FROM HERE TO THERE

Mexico 2017 | TRANSPORT & SECURITY | REVIEW

Hefty public investment in transportation and logistics infrastructure continues to be bolstered by avid private-sector spending.

2016 was a landmark year for Mexico's transportation and logistics industry, as the Mexican government announced infrastructure as a key priority. The current administration's National Infrastructure Program (PNI) for 2014-2018 aims at an investment target of USD500 billion for a total of 743 projects in six strategic sectors—communications and transport, energy, water, health, urban development, and tourism. Overall, 17% of the plan, or USD85 billion, will be allocated toward the transportation and logistics sector in particular.

Transportation's overall GDP contribution grew by 4.3% in 2015 yet slowed to 2.8% in 2016, likely due to the devaluing of the peso amid a politically challenging environment. Still, experts expect a bounce back in 2017, as most recent data points toward ongoing upward trends in passenger and cargo numbers. According to the Secretariat of Communications and Transportation (SCT), the number of passenger trips by air rose by 12.5% to 73 million in 2015, while the number of people traveling by rail increased by 11.9% to 54 million, and total cargo rose by 2.2% to 935 million tons, of which 56% was carried by road, 31.2% by sea, 12.8% by rail, and 0.1% by air.

According to transport secretary Gerardo Ruiz Esparza, between 70% and 75% of the resources funding Mexico's public infrastructure is sourced from the private sector. Total infrastructure investment in Mexico grew 23% from USD13.4 billion in 2011 to over USD16 billion in 2016. As far as public contributions go, the SCT has committed to investing USD4 billion for work related to its departments, with approximately USD3.7 billion reserved for infrastructure, transportation, and ports.

In total, there are 117 ports in operation in the country, 59 of which are located in the Gulf of Mexico region. Cayo Arcas comprises the largest share of port activity, with 14%. The ports of Manzanillo, Lazaro Cardenas, and Coatzacoalcos are tied for second place with 10%, followed by Veracruz, Altamira, and Isla de Cedros, which comprise a respective 6% of all port activity in the country. The SCT reports that important advancements have been made in the consolidation of both Pacific and Gulf of Mexico ports, an initiative that is set to transform Mexico into an even stronger logistics platform. Now, four years in, the consolidation projects are well underway, with multi-modal links supporting the growth of maritime cargo to reach 405 million tons in 2016. The SCT's wider goal is to double Mexico's port capacity, adding more than 500 million tons by 2018.

Meanwhile, Mexico's rail network stretches 15,389km, making it the world's 18th longest. Privatized in the 1990s, the rail network provides freight and passenger service throughout the country, connecting major industrial centers with air and sea ports, as well as the US border. Proposed work for 2017 includes devising ways the rail network can reduce its costs, as well as support sustainable urban development across the country's largest cities.

In the aviation segment, there are 21 registered airlines operating a fleet of approximately 357 aircraft in total. Mexico is home to 243 airports with paved runways, the busiest of which is Mexico City International Airport (AICM). Under the guidance of the public sector, major renovations are underway to increase the capacity and improve the design of AICM. Government initiatives for 2017 are also focused on attracting private investment toward the improvement of airport and aviation infrastructure. To expedite that process, the government is signing new bilateral air transportation agreements that aim to increase connectivity and improve the level of aviation services in the country.


THE ROAD GOES ON

There are over 1.4 million km of roads in Mexico, with annual traffic density of nearly 500 million vehicles. The peak year for land transportation traffic was in 2015, when an average daily rate of over 1.5 million vehicles was recorded. 2016 was characterized by a generous budget of USD10.5 billion for the enhancement of this road infrastructure, part of a detailed plan for land transportation laid out by the SCT. Among the work planned for the sector is the construction of 52 new motorways, 34 of which have already been delivered. There is also ongoing work to modernize 80 existing roads, requiring an investment of more than USD4 billion. Thus far, 45 projects exceeding a total of 1,600km have been completed, for a total investment of USD1.6 billion.
Leading the charge is the Federal Highways and Bridges (CAPUFE) agency, a government entity with over 56 years of experience in managing, operating, and maintaining toll roads and bridges. CAPUFE currently operates 44 toll roads with a total length of 15,146km, including the principal highways of México-Cuernavaca Acapulco, México-Querétaro-Irapuato, México-Puebla-Veracruz, Monterrey-Nuevo Laredo, and Durango-Mazatlán. CAPUFE is also in control of 32 toll bridges, 14 of which are located on the borders with Guatemala and the US.

