Overview of the Economic and Social Overview of the Economic and Social Impacts of the New Manzanillo Port Impacts of the New Manzanillo Port

Alejandro Díaz-Bautista, Alejandro Díaz-Bautista, Ph.D.Ph.D.

Professor of Economics and Researcher at the Department of Economics at Colef. Ph.D. Economic Consultant. Visiting Research Fellow and Guest Scholar 2008, Center for U.S.-Mexican Studies, University of California San Diego (UCSD). January 30, 2008.adiazbau@gmail.com

Mexico’s port system was centrally managed by Mexico’s port system was centrally managed by public firms until 1993 reforms liberalized and public firms until 1993 reforms liberalized and decentralized it to regional port authorities to decentralized it to regional port authorities to improve its efficiency.improve its efficiency.

The Port of Manzanillo, located on the Pacific The Port of Manzanillo, located on the Pacific coast, is one of the busiest ports in Mexico. coast, is one of the busiest ports in Mexico.

The Ministry of Transport and Communications, The Ministry of Transport and Communications, Manzanillo Port Administration (API) and the State Manzanillo Port Administration (API) and the State Government are promoting a new port in Colima Government are promoting a new port in Colima in order to expand the port’s capacity and to in order to expand the port’s capacity and to increase industrial activities in the region.increase industrial activities in the region.

Since the privatization of Mexico's ports began in 1994, facilities at Since the privatization of Mexico's ports began in 1994, facilities at Manzanillo have registered substantial improvement in efficiency and Manzanillo have registered substantial improvement in efficiency and the port has recorded rapid growth in recent years. Ships attended the port has recorded rapid growth in recent years. Ships attended rose to 1,077 in 2000 from 700 in 1997, container movements increased rose to 1,077 in 2000 from 700 in 1997, container movements increased to 426,717 from 256,425, and tonnage rose to 9.3 million from 7.9 to 426,717 from 256,425, and tonnage rose to 9.3 million from 7.9 million. The number of shipping lines, agencies, destinations and million. The number of shipping lines, agencies, destinations and service companies has grown apace. service companies has grown apace.

Manzanillo is Mexico's most important deep-sea port with 446,000 Manzanillo is Mexico's most important deep-sea port with 446,000 TEUs (Twenty Foot Equivalent Unit) of cargo imported through the TEUs (Twenty Foot Equivalent Unit) of cargo imported through the port in 2005, the highest volume of cargo on the country's Pacific port in 2005, the highest volume of cargo on the country's Pacific coast. coast.

The port covers437 hectares and is outfitted with world-class The port covers437 hectares and is outfitted with world-class navigational and cargo equipment. The Port of Manzanillo is a navigational and cargo equipment. The Port of Manzanillo is a significant player in Mexico's industrial and commercial corridor significant player in Mexico's industrial and commercial corridor carrying goods from all major points in Mexico. Internationally, the carrying goods from all major points in Mexico. Internationally, the port has shipping lanes to the United States, Canada, Australia, New port has shipping lanes to the United States, Canada, Australia, New Zealand, Guatemala, Costa Rica, Colombia, Peru and the Pacific Rim.Zealand, Guatemala, Costa Rica, Colombia, Peru and the Pacific Rim.

The Progress of Port Modernization in Colima is now The Progress of Port Modernization in Colima is now conceived as a fundamental part of the transportation conceived as a fundamental part of the transportation chain, and not solely as an infrastructure with a chain, and not solely as an infrastructure with a limited participation in market dynamics and the limited participation in market dynamics and the economy.economy.

Manzanillo is Mexico's leading Pacific port, with Manzanillo is Mexico's leading Pacific port, with shipping lines serving the Pacific Rim.shipping lines serving the Pacific Rim.

Manzanillo is a port capable of double-stacking Manzanillo is a port capable of double-stacking containers onto railcars, providing efficient movement containers onto railcars, providing efficient movement of cargo by a private railroad company, Ferromex, of cargo by a private railroad company, Ferromex, throughout Mexico and as far as the Texas border throughout Mexico and as far as the Texas border 1,000 miles away.1,000 miles away.

Port of Port of Manzanillo, Manzanillo,

ColimaColima

Access channel: 816.8 m long; 120.00 m width; 12.5 m depth.Access channel: 816.8 m long; 120.00 m width; 12.5 m depth. Navigation Channel: 1,263.5 m long; 120.00 m width; 12.5 m Navigation Channel: 1,263.5 m long; 120.00 m width; 12.5 m

depth.depth. Two turning basins: 460.00 m diameter each one; 12.5 m depth.Two turning basins: 460.00 m diameter each one; 12.5 m depth. Eight berthing positions. Band A (pier 2 and 3, length is 450.00 mts Eight berthing positions. Band A (pier 2 and 3, length is 450.00 mts

both); Band B (piers 4, 5 & 6, overall length is 570.00mts); and both); Band B (piers 4, 5 & 6, overall length is 570.00mts); and Band C (piers 7, 8 & 9, overall length is 685.00 mts)Band C (piers 7, 8 & 9, overall length is 685.00 mts)

All piers in Manzanillo are 3.5 Tons per Cubic Meter strength.All piers in Manzanillo are 3.5 Tons per Cubic Meter strength. Also there is a very vast area for anchorage at the bay of Also there is a very vast area for anchorage at the bay of

Manzanillo.Manzanillo.

Supporting services for the port Supporting services for the port are a major target for inward are a major target for inward investment and the port's investment and the port's expanding capacity is a draw for expanding capacity is a draw for other industrial activities.other industrial activities.

The Port of Manzanillo The Port of Manzanillo represents the most important represents the most important pole of economic development pole of economic development for the state of Colima. for the state of Colima.

Colima officials see the port as Colima officials see the port as the cornerstone for the state's the cornerstone for the state's economic development.economic development.

