Leaders of Gulf Coast ports are eyeballing the recently announced partnership between Texas Mexican Railway Co. and Kansas City Southern Railway, seeing potential for new waterborne traffic because of the deal.

Tex Mex announced early this month that it would sell a 49 percent stake to KCS. The move was widely perceived to be aimed at strengthening Tex Mex's negotiating position in the face of the planned merger of Union Pacific Railroad and Southern Pacific Lines.Transportacion Maritima Mexicana (TMM), Mexico's largest steamship line, owns Tex Mex and has said its support for the UP-SP merger will come with a price - the ability to create an alternative route for shippers.

Tex Mex runs on a 160-mile line between the Texas border city of Laredo and the port city of Corpus Christi. TMM is believed to be seeking connections

from the merging railroads all the way to Beaumont, where KCS track ends.

This month's surprising news of the Tex Mex-KCS partnership has Texas ports weighing implications.

"We're looking at it, and I feel hopefully it will be a good thing for all the Gulf ports, and we at Beaumont hope to participate in some (new) Mexico business down the road," said Bill Masters, Beaumont's port director.

Beaumont, a stone's throw up the Gulf Coast from Houston, has seen its breakbulk traffic to and from Mexico grow since the North American Free Trade Agreement took effect. Mr. Masters said the new short-line railroad development can only help create new business.

"A million tons of our 4 million tons of business last year was to Mexico," he said during an interview late last week at the Gulf Ports Association meeting held in the Mexican port city of Veracruz.

Beyond attending the gathering of port officials, Mr. Masters was trying to get a sense of current opportunities and how the rail mergers and partnerships may generate new traffic or boost current flows.

"Certainly the types of cargo we're handling in Beaumont at this time are

bulk commodities. We're handling a lot of aggregate coming from Mexico via discharge into Beaumont," he said. "We're shipping a lot of bulk grain down into Mexico and we're looking at their ports and what type of business they have here."

Among the areas already identified for potential growth are forest products imported by Mexican companies.

"We have increased our forest products in the last five years tremendously. We know that Mexico is a big buyer of forest products since the Nafta has been successful, so we think that we might participate in shipping forest products such as plywood down there," Mr. Masters said.

Other Texas ports such as Brownsville and Houston are also trying to understand the implications of the short-line partnership.

"I really haven't had any time to look at this," said Thomas Kornegay, executive director of the Port of Houston. He did say the region will benefit by having more rail competition.

It is not clear whether the Tex Mex-KCS partnership will seek access south of Corpus Christi to Brownsville. Both the UP and SP have operations at that port, the closest Texas port to Mexico.

"We can't live with just the UP running the show," said C. James Kruse, port director of the Brownsville Navigation District. "Really we have only one (carrier) now, even though there is one called the Southern Pacific. Anything that will bring another financially healthy carrier into the area has got to be good."

Tex Mex and KCS expect continue negotiations and have all arrangements wrapped up and announced on or before Oct. 30.