Plunking a port in Baja paradise

PUNTA COLONET, Mexico — Mexico's government is preparing to open bidding on the largest infrastructure project in the nation's history, a $4 billion seaport that could transform this farming village into a cargo hub to rival the ports of Los Angeles and Long Beach in California.

If completed as planned by 2014, the port would be the linchpin of a new shipping route linking the Pacific Ocean to America's heartland. Vessels bearing shipping containers from Asia would offload on Mexico's Baja California peninsula, about 150 miles south of Tijuana, where the cargo would be whisked over newly constructed rail lines to the United States.

The development, which is to be privately funded, is attracting interest from heavyweights such as Mexican billionaire Carlos Slim Helu.

The world's second-richest man is part of a consortium planning an "aggressive" run at the project, according to Miguel Favela, general director of Mexican operations for cargo terminal operator MTC Holdings, of Oakland, Calif.

Favela said MTC had teamed with Slim's infrastructure company and Mexican mining and railroad giant Grupo Mexico in an effort to nab the 45-year concession.

Mexico's transportation secretariat will release the request for proposals in June and hopes to select a winner by the following summer, said Subsecretary Manuel Rodriguez Arregui.

Competition promises to be fierce. Hong Kong-based Hutchison Port Holdings, a major port developer and operator whose parent company is chaired by billionaire Li Ka-Shing, said it planned to study the bid documents.

Seattle bidder

So will terminal operators SSA Marine of Seattle and Dubai's DP World. Ditto for railroads Union Pacific and BNSF.

"All the major players ... they'll be here," said Rodriguez Arregui, who will oversee the selection process.

The Punta Colonet proposal will be structured as a joint port and rail project, requiring terminal operators, railroads and construction companies to join forces to win the deal.

Hutchison and Union Pacific had formed an earlier alliance that dissolved in 2007. Sources said SSA had partnered with leading Mexican construction company Empresas ICA.

Those companies declined to comment.

Rodriguez Arregui said Mexico would choose the group that could guarantee the most volume. He estimated the facility would be capable of handling a minimum of 2 million containers annually at startup.

The prospect of billionaires duking it out over this remote stretch of Baja underscores just how lucrative the movement of goods between Asia and North America has become.

About 30 million containers crossed the Pacific in 2007, a flow that until recently had been growing about 10 percent a year for more than a decade.

Although trans-Pacific trade has slowed because of deceleration in the U.S. economy, experts said those figures would continue to grow over time.

Hunt for options

With the West Coast's largest port complex, Los Angeles-Long Beach, constrained by urban development and environmental regulations, shippers are searching for alternatives.

Punta Colonet has emerged as an attractive option. It's close to the United States and has a wide, natural harbor. And it's in a rural, lightly populated area with almost unlimited room for expansion.

Favela said: "In the long run ... it could get to the size of Long Beach-L.A.," which last year handled a combined total of nearly 16 million containers. "Without a doubt, this is one of the biggest green-field projects ever to be done" in the industry.

The plan is nothing if not ambitious. Punta Colonet would be the first major seaport built in North America in nearly a century.

The harbor would have to be dredged and protected with breakwaters. Rail links could be costly and complicated. Hundreds of miles of new track must be laid in Mexico.

But the ultimate route and U.S. crossing points will depend on which railroad snares the deal and how it would propose to link with networks on both sides of the border.

Mexico's transportation secretariat estimates the winning consortium would have to invest at least $4 billion to launch the project.

Some industry experts are skeptical. Dubbed the "Port of Illusion" by one Baja newspaper, Punta Colonet has been plagued by legal squabbles and other setbacks since it was first proposed in 2004.

While Mexico dithered, competitors forged ahead.

Panama is in the midst of a $5.3 billion expansion of its landmark canal. Canada, which offers the shortest sailing distance from Asia, is looking to capitalize on that advantage with $3 billion in port and rail improvements to speed cargo to the United States.

Ports along the west, east and Gulf of Mexico coasts of the U.S. have begun their own upgrades. So has Mexico's Puerto Lázaro Cárdenas on the Pacific Coast of the state of Michoacán.

"The logic for [Punta Colonet] is not as strong now," said Asaf Ashar, research professor with the National Ports and Waterways Institute.

Others insist there will be plenty of boxes to go around. The Punta Colonet project could be especially appealing to U.S. railroads, which don't want to lose business to Canada or Panama.

Union Pacific owns a 25 percent stake in the Mexican railroad company Ferromex, which is part of Grupo Mexico. And it controls the U.S. side of the tracks at a half-dozen key border crossings from Calexico, Calif., to Brownsville, Texas, making it an obvious contender.

Union Pacific spokeswoman Zoe Richmond said the company was waiting to see the Mexican government's request for proposal. She wouldn't comment on whether the railroad was contemplating renewing its partnership with Hutchison or joining a new consortium to bid.

Mexico has a spotty track record when it comes to executing big public-works projects on time, on budget and with top quality.

"What's at stake here is much more than the project itself," Rodriguez Arregui said. "It's our capacity to show the world that we can do big things."

Not everyone is likely to share his enthusiasm. A new Baja port could dilute the power of Southern California's unionized longshore workers, whose muscle depends, in part, on shippers having few options on the West Coast.

Surfers will lose a prized spot for catching waves near Punta Colonet. Environmentalists are worried about potential destruction of unique plants and sea creatures.

Some U.S. border communities might not welcome a major new rail development in their backyards. Union Pacific met stiff resistance from vegetable growers near Yuma, Ariz., after it floated the idea of routing Punta Colonet containers northeast out of Baja through prime farmland there.

Punta Colonet dwellers, in contrast, are thrilled. Their hamlet of about 2,500 souls will need to be reinvented as a modern city with upgrades to its roads, housing, water system and power supply.

State and local officials are planning for a city of about 200,000 to spring up around the port.

Such a thought is enough to fill even a hardened urban dweller with regret. The winding two-lane highway heading south into Punta Colonet crosses mist-covered foothills and tranquil valleys. The natural harbor is an azure collision of sky and sea.

But the farmers who scratch out a living here in this stunningly beautiful but impoverished stretch of oceanfront say they are willing to trade a little paradise for prosperity.

Many hope to get rich selling land to the port's developers or to other businesses that would sprout to support the project. At a minimum, they would like to see the streets paved and their children have a shot at landing jobs beyond the produce packing houses.

"This port may be the last opportunity any of them gets," said Jesus Lara, the representative for several peasant landowner groups. "You can't eat the view."