The economic role that the port of Manzanillo The economic role that the port of Manzanillo plays is significant.plays is significant.Manzanillo is the principle gateway for the Manzanillo is the principle gateway for the Center and Bajio zones of Mexico. This area is Center and Bajio zones of Mexico. This area is integrated by 16 states that represent more than integrated by 16 states that represent more than 60 percent of the integral gross production and 60 percent of the integral gross production and 47 percent of the national population, for the 47 percent of the national population, for the foreign exchange by maritime traffic. foreign exchange by maritime traffic. The geographic position both internationally as The geographic position both internationally as well as nationally counts with an extensive well as nationally counts with an extensive influential zone in Mexico.influential zone in Mexico.

Mexican PortsMexican Ports

After handling just 2,670 cargo containers in 2003, the Port of After handling just 2,670 cargo containers in 2003, the Port of Lazaro Cardenas Michoacan grew to 160,000 containers in Lazaro Cardenas Michoacan grew to 160,000 containers in 2005. Nov, it is in the process of expanding its capacity to as 2005. Nov, it is in the process of expanding its capacity to as much as 2.2 million units per year and with 6,000 acres at its much as 2.2 million units per year and with 6,000 acres at its disposal, experts predict the port could handle upwards of 6 disposal, experts predict the port could handle upwards of 6 million containers within the next five years.million containers within the next five years.

The Port of Ensenada, about 70 miles south of Tijuana, The Port of Ensenada, about 70 miles south of Tijuana, handled 123,000 containers in 2006, a number that is likely to handled 123,000 containers in 2006, a number that is likely to rise significantly after the rail lines are built to the U.S. border rise significantly after the rail lines are built to the U.S. border in the near future.in the near future.

The Port of Manzanillo in the state of Colima is Mexico’s The Port of Manzanillo in the state of Colima is Mexico’s Biggest port handling 1.2 million containers last year. Biggest port handling 1.2 million containers last year.

Sector Sector Configuration in Configuration in Mexican PortsMexican Ports

Mexican Ports in Mexican Ports in DevelopmentDevelopment

WHAT DO WHAT DO STATES STATES

LIKE LIKE COLIMA COLIMA WANT?WANT?

An economic base that generates tax revenues.An economic base that generates tax revenues.

Good jobs for residents (in the city or state of Colima).Good jobs for residents (in the city or state of Colima).

An array of amenities for the residents.An array of amenities for the residents.

Colima’s port system is being modernized to enable it to offer a competitive, Colima’s port system is being modernized to enable it to offer a competitive, quality service with international level tariffs.quality service with international level tariffs.

The port supports the participation of the Colima economy in international The port supports the participation of the Colima economy in international trade markets.trade markets.

Colima’s EconomyColima’s Economy

Colima’s economy relies heavily on agricultural production, coffee and Colima’s economy relies heavily on agricultural production, coffee and particularly fruits and vegetables such as lemons, bananas, corn, rice, maize, particularly fruits and vegetables such as lemons, bananas, corn, rice, maize, copra, mangoes, sugar cane, and avocados. Mining extraction of copper, lead, copra, mangoes, sugar cane, and avocados. Mining extraction of copper, lead, iron and salt are also important, and Colima accounted for more than one-third of iron and salt are also important, and Colima accounted for more than one-third of the nation’s production of iron in the mid-1990s. Fishing, raising livestock, salt the nation’s production of iron in the mid-1990s. Fishing, raising livestock, salt production, forestry and tourism are other significant economic activities.production, forestry and tourism are other significant economic activities.

The Revilla Gigedos islands produce sulphur, guano, timber, fruit, sheep and fish.The Revilla Gigedos islands produce sulphur, guano, timber, fruit, sheep and fish. Colima has major technological industry with companies involved with software Colima has major technological industry with companies involved with software

development, information technology, and biotechnical development.development, information technology, and biotechnical development. Besides container facilities, Manzanillo port handles agricultural grains, plant and Besides container facilities, Manzanillo port handles agricultural grains, plant and

animal fluids, cement and raw materials, and has cold storage for perishables. A animal fluids, cement and raw materials, and has cold storage for perishables. A massive Pemex refueling station dominates the southwest curve of the port's massive Pemex refueling station dominates the southwest curve of the port's bay.bay.

A portion of the port of Manzanillo is reserved for fishing. The corporation, A portion of the port of Manzanillo is reserved for fishing. The corporation, Marindustrias, operates a tuna fleet that can catch up to 20,000 tons of tuna a Marindustrias, operates a tuna fleet that can catch up to 20,000 tons of tuna a year and includes other vessels to catch species such as giant squid and shark. year and includes other vessels to catch species such as giant squid and shark. The company's processing plants are located within the port area.The company's processing plants are located within the port area.

Colima has two massive thermoelectric power plants Colima has two massive thermoelectric power plants located in Manzanillo. The plants supply the entire state located in Manzanillo. The plants supply the entire state with electrical energy. In addition, 95% of the power they with electrical energy. In addition, 95% of the power they generate goes to the rest of Mexico and is sold to other generate goes to the rest of Mexico and is sold to other countries.countries.

The new LNG project in Colima in its first stage the project The new LNG project in Colima in its first stage the project will process about 500 million cubic feet a day of LNG and will process about 500 million cubic feet a day of LNG and supply gas to the 1,200MW Manzanillo I and 700MW supply gas to the 1,200MW Manzanillo I and 700MW Manzanillo II thermoelectric plants in Colima state, the Manzanillo II thermoelectric plants in Colima state, the 565MW Bajío and 866MW Salamanca plants in Guanajuato 565MW Bajío and 866MW Salamanca plants in Guanajuato state and the 601MW El Sauz plant in Queretaro state.state and the 601MW El Sauz plant in Queretaro state.

The project will also supply gas to the new Guadalajara I The project will also supply gas to the new Guadalajara I and II combined cycle projects in Jalisco state.and II combined cycle projects in Jalisco state.

