Arduino use C? Or C++?
In Java, there are no pointers, all parameters to functions are passed by value.
But when you pass an object, the value is actually a reference to the object, so it is a bit like passing a pointer to the object.

Excuse me, but your question is a bit too generic.
What are your variables, their type?
What your function is supposed to do?

First, you can't use dash in variable names (ambiguity with minus operator).
Next, indeed there is several ways to do this.
Simple way, as you point it: declare coordinates at global level, update everywhere. That's OK if you have only one boat, it can be messy with lot of stuff. Although you can group them in an array or an ArrayList.
Actually, you need to do that, so setup() can communicate with draw(): both are part of the same (hidden) higher level object (PApplet), and so access this object's members (so called global variables).

You can use objects to avoid having too many atomic variables. Either a simple point object, to pass around coordinates, or a more sophisticated boat object, knowing where it is, what it is (size, color, etc.) and how to draw itself.

To illustrate the simple object:

PVector boatPos1, boatPos2; // PVector is Processing's class to handle pairs of coordinates

void setup() {
 // Init
 boatPos1 = new PVector(10, 10);
 boatPos2 = new PVector(width / 2, 10);
}

void draw() {
 // Move all the boats
 moveBoat(boatPos1);
 moveBoat(boatPos2);
}

void moveBoat(PVector boatPos) {
 //move boat and
 //update boat coordinates
 boatPos.x += 10;
 boatPos.y += 10;
}