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NAFTA Rail Revenues Set to Grow

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In my last bog I looked at how the near-shoring movement and a host of other factors are contributing to an economic boom in Mexico.  I also discussed how the privatization of the Mexican rail industry has led to the improvement in Mexico’s rail network.  These enhancements combined with lower costs and faster customs clearance processes (as compared to truck) are expected to positively impact on cross-border intermodal growth.  In this blog, I will examine some specific activities that are under way that could propel significant growth in cross-border (e.g. Mexico – U.S.) rail traffic.

Mexico’s Rail History

Mexico's current rail system started to take shape in 1995, when the Mexican government announced its privatization plans. U.S. railroad Kansas City Southern (KCS) and Mexican company Transportación Marítima Mexicana (TMM) formed a joint venture to buy the Northeast Railroad concession. KCS bought out TMM's share in 2005 and changed the railroad's name from Transportación Ferrovaria Mexicana to Kansas City Southern de México (KCSM).

In 1998, mining corporation Grupo Mexico and U.S. railroad Union Pacific (UP) joined forces to buy the Northwest Concession, creating Ferromex.  In 2005, Grupo Mexico bought a third Mexican railroad, Ferrosur, which operated in southeastern Mexico. Grupo Mexico is currently merging Ferrosur with Ferromex.

Ferromex and KCSM offer cross-border service in partnership with KCS, UP, and BNSF Railway. The U.S. and Mexican railroads pass freight from one jurisdiction to the other at six major border crossings. The U.S. sides of these crossings are in San Ysidro and Calexico, Calif.; Nogales, Ariz.; and El Paso, Eagle Pass, and Laredo, Texas. 

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