The LNG regasification project will be built in three years The LNG regasification project will be built in three years and create 1,500 direct jobs.and create 1,500 direct jobs.

Colima’s Economy Power PlantsColima’s Economy Power Plants

Colima’s EconomyColima’s EconomyLNG PlantLNG Plant

Mexico's CFE and Pemex have launched the tender for the construction of Mexico's CFE and Pemex have launched the tender for the construction of a US$430mn liquefied natural gas (LNG) regasification project in a US$430mn liquefied natural gas (LNG) regasification project in Manzanillo, Colima. With regards to the selection of the site for the LNG Manzanillo, Colima. With regards to the selection of the site for the LNG project, CFE originally selected a location near the thermo-electrical plant project, CFE originally selected a location near the thermo-electrical plant of Manzanillo, in the Lagoon of Cuyutlan, (Vaso I), where technically, of Manzanillo, in the Lagoon of Cuyutlan, (Vaso I), where technically, economically, safety-wise, and environmentally, this project was very economically, safety-wise, and environmentally, this project was very feasible. CFE heard the demands of the local residents of Manzanillo, and feasible. CFE heard the demands of the local residents of Manzanillo, and their perception of a more secure ambience for their suburbs. To alleviate their perception of a more secure ambience for their suburbs. To alleviate their concern, CFE moved the project to the Canal de Tepalcates. their concern, CFE moved the project to the Canal de Tepalcates.

Therefore, the site for the construction of the Terminal for Liquid Natural Therefore, the site for the construction of the Terminal for Liquid Natural Gas will be in the Lagoon of Cuyutlan (Vaso II), adjacent to the right flank Gas will be in the Lagoon of Cuyutlan (Vaso II), adjacent to the right flank of the Channel of Tepalcates, 12 km south of the Port of Manzanillo.of the Channel of Tepalcates, 12 km south of the Port of Manzanillo.

Currently, the access is via the Manzanillo-Campos road that also joins Currently, the access is via the Manzanillo-Campos road that also joins Federal Hwy. 200 Colima-Manzanillo. It also counts with railroad tracks Federal Hwy. 200 Colima-Manzanillo. It also counts with railroad tracks that are adjacent to the site and that hook up to the Guadalajara-that are adjacent to the site and that hook up to the Guadalajara-Manzanillo route that currently supplies the thermo-electrical plant with its Manzanillo route that currently supplies the thermo-electrical plant with its “combustoleo”. “combustoleo”.

NewPort Manzanillo's Economic NewPort Manzanillo's Economic Impact Benefits for the RegionImpact Benefits for the Region

Initial investment in the port and rail line has been Initial investment in the port and rail line has been estimated at as much as $3.5 billion.estimated at as much as $3.5 billion.

According to the preliminary economic impact study, According to the preliminary economic impact study, Newport Manzanillo is more than a center for trade and Newport Manzanillo is more than a center for trade and commerce in the state of Colima: it is a growing focal point commerce in the state of Colima: it is a growing focal point of regional economic development, creating thousands of of regional economic development, creating thousands of jobs, driving the economy of Colima and serving as a jobs, driving the economy of Colima and serving as a statewide and regional catalyst for economic development. statewide and regional catalyst for economic development.

The port will have a designated zone for light industry and The port will have a designated zone for light industry and logistics. It is designed to serve as a transshipment center logistics. It is designed to serve as a transshipment center for onward movement of goods to North and South for onward movement of goods to North and South America, Asia and beyond. It will boast an integrated America, Asia and beyond. It will boast an integrated transport system with seamless high-speed transition from transport system with seamless high-speed transition from sea to rail, road and air, making Manzanillo the main sea to rail, road and air, making Manzanillo the main gateway to Central Mexico.gateway to Central Mexico.

821 hectares = 9,819,078.28 yrd² 9000 meters = 5.59 miles NewPort Manzanillo, ColimaNewPort Manzanillo, Colima

Berth Depth Considerations at the PortBerth Depth Considerations at the Port

Design Depth Design Depth

- - Future max draft.Future max draft. - Underkeel clearance.- Underkeel clearance. - Allow for over dredge.- Allow for over dredge.

Accommodate ships with underkeel clearance at low water

Most hub terminals are designed for – 18m or – 19m.

Berth Alignment in the PortBerth Alignment in the Port

Provides flexibilityProvides flexibility Can accommodate mix of shipsCan accommodate mix of ships Good crane utilizationGood crane utilization For hub optimum length may be 1200 mFor hub optimum length may be 1200 m

Straight

NewPort Manzanillo, ColimaNewPort Manzanillo, Colima

Newport Manzanillo Economic Development Newport Manzanillo Economic Development ImpactsImpacts

An Input Output System ApproachAn Input Output System Approach

The economic development contribution of the Port consists of The economic development contribution of the Port consists of both quantifiable impacts and intangible benefits. both quantifiable impacts and intangible benefits.

The quantifiable contributions are measured in terms of jobs, The quantifiable contributions are measured in terms of jobs, income, local government revenues and similar economic income, local government revenues and similar economic indicators. indicators.

The intangible benefits include synergies with other industries that The intangible benefits include synergies with other industries that increase productivity and create a positive brand image that increase productivity and create a positive brand image that attract new investments. attract new investments.

The intangible benefits, though difficult to quantify, are essential The intangible benefits, though difficult to quantify, are essential for sustaining regional economic growth and development. for sustaining regional economic growth and development.

The I-O Matrix for Colima will be used to estimate all economic The I-O Matrix for Colima will be used to estimate all economic impacts in the economy. impacts in the economy.

Port’s Economic Impact Method: Port’s Economic Impact Method: State’s Input-Output Model State’s Input-Output Model

The I-O Matrix is used to estimate the The I-O Matrix is used to estimate the quantifiable impacts and intangible quantifiable impacts and intangible benefits. The I-O matrix gives an more benefits. The I-O matrix gives an more precise estimation of the direct and precise estimation of the direct and indirect effects.indirect effects.

