As cargo clogs West Coast ports again this summer, Mexican officials and global shipping executives are getting ready to transform a remote bay 150 miles south of the border into a megaport to help relieve the Asian import glut.
PEGGY PEATTIE / Union-Tribune
The sleepy, sweeping inlet of Punta Colonet in Baja California will be transformed into a multibillion-dollar container port, one of the biggest maritime transportation centers on the West Coast of North America, under a plan by Mexico's government.
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Mexico plans a multibillion-dollar project to remake Punta Colonet, a desolate, sparsely inhabited inlet two hours beyond Ensenada, into a major container port on the scale of those at Los Angeles and Long Beach. "What is intended is to get the interest of several consortia," said Carlos Jaurequi, of the Secretariat of Communications and Transportation and the federal official in charge of Ensenada's port.
The Punta Colonet site is a virtual blank slate, said Jaurequi, who will seek proposals this year.
"There's nothing there now," he said.
If the plan succeeds, Punta Colonet's expansive cove and 27,000 surrounding acres would become one of the largest maritime transportation centers on North America's West Coast.
The facility is among Mexico's biggest public works projects. The cost has been estimated at $1.2 billion to $2 billion, but proponents say as much as $22.2 billion could flow into development of the region.
The government would turn to private companies to develop the port while giving them multi-year operating contracts. It's a system that has worked to upgrade much of the nation's infrastructure, including highways, airports, railroads and existing ports.
But there are substantial obstacles, among them determining how the port would be governed.
"Mexico also has had problems of providing property rights, especially on the coast," said Gary Clyde Hufbauer, a senior fellow at the Institute for International Economics in Washington, D.C. "But if they can, it's very feasible. Any port can pay for itself if properly structured. The port rates and concessions can pay for the construction and earn the companies a good return." At Punta Colonet, a harbor would have to be dredged deep enough to accommodate several megaships at once. A breakwater, 10 to 20 berths, roads, housing and public buildings are planned where none exist today. The government also wants a 180-mile rail line to the border. An airport specializing in cargo service is being discussed.
Within seven years, Punta Colonet could be processing the equivalent of a million 20-foot-long containers annually, 6 million by 2025. TEU, or 20-foot equivalent units, is a standard measurement in the shipping industry to quantify container traffic. One 20-foot-long container equals one TEU, while one 40-foot-long container equals two.
The volume predicted for Colonet is comparable to that at the ports of Los Angeles and Long Beach, which are the largest on North America's West Coast. Together, they handled $200 billion worth of cargo, or 13 million TEUs, last year.
Mexico's Punta Colonet project also would create a new city in Baja California.
Port and related activities are expected to spawn relatively well-paid jobs and absorb some of the migrants who continually move into Baja California. The development might promote industrial growth in other sectors, too, including aerospace, electronics and information technology.
Roberto Diaz, a consultant and former Baja California official who has put together a planning model, believes the new port city – whether called Colonet or something else – will be home to 250,000 residents by 2025.
The proposed port, one of Mexico's biggest public works projects, could bring as much as $22.2 billion in development of the region.
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"We have many, many problems at the border," he said. "We want to reorient growth to the south and take advantage of the space and natural resources between Ensenada and the Bahia de San Quintin." Interest in creating a port at Punta Colonet has sprouted in several key circles.
Global shipping companies, frustrated with backlogs at West Coast ports and especially at Long Beach and Los Angeles, are driving the project. Several appealed to the Mexican government last year to spur development of a new port in Baja California.
Firms such as Nippon Yusen K.K., Japan's biggest shipping line; MaerskSeaLand, the world's biggest cargo line; Neptune Orient Lines Ltd.; and Marine Terminals Corp., one of the West Coast's oldest family-owned contract stevedore and terminal operating companies, are among those seeking port alternatives.
"When we look at the totality of the infrastructure that supports the nation's foreign trade, we are deeply concerned that the infrastructure will support even modest growth," said Doug Tilden, president of Marine Terminals Corp.
Retail leaders Wal-Mart and Costco Wholesale are also looking to Mexico as a conduit to get speedier delivery of their goods.
At the same time, Vida Ensenadense, an Ensenada citizens group, identified Punta Colonet as a suitable port site after a six-month search for possible alternatives to a port expansion and the introduction of a rail line the group opposed at Ensenada. And this year, Baja California Gov. Eugenio Elorduy Walther gave the go-ahead for a port feasibility study by Hutchison Port Holdings, the operator of Ensenada's cargo and cruise ship operations; and U.S. railroad company Union Pacific. Mike Power, executive director of Hutchison's Ensenada operations, said the study would be completed late this year.
Ensenada's cargo operations, he noted, mainly serve Baja California's maquiladora and agricultural industries. Any new venture by Hong Kong-based Hutchison, the world's largest terminal developer and operator, would focus on moving goods to the U.S. interior.
