Across the Border: The road between two oceans is paved with good intentions

Mexican rail freight is increasingly occupied with the containers moving from Asia to the U.S. The two main Mexican railroad companies, Ferromex (www.ferromex.com) and Kansas City Southern of Mexico (KCSM) (www.kcsi.com) are moving freight from the Mexican ports of Manzanillo and Lazaro Cardenas to Laredo, Tex., and El Paso, Tex., respectively, garnering business that's proved highly successful for both.

In Mexico's Baja California peninsula, the state government has just announced that a new Pacific Coast mega port project at Point Colonet is a go and the work will be auctioned to the international community no later than September 2006. The $4 billion construction project is to include ten 55-foot deep port docking positions that will be able to handle seventh-and eighth-generation container ships. It also includes a two-track railroad from Colonet to Mexicali, where containers will be redistributed to the U.S. from what is presently a small station at Calexico, Calif.

In short, all of the proposed work is timely and serves as an opportunistic answer to Long Beach/Los Angeles congestion that won't go away if Pacific Rim trade growth continues at its current pace.

In the midst of this newly found West Coast euphoria, a nagging question lingers: Whatever happened to the oldest multimodal railroad project in Mexico — the Isthmus of Tehuantepec Railroad? The response is "nothing" and yet, the plan to move cargo from the Pacific Ocean to the Gulf of Mexico and on to the U.S. is still there.

The Isthmus of Tehuantepec, the narrowest part of Mexico (roughly 125 miles from coast to coast), has for more than a century-andahalf been seen as the ideal crossing point between the Pacific and Atlantic Oceans. In fact, back in 1859 the U.S. saw it as a potential for takeover under the McLane-Ocampo Treaty, which allowed for the creation of a railroad that would permit "in perpetuity" the crossing of U.S. troops. The U.S. Senate under Abraham Lincoln nixed the treaty.

The Isthmus railroad was inaugurated in the 1870s. However, by then political fear of the U.S. in Mexican political circles prevented the transit from truly developing. To make a long story short, the same old rail line still exists and is maintained today, and according to its main supporter, Gustavo Baca, it is in good operational shape.

Since 1954, every president of Mexico has had a plan to develop a multimodal system for the Isthmus, all to no avail. Even current lame duck President Vicente Fox had an ambitious plan that included an eight-track electric railroad to move containers from the Port of Salina Cruz on the Pacific to the Port of Coatzacoalcos in the Gulf of Mexico "in less than two hours."

"Maybe not so quick," says Baca, who is the current director of the Isthmus of Tehuantepec Railroad, a state operated company that manages no trains, only track. "But we do have the facilities to cross as many as 300,000 containers a year," he claims.

Baca concedes that despite its potential, the track is operating at 30% capacity for reasons that now have nothing to do with politics. The two companies using it — Ferrosur (www.ferrosur.com), operated by Ferromex, and the ailing Chiapas-Mayab Railroad, owned by U.S. shortline operator Genessee & Wyoming Inc. (www.gwrr.com) — give it little importance.

"Maybe on this line transport costs are a little more costly because of speed limitations," speculates Baca. "But that doesn't limit the capacity to transport containers and general cargo."

Oscar Corzo Cruz, director general of Mexican Railroads and Intermodal Systems, notes that overall costs are higher for the line, possibility because of stevedoring activities that currently have to be carried out at the two endline ports. Those expenses hike the cost of moving a container by more than 10% more than through the Panama Canal.

Another reason the line is under-operating is because of the destruction last year of 14 bridges along the railway by Hurricane Stan that struck near the Guatemala border, in the state of Chiapas. To date, the federal government has failed to repair the bridges for insurance reasons, according to Corzo Cruz.

A larger reason acknowledged by both Corzo Cruz and Baca is that the facilities at the Ports of Salina Cruz and Coatzacoalcos have become obsolete with the need for larger facilities. Expansion, however, continues to be an item on the agenda.

Corzo Cruz, along with Cesar Patricio Reyes Roel, director of Merchant Marine, have announced creation of two new port facilities near the existing ones at Salina del Marquez on the Pacific, and Pajaritos Bay, near the port of Coatzacoalcos. At each end, the government has made appropriations of 120 acres of oceanfront land for new state-of-the-art industrial ports where the government seeks more than just the crossing of containers. It also hopes for industrialists who will create facilities to add value to products in transit to create jobs locally at both ports, and perhaps at intermediate sites.

"We are seeking regional development to benefit the local people with jobs and new technology," claims Corzo Cruz. The Oaxaca and Veracruz states region that the railway crosses is considered one of the most underdeveloped in Mexico. The area has presented a perennial struggle by the government in seeking to bring education and industrial savvy to the region. Despite stated concerns, it remains a low-tech survivallevel agricultural region.

Ideally in the future, says Corzo Cruz, the government will give operational concessions of the two ports and the right of way on the track to just one supplier in an effort to consolidate all dock-todockmovements and create a seamless operation.

Asked when the Isthmus of Tehuantepec will really work as the transoceanic path everyone has foreseen, both government officials, Corzo and Baca, think that time is still far in the future even if the bureaucratic road to auctioning off the business concession is paved.

In this presidential election year in Mexico, the future of the so-called Isthmus of Tehuantepec Multimodal System will depend on the actions of the next president.

But then, it always does.

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