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PUNTA COLONET, MEXICO-Mexico’s decision to postpone and perhaps cancel development of a massive new container port at this site on the north end of the Baja Peninsula underscores how quickly global shipping has deteriorated in the face of a struggling international economy. The government-sponsored consortium responsible for building the $5 billion project opened preliminary bidding on the project less than a year ago but was forced to retrench in response to a precipitous drop in trade, particularly at ports along the West Coast.

The widespread recession has led to a dramatic fall in traffic at Pacific Coast ports in the US, Canada and Mexico. In particular, the ports of Los Angeles and Long Beach experienced their weakest performance in more than a decade, with total December container volume dropping 25.8% from the same month in 2007 and the yearly total off approximately 15%.

The Punta Colonet development is intended to take advantage of increasing congestion at the two US ports by siphoning off business to what would be a newer and more efficient destination a few hundred miles to the south. The Mexican project was planned to include a new rail line from Punta Colonet to the US-Mexico border so goods destined for US markets could be unloaded in Mexico for placement into the US logistics system.

But the recent falloff in imports has brought into question not only whether the new port will be needed in the near future but whether it will be needed at all. First, Los Angeles and Long Beach are engaged in various expansion and modernization projects designed to enable the two ports to handle greater volumes once trade picks up again.

For example, this summer Los Angeles port officials are scheduled to begin a $106-million expansion of the China Shipping Container Line terminal, almost doubling its size to 142 acres and capacity to 1.5 million 20-foot-equivalent units. In addition, a major upgrade of the Alameda rail corridor leading out of the ports is already in progress to speed delivery of cargo to inland distribution centers.

Furthermore, the Mexican government has begun publishing tenders for a $75 million expansion of the Port of Manzanillo, about halfway down Mexico’s west coast. The port is served by a rail line that runs to the US border. And in November, Hutchison Port Holdings opened the first phase of a $350 million expansion of its terminal at the Port of Lazaro Cardenas, another 250 miles south. The project ties in with an upgrade of tracks by Kansas City Southern de Mexico that will reduce transport time between Lazaro Cardenas and Kansas City Southern Railway intermodal facilities in Texas and Kansas, allowing for more US imports to be handled by the Mexican port.

On top of this, the widening of the Panama Canal to accommodate bigger ships has encouraged US ports on the East and Gulf coasts to expand their facilities in order to divert yet more business from Los Angeles and Long Beach. The out come of all factors combined may be to reduce ship traffic into Southern California over the long term, making a new port at Punta Colonet redundant.

A drop-off in trade, however, was not the only issue prompting postponement of the Baja port. According to Mexico’s communications and transportation minister Luis Tellez, lining up financing has also become problematic as lenders and investors pull back from funding speculative ventures. The question now is whether the government will opt to scrub the project entirely rather than simply put it on hold. At a Jan. 12 press conference, Tellez indicated officials would eventually like to press forward, saying, “We are working with banks to see if this will be possible. There is still interest in the project. It is just a matter of timing.”

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