Monday, March 02, 2009
Planned seaport to be third largest in world
By Jerry Pacheco
For the Journal
Punta Colonet is a small Mexican Pacific coastal village located approximately 150 miles south of Tijuana in Baja California. Historically, this area's economy has relied on agriculture and tourism. For the past five years, excitement and speculation has centered on Punta Colonet, as the Mexican government has announced that it will build a new Pacific seaport at this site.
The scope of the project is enormous by world standards. According to Mexican government reports, the port will be designed to handle six million containers annually at final build-out. In terms of processing volume, it will be larger than the ports of Los Angeles and Long Beach combined. When completed, the site is projected to encompass an area of more than 27,000 acres, or slightly more than 42 square miles. It will be the third largest seaport in the world, behind only Singapore and Hong Kong. It is estimated that between 90,000 and 200,000 people, a small city, will be needed to operate the port facilities.
Punta Colonet is Mexico's attempt to claim a larger share of the billions of dollars in merchandise shipments between North America and Asia, which are coming through ports farther north. It is estimated that this aggressive project will cost close to $2 billion in its initial phase, with a final build-out estimate of up to $6 billion. Multiple sources of public and private monies will need to be accessed. Citicorp has been meeting with high-level Mexican officials to discuss participating in the financing of this project.
Because of its scope, the project has not been without a certain amount of gamesmanship and controversy. Several high-profile Mexican ex-politicians have expressed interest in teaming up with Asian investors and developers on the venture. There appears to be a lot of behind-the-scenes negotiations and intrigue on behalf of interested parties trying to line up their political connections with the Calderón administration and with financial partners.
In the current world economic recession, many people question the timing for Punta Colonet. Previously, the capacity and the ability of the mature U.S. West Coast ports to handle increasing ocean cargo was a major concern, but the volume at the Los Angeles and Long Beach Ports has recently decreased by up to 30 percent because of the economic crisis, and the capacity issue has become less important. Many people, particularly players in the U.S. and California, are worried that bringing such a large port on line would further depress and dilute the ocean cargo business.
A controversy is also brewing as to where to construct the rail line from the port to move cargo shipments into the U.S. Since Punta Colonet is so close to the U.S., many people thought that the Mexican government would opt for the construction of a Ferromex rail line from the port through the Yuma, Ariz. region, eventually connecting to the east-west Union Pacific line. This option, which was supported by Union Pacific, would provide a quick artery to the U.S. market. However, problems with this alternative quickly ensued when farmers in the region raised concerns that they would be forced to give up right of way to the railroad.
In response to these concerns, the Mexican government publicly favored a second option — running the rail line from Punta Colonet just south of the U.S. border and crossing into the U.S. somewhere in the Santa Teresa, N.M. area. In addition to avoiding some of the previous right of way issues, this would also provide Ferromex a new east-west rail line in Mexico, and thus more revenues in moving freight to the U.S.
Punta Colonet has been designed to begin construction in 2012 or 2013, with completion around 2020, and had developed a strong momentum. However, in mid-January of this year, Mexico's Secretary of Communications and Transportation Secretary, Luis Tellez, for the second time issued a postponement of the construction bidding process. At that point, it was announced that the global financial crisis had put the brakes on the project, but by the end of January the Mexican government announced it would begin administering the registration for proposals in April, with the actual process to accept these proposals scheduled for June.
Whatever the time frame, it appears that the Mexican government has decided to proceed with the Punta Colonet port. If the Santa Teresa region remains the preferred crossing point into the U.S. for this project, it could bring a slew of new economic development activities to the southern New Mexico-west Texas region (Paso del Norte region).
More than 50 percent of the cargo that arrives at California ports from Asia proceeds to the interior of the U.S. Cargo containers arriving at Punta Colonet and crossing at Santa Teresa will need to be consolidated, placed on other trains or trucks, and hauled to their final destination. Logistics, distribution and trade support service activities will be generated by this flow of commerce from Mexico's coast to the U.S interior, generating billions of dollars and thousands of jobs. Punta Colonet is a project which should be watched very closely by businesspeople and policymakers in the Paso del Norte region.