Purpose:Purpose: Analyze Linkages among sectors of our EconomyAnalyze Linkages among sectors of our Economy Project Sector output requirements from an Project Sector output requirements from an

Economic changeEconomic change Port Sector Port Sector Rest of the Economy Rest of the Economy

Input-Output ModelsInput-Output Models

Origin and Previous Work on I-O Origin and Previous Work on I-O Models:Models:

Wassily Leontief - 1974 Nobel PrizeWassily Leontief - 1974 Nobel Prize Regional I/O Models - 1960’sRegional I/O Models - 1960’s National I/O Model Mexico – National I/O Model Mexico – 1980 – 1990 by INEGI and Bank of 1980 – 1990 by INEGI and Bank of

MexicoMexico Regional I/O Models 1990’s – 2000’sRegional I/O Models 1990’s – 2000’s

Leontief developed an input-output method for estimating economic impacts and tracing the flows of dollars. Professor Leontief won the Nobel Prize in 1973, largely related to the work in economic input output models.

Input-Output ModelingInput-Output Modeling

Uses of I-OUses of I-O Projection of output requirements to meet Projection of output requirements to meet

levels of final demand.levels of final demand. Analysis of economic changes in a sector due Analysis of economic changes in a sector due

to a new project.to a new project. Uses of I-OUses of I-O

• Location of new industry in an area.Location of new industry in an area.• Government policy changes - local impacts.Government policy changes - local impacts.• Projection resource and labor needsProjection resource and labor needs

L (I-A)L (I-A)-1 *-1 * y yL=vector (1 x n) of labor use per $ of output.L=vector (1 x n) of labor use per $ of output.

Colima’s Newport Manzanillo has positive indirect economic Colima’s Newport Manzanillo has positive indirect economic impacts in other sectors of the Economy. Agribusiness and impacts in other sectors of the Economy. Agribusiness and mining as well as more recent industrial activities in electronics, mining as well as more recent industrial activities in electronics, automotive, and textiles and also the energy and tourism automotive, and textiles and also the energy and tourism industry.industry.

In automotive, it could impact in the development of regional In automotive, it could impact in the development of regional clusters that take advantage of port infrastructure. It would also clusters that take advantage of port infrastructure. It would also impact textiles and yarn and thread manufacturing. It would also impact textiles and yarn and thread manufacturing. It would also have an impact in the field of electronics, such as software have an impact in the field of electronics, such as software development and component manufacture for investment.development and component manufacture for investment.

Impacts in the primary sector of the economy are expected. The Impacts in the primary sector of the economy are expected. The port enhances economic impacts for modular pre-cooling units, port enhances economic impacts for modular pre-cooling units, tropical fruit processing and packaging plants, milk pasteurizing tropical fruit processing and packaging plants, milk pasteurizing plants, and cattle and poultry production. The mining sector is plants, and cattle and poultry production. The mining sector is also impacted, iron and steel production for the export market, also impacted, iron and steel production for the export market, ceramic and stone tile manufacturing, and limestone extraction, ceramic and stone tile manufacturing, and limestone extraction, among others. among others.

Some other sectors that are impacted would be the wood and Some other sectors that are impacted would be the wood and cellulose extraction subsector, tropical wood production, and cellulose extraction subsector, tropical wood production, and other activities.other activities.

NewPort Manzanillo's Economic Impact NewPort Manzanillo's Economic Impact Benefits for the RegionBenefits for the Region

Newport Manzanillo will also develop:Newport Manzanillo will also develop:

Develop marine terminals, rail terminals and other Develop marine terminals, rail terminals and other facilities for handling cargo and accommodating facilities for handling cargo and accommodating passengers. passengers.

Buy and improve pieces of property for lease - or Buy and improve pieces of property for lease - or sometimes to sell - to private industry for industrial and sometimes to sell - to private industry for industrial and commercial uses. commercial uses.

Provide air and water pollution control facilities. Provide air and water pollution control facilities. Operate trade centers and export trading companies. Operate trade centers and export trading companies. Provide environmental enhancement, protection and Provide environmental enhancement, protection and

public access. public access. Build and operate or lease out marinas and related Build and operate or lease out marinas and related

facilities and provide public boat ramps for public use. facilities and provide public boat ramps for public use.

NewPort Manzanillo's Economic NewPort Manzanillo's Economic and Social Impact Benefits for the Regionand Social Impact Benefits for the Region

NewPort Manzanillo's Economic NewPort Manzanillo's Economic and Social Impact Benefits for the and Social Impact Benefits for the

RegionRegion The Port is willing to invest for the long-run The Port is willing to invest for the long-run

prosperity of their communities. The Port will prosperity of their communities. The Port will make significant investments in infrastructure make significant investments in infrastructure and building facilities that will eventually house and building facilities that will eventually house social projects that reinvest in the community. social projects that reinvest in the community.

Promotes tourism as an economic stimulus Promotes tourism as an economic stimulus within the port district.within the port district.

The Port is not only an important generator of The Port is not only an important generator of income, jobs, and economic output, but it is also income, jobs, and economic output, but it is also an important catalyst for attracting high-wage an important catalyst for attracting high-wage industries. High-wage industries generate industries. High-wage industries generate economic benefits for all industries and create economic benefits for all industries and create jobs (directly or indirectly) at all occupational jobs (directly or indirectly) at all occupational levels. levels.

NewPort Manzanillo's Economic NewPort Manzanillo's Economic and Social Impact Benefits for the and Social Impact Benefits for the

Colima RegionColima Region The potential positive impacts of Newport Manzanillo The potential positive impacts of Newport Manzanillo

during construction include new employment during construction include new employment opportunities and economic benefits to the State of opportunities and economic benefits to the State of Colima and to the government of Mexico due to the Colima and to the government of Mexico due to the payment of taxes by the project. During operations, payment of taxes by the project. During operations, the Port is likely to have a positive economic impact in the Port is likely to have a positive economic impact in the State of Colima, mainly from taxes, as well as the State of Colima, mainly from taxes, as well as providing economic reactivation in many sectors providing economic reactivation in many sectors associated with the employment opportunities related associated with the employment opportunities related to the terminal’s operations. to the terminal’s operations.

