Private sector interest growing in Tehuantepec dry canal

Tuesday, March 28, 2006

The Mexican government's project to develop a multi-modal "dry canal" across the Tehuantepec isthmus to compete with transoceanic traffic using the Panama Canal is progressing and Spanish firms' interest is picking up quickly, newspaper Expansión reported.

The federal government and state authorities in Veracruz and Oaxaca in southeastern Mexico have outlined a plan involving 35bn-peso (US$3.28bn) investments in the rail and road corridor across the isthmus, Veracruz state official Manuel Escalera previously told BNamericas.

Spanish engineering firms Alatec and Getinsa have been advising Mexican government officials for several months on calling tenders for the various infrastructure works required for the project, according to Expansión.

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The idea is to call an international bidding process for the construction of the works and concession of the corridor, which would need the investment of approximately US$1.5bn from the private sector.

In Mexico there are hints that business magnate Carlos Slim has already shown an interest in taking part, while at least 10 Spanish firms have also started talks with authorities over possible participation.

Construction firms OHL and FCC have significant activities in the region and are reportedly looking closely at the Tehuantepec isthmus, while logistics and container transport companies TCB and Tercat have admitted their interest, according to sources cited by the Spanish daily.

In addition to these, the port services and logistics company Dragados SPL has approached the government to find out more about the project, while the UK-Australian logistics firm P&O Nedlloyd is also hovering.

The promoters of the dry canal, which would run between Coatzacoalcos in Veracruz state and Salina Cruz in Oaxaca, are also reportedly convinced that the Spanish bank BBVA will take part in the project through its Mexican subsidiary Bancomer.

The two ports lie on the northern and southern coasts of the 306km-wide Tehuantepec isthmus, which was once seen as a viable option for a transoceanic canal before the Panama Canal was built.

Coatzacoalcos is on Campeche bay on the Gulf of Mexico on the northern coast of the isthmus, while Salina Cruz is on the Gulf of Tehuantepec on the south of the isthmus on the country's Pacific coast.

The latest estimates are that the Tehuantepec corridor could reduce the cost of transporting containers from Asia to the US east coast by some 20% and could also beat the journey time through the Panama Canal by four days.