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Mexican Rail Infrastructure Investment on the Rise

Mexican Rail Infrastructure Investment on the Rise

In the past few years, the popularity and utilization of Mexican rail transportation has been increasing. Ferromex, Mexico’s largest railroad, has increased carload volume by nearly seven percent and revenuesby an additional fourteen percent. The second largest railroad in Mexico’s national territory, Kansas City Southern de Mexico (KCSM), also moved sixteen more carloads than in 2010. The Mexican government is taking necessary steps to facilitate a countrywide overhaul and expansion of the nation’s capacity to accommodate this trend in growth in demand for rail transportation services, as part of an overarching plan to improve Mexican rail infrastructure across several areas.

Last year, Mexican president Enrique Peña Nieto announced over US three hundred billion dollars in new spending over the next six years for new Mexican rail infrastructure projects with an eye toward further boosting the country’s rate of GDP growth. The announcement was swiftly followed by news that US $7.4 billion of the allotted budget would be spent on just three passenger train projects in 2014 alone. Various projects to be completed under the new Mexican rail infrastructure development plan will include among others:

  • The Aguascalientes-Guadalajara railway
  • The Mexico City-Toluca Passenger High Speed Railway
  • The Mexico City-Queretaro Passenger High Speed Railway
  • The Transpeninsular Passenger & Cargo Railway in the Yucatán Peninsula
  • The railway by-pass at Coatzacoalcos in the State of Veracruz

One railroad giant that is leading the push in the private sector to overhaul rail infrastructure is Ferromex (and affiliate Ferrosur). Volume gains in various industries, such as manufactured chemicals, Mexican built automobiles, as well as steadily increasing yields of farm products are continuing to drive the company’s bottom line to ever higher heights. Additionally, the railroad was boosted by intermodal in 2012, increasing units carried annually by over seventeen percent, according to the Association of American Railroads (AAR). In just the first seven months of 2013, the railroad handled 130,500 intermodal containers, according to Ferromex data. The company recorded intermodal revenue of US $55.7 million. This represents an increase of thirteen percent over the previous calendar year.

This has led the company to divert a large portion of their attention and revenue to Mexican rail infrastructure upgrades. For 2013, Ferromex budgeted US four hundred and fifty million dollars for capital expenditures, roughly thirty percent of total income – the highest of any other Class I railroad in North America. Eighty percent of these funds have been directly designated to be used for infrastructure improvement. Recent technology upgrades have included working with Union Pacific Railroad for the past few years to replace SICOTRA, the Ferromex transportation management system, at a cost of US thirty four million dollars. Ferromex also intends to allocate millions of dollars for the enhancing of rail security, as well as for providing additional training to prepare the railroad’s workforce to meet growth-related challenges. Much of the training will be provided by Mexico’s new Instituto de Capacitación Ferroviaria (Railroad Training Institute), a state-of-the-art training center for rail personnel.

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