An inexorable growth in economic activity will drive the prioritization of Mexican infrastructure improvements.
Mexico will continue to grow at a healthy pace into the foreseeable future. For instance, it is estimated that, by the year 2020, the country will produce a total of 4.5 to 5 million passenger vehicles. This number of vehicles tops the output being churned out by Mexican factories by about forty percent. Logistics and transportation experts are now speculating that, to move increased volumes of automotive and other industry production to global markets economically and on time, Mexican transportation infrastructure improvements will be required on a significant scale. Increased demand for expanded railways, seaports and roadway corridors represent an immediate and tangible opportunity for investors, foreign and domestic alike.
For instance, eighty percent of auto production that is shipped to the US, Latin America, Europe and Asia is transited by sea (primarily through Lazaro Cardenas, Veracruz and Manzanillo), by rail and by truck. Given the capacity that is in place today, the ability of the country’s system of transportation linkages to support the export of future automotive and other manufactured products will fall short. Mexican transportation infrastructure improvements must be invested in and undertaken, so create a drag on the nation’s economic growth.
There are opportunities to be capitalized on by those willing to invest insofar as the rail system is concerned. Mexico has a network of somewhere between fifteen and sixteen thousand miles of track that traverses its national territory. Although it is a mode of transportation that is gaining in importance as Mexico grows, only three percent of existing track has been built over last eighty years. Beefing up rail capacity to move increased production which will result from automotive and other industry growth will be a key factor in helping Mexico to increase its overall economic competitiveness. Because shipping by rail is fifteen to eighteen percent cheaper than truck transportation, increasing connectvity between rail and land ports will be a consumer driven necessity. Some companies such as the Union Pacific have stepped up to position themselves to reap the economic benefits that future growth will bring. Earlier this year, the company had a grand opening of a new,state-of-the-art multi-modal facility in San Jeronimo, Mexico. San Jeronimo shares a common border with Santa Teresa, New Mexico. It is expected that the facility will move products from Mexico’s growing industrial interior, as well as in the border area that encompasses the Ciudad Juarez/ El Paso and Southern New Mexico region.
Mexican transporation infrastructure improvements in the nation’s ports are being tackled by the federal government through its Secretariat of Communications and Transport. Officials have the expectation that trade with Asian nations will increase at a healthy pace for the forseeable future and have plans to address maritime trade infrastructure in a plan that was conceived in 2013, which will be implemented through 2018. One of the major challenges related to this effort will be to better connect the nation’s rail system with its major commercial ports. At present, in the automotive industry, approximately eight hundred thousand passenger vehicles are moved through the nation’s ocean ports to principally US and Asian markets. As this number increases so will the demand for access to expanded rail capacity.
In the recent past the federal government made modest Mexican transportation infrastructure improvements between 2007 and 2012, when it built and repaired approximately six hundred and fifty miles of federal highways. Although this was a step forward, much work is left to be done in building highways that connect trade corridors and logistics centers.
Mexico’s rank in terms of the world’s leading economies is currently fourteenth. As the country continues to offer foreign direct investors an environment to have products made in a stable environment at globally competitive prices and in proximity to major markets, more investment will be directed at making essential Mexican transportation infrastructure improvements.