Location, location, location: Connectivity is key to making the most of the state’s unique position

With close to 60m crossings per year in both directions, the boundary between Baja California (BC) and the US is the most crossed border in the world. BC is one of six Mexican states that share a border with the US, as well as being one of 11 states with access to the Pacific Ocean coast. The administration is looking to expand the existing infrastructure by including, as part of the State Development Plan, an aggressive public-private partnership (PPP) offering of 120 infrastructure projects in many different fields such as transport, water treatment, storm- and wastewater management, and energy. The cost of this immense project pipeline adds up to around MXN63bn ($4.9bn), of which MXN17bn ($1.32bn) is expected to come from private investors.

ROAD & RAIL: The 265-km border between BC and the US states of California and Arizona has six access points with California, located in the municipalities of Tijuana, Tecate and Mexicali. At one alone, San Ysidro, 13m cars cross each year. Based on a study by the nearby US city of San Diego’s Regional Planning Agency, there will be a projected 87% increase in vehicle traffic in San Ysidro by the year 2030. With this in mind, an expansion project for the crossing is under way.

The US government intends to invest $226m during 2014 alone, while the total projected cost is calculated at more than $700m. The state’s highway network consists of approximately 2700 km of paved roads. Federal Highway 2, the connection point in BC to the rest of Mexico, runs from Tijuana to Mexicali and all the way to Mexico City. The cities of Tijuana and Mexicali offer road connections to the ports of Ensenada and Long Beach, as well as ground connections to the US. Mexicali links with Calexico, California, through two of its three border crossings, while Tijuana connects to US Interstate highways I-8 and I-5.

Meanwhile, the more than 200 km of BC railways comprise 144 km of main lines, 45 km of secondary lines and 29 km of private railways. Serving Mexicali is Ferromex’s rail line. This is a 50:50 joint venture with Union Pacific, with a crossing at the Mexicali-Calexico border.

On the other side of the Rumorosa mountain range, railroad operations are under the administration of the state government of BC and are concessioned out to Carrizo & Gorge Company. This railway consists of a short line from Tijuana to Tecate, where there is a border crossing to Campo, CA. The connection from Campo to Calexico means that cargo can be moved from Tijuana/Tecate to Mexicali and to the rest of Mexico and the US. Tijuana also has a daily connection to San Diego operated by Rail America, while a link to Los Angeles and the rest of the US and Canada is available through the BNSF Railway Company. The plan to build a railroad from Tijuana to the Ensenada region is among the top priorities for the administration.

PORTS: Five seaports make up the port system in BC: four on the Pacific Coast and one in the Sea of Cortez. The most prominent is Ensenada, which moved 2.37m tonnes of cargo in 2013. This port connects BC with the US west coast and the Asian market and is integrated into the Intermodal Corridor Ensenada-Border BC. The corridor joins the Ensenada, Tijuana, Tecate and Mexicali Customs houses with the US to accelerate ground cargo transit. However, many companies in the BC region still prefer to ship via California’s Long Beach port (which handles 75m tonnes of cargo per year), even with the extra effort required to import and export products via truck. The Port of Sauzal de Rodríguez, or “El Sauzal”, is only 10 km north of Ensenada. It is mainly used for food industry cargo, moving live, frozen and processed products to US and Asian markets. Expansion plans for this port are under way.

AIRPORTS: BC has four main airports – Tijuana, Mexicali, Ensenada and San Felipe – which among them handle approximately 6m passengers per year. Works to be completed in 2014 are under way by Otay Tijuana Venture and Grupo Aeroportuario del Pacífico for a direct Mexico-US border crossing in Tijuana airport, which in its first phase will cost more than $50m, plus $34.5m for the purchase of land in the US. These works explore the potential for Tijuana Airport to become a centre for the Southern California and BC region. Passenger and cargo traffic in the area centre on the San Diego and Los Angeles airports, with 17m and 66m passengers, respectively, compared to Tijuana’s 4m.

WATER: The Colorado River provides most of the state’s water and the main urban areas of Mexicali, Tijuana and Ensenada depend almost completely on this body of water. There are bi-national treaties that ensure water availability, but the transport costs for each city vary greatly. While Mexicali is directly on the river’s path, both Tijuana and Ensenada are more than 200 km away. Water has to be pumped over elevations of 1000 metres to cross the La Rumorosa mountain range. The cost of the infrastructure and the energy requirements of transporting water make it an expensive resource.

With installed capacity of more than 100 MW, the state spends MXN600m ($46.62m) a year in electricity for water pumping alone, Javier Orduño, BC’s Energy directorate, told OBG. Complexities such as transport in the drinking water infrastructure have revealed a new set of business opportunities in the field of water desalination. Currently Ensenada has its first project under construction. At a cost of $48m, OHL is building a plant that will output 15 cu metres of potable water per minute for more than 90,000 inhabitants. A development of this type indicates that the maturity of the technology in combination with the high water costs in the area, averaging MXN17-18 ($1.32-1.40) per cu metre, will make it possible to replicate these types of projects in the state as long as reliable, long-term water tariff contracts can be assured.

MINING: The mining industry consists mostly of nonmetallic exploitation. The main product is sand with a value of MXN2.1bn ($163.17bn) from the total mining production of MXN3.93bn ($305.36m) in 2012 as reported by Servicio Geológico Nacional (SGN). The predominance of non-metallic mining is mainly due to the closure of the San Felipe Company in 2001, which greatly reduced the state’s gold and silver production. However, in 2010 Grupo México, one of Mexico’s largest mining groups, announced a $2.6bn project in El Arco, which would centre around copper production and thus boost the state’s metallic mining industry. The biggest challenge for this project includes the underdevelopment of infrastructure in south-east BC, such as highways and an electricity network, a fact that would bring new investments in the sector for the mainly undeveloped south-east part of the state.

If the current administration is able to break the financing barrier, upcoming years could see significant investments in infrastructure. As Manuel Guevara, the secretary of infrastructure and urban development for BC, told OBG, “More important than incentives, such as tax reductions, the best way to bring investment to a region is by building infrastructure. That is why this is the main challenge for the current administration in order to regain the region’s leadership.” The new PPP law should be ready in 2014 and promises to expedite projects, and the state’s own annual MXN6bn ($466.2m) budget, combined with private investment and public financing, could make such developments a reality.