Amid considerable growth in Asian shipping to Mexico’s Pacific Coast, the Los Angeles and Long Beach ports have launched unprecedented talks with Mexican port officials in an attempt to develop new trade routes and limit future damage to L.A.’s import-dependent economy.

Three weeks ago, representatives from the two local ports visited Mexico, following up a memorandum signed in May by Los Angeles Harbor Commission President David Freeman, Mayor Antonio Villaraigosa and Mexican officials.

The memorandum calls for increased cooperation and communication between port officials on both sides of the border as large Asian freighters are increasingly docking in Mexican ports even when they are carrying some goods ultimately bound for the U.S.

U.S. port officials also have their eye on a state-of-the-art megaport Mexico plans to build 150 miles south of Tijuana that would directly compete with the Southern California ports.

“As the trade volume between Mexico and Asia has increased, there’s now sufficient critical mass for steamship lines to justify putting a ship into Mexico,” said Paul Bingham, an economist who tracks ports for Waltham, Mass.-based Global Insight Inc. “There’s clearly people that see opportunities there.”

Local port officials are specifically seeking to boost so-called “short sea shipping,” which involves sending U.S.-bound goods to the Los Angeles and Long Beach ports via smaller freighters once they have arrived at Mexican ports, or in the reverse.

Port officials say the practice, which requires the close cooperation of Mexican ports, would be positive for both sides -preserving import volumes of domestic goods at the Southern California ports while allowing Mexico a chance to capture a greater share of its own growing domestic commerce.

The process also could benefit Mexico by compensating for the country’s inadequate roads and rail lines, which otherwise could stunt its growth in trade by limiting inland dispersal of goods once they reach ports.

“We’re all working on a much more collaborative level than we ever have before,” said Arley Baker, senior director of legislative affairs for the Los Angeles port. “We’ve got such a tsunami of trade headed our way in the coming decades that we all need to work together.”

Volume up

The Los Angeles and Long Beach port complex is by far the largest port in the country and is the fifth largest in the entire world. The ports handle about 40 percent of all of the country’s imported and exported goods.

The complex is also the undisputed giant of North American West Coast goods movement, with each port handling more than 7 million cargo containers last year. Despite being hemmed in by urban neighborhoods, the ports are expected to grow substantially over the next two decades. However, several smaller Mexican ports are quickly gaining in stature and have the potential to grow even faster.

After handling just 2,670 cargo containers in 2003, the Port of Lazaro Cardenas on the Pacific coast in the Southern Mexican state of Michoacan grew to 160,000 containers in 2005. Now, it is in the process of expanding its capacity to as much as 2.2 million units per year and with 6,000 acres at its disposal, experts predict the port could handle upwards of 6 million containers within the next five years.

The Port of Ensenada, about 70 miles south of Tijuana, handled 123,000 containers in 2006, a number that is likely to rise significantly after the rail lines are built to the U.S. border, which is expected in the near future.

But Lazaro Cardenas and Ensenada are not even the country’s largest ports. The Port of Manzanillo in the state of Colima handled 1.2 million containers last year and sees itself as a growing competitor to the Los Angeles and Long Beach ports.

“Lazaro Cardenas and Manzanillo are already promoting themselves as alternatives,” Bingham said. “They would lose market share at L.A.-Long Beach but it’s not as if it will put them out of business.”

And then there is the massive port complex in Baja California that would be built to handle the largest tankers on the seas today and others still on the drawing board.

Still, much of this anticipated development would be dependent on the growth of Mexico’s consumer market for mostly low-cost, finished consumer products from Asia, including apparel, furniture and consumer electronics.

But with all the Mexican ports it remains to be seen whether any can reach all of their theoretical container volume potential given limitations to the country’s transportation infrastructure.

Mexican port officials could not be reached for comment for this story, but in a speech last week, Luis Tellez, Mexico’s secretary of communications and transport and a strong proponent of the country’s port development, asserted that Mexico has the resources and is in the process of making improvements.

“Our great challenge in this scenario is to be able to achieve this quantum jump and to transform the infrastructure into a world-wide class one, that really contributes to the rest of the Mexican economy,” Tellez said.

The Port of Los Angeles, along with Mexican officials, is sponsoring a conference in San Pedro next month designed to facilitate cooperation between the growing Pacific Rim ports.

The Mexican Pacific Ports Conference, as it is called, is an unusual event because to date there has been very little dialogue between local ports and those south of the border.

At the top of the agenda will be expansion of the short-sea shipping. Currently, only about 1 percent of the $14 billion in U.S.-Mexico trade is handled via ocean shipping. “The city is actively talking with the Mexican government as far as how we can synergize with them,” Baker said.

Goods diversion

Ironically, Mexican ports have accepted additional cargo diverted from Los Angeles and Long Beach during past labor disputes and are hoping to grab a piece of the huge growth expected in the next decade.

Costco Wholesale Corp., the Issaquah, Wash.-based national warehouse retailer, brings about 60 percent of its products through the local ports, but has diverted goods through Ensenada and some other ports during past labor disputes. Chief Financial Officer Richard Galanti said the company only rarely diverts cargo, but is willing to move its business to other ports if they become more operationally efficient.

“Ultimately, cost and time of delivery are the two main issues,” he said. “What is the least expensive and most efficient way to get the goods to their destination?”

That attitude is behind plans for a new port project proposed in the Baja bay of Punta Colonet, about 150 miles south of Tijuana. Mexican officials envision a sprawling port in the pristine bay that would attract Asian goods and serve both Mexico and the large U.S. Midwest and East Coast markets.

The project is drawing serious interest from major corporations and while observers expect construction contracts to be awarded perhaps before the end of the year, progress has stagnated of late.

Omaha, Neb.-based rail line Union Pacific Corp. was set to partner with port developer Hutchison Port Holdings Ltd., a subsidiary of Hong Kong-based Hutchison Telecommunications International Ltd., to bid on the project, but ended the partnership earlier this year.

Union Pacific spokesman James Barnes said the company decided “for strategic reasons” not to bid jointly, but he declined to give more details.

Nevertheless, the company is still monitoring the project and observers expect that either Union Pacific or Fort Worth, Tex.-based rail line Burlington Northern Santa Fe Corp. will ultimately bid when the proposal moves forward.

“This would be building something from scratch. (Planning and construction) could go on easily another 10 years,” Bingham said. “But there’s real potential for it to be a viable port in the long term.”