Overdrive: Mexico's Port of Veracruz expands to move more goods--cars above all else.

If you were to see Mexico's Port of Veracruz from an airplane, it would seem as though you were looking at an ant colony moving very quickly.

The ants would be really shiny and boxy. This is because Veracruz, located in the state with the same name on the Gulf of Mexico, is not only the largest commercial port in the country, it's also the gateway for the automobile industry. In 2004, the port handled 70% of the total 687,000 automobiles that shipped in and out of the country. In Mexico, the automobile trade largely depends on maritime logistics. Worried whether the port can handle such traffic, the Integral Port Administration (API) of Veracruz unveiled in 2003 a US$295 million development plan to enlarge the port's infrastructure and expand operations by 2010. "We want to become a highly competitive port and want to be recognized internationally," says Arturo Marin, commercial manager of the Port of Veracruz. "In order to accomplish this, we must increase its capacity."

The port, which handles all kinds of cargo, moved a total of 16.1 million tons of products in 2004, a figure that will jump to 20.5 million tons once the improvements wrap up. The master development plan includes the construction of a highway that will connect port facilities with the Veracruz Cardel Highway. The new road will give heavy trucks easy access to the port without routing them through the city. The plan will also broaden a railway network near the port as well as expand several docks. Planners will build a logistics park, among other projects.

The automobile industry couldn't be happier. This year, the Port of Veracruz expects to move 500,000 vehicles in and out of its facilities, 20,000 more than last year and a figure that warrants investment in the port. "We were the first port in Latin America to have specialized facilities for automobiles at our disposal, and soon we will have other specialized facilities to face the demand for storage and other services in the upcoming years," says Marin.

Veracruz's success may lie in its geography. Located on the south-central coast of the Gulf of Mexico, the Port of Veracruz is closer to car manufacturers and distributors operating in central Mexico than other ports. "Manufacturers are interested in Veracruz due to their import and export markets: basically imports from Europe and the U.S. and exports to Central and South America, Europe and the U.S.," says Angel Gonzalez Rul, general manager of the Ports of Mexico, the government port regulator. "The port has consolidated to be the primary entry and exit point for the country's merchandise."

General Motors, the U.S. automobile giant, moves its products through Veracruz. The company says the facilities are worthwhile, as are its logistics spurs, which include both railroads and highways. "Veracruz is the best point for merchandise to enter and exit the Gulf of Mexico, with its source and destination in the middle of the country," says Agustin Izquierdo, customs manager at General Motors. "Its infrastructure allows our operations to take place without supply risks."

Come on in. Apparently, the city of Veracruz itself is open for business too. The world's top shipping lines call on the port, coming and going from Europe, the Mediterranean, South America, the United States and the Caribbean, among others. To handle not only the flow of these ships in and out of the city but the executives working here, Veracruz has encouraged real estate development to better cater to business travelers. "It is important to note that Veracruz has all the air, hotel, restaurants and business-center infrastructure necessary for a business trip," says Izquierdo.

In Mexico, there are three A-level customhouses, which are defined as those certified with high levels of security, flexibility and efficiency. They all have highly organized and advanced systems as well as top-notch financial and labor controls. One of these customs facilities is in Veracruz.

According to data compiled from the Mexican Association of Automobile Industries, up until April of this year, Mexico had exported 333,041 cars and imported 236,104. In 2004, total automobile imports and exports grew 5% compared with 2003. According to the General Ports and Merchant Marine Coordinate, the six ports in the country that handle automobiles imported 455,625 new units in 2004. For every 100 cars that come into the country, 67 did so by ocean cargo last year, compared with 69 in 2003.

Of this growth, Veracruz was responsible for a slight 1.4%, but industry officials expect the port to catch up and grow at the same pace as the sector, which could pick up more speed. That's why the investments are needed to get the Port of Veracruz operating at its fullest capacity possible, says Gonzalez Rul. While the development plan will enable the port to meet the needs of all automobile manufacturers in the area, there are some clouds on the horizon. Currently, a highway is under construction in the region that will connect with other ports on the Gulf of Mexico, including Altamira and Tampico. That road could cut the costs that carmakers pay to ship out of Altamira, a trend that could take business away from Veracruz. "There are many external factors that influence an importer and exporter," says Gonzalez Rul.

Even though the Port of Altamira, located in Tamaulipas state, doesn't handle large amounts of automobiles as of now, car shipments have grown significantly in the last two years. In 2004, the port exported 2,193 units and imported 82,693 cars, compared to 629 in exports and 78,134 in imports in 2003.

For Francisco Kassian, general manager for project development and government relations for the SSA Mexico, which runs port activities at Veracruz and is the fifth-largest port-terminal operator in the world, the Port of Veracruz is working hard to improve the quality of its services. Yet investments notwithstanding, port authorities must keep prices competitive if Mexico's automobiles are to compete. "Veracruz has been the best entry and exit point for the automotive industry," Kassian says. "However, if the Mexican ports aren't competitive, [the manufacturers] will look for alternatives to ensure that their products remain competitive in the marketplace."

SSA Mexico, whose list of Veracruz clients reads like a "who's who" among automobile producers--DaimlerChrysler, Ford, General Motor, Nissan, Peugeot, Renault, Toyota, Volkswagen and BMW--hopes car shipments will continue to rise. "The growth of the exports will depend on the competitiveness of the products," Kassian says. "Today there is much recognition of cars manufactured in Mexico, but we have to review price and quality, and I am referring to everything from maritime handling to the transportation."