The new Port will also help alleviate additional waiting The new Port will also help alleviate additional waiting times, provide additional competition regarding times, provide additional competition regarding handling and storage fees and allow further handling and storage fees and allow further specialization among the existing ports such that each specialization among the existing ports such that each port will handle the cargo type (containers, liquid port will handle the cargo type (containers, liquid cargo, grains, etc.) for which it is most suited. cargo, grains, etc.) for which it is most suited.

NewPort Manzanillo's Economic NewPort Manzanillo's Economic and Social Impact Benefits for the and Social Impact Benefits for the

Colima RegionColima Region The operation of Newport Manzanillo’s port would The operation of Newport Manzanillo’s port would

generate jobs for Colima’s economy.generate jobs for Colima’s economy. From the survey of employment and occupation, we From the survey of employment and occupation, we

observe that the Economically Active Population (EAP) observe that the Economically Active Population (EAP) in the state of Colima stood at 267,800 people, in the state of Colima stood at 267,800 people, representing 62.3% of the population 14 years and representing 62.3% of the population 14 years and older. Of these, 96.9% are occupied and the remaining older. Of these, 96.9% are occupied and the remaining 3.1% unemployed. 3.1% unemployed.

A total of 259,500 people are employed in the state, A total of 259,500 people are employed in the state, having increased by 2,500 over the last twelve months. having increased by 2,500 over the last twelve months. Most of the growth in employment is located in the Most of the growth in employment is located in the tertiary sector and small establishments. tertiary sector and small establishments.

Direct Employment associated with port related Direct Employment associated with port related activities would exceed 17,000 jobs, which would be activities would exceed 17,000 jobs, which would be between 6.5 and 7% of all the jobs available in the between 6.5 and 7% of all the jobs available in the state of Colima. state of Colima.

Compliance of Economic, Environmental, Social Compliance of Economic, Environmental, Social and Health and Safety Management Systemsand Health and Safety Management Systems

The Newport Manzanillo project complies with all adequacy The Newport Manzanillo project complies with all adequacy and sufficiency of the proposed Economic, Environmental, and sufficiency of the proposed Economic, Environmental, Social and Health and Safety Management Systems, in Social and Health and Safety Management Systems, in terms of written policies and procedures, defined staff terms of written policies and procedures, defined staff responsibilities, training programs, auditing/inspection responsibilities, training programs, auditing/inspection programs, and reporting procedures, in particular the programs, and reporting procedures, in particular the environmental, social and health and safety monitoring environmental, social and health and safety monitoring programs for both the project construction and operation programs for both the project construction and operation phases, including independent (third-party) quality control phases, including independent (third-party) quality control or project supervision activities.or project supervision activities.

Also the adequacy and sufficiency of the project’s risks Also the adequacy and sufficiency of the project’s risks assessment for both the construction and operation assessment for both the construction and operation phases including both natural hazards and man-induced phases including both natural hazards and man-induced risks (i.e., spills, fires,accidents, unplanned risks (i.e., spills, fires,accidents, unplanned emissions/discharges, etc.) and the construction and emissions/discharges, etc.) and the construction and operation phase contingency plans (emergency plan, spill operation phase contingency plans (emergency plan, spill prevention and control plan.prevention and control plan.

Newport ManzanilloNewport ManzanilloNational and International Economic National and International Economic

PerspectivePerspective

Newport Manzanillo Newport Manzanillo International FrameworkInternational Framework

The Port will operate according to the The Port will operate according to the International Ship and Port Facilities Security International Ship and Port Facilities Security Code (ISPSCode). Code (ISPSCode).

The objectives of this Code are to establish an The objectives of this Code are to establish an international framework involving co-international framework involving co-operation between Contracting Governments, operation between Contracting Governments, Government agencies, local administrations Government agencies, local administrations and the shipping and port industries to and the shipping and port industries to detect/assess security threats and take detect/assess security threats and take preventive measures against security preventive measures against security incidents affecting ships or port facilities used incidents affecting ships or port facilities used in international trade.in international trade.

The new econometric model for forecasting commercial The new econometric model for forecasting commercial traffic cargo for NewPort Manzanillo would be based in time traffic cargo for NewPort Manzanillo would be based in time series analysis with the error correction model that is used series analysis with the error correction model that is used in major Asian ports such as Hong Kong. It would also use a in major Asian ports such as Hong Kong. It would also use a panel data technique combination for the cross section and panel data technique combination for the cross section and time series. Some of the variables that are initially time series. Some of the variables that are initially proposed for the estimation of the model are: the exchange proposed for the estimation of the model are: the exchange rate, time series of regional exports and imports, GDP per rate, time series of regional exports and imports, GDP per capita in the hinterland of Colima Economy and at the capita in the hinterland of Colima Economy and at the national level, regional average revenue per crew, number national level, regional average revenue per crew, number of vessels, dummy variable for the year t where t is a of vessels, dummy variable for the year t where t is a period where there is a construction or extension of docks period where there is a construction or extension of docks at other ports in the Pacific like Long beach, Los Angeles, at other ports in the Pacific like Long beach, Los Angeles, Oakland, Topolobampo, Prince Rupert or Punta Colonet. Oakland, Topolobampo, Prince Rupert or Punta Colonet. Finally, it would consider the growth of the multimodel Finally, it would consider the growth of the multimodel system in Mexico and growth of supply and demand for system in Mexico and growth of supply and demand for trading and transhipment ports in the Pacific.trading and transhipment ports in the Pacific.