FLY AWAY

With over 1 million jobs and a USD27.4 billion contribution to Mexico's GDP, the aviation sector is a major force of Mexico's economy. The aerospace manufacturing industry has registered exponential growth over the last decade, while the 2005-2016 period saw the number of companies and institutions engaged in the sector rise from 60 to 330. Aerospace exports continue to grow at an annual average rate of approximately 14.5%. While manufacturing is the main source of income and activity, local producers feed into the growth of the sector and boost investor confidence when it comes to building new airports, updating existing infrastructure, or expanding airline routes and fleets.
Since the early 1990s, the number of domestic passengers has grown at a yearly rate of 4.2%, with international passenger numbers expanding by 6.4% per year. However, that trend reversed in 2016, when domestic passenger traffic rose by 12.4% to 41.9 million, and international traffic increased 8% to 40.5 million. Meanwhile, per capita flights taken by the middle- and upper-class population demographic register at 0.6 per annum. In the domestic travel market, passenger traffic was distributed between Aeroméxico (31.2%), Volaris (27.5%), InterJet (21.7%), and VivaAerobus (14.3%).

Rising demand has spurred on what could be considered the most significant development in the aviation segment: the expansion of Mexico's largest airport, AICM. The existing facility is already under pressure to cope with exponential growth in air traffic. Through collaboration between Foster+Partners, FR-EE (Fernando Romero Enterprise), and NACO, the 470,000-sqm airport will become one of the world's largest. With the concept “Airport of the Future,” architectural firm FR-EE designed the building with the aim of “revolutionizing airport design and the experience of traveling.” Upon its completion, the building is expected to evolve into an icon: modern, sustainable, and LEED-certified. Three runways capable of handling over 60 million passengers per year are planned for the airport, which can then be expanded to six runways and 120 million passengers per year. It is scheduled to open in 2020.

Perceiving Mexico's massive air transportation potential, Delta Airlines and Aeroméxico recently announced a cooperation deal to transport cargo to and from the US. The two airlines signed an agreement in which customers can work with either carrier to transport cargo between the two countries using an expansive network of flight and trucking options. Moreover, in February 2017, Delta announced its intentions to purchase 32% of Aeroméxico, which will increase the company's ownership share to 49%.
For the third time, Mexico welcomed delegates to the International Air Transport Association's (IATA) 73rd Annual General Meeting in 2017, with leaders of the global air transport industry gathering in Cancún. More than 900 delegates and media participated in this year's event, which was hosted by Aeroméxico.

SAFE WITH ME

Mexico's logistics operators are capitalizing on new transportation links and improved connectivity by expanding their operations at the country's primary ports and borders. However, logistics activity in the country requires heavy concentration on security, and in 2017, new technology has come into play as a method to improve operations. Additionally, opening new offices and taking advantage of face-to-face interaction are major focuses for the coming year.

GRUPO AMPM is one of the largest and oldest mail delivery companies in the country, constantly expanding its operations to reach new areas faster and at a lower cost. The company employs over 5,000 people, establishing itself as the number-one employer in logistics. “We offer truly great opportunities in terms of jobs for couriers and messengers and need to lead by example. In this sense, we are in the process of continuous improvement within our human resources structure,” Pablo Moreno, President of GRUPO AMPM, told TBY. The company is currently in the process of expanding its network to open offices in every area of the country by 2020, as well as an increase revenues by 15-20% during the next five years. To that end, Moreno explained that the company “needs to better approach those market niches where other companies do not provide high-quality services, as well as those market niches where demand is not currently being met by the companies in the industry.”
TIBA is another of the most established logistics operators in Mexico, with the largest geographical coverage. Following the trend of being physically present in all the areas in which it operates, TIBA is “very focused on the human component of logistics,” Justin Facey, Regional Director of TIBