REVIEW

The Bridge to Everywhere

Both the public and private sectors are hard at work to develop Mexico’s national and international transport links and improve its trade interconnectivity.

The Mexican government is heavily investing in the development of the country’s transport sector through road, rail, air, and maritime transportation as part of its National Infrastructure Program (NIP), aimed at positioning the country in the top 20% in infrastructure competitiveness by 2030. Both the public and the private sectors are playing a crucial role in achieving this goal.

Under President Calderón’s NIP, an unprecedented effort is being made toward improving the quality and coverage of infrastructure in the country. According to the World Economic Forum, Mexico currently ranks 47th worldwide in terms of transport infrastructure.

The country aims to become a leader in the coverage and quality of infrastructure in Latin America, and has invested more than $45 billion in the development of roads, railways, airports, ports, and communications infrastructure, accounting for close to 5% of GDP.

The Secretariat of Communications and Transportation (SCT) is tasked with developing Mexico’s transportation network. A number of mega-projects have been developed or are currently underway, including the Durango-Mazatlán highway, a 230-kilometer road that consists of a new 75-kilometer segment that forms part of a corridor linking Mexico’s Pacific and Atlantic coasts and reducing travel times by six hours for freight vehicles and 2.5 hours for private cars. The project consists of 115 bridges, including the tallest cable-stayed bridge in the world, the Baluarte Bicentennial.

Railroads are also being developed. The construction of the first suburban railway in the Mexico City metropolitan area, which started
operations in 2008, transports more than 130,000 passengers per day. In order to keep freight trains from having to run through major urban areas, 24 railway underpasses have been built.

Mexico is a pioneer in involving the private sector in the financing and operations of the transport network, with around 50% of investment coming from the private sector. In an interview with TBY, the Secretary of the SCT, Dionisio Pérez-Jácome Friscione, emphasized the role of private investment in the development of the sector. “Private investment has played a crucial role in improving the quality and quantity of infrastructure in Mexico,” he said. Between 2007 and 2011, the private sector invested more than $22 billion in transport infrastructure. The government has set up public-private partnership (PPP) schemes to boost private investment in road construction. The three models include concessions, highway asset utilization, and service provision contracts. Concessions are granted through public bids to the bidder that requests the least financial assistance from the federal government to build, operate, and maintain new highways. Concessions are typically granted for 30-year periods.

Through Service Provision Contracts (PPS) the government grants concessions to private companies to design, finance, build, maintain, and operate roads, again awarding them to the bidder who requests the least amount of federal funding. The government pays them an amount that includes the amortization of the investment plus the amount necessary for the maintenance of the road. The duration of the service contract is fixed, from 15 to 30 years.

ROADS & HIGHWAYS

The roadway network in Mexico is extensive, covering more than 372,000 kilometers, of which more than 138,000 kilometers are paved, making it the largest paved-roadway network in Latin America. The national highway network is the backbone of the transport system, moving 53% of the national weight and 98% of passengers who move throughout the country. The road system is divided into federal, regional, and rural networks. The SCT is in charge of the federal network, while the regional network is the responsibility of state governments. Since 2007, an investment of over $17 billion has been allocated to over 16,500 kilometers of federal highways and rural roads that have been built and modernized.

With an investment of $548 million, the Mexico City Northern Bypass consists of a 224-kilometer road that eases congestion and reduces the environmental impact, with about 1 million cars no longer having to drive through Mexico City. Other developments that increase the country’s connectivity include the construction of the San Rafael-Bahuichivo road in the mountainous region of the state of Chihuahua, benefiting over 1.4 million people in the region. The Cuetzalan-Mazatepec road in the state of Puebla helps reduce traveling time from 2 hours and 20 minutes to just 40 minutes.

AIR TRANSPORT

Mexico has one of the most developed airport infrastructure networks in Latin America, and is ranked eighth in the region by the World Economic Forum (WEF), with more than 80 airports throughout the country. For two consecutive years, Airports Council International (ACI) has ranked Mexico’s second biggest airport in Cancún as the best in Latin America and the Caribbean.

