Page 80 - STRATEGY Magazine

INTERVIEW: HUTCHISON PORTS
JORGE LECONA
Hutchison Ports
General Director for Latin America and the Caribbean
“Trade,” says Jorge Lecona, “goes hand in hand with transport.” Mexico’s trade future looks bright, based on “signed free trade agreements with practically 90 percent of the world,” he notes. As the General
Director for Latin America and the Caribbean for Hutchison Ports, Lecona has had a front-row seat to the growth of the Mexican economy. Even the shadow cast by U.S. President Donald Trump’s threats to pull out of NAFTA do not phase the veteran port operator. “In my opinion, NAFTA isn’t going to die—it will modernize.”
A STANDARD OF PRACTICE
The most influential trade event in modern Mexican history was the implementation of NAFTA in 1994. The Mexico– U.S.–Canada pact currently boasts a market of 457 million consumers, making it the world’s largest trading market. “NAFTA established distinct rules, which forced Mexico to standardize trade practices,” says Lecona.
Despite an uncertain future for the agreement, Mexico’s stalwart automotive industry continues to grow. It is now the fourth-largest automobile exporter in the world. In May 2017, the National Institute of Statistics and Geography (INEGI) reported that automotive exports in March rose by 18.7 percent over the same period last year, while all exports rose 14.1 percent.
CAN MEXICO KEEP UP?
Nonetheless, Mexico’s infrastructure ranks only 54th among all nations. Lecona says that “the subject of infrastructure is one of [the nation’s] pending tasks.” Manufacturers have expressed concern that, in the near future, the nation’s port system will not be sufficient to handle output. In response to such fears, in 2015 the federal government announced a US$5 billion initiative to upgrade its network of 117 ports. Port capacity is expected to reach 530 million tons a year by the end of 2018, or 32.5 percent higher than the 400 million- ton capacity at the beginning of 2016.
One issue facing Mexico’s ports is the size of New Panamax ships. As Lecona says, “The ports have had to modernize with these new specifications. This requires super-intensive investments not only in cranes, but in docks.” Other challenges facing the port system include a lack of sufficient multimodal connectivity, which can cause bottlenecks in
moving cargo to and from ports, and operational efficiency, caused by bureaucracy, outdated technologies, and other procedural faults.
STRATEGIC CONSIDERATIONS
How does Mexico solve these problems? Major expansions and modernizations are underway or planned for more than 20 ports. The government considers four of these ports, two on the Atlantic and two on the Pacific, to be strategic: Veracruz, Altamira, Lázaro Cárdenas, and Manzanillo.
Veracruz. The crown jewel of Mexico’s port expansion efforts is taking place at the Atlantic port of Veracruz. The US$3.3 billion development, which has been called the country’s “most important project in one hundred years” by the nation’s Secretariat of Communications and Transportation, features four new terminals. After the first stage is completed in 2018, the port’s cargo handling ability will triple. When the entire expansion is completed in 2024, officials say Veracruz’s port operations will be larger than those of Manzanillo and Lázaro Cárdenas combined.
Altamira. At a cost of more than US$800 million, the improvements to this East Coast port will include better road and rail connections, dredging to allow for deep-harbor oil and gas platforms, and the construction of a natural gas compression station.
Lázaro Cárdenas. This Pacific port, Mexico’s busiest, is undergoing a major expansion to be completed by 2019. Its capacity will jump from 250,000 to 3 million containers a year, based on the addition of both general cargo terminals and specialized auto and bulk grain terminals.
Manzanillo. A key tunnel will vastly improve the port’s rail accessibility, which is currently limited to four times a day due to the city’s restrictions on overland rail traffic. Furthermore, one of Manzanillo’s two terminals is undergoing a multiphase expansion project that will boost its capacity from 650,000 to 4 million twenty-foot equivalent units by 2025.
As Mexico’s trade continues to grow, it is crucial that ports keep pace. “The world has invested in the great European ports, the great ports of Asia,” Lecona acknowledges. “Now, thanks to backing for port infrastructure in Latin America, there is a lot of opportunity here.”
Right now, just 32 percent of Mexico’s commercial traffic travels by sea, which is significantly less than that of the United States (44 percent) and Europe (48 percent).
Are Mexico’s Ports Shipshape?
Despite NAFTA-related ambiguity, Mexico is proceeding with its ambitious plan of upgrading its ports and modernizing
its infrastructure in the hopes that it can become one of the world’s most vital logistics hubs.
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