port on its way to a third destination - which Hutchison will be keen to develop.

Full-size berths, capable of handling the world's biggest containerships, typically cost US$100 million each to build in developing nations. Ecuador's per capita gross domestic product is US$950.

The first phase of the rebuilt facility is to begin operations next year and its off-dock working area will be expanded more than tenfold to 65 hectares.

The deal will come as some consolation for Hutchison, which again last month was rejected for terminal projects in Chennai and Mumbai, India, on 'security' concerns. Its elimination from the bidding in Chennai handed the project to Singapore's state-owned PSA Corp which, with local partner South India Corp (Agencies), became the only remaining bidder.

PSA's international port investment arm in April paid US$4.38 billion for 20 per cent of Hutchison Port, or 33.4 times projected earnings for the company's 2005-06 financial year at the time, according to Morgan Stanley estimates. Shares in Hutchison Whampoa, which have lost 6.07 per cent since August 22, closed 0.14 per cent lower at HK$69.60 yesterday.