KCSM: Bright future for Mexico's rail freight sector

Friday, February 20, 2015

As a key logistics platform for North America, Mexico's rail freight sector has a bright future, according to Kansas City Southern Mexico (KCSM).

Railroads accounted for 26% of all overland cargo movement in 2014 and traffic across the US-Mexico border increased by 4.4%. Given Mexico's expanding automotive production and the benefits brought by the energy reform and the national infrastructure plan (PNI), the rail sector will see strong growth, KCSM's president José Zozaya said on the sidelines of the BNamericas Mexico Infrastructure Summit.

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KCSM, which operates cargo trains between Kansas City and the Mexico Gulf coast port of Veracruz, has invested US$3bn in upgrading track and railroad infrastructure in Mexico since it was awarded a 50-year concession to operate in 1995 after the privatization of the country's rail network.

KCSM has also invested in remodeling Sánchez station in Nuevo Laredo, on the Mexico-US border, to facilitate the movement of freight and optimize its cross-border cargo service, Zozaya said.

Mexico's cargo railroad network is Latin America's most productive and is the largest worldwide in terms of the volume of cargo transported annually, moving more than Austria, France, Spain and the UK combined, according to the Organization for Economic Cooperation and Development (OECD).

In order to improve and grow the railroad freight sector, delays on the Mexico-US border need to be reduced by eliminating bottlenecks and by following a multi-modal strategy to create logistics hubs, combining rail, road transport and shipping, according to Zozaya.

He identified cross-sector planning and coordination, respect for the rule of law and procuring financing in developing projects as the biggest challenges to creating multi-modal logistics hubs in Mexico.

"Money is nervous and needs to be ensured a safe landing," he said.

By strengthening Mexico as the central logistics hub of North America, the country can take advantage of its strategic geographic position and become a global supplier, Zozaya told BNamericas, but for that to happen the necessary regulatory infrastructure must be put in place.

He also said that Mexico should take advantage of its nationwide railroad network to re-introduce passenger train services, which were withdrawn in 1995. He said, however, that KCMS would not participate in such an endeavor, as it will remain solely dedicated to freight transportation.

Ferromex and Ferrosur also have concessions to operate freight trains in Mexico.