Trains, planes and automobiles: Mexico rail freight comes of age

Fri Jul 5, 2013 2:43pm EDT
 
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By Gabriel Stargardter

MEXICO CITY (Reuters) - Slowly, like the trains that crawl past towering avenues of containers here at the country's largest rail hub, Mexico's freight business has transformed into a principal artery for the top export industries of Latin America's second-largest economy.

A rail network that once shunted Mexico's mustachioed revolutionaries to battles across the country was gasping for air by the late 1990s as grinding inefficiency and rising costs forced the government into privatization.

But gradually, thanks to private investment, the North American Free Trade Agreement, a bulging wage differential with China and booming auto and manufacturing sectors, Mexico's freight sector has morphed into a top logistical thoroughfare, shuttling cars, fridge-freezers and grains across the border.

A planned government reform that seeks to allow foreign investment in the state-controlled oil sector, coupled with a federal commitment to spend over $20 billion on infrastructure this year alone, has helped raise expectations for the industry.

Mexican trains now haul about 14 percent of the nearly $500 billion worth of goods that cross the Mexico-U.S. border each year, up from 10 percent in 2009.

And with some saying total bilateral trade could double in the next five years, having already jumped 62 percent between 2009 and 2012, it's a trend that looks set to continue.

"We're very conscious of the boom that's coming," said Isaac Franklin, chief financial officer at Ferromex, a joint subsidiary of Mexican miner Grupo Mexico and U.S. railroad Union Pacific, and one of Mexico's three railway concession-holders.

Grupo Mexico will invest a record $536 million in its rail business this year, a 10 percent increase on the usual spending level, on infrastructure, maintenance and equipment.   Continued...

 
A crane removes a container at Ferrovalle rail yard in Mexico City June 24, 2013. Slowly, like the trains that crawl past towering avenues of containers here at the country's largest rail hub, Mexico's freight business has transformed into a principal artery for the top export industries of Latin America's second-largest economy. REUTERS/Tomas Bravo