NewPort Manzanillo Econometric Model for Forecasting Cargo Traffic

CROSS BORDER

CROSS BORDER

NATIONALHINTERLAND

COLIMA

ECONOMY

TRANSHIPMENT

IMPORT

EXPORT

PORT RELATED

INDUSTRIES

NewPort Manzanillo Econometric Model for Forecasting Cargo Traffic

010,00020,00030,00040,00050,00060,00070,00080,00090,000

1980 1990 1995 1998 1999 2000 2005

Increasing World Transhipments Increasing World Transhipments (in Thousands of TEU’s)(in Thousands of TEU’s)

World Largest Ports (TEU’s)World Largest Ports (TEU’s)

China is expanding its markets, and the U.S. becomes less China is expanding its markets, and the U.S. becomes less

important, Latin America also expandsimportant, Latin America also expands US Share of China Exports

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

TEUs

29.0%

30.0%

31.0%

32.0%

33.0%

34.0%

35.0%

36.0%

37.0%

38.0%

39.0%

40.0%

US S

hare

World Total United States United States Share of Ch Exp

Source: GIWTM

Latin America could absorb 10% of China’s Latin America could absorb 10% of China’s container exports by 2010container exports by 2010

Source: GIWTM

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

World Total Latin America LA Share

China is investing heavily in China is investing heavily in developing deep-water ports in developing deep-water ports in Mexico to bring an unprecedented Mexico to bring an unprecedented volume of containers into the U.S. volume of containers into the U.S. along the emerging NAFTA Super along the emerging NAFTA Super Highway. This move signals China’s Highway. This move signals China’s emergence as the unexpected emergence as the unexpected economic winner in the North economic winner in the North American Union free market.American Union free market.

China business projections are driving the frenzy to open Mexican China business projections are driving the frenzy to open Mexican ports to NAFTA corridors. Container traffic from China and the Far ports to NAFTA corridors. Container traffic from China and the Far East has exploded, with industry experts expecting the cargo traffic East has exploded, with industry experts expecting the cargo traffic from China to double by 2020. Today jumbo cargo ships containing from China to double by 2020. Today jumbo cargo ships containing 8,000 TEUs routinely cruise Pacific Trade routes. Unloading 8,000 8,000 TEUs routinely cruise Pacific Trade routes. Unloading 8,000 containers from a single ship can take up to 3 days, even with containers from a single ship can take up to 3 days, even with experienced dock workers and state-of-the-art cranes. experienced dock workers and state-of-the-art cranes.

West coast ports such as Los Angeles and Long Beach are regularly West coast ports such as Los Angeles and Long Beach are regularly described as overwhelmed with containers arriving from the Far described as overwhelmed with containers arriving from the Far East, resulting in a virtual gridlock that causes expensive delays. As East, resulting in a virtual gridlock that causes expensive delays. As a result, inland ports such as the Free Trade Alliance of San Antonio a result, inland ports such as the Free Trade Alliance of San Antonio and Kansas City Smartport, both members of the North America’s and Kansas City Smartport, both members of the North America’s SuperCorridor Coalition Inc. (NASCO), are exploring with SuperCorridor Coalition Inc. (NASCO), are exploring with enthusiasm opening NAFTA corridors to facilitate the movement enthusiasm opening NAFTA corridors to facilitate the movement from Mexican ports 50% to 60% of all containers entering the U.S. from Mexican ports 50% to 60% of all containers entering the U.S. from China that are destined for delivery in the heart of the U.S.from China that are destined for delivery in the heart of the U.S.

Punt

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Mexican alternative Port Projects to feed the US Mexican alternative Port Projects to feed the US market are being discussedmarket are being discussed

Manzanillo

$3.5 billion

Alfa-Omega Line

$4 billion PortRuffoUP + HutchisonBNSF + Grupo MexicoMTC + Carlos SlimOthers?

• MHFM Transport (Mexico)• SPV (Japan)• Arias Asia (China)

Mexican President Felipe Calderón mentioned Mexican President Felipe Calderón mentioned that he had a high priority in his plan to invest in that he had a high priority in his plan to invest in the country's port infrastructure over the next the country's port infrastructure over the next five years through partnerships with the private five years through partnerships with the private sector. sector.

His strategy also includes new ports and major His strategy also includes new ports and major improvements in the transportation improvements in the transportation infrastructure, as a lever to raise Mexico into a infrastructure, as a lever to raise Mexico into a central role in North American supply chains, central role in North American supply chains, during the period 2008-2012.during the period 2008-2012.

Dr. Luis Tellez, Mexico's secretary of communications and Dr. Luis Tellez, Mexico's secretary of communications and transport and a strong proponent of the country's port transport and a strong proponent of the country's port development, asserted that Mexico has the resources and development, asserted that Mexico has the resources and is in the process of making improvements.is in the process of making improvements.

"Our great challenge in this scenario is to be able to "Our great challenge in this scenario is to be able to achieve this quantum jump and to transform the port achieve this quantum jump and to transform the port infrastructure into a world-wide class one, that really infrastructure into a world-wide class one, that really contributes to the rest of the Mexican economy," Dr. Luis contributes to the rest of the Mexican economy," Dr. Luis Tellez, Mexico’s Minister of Transport and Communications.Tellez, Mexico’s Minister of Transport and Communications.

At the top of the agenda will be expansion of the short-sea At the top of the agenda will be expansion of the short-sea shipping. Currently, only about 1 percent of the $14 billion shipping. Currently, only about 1 percent of the $14 billion in U.S.-Mexico trade is handled via ocean shippingin U.S.-Mexico trade is handled via ocean shipping

Mexico’s Multimodal Systems and Port Infrastructure in Mexico’s Multimodal Systems and Port Infrastructure in 20122012

FUENTE: Programa Nacional de Infraestructura, Secretaría de Comunicaciones y Transportes

Manzanillo in Nafta’s SuperhighwayManzanillo in Nafta’s Superhighway The North American Free Trade Agreement (NAFTA) and the The North American Free Trade Agreement (NAFTA) and the

European Union (EU) gave rise to new trading blocs that have European Union (EU) gave rise to new trading blocs that have underpinned the new integrated global marketplace. underpinned the new integrated global marketplace.

