Volume 11 | Issue 2 | Year 2008

It’s easily one of the biggest ports in Mexico, and every month thousands of tons of iron ore and hundreds of thousands of containers pass through Manzanillo’s 17 docking points and 14 specialized terminals. Dozens of cruise ships dock there every year, and Mexico’s state oil company, Petróleos de México (PEMEX) operates a large facility at Manzanillo for its exclusive use.
But even if it is one of the biggest ports now, that’s not big enough: In 2008, the port administrator will begin a project to make it much, much bigger – twice as big in fact, in terms of traffic. Though most of the ports in Mexico are undergoing some sort of change or addition to add more capacity, Manzanillo’s $600-million expansion ranks easily as the biggest.

The expansion will include the addition of five new parking positions, as well as two new terminals and a massive infrastructure overhaul. The added capacity will become key as China continues to suck up the world’s raw materials and more mines come online in Mexico. At the same time, the continued growth of the port’s traffic despite a slowdown in the United States’ industry means sustainable prosperity is at hand in Mexico – and imports are certain to keep rising.

PUBLIC TO PRIVATE
Like all ports in Mexico, the port of Manzanillo was under the control of Mexico’s federal government for most of the 20th century. The government’s system of organizing the work force and assigning tasks at the port, however, was inefficient, and for years caused the port’s growth to stagnate. Recognizing this, the federal government changed the laws for all ports in the 1990s.

The change made it legal for the federal government to enter into certain arrangements with private companies. It was at that time that the government founded 21 private port administrators and – while maintaining a majority stake in the companies – allowed them to act independently.

Since then, business has boomed, especially at Manzanillo. A simple enough illustration is the graph charting the growth of traffic at the port over the last decade. The bars sweep up in a steep arc, from 1994, when the port was handling a little over seven million tons of cargo per year, to 2006, when more than 20 million tons passed through Manzanillo’s waters.

CONTAINERS
Much of that volume – about 61 percent – has been in the form of container traffic. Last year, Manzanillo moved 1.25 million containers, and the graph charting the growth of that traffic is even more impressive than the general growth: In 1994, Manzanillo handled only about 63,800 containers. Today Manzanillo is Mexico’s main container port and handles 45 percent of all the country’s incoming container traffic.

“It’s the fastest growing part of the transportation district,” said Jose Luis Iberri, the general manager of port administrator Administración Portuario Integral de Manzanillo S.A. de C.V. “It’s the fastest, the cheapest, and the most efficient way to handle cargo, and it’s the most environmentally safe.”

Though container traffic at the port has increased substantially, it is still well beneath the port’s capacity of 2.2 million, Iberri said. Of the port’s 14 specialized terminals, one is designed and reserved exclusively for container traffic. The terminal can load or unload three boats at a time and move up to 43 units per crane hour. In addition to that the port features three general cargo installations that can also handle container traffic.

EXPANSION PLANS
Despite the fact that Manzanillo has yet to max out its capacity for container traffic, the administrator is not waiting around for that to happen before expanding to meet future demand. Within the project to spend $600 million expanding the port – known as the North Zone project – is a plan to double the port’s capacity for container traffic, to 4.4 million units per year.

That will include constructing an entirely new container traffic terminal, Iberri said. Construction on that phase of the project is scheduled to start this year (2008), along with the expansion of the road and rail infrastructure to facilitate easy transfer of the containers to various parts of the country once they arrive in the port. Phase one should be up and running by 2011, by which time Iberri said the port should have a timeline figured out for the rest of the expansion.

THE JOY OF GOING PRIVATE
Iberri noted that one of the most interesting things about the new expansion is its public-private nature. While the government technically remains the owner of the port and simply concessions it out to the private companies, the companies will hold the concessions for years and have the ability to act like landlords.

Hence this new expansion will be a joint effort of public ownership and private capital. It’s just the latest step in the successful privatization of the ports. Manzanillo’s traffic has been growing a reliable 15 percent annually. Part of that is thanks to the newfound health of the Mexican economy, Iberri said. Without the catastrophic currency devaluations that used to occur every so often, Mexicans are for the first time in a long time seeing their buying power increase.

“In the past, when the U.S. industry did badly, we did really badly,” Iberri said, but that’s changing. “We are now building a very interesting internal market. People have more purchasing power.”

At the same time, Iberri chalked the port’s growth up to increased private sector efficiency. Using a new management strategy, the port administrator has been working to coordinate the hundreds of private companies offering services there to improve efficiency.

“We are looking at Manzanillo as a whole concept, not just a bunch of individual companies,” Iberri said.

It’s working. The port has in the last few months dropped its container dwell time by three days, something that Iberri said is a first for a Mexican port.

IRON TO ASIA
Meanwhile, other major parts of the port’s business are doing well also. Iron ore exports, for example, have been growing significantly, though that market does not yet need added facilities. The port’s exports of iron ore are expected to jump suddenly in the next two years. Right now the port’s traffic consists of 60 percent imports and 40 percent exports, and much of that export traffic comes from the shipping of huge quantities of iron ore to destinations like China, a country whose breakneck industrial growth is sucking up much of the world’s raw materials.

“That market is increasing very, very significantly,” Iberri said.

At the moment, Manzanillo handles about 3.6 million metric tons of iron ore every year, shipped out from a local mine. Like container traffic, Iberri is expecting iron ore traffic to increase significantly, and he predicts that within two years the port will be moving 7.5 million tons annually. Much of that increase will come from several new mining operations that are setting up shop and expected to begin producing this year.

STRONG ECONOMY, STRONG PORTS
Other of Manzanillo’s markets are seeing decent action as well. The auto industry in Mexico continues to use Pacific ports to ship out large volumes of their cars, for example shipping 60,000 vehicles from Manzanillo last year. Another sector of increasing importance for Manzanillo – tourism – is also on the rise. Last year 37 cruise ships docked at Manzanillos special cruise ship terminal, and in 2007 through October about 57,000 passengers passed through the port.

The challenge ahead will be to carry out the port expansion and keep Manzanillo one of the biggest ports in the country. As confidence in the Mexican economy continues to grow, so will the country’s industry and trade, and so will main ports like Manzanillo, Iberri said.

“Everything is based on trust,” Iberri said. “People are trusting Mexico, companies are trusting Mexico, and that results in economic growth.”