BUSINESS: Locals say Mexican plans should spur upgrades to L.A./L.B. ports.
Source: Press Telegram
By Kristopher Hanson
Staff Writer
COLONET, BAJA CALIFORNIA - Three hours south of San Diego on a desolate, picturesque strip of beach surrounded by rolling farmland sits the site of Baja's proposed mega-port.
Planned to be larger, cheaper and more efficient than Long Beach-Los Angeles, America's busiest seaport, Puerto Colonet seeks to provide an alternative gateway to the United States for the growing volume of cargo arriving from manufacturing bases in Asia.
It's also, for now, just a dream.
Still needed is about $4 billion of private capital, construction of community and infrastructure to support the port complex and agreements from various transportation and trade-related entities like railroads, marine terminal operators and ocean carriers.
But the project has cleared several important hurdles, including a $1 billion commitment from the Mexican government, political support from national, regional and local bureaucracy and the resolution of important and often complicated land-use issues.
Plus, there's growing interest from shippers and retailers concerned about growing costs associated with seaports in California and elsewhere.
"The time is right for this project," said Ernesto Ruffo, a well-connected former Baja governor and northern border czar who founded Puerto Colonet Infraestructura (PCI), an international consortium of developers and shipping interests, to support the project. "The ports of Long Beach and Los Angeles are getting crowded, the infrastructure is congested and people are looking for lower costs and efficiencies."
The Mexican government, which wants the port designed and built by a single developer, is expected to seek bids on the project by the end of March.
So far, Ruffo's PCI, Hutchinson Port Holdings, one of the globe's largest port developers, and a few Chinese marine terminal developers have expressed interest in placing bids.
The Wall Street Journal also reported in August 2007 that one of the world's richest men, Mexican billionaire Carlos Slim Helú, is interested.
Developers say Puerto Colonet has the potential to be one of the world's largest and most efficient ports, surpassing anything in the United States and Europe.
One proposal by PCI would include construction of 18 1,300-foot berths capable of handling the world's largest container ships.
Rail lines, which need to be extended to the Baja coast, would whisk more than 90 percent of containers directly from marine terminals to destinations in the United States.
One proposal has cargo transported to border crossings in Mexicali; Nogales and Douglas, Ariz.; and El Paso, Texas.
At full capacity, Ruffo envisions the port handling 7 million or more 20-foot equivalents (TEUs), about the same volume now handled by the Port of Long Beach.
Mexican officials hope to feed Puerto Colonet by siphoning future growth from U.S. West Coast ports, which are expected to double or triple in capacity by 2025.
Competition debated
In particular, they're positioning Colonet as a lower-cost alternative to Long Beach and Los Angeles, where environmental regulations, labor agreements and container fees have pushed costs ever higher in recent years.
But despite the potential threat to Southern California jobs and economic growth, port authorities aren't expressing too much concern about projects south of the border, saying there's enough container volume to go around.
"Long Beach will remain competitive based on the high level of projected efficiency," said Mario Cordero, president of the Port of Long Beach Harbor Commission. "Ultimately, the shippers are concerned in getting their products to the consumer in the most efficient manner. Here, time-sensitive delivery and security factors are high on the priority list."
Rail infrastructure key
Cordero also said rail infrastructure in Southern California is far superior to Mexico's, and Puerto Colonet, if it's built, will result in only a small diversion.
"The most optimistic forecast of Puerto Colonet calls for a 5 million annual TEU complex by the year 2020," Cordero said. "However, many believe the complex would be a 2 million TEU facility. Clearly, any potential diversion would not approach a significant percentage."
Combined, the ports of Long Beach and Los Angeles handle nearly 17 million TEUs per year.
The Los Angeles Area Chamber of Commerce says projects like Puerto Colonet should serve as a wake-up call to Southern California port authorities to begin long-delayed modernization projects.
They suggest first focusing on increasing rail capacity in the region.
"Capacity to move goods out of the ports is the number one issue," said chamber spokeswoman Gwen Oldham. "The ports themselves need to invest in as much on-dock and near-dock rail as possible. Rail is not impacted by road congestion, so it helps avoid bottlenecks, which provides even greater benefit to the region."
The chamber has also advocated greater efficiencies on the piers, many of which are outdated and jammed with containers.
"On the piers ... automate as much of the process as possible," Oldham said. "Incorporating technology into cargo handling processes will reduce the time and cost of moving goods from ship to truck and rail."
Expansion and modernization in San Pedro Bay has been largely halted since 2002, when a landmark environmental lawsuit filed by the Natural Resources Defense Council on behalf of area residents resulted in court orders that the ports address significant air-quality issues before new projects can move forward.
Since that time, the ports have jointly adopted a Clean Air Action Plan to cut emissions in half by 2012. A major part of this plan involves a complete turnover of the nearly 17,000 diesel trucks now working in the harbor.
To accomplish this, authorities have incrementally banned all trucks not meeting federal 2007 emission standards from waterfront marine terminals by Jan. 1, 2012.
The truck turnover is expected to cost in excess of $2 billion.
Fees raise local costs
In December and January, the ports adopted two new container fees to help pay for infrastructure projects and new trucks. Together, the new fees can push the cost of moving a 40-foot equivalent container through San Pedro Bay up $106.
After talking with importers, exporters, shippers and retailers, chamber authorities believe that environmental regulations and fees will drive some business away, but are a necessity for future growth.
"We as a region have rightly prioritized the environment and public health," Oldham said. "But the best way to reduce pollution and congestion is to invest in cleaner technologies and system improvements that alleviate bottlenecks."
Mexico is banking on diverted business and frustration with local ports to fuel interest in Puerto Colonet.
They also tout the fact the site offers developers a clean slate.
"One of the biggest upsides to this whole thing is that we can start from scratch and make the most efficient, productive port in the world," said Gustav Hein, a Long Beach-based trade adviser who is working as a consultant to the port developers. Hein worked previously as a government liaison and executive officer for the Port of Long Beach.
Hein believes recent decisions by Southern California port executives have alienated ocean carriers and retailers, who are seeking other options in rocky economic times.
"These rising costs make Mexico an appealing alternative," Hein said.
A trade group representing ocean carriers said uncertainty about capacity at local ports and rising costs have already led to diversion from Southern California, and the more options that are available, the more cargo will be diverted.
Michele Grubbs of the Pacific Maritime Shipping Association cites statistics showing that while volumes in Long Beach-Los Angeles were flat in 2007, they grew by 11 percent in Houston and 20 percent in Savannah, Ga., ports fed by Asian trade moving through the Panama Canal. The PMSA represents most major West Coast ocean carriers and terminal operators
In addition, shippers are expected to increase volumes through Prince Rupert, Canada, in coming years as that port increases capacity.
"The biggest issues (Southern California) ports face are infrastructure and cost," Grubbs said. "Cargo owners want reliable service at a competitive cost without complications or uncertainty ... and like all business interests, cargo seeks the lowest cost and most efficient ports."
Grubbs said recent adopted or planned regulations affecting Long Beach-Los Angeles from local and state officials are of particular concern.
"Businesses are willing to meet the environmental requirements, they just need consistency and time to plan for compliance," Grubbs said.
Baja awaits job boost
Mexicans living in the area expressed mixed optimism about the project, saying it would at least invigorate the local economy, which now consists mostly of farming and some tourism.
One local farmer said the port would offer sustainable incomes where none exist now.
"The farming here is dying, and people want to work," said Manuel Chavez, a tomato farmer living not far from the harbor. "If they build it, we'll definitely support it and apply for jobs."
Named after Captain James Colnett, an 18th-century British sailor who explored the area, the bay is a natural deep-water harbor framed by rocky beaches and sandy cliffs.
For now, the beach is accessible only after a bumpy ride across unpaved road several miles removed from the main highway, although a highway is in the works.
Colonet, the town nearby, has about 1,000 residents clustered around a sleepy main strip with a handful of small produce stands, pharmacies, Pemex gas stations and tourist traps typical in this part of Baja.
For miles surrounding the town in all directions are rolling farmlands and orchards.
Growing and packaging tomatoes destined for America is a top employer in this region.
In the future, it may be a different kind of U.S.-destined package - one encased in steel containers and shipped across the Pacific Ocean on giant freight ships - that workers will be handling.
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