Ovidio Noval
Director General
API Coatzacoalcos

Special Economic Zones for Isthmus of Tehuantepec

Wed, 01/20/2016 - 10:58

Mexico has several important ports in terms of commercial load, such as Veracruz, Manzanillo, and Altamira. “If we consider total load capacity, however, the most important one is Coatzacoalcos,” claims Ovidio Noval, Director General of API Coatzacoalcos. Total load refers to both the commercial capacity and that used by PEMEX. Noval explains that the port sees intense shipping activity, and accounts for approximately 22% of the NOC’s total trade, including oil, gas, and aviation fuel transactions. “To put it in numbers, this year we are expecting to close operations with a total load of 30 million tonnes, an unmatched capacity for ports in Mexico. We expect this figure to increase in the near future, with the advent of the Special Economic Zones initiative currently being discussed in Congress,” boasts Noval.

This proposal aims at boosting the economic development of the selected areas by improving their infrastructure and providing incentives to encourage private investments. “Worldwide, there are approximately 3,500 special economic zones,” Noval mentions, “including some extremely successful cases. For instance, Manaos, in Brazil, after being named a Special Economic Zone increased its turnover by 300% within five years.” In order to shape this initiative, the Mexican government followed the example set by successful cases around the world, using best practices and creating a proposal adapted to national circumstances. Three southern areas will be involved in the Special Economic Zones initiative in an attempt by the authorities to balance out unequal economic growth that has benefited mostly the northern states. The areas include Puerto Chiapas, Lázaro Cárdenas, and the transisthmic corridor, which contains the port of Coatzacoalcos.

“Of the selected economic zones, the trans-isthmic corridor is of special importance as it entails the narrowest strip connecting the Gulf of Mexico and the Pacific Ocean, linking the ports of Salina Cruz in Oaxaca and Coatzacoalcos in Veracruz,” Noval states. The Isthmus should benefit from various improvements to the communication and transportation system, allowing coastlines to be connected in an efficient and competitive way. The authorities are currently discussing the renovation of the old railroad system and the existing highway, as well as the modernization of the infrastructure of the existent ports.

Moreover, the Gulf of Mexico and the Pacific coastline will also be connected by a US$2 million pipeline constructed by PEMEX, and this is expected to create more opportunities for local industries and ports. “One of these pipelines is planned for the transportation of natural gas to a refinery in Salina Cruz that is currently using fuel oil for power generation,” Noval asserts. “The substitution of old fuels for natural gas will likely take place in other industries. Another implication will be the possibility to transport oil derivatives to that part of the country, attracting new industries to the area. This was what occurred with Braskem Idesa, the consortium in charge of Etileno XXI, the country’s largest polyethylene plant. The companies decided to install the manufacturing plant 9.5km off the port of Coatzacoalcos because of the presence of a PEMEX pipeline nearby, which eased the delivery of the ethane gas needed for the operations. After the plant started operating, other plastic companies decided to move to the area to increase their proximity to their polyethylene supplier.” The availability of raw material is particularly attractive for many international companies, especially when considering the fiscal benefits that can come with the Special Economic Zone scheme.

Noval believes Mexico’s resource availability and incentives, in addition to the country’s location and its impact on logistics costs, could attract companies from China, one of the countries with the highest logistics costs. “The real competition are foreign ports,” Noval admits. “Most people do not know this but 70% of all Mexican imports are brought into the country through the Long Beach port, instead of being shipped directly to a national port.” In order for Mexican ports to gain prominence, he believes they should specialize to improve efficiency and become more cost competitive.