The document also addresses the need to place an integrated The document also addresses the need to place an integrated North American economy and marketplace into an emerging North American economy and marketplace into an emerging global marketplace that is increasingly dominated by China and global marketplace that is increasingly dominated by China and India. India.

Coupled with the emergence of new economic powers such as Coupled with the emergence of new economic powers such as China and India, global marketplace integration is driving the China and India, global marketplace integration is driving the distribution of economic activity, as well as the expansion of world distribution of economic activity, as well as the expansion of world trade.trade.

Unloading the container in Mexican ports, such as Manzanillo and Unloading the container in Mexican ports, such as Manzanillo and Lazaro Cardenas on Mexico's Pacific coast south of Texas, further Lazaro Cardenas on Mexico's Pacific coast south of Texas, further reduces costs by using Mexican dock workers to unload the goods reduces costs by using Mexican dock workers to unload the goods and Mexican trucks and Mexican trains to transport the goods and Mexican trucks and Mexican trains to transport the goods north along trade corridor transportation infrastructure, such as north along trade corridor transportation infrastructure, such as TTC-35. The proposed TTC-35 corridor generally parallels I-35. The TTC-35. The proposed TTC-35 corridor generally parallels I-35. The initial study area is approximately 600 miles long, extending from initial study area is approximately 600 miles long, extending from north of Dallas/Forth Worth to Mexico and possibly the Gulf Coast.north of Dallas/Forth Worth to Mexico and possibly the Gulf Coast.

The Ports-to-Plains Trade Corridor is a planned, multimodal The Ports-to-Plains Trade Corridor is a planned, multimodal transportation corridor including a multi-lane divided highway transportation corridor including a multi-lane divided highway that will facilitate the efficient transportation of goods and that will facilitate the efficient transportation of goods and services from Manzanillo Mexico, through West Texas, New services from Manzanillo Mexico, through West Texas, New Mexico, Colorado, and Oklahoma, and ultimately on into Canada Mexico, Colorado, and Oklahoma, and ultimately on into Canada and the Pacific Northwest.and the Pacific Northwest.

Together, the communities along the Ports-to-Plains Trade Together, the communities along the Ports-to-Plains Trade Corridor are becoming the Gateway to trade throughout the Corridor are becoming the Gateway to trade throughout the nation and with Mexico and Canada. The Ports-to-Plains Trade nation and with Mexico and Canada. The Ports-to-Plains Trade Corridor will provide a vast number of benefits for communities Corridor will provide a vast number of benefits for communities along the corridor. The Trade Corridor will allow for the along the corridor. The Trade Corridor will allow for the development of less congested ports of entry along the development of less congested ports of entry along the Texas/Mexico border. In addition, it will provide alternatives to Texas/Mexico border. In addition, it will provide alternatives to other congested corridors that run through major metropolitan other congested corridors that run through major metropolitan areas. In doing so, the trade between Mexico, Canada, and the areas. In doing so, the trade between Mexico, Canada, and the United States will continue to dramatically increase and all three United States will continue to dramatically increase and all three nations will continue to see a rise in their regional mobility and nations will continue to see a rise in their regional mobility and economic status.economic status.

Manzanillo in Nafta’s Manzanillo in Nafta’s SuperhighwaySuperhighway

Manzanillo in Nafta’s SuperhighwayManzanillo in Nafta’s Superhighway

Colima has a total of 1,225 miles (1,971.5 kilometers) of highways. Colima’s highways connect with the NAFTA route, beginning in Manzanillo, passing through the cities of Tecomán and Colima and continuing on to Jalisco state where it joins the Guadalajara-Mexico highway to the U.S. and Canada.

Growing Strength of Railroad Intermodal FacilitiesGrowing Strength of Railroad Intermodal FacilitiesPort Rail ConnectionsPort Rail Connections

Manzanillo – Ciudad Juárez (FERROMEX)Manzanillo – Ciudad Juárez (FERROMEX) Lázaro Cárdenas y Pantaco–Nuevo Laredo (KCS) Lázaro Cárdenas y Pantaco–Nuevo Laredo (KCS) Mexicali–Guadalajara–Querétaro– Pantaco (FERROMEX) Mexicali–Guadalajara–Querétaro– Pantaco (FERROMEX) Veracruz–Pantaco (KCS and FERROSUR) Veracruz–Pantaco (KCS and FERROSUR)

Mexican ports have faced a dramatic increase in cargo movement since Mexican ports have faced a dramatic increase in cargo movement since the enactment of NAFTA in 1994. There has also been an exponential the enactment of NAFTA in 1994. There has also been an exponential increase of imports from Asian countries. The increase in traffic increase of imports from Asian countries. The increase in traffic coupled with the privatization of railroads in 1998, which brought the coupled with the privatization of railroads in 1998, which brought the participation of international railroad corporations, is changing the participation of international railroad corporations, is changing the profile of the transportation and logistics sector in Mexico.profile of the transportation and logistics sector in Mexico.

At present the only port with a double stack train service is Manzanillo, At present the only port with a double stack train service is Manzanillo, where rail’s market share has been increasing: in the year 2000, where rail’s market share has been increasing: in the year 2000, around 40 per cent of its containers were moved by rail. Increasing around 40 per cent of its containers were moved by rail. Increasing 10% each year. This gives Manzanillo an additional competitive 10% each year. This gives Manzanillo an additional competitive advantage that will allow it, in the long term, to continue climbing advantage that will allow it, in the long term, to continue climbing upwards in the global port hierarchy.upwards in the global port hierarchy.

The Port of Manzanillo is a Mexican container port that can provide The Port of Manzanillo is a Mexican container port that can provide railroad service to the U.S. market, all the way to Kansas City.railroad service to the U.S. market, all the way to Kansas City.