"The containerized imports that come into ports on the U.S. West Coast, 50 (percent) to 60 percent go to the other side of the United States," Power said. "It's really that market that we're analyzing as an opportunity."
One consideration for Hutchison, which has Mexican terminal operations at Lázaro Cárdenas, Manzanillo and Veracruz, is whether it wants to participate in development of a new port in Baja California when it is undertaking an expansion at Lázaro Cárdenas. That terminal in linked by rail to the United States and can move containers to Houston in the same amount of time it takes to move items from the ports of Long Beach and Los Angeles, Power said.
Nevertheless, he said, the number of Asian cargo shipments is expanding so much that each year a new port the size of Seattle's is needed just to handle the increase.
"On the face of it, the business exists," Power said. "There's massive volume on the West Coast, and there's not much expansion going on."
Congestion at Long Beach and Los Angeles over the past three years has cost shipping companies as much as $300,000 a week in salaries and fuel while vessels sat offshore as long as 14 days.
The backlogs have spurred dredging and construction projects at ports from Alaska to Central America. Even Panama is building a $1 billion megaport at the Pacific Ocean entrance to the Panama Canal.
But the upgrades are limited and expected to offer little relief in handling the surge in cargo coming from across the Pacific.
A recent Penn State survey of container port capacity found that most ports are addressing the overcrowding by focusing on increasing productivity rather than physical growth. It warned that operations on the West Coast might be underestimating the rise in container volume over the next decade by as much as 6 million TEUs a year.
Meanwhile, cargo traffic from East Asia is increasing 15 percent annually, with nearly 57 percent of that volume from China alone. Elimination of global textile quotas last January is expected to boost clothing shipments even more. By 2020, according to industry estimates, cargo from Asia is expected to double.
New ports are being built in China that are handling the vast amount of outbound cargo with ease, but their counterparts in North America are struggling.
To prevent the backlogs of previous years during peak shipping season from July 4 to just before Christmas, the ports of Los Angeles and Long Beach have extended their hours and days of operation and hired more workers. But the ports at Los Angeles and Long Beach can absorb only a fraction of the additional shipments. Expansion also is complicated by community opposition. The ports are the region's biggest source of air pollution.
Southern California port officials worry about losses in jobs and revenue if shipping traffic shifts to competing regions.
"We've heard about a port there," said Port of Los Angeles spokeswoman Theresa Adams Lopez. "But there's a lot of ducks that have to be put in a row. . . . There's plenty of cargo to go around, but the amount of infrastructure that is needed would be huge. So it will be some time before it's built."
A new generation of jumbo ships also will strain West Coast operations. Not so long ago, a big container ship was one capable of carrying 6,000 TEUs. Today, ships of 7,500 to 8,000 TEUs are becoming commonplace in the Pacific. Many of the world's largest shipping companies have them on order.
The new megaships are so large, with containers stacked 18 wide across their decks, that loading and unloading one can take up to three days, even with the fastest available cranes.
They're far too big to fit through the Panama Canal, and they ride so deep in the water that they can't be handled at several West Coast ports, including the Port of San Diego, which is not deep enough to handle the full range of current cargo ships.
With a harbor that could handle megaships, it's estimated that a port at Punta Colonet would be able to handle nearly one-seventh of Los Angeles' current volume by 2012.
Mexican officials will gauge corporate response to its request for proposals and by next year take bids from companies that want to develop the project, said port director Jaurequi. A number of business partnerships could be involved, with each group building separate terminals, he said.
Construction would take at least five years.
"You're looking at building a very extensive infrastructure," he said.
The project already has prompted business activity in the area.
Prices for land at Colonet, owned mostly by small ejido communal groups, reportedly have soared from 5 cents a square meter to $5.
Two former governors are backing ventures that would dovetail with the port project.
Ernesto Ruffo Appel reportedly is behind an effort to develop a nearby airport, estimated to cost $1.75 billion. And Roberto de la Madrid, together with former Atlantic Richfield Chairman Robert O. Anderson, is leading an effort to transform nearby Punta Santo Tomas into a $2 billion energy center that would support activity at Punta Colonet. Included would be a liquefied natural gas receiving terminal, at least one power plant and a desalination facility.
"It's a new development model," consultant Diaz said of the Punta Colonet and Santo Tomas projects, noting that much of the basic planning still needs to be done. "It will be one of the most important economic centers along the West Coast. It will impact the future development of Baja California."
Diane Lindquist: (619) 293-1812; diane.lindquist@uniontrib.com
Additionally, there is the concern for jobs and wages in the US. Longshoreman’s wages in the US are significantly higher than wages in Mexico would be. With such a gap in labor costs, the Colonet port could be quickly overwhelmed and in need of immediate expansion. 