Private companies like Aeropuertos y Servicios Auxiliares (ASA), and Aeropuertos del Sureste (ASUR) manage most of Mexico’s airports, although Mexico City International Airport (AICM) belongs to the government. According to its General Director, Héctor Velázquez y Corona, Mexico City is becoming the main hub for transportation routes from Europe, the US, and South America, with 32 million passengers in 2011 and an expected 5% increase for 2012. “I believe that we are assuming an important role in terms of transportation and logistics, due to our geographic location,” he said. As Velázquez sees it, “the sector will continue to grow year by year, and make up a larger share of Mexico’s economy.”

Under the NIP, a new international airport, Mar de Cortés, located in the state of Sonora, was completed in 2009. The current administration has also built four new terminals in Mexico City, Monterrey, San José del Cabo, and Cuernavaca. It has also modernized 13 terminals across the country, and built a second runway at Cancún airport.

RAILWAYS

Mexico has been a pioneer in involving the private sector particularly in the financing and operations of railways. The rail industry was privatized in 1997, and according to the Mexican Rail Association (AMF) the sector has grown at an average of 8% annually ever since.

The main rail companies will invest between $350 million and $400 million annually in infrastructure and new equipment. Ferromex, which was the second line to receive a concession after the industry was privatized and has been an essential part of the development in the industry, is investing $180 million in 2012. This investment represents 15% of its total revenues and follows an important capital investment of $330 million the previous year, which included the purchase of 44 locomotives.

Mexico’s freight railway system extends across most of the country, connecting major industrial centers with ports and rail connections at the US border. The railroad’s share of freight movement in Mexico has grown from 20.4% in 1999 to 26.3% in 2011. As the Director General of Ferromex, Rogelio Vélez, told TBY, the railroad is the only one that has increased its participation, from 8.9% in 1999 to 15.2% in 2011. As Vélez sees it, “the main challenge is to attract enough investment to take advantage of the opportunities and growth of the industry.” The agriculture and automotive segments represent the highest percentage of revenues, with 30% of trade volume each. With a 45% growth projection for the automotive industry over the next two years, an important investment will be required in order to increase capacity. More capacity is also required to move more crops. “We don’t move everything we have the opportunity to transport,” he added.

At the same time, the government plans to build 1,418 kilometers of railroad, as well as increase the average speed of the railway system from 24 to 40 kilometers per hour. Other initiatives include the construction of 64 overpasses and underpasses, the development of three bypasses and four border railway crossings with bypasses, as well as the development of 10 new multimodal corridors, including the construction of 12 intermodal cargo terminals and the start up of the Punta Colonet project.

SEA & PORTS

Mexico has 9,330 kilometers of coastline, of which 7,338 kilometers face the Pacific Ocean and the Gulf of California, and the remaining 2,805 kilometers front the Gulf of Mexico and the Caribbean Sea. Mexico has a total of 116 seaports and 10 river ports, with the four major seaports concentrating around 60% of the merchandise traffic. These are Altamira and Veracruz in the Gulf of Mexico, and Manzanillo and Lázaro Cárdenas on the Pacific Ocean.

Among the top companies dominating the Mexican shipping and logistics industry is TMM Corporation. As TMM Corporation’s Senior Managing Director of Maritime Business, Luis M. Ocejo, told TBY, the decision to increase the number of terminals will be very beneficial for the country, which should expand its trade horizons beyond the US market. “If we are going to focus on Europe and Asia, we need to have the ports to accommodate that,” he said. Ocejo, who is also the president of the Maritime & Ports Counsel (Comport), emphasized the importance of cooperation between the government and private companies in developing the industry, but insisted that more action needs to be taken in order to increase the number of operators and terminals. “That is the key in order to be more efficient and competitive, and that is what we are fighting to get,” he explained.

The government has updated Mexico’s port infrastructure, investing in new specialized terminals and industrial facilities. It plans to build five new ports and expand 22 more, build 13 cruise-ship docks, and increase the container terminal capacity from 4 million to 7 million TEUs.

Finally, a $4 billion seaport to be completed by 2014 is planned for Punta Colonet. This seaport could transform the farming village into a cargo hub to rival the ports of Los Angeles and Long Beach. It will be key for a new shipping route that will link the Pacific to America’s heartland, where containers from Asia will be offloaded before they are transported to their destinations, providing a major boost to Mexico’s shipping industry.