Ensenada Seeking Expansion of Port : Shipping: Supporters say $100-million project would serve <i> maquiladoras </i> along U.S.-Mexico border and accept cargo that Los Angeles ports don’t find lucrative.

ENSENADA, Baja California —  As a port of call, this town is best known as a scenic but sleepy haven for yachtsmen and tuna boat skippers attracted by the city’s great natural harbor and nearby schools of yellowfin and albacore.

But Ensenada’s port is thinking big these days, emboldened by the growing maquiladora industry and the prospect of a North American free-trade agreement.

A proposal being ramrodded by Baja California Gov. Ernesto Ruffo, a former Ensenada mayor, envisions a $100-million expansion that could transform the port 90 miles south of San Diego into a significant competitor in the Pacific Coast ship container cargo market.

Ruffo and other proponents said the expansion would increase the city’s container cargo traffic by more than tenfold in five years, from the current 16,000 annually to 250,000. That kind of expansion would rank Ensenada with the top 20 U.S. ports.

The promoters of Ensenada’s port, one of five on Mexico’s priority list for expansion, said its geography makes it a natural to fill two important niches: serving the booming maquiladoras along the California-Mexico border and taking on cargo that the much larger Los Angeles and Long Beach ports don’t find lucrative.

Fully 10% of international cargo destined for Mexico is offloaded in U.S. ports, then shipped by truck to the Mexican border.

And the percentage is even higher for material and components destined for Mexican maquiladoras. Indeed, the overwhelming bulk of raw material and parts imported from the Far East for maquiladoras in Tijuana operated by Japanese, Korean and Taiwanese consumer electronics and appliance manufacturers moves through Los Angeles or Long Beach and is then trucked across the border.

Skeptics said Ensenada’s rail and trucking services aren’t good enough to lure customers away from U.S. ports, congested though some may be. There is no direct rail service from Ensenada to rail lines in the United States or Mexico, although Ruffo said the state plans to build one to Tecate, roughly midway between Tijuana and Mexicali.

Ensenada also faces competition from other Pacific U.S. ports--including San Diego’s--that see opportunities arising from the growing congestion at the Los Angeles and Long Beach ports. San Diego, which through September had handled a paltry 4,000 20-foot equivalent containers units (TEUs) of international cargo, contrasted with 1 million at Los Angeles, recently commissioned a $100,000 study to find ways of increasing its piece of the container cargo pie.

Another disadvantage, at least for now, is that Ensenada’s longshoremen’s union is strong and its members relatively well paid, to the point that cost savings when contrasted with U.S. facilities would not be great, sources said. Shipping lines such as Sea-Land Service of Seattle said Ensenada would have to offer overriding benefits to U.S. and Asian shippers, who have grown accustomed to shipping cargo to and from Mexico through existing intermodal routes.

“It would take a strong cost advantage to change, and we are pretty well entrenched where we are,” said Dan Ramsey, spokesman for Sea-Land Services, the largest Pacific cargo shipping line. “Ensenada was considered at one point a few years ago (as a port of call), and we decided not to. We just didn’t need the additional port. We found we could continue to serve the market from existing ports from Oakland, Long beach, Los Angeles and Tacoma.”

But other industry officials said shippers are increasingly interested in port options. “There is a congestion issue in Los Angeles-Long Beach, and, depending on how that’s resolved, the port of Ensenada would become a good alternative,” said Leo Brien, president of the San Francisco-based Pacific Merchant Shipping Assn.

Others said Ensenada could succeed as a major league port simply by grabbing a piece of the maquiladora trade and a reasonable share of cargo growth.

Despite the recession and limping recovery, international container shipments moving through U.S. ports should increase 4% this year, after having grown 5% to 10% annually over the past decade, said Bill Ralph, vice president of the Journal of Commerce, a New York-based newspaper that follows the transportation industry. He projects a 10% increase next year.

“The container trade has been growing at leaps and bounds, which is putting heavy limitations on the use of West Coast port facilities,” Ralph said. “There are not as many ports to choose from as on the East Coast. So, the geography gives opportunities for more niche players to develop container markets.”

Los Angeles port officials, although disputing that their facilities are choked by traffic, concede that there is a market for an expanded Ensenada port.

“They can take a portion of our cargo, most likely the Mexican or maquiladora- type cargo,” said Al Fierstine, director of marketing at the Port of Los Angeles. “That cargo is growing--not explosively, but our figures are that that cargo is moving and vessels are full inbound and outbound.”

Tony Ramirez, vice president of Chula Vista-based Made in Mexico, a maquiladora consulting firm, said “there is absolutely no question” that an expanded Ensenada port would attract cargo.

“A deep sea port in Ensenada would make shipping into the interior of Mexico from the West Coast very viable. It would continue regardless of free trade and involve goods destined not only for the maquiladoras but for other parts of Mexico,” said Ramirez, who is an officer in the Mexican national association of maquiladora operators.

In an interview at his Mexicali office, Ruffo said he will formally request about $70 million in federal aid early next year from Mexican President Carlos Salinas de Gortari--funds that would enable Ensenada to extend its breakwater and deepen its ship channel to take on large container-cargo craft.

Once that’s accomplished, Ruffo said, it will be relatively easy to raise $30 million in private funds to expand the shipside platforms, build warehousing and buy the huge mobile cranes to load and unload the cargo containers.

“A free-trade agreement would be a big accelerator, but Ensenada will be growing by itself anyway,” Ruffo said. “It’s only natural. The port will grow faster or slower depending on whether there is a trade agreement.”

Ensenada was at first left out when, in March, 1990, the Mexican government put four of its ports on a priority list for expansion: on the Pacific, Salina Cruz near Manzanillo and Topolobampo near Los Mochis; and, on the Gulf of Mexico, Veracruz and Alta Mira.

The Mexican government then declared that it would guarantee international investment in the ports in the interest of raising international cargo trade.

Ruffo said he was able to persuade the federal government to add Ensenada to the list just last March, basing his case on the steady growth of Ensenada’s cargo traffic.

Admittedly, Ensenada’s container traffic is a drop in the bucket compared with other West Coast ports. But Ruffo said he is encouraged by the sources of the growth in his hometown’s cargo traffic. For example, there has been a steady increase in containers headed to and from Ford Motor Co.’s giant auto plant in Hermosillo.

Ford finds it more economical to ship some material to Ensenada and truck it to Hermosillo than to offload on the Mexican mainland, even though it’s a 16-hour truck drive from Ensenada and only two hours from the port at Guaymas, Ruffo said.

Mexican container traffic could now only be described as anemic. Manzanillo leads all ports with only 27,000 container units handled last year, according to Paul Sorenson, a consultant with Belyea, Sorenson Trottier & Associates of Seattle, the firm recently hired by the Port of San Diego for its market study.

Ensenada Mayor Jesus del Palacio Lafontaine said in an interview that a port expansion represents the best chance for his city’s economic growth in the near term. Growth in agriculture in Baja California is limited because of scarce water, and the tuna fishing industry has been hurt by the boycott of Mexican tuna as a result of the use by some Mexican fishermen of seiner nets that kill dolphins.

“The port would put us on the map for the world’s ships,” the mayor said, and fuel the city’s already robust growth rate. Ensenada’s population of 250,000 is up 50% from 10 years ago, a rate he attributed largely to his city’s economic diversification.