Growing Strength of Railroad Growing Strength of Railroad Intermodal FacilitiesIntermodal Facilities

Port Rail ConnectionsPort Rail Connections The passage across Mexico is possible because of a new The passage across Mexico is possible because of a new

Mexican law that allows foreign freight to cross Mexico “in Mexican law that allows foreign freight to cross Mexico “in bond,” without tariffs or duties, if it travels to the U.S. bond,” without tariffs or duties, if it travels to the U.S. market. Trucks do not have same advantage under the law, market. Trucks do not have same advantage under the law, except when making deliveries the short distance between except when making deliveries the short distance between the Port of Ensenada in Baja California, Mexico, to the the Port of Ensenada in Baja California, Mexico, to the border city of Mexicali.border city of Mexicali.

As freight moves by rail across Mexico toward the U.S. As freight moves by rail across Mexico toward the U.S. market, it can stop at San Luis Potosí in North Central market, it can stop at San Luis Potosí in North Central Mexico for storage and services, also without incurring Mexico for storage and services, also without incurring duties or tariffs, thanks to the foreign trade zone operating duties or tariffs, thanks to the foreign trade zone operating at an integrated logistics center. The 1,300-acre ceter is at an integrated logistics center. The 1,300-acre ceter is along Kansas City Southern’s “NAFTA Railway” route, as along Kansas City Southern’s “NAFTA Railway” route, as well as on the main truck corridor between Mexico City and well as on the main truck corridor between Mexico City and Laredo, Texas in the U.S.-Mexico Border.Laredo, Texas in the U.S.-Mexico Border.

Manzanillo in Nafta’s SuperhighwayManzanillo in Nafta’s Superhighway

This map shows This map shows the Super the Super Highways Highways now now underway to underway to connect the connect the United United States, States, Canada, and Canada, and Mexico to Mexico to help bring help bring about the about the creation of a creation of a North North American American Union similar Union similar to the to the European European Union.Union.

Alternative to NAFTA Superhighway, the Alternative to NAFTA Superhighway, the Expansion of Panama CanalExpansion of Panama Canal

A secondary southern route for Asian containers traveling through the Panama Canal and linking up with Canadian National routes in Louisiana, or heading north into the Atlantic to connect with Canadian National in Halifax.

The development of the port in Prince Rupert, B.C., as an official "Asian Gateway“ is another alternative to NAFTA super highway.

World growth to slow in 2008, but still expected to World growth to slow in 2008, but still expected to remain solid at 4.75 percent. remain solid at 4.75 percent.

Major emerging markets have taken over as leading Major emerging markets have taken over as leading contributors to global growth in 2008. U.S. economy contributors to global growth in 2008. U.S. economy expected to remain weak. Markets of Asia and Eastern expected to remain weak. Markets of Asia and Eastern Europe will experience some growth; the United States, Europe will experience some growth; the United States, Western Europe and Japan will be experience slower Western Europe and Japan will be experience slower growth in 2008.growth in 2008.Even with slower economic growth, container traffic Even with slower economic growth, container traffic growth will increase in the next 5 years will push many growth will increase in the next 5 years will push many ports to their full capacity limits, before the Panama ports to their full capacity limits, before the Panama Canal is expanded. The search for alternative ports in Canal is expanded. The search for alternative ports in Latin America, like Newport Manzanillo is on.Latin America, like Newport Manzanillo is on.

Although there has been a slowdown in trans-Pacific Although there has been a slowdown in trans-Pacific shipping this year, due largely to the downturn in the U.S. shipping this year, due largely to the downturn in the U.S. housing industry, trade is expected to double over the next housing industry, trade is expected to double over the next 10 years and triple by 2025. 10 years and triple by 2025.

With the new generation of megaships carrying 8,000 to With the new generation of megaships carrying 8,000 to 10,000 TEUs – the standard measure of containerized cargo 10,000 TEUs – the standard measure of containerized cargo – West Coast ports are unlikely to be able to handle the – West Coast ports are unlikely to be able to handle the load, despite expansion projects in the works everywhere load, despite expansion projects in the works everywhere from Prince Rupert in Canada to the giant Los Angeles-Long from Prince Rupert in Canada to the giant Los Angeles-Long Beach complex that processes two-thirds of Asian Beach complex that processes two-thirds of Asian shipments into the United States. shipments into the United States.

Newport Manzanillo will have facilities to handle cargo and Newport Manzanillo will have facilities to handle cargo and dry bulk and will be equipped to receive the world’s largest dry bulk and will be equipped to receive the world’s largest vessels.vessels.

Newport Manzanillo yields intangible economic benefits that Newport Manzanillo yields intangible economic benefits that help sustain long term economic growth. help sustain long term economic growth.

Ports like Newport Manzanillo, Colima are Ports like Newport Manzanillo, Colima are thriving gateways to international trade thriving gateways to international trade and economic prosperity. The impact that and economic prosperity. The impact that the new port has on job growth, the new port has on job growth, generation of business revenues and generation of business revenues and overall quality of life is extraordinary. That overall quality of life is extraordinary. That makes the port an invaluable force in makes the port an invaluable force in spurring regional, state and national spurring regional, state and national economic growth.economic growth.

An efficient and economically viable Port in An efficient and economically viable Port in Manzanillo is essential to the long run Manzanillo is essential to the long run economic vitality of Colima. economic vitality of Colima.

Overview of the Economic and Social Overview of the Economic and Social Impacts of the New Manzanillo Port Impacts of the New Manzanillo Port

Alejandro Díaz-Bautista, Alejandro Díaz-Bautista, Ph.D.Ph.D.

Professor of Economics and Researcher at the Department of Economics at Colef. Ph.D. Economic Consultant. Visiting Research Fellow and Guest Scholar 2008, Center for U.S.-Mexican Studies, University of California San Diego (UCSD). January 30, 2008.adiazbau@gmail.com

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