Koreans Express Interest in Mexican Port, Railroad

Korean conglomerates are interested in buying the Mexican port of Ensenada and helping build a railroad from there northeast to Tecate as part of a major expansion of their industrial presence in northern Baja California, Mexican officials say. Among the possibilities: a new Hyundai steel mill.

The strong interest, generated partly by a Mexican delegation’s trip to the Far East in recent weeks, has prompted the government of Ernesto Zedillo to put the proposed Baja rail project at the top of its list of planned rail privatizations.

Previously, the Mexican government said it will begin taking bids next month on the $200-million plan to modernize and expand the Ensenada port to include three container cargo loading facilities.

The port expansion and railroad construction would be privately financed and, with Pacific Rim investors the logical targets, Mexican officials have presented their development scheme to investor groups, manufacturing and maritime businesses in Korea, Singapore, Japan, Hong Kong and Australia.

Koreans have shown the most interest thus far, said Pablo Medina, federal director of the Ensenada port, who went on the Far Eastern trip. Korean firms see an Ensenada port as a potential multifaceted transit center that would combine truck, rail and shipping cargo facilities, he said.

Attending the dedication in December of a new Daewoo appliance plant in Queretaro, 100 miles north of Mexico City, Mexico’s ambassador to Korea, Cecilio Garza, told reporters that Koreans are interested in buying the Ensenada port.

Hyundai makes shipboard cargo containers and truck trailers at its Tijuana plant, and two other Korean conglomerates--Samsung and Daewoo--make TVs and other electronic products at plants in Tijuana and San Luis Rio Colorado near Yuma, Ariz.

Daewoo and Samsung have announced plans to expand their manufacturing operations in Baja California, and Hyundai has told the Mexican delegation that it is mulling the possibility of building a steel plant in Mexico.

“A port official from Ensenada visited the Hyundai Group in December, and there was a presentation about an expansion of the Ensenada port, including railway privatization, and he asked Hyundai to participate,” said Oh Won Taik, the manager in charge of Mexican investment for Hyundai Corp. at its headquarters in Seoul. “Hyundai asked the Ensenada port to submit more detailed materials.” Hyundai still needs more information before it can decide whether to move forward, he said.

Different companies within the Hyundai Group are discussing among themselves whether to build a steel plant in Mexico, but no decision has been made yet, Oh said.

Daewoo Construction Co. is also considering whether to participate in an expansion of the Ensenada port, said Park Seung Il, a spokesman for Daewoo Electronics Co.

Samsung Petrochemical Co. announced in Seoul today that it plans to expand production of chemical compounds in Mexico to boost supplies for Samsung Electronics, which has facilities in Tijuana.

A crucial element of the Ensenada port plan is a proposed 70-mile rail extension linking it to existing trackage in Tecate near the California border, and thus to the North American rail network.

A winning developer will be named by October and given a 50-year lease, Medina said. The winning bidder will most likely be a consortium of foreign companies that includes a Mexican partner that will commit to develop the port first and then the railroad two to three years later, he said.

The Mexican government sees the port and the railroad as a boon to the growing maquiladora industries on the Mexico side of the U.S border. And in recent years, the biggest newcomers to the area have included such Korean corporations as Hyundai, Samsung and Daewoo.

By connecting the Ensenada port, the busiest in Baja, federal officials hope the rail extension will generate intense industrial development of northern Baja California. With container-handling facilities, the port might also attract some of the cargo that now goes through Long Beach and Los Angeles ports.

Although the entire Mexican rail system is being privatized or sold to domestic and foreign investor groups, the Ensenada project has been given priority partly because of the added time it would take to develop a railroad from scratch and because President Zedillo, a native of Baja California’s capital city of Mexicali, sees a big future for the state.

“It wouldn’t be the same, trying to sell the port without the railway,” said Sergio Inclan, vice president of Mexican Investment Board, a government-financed agency charged with attracting foreign companies to Mexico.

Investors in Hong Kong and Singapore also expressed interest in developing the port, which is about 90 miles south of San Diego.

By contrast, Mexican officials complained that the project has elicited little interest so far from U.S. companies.

The lack of a good railroad-container cargo port facility is one of two things keeping Baja California from realizing what federal officials view as vast development potential. Also lacking is an adequate water supply.

“The whole world recognizes the potential of Baja California, for obvious reasons,” Inclan said. “It’s the closest state to Asia and it’s right next to California. But it needs infrastructure.”

Times researcher Chi Jung Nam of The Times’ Seoul bureau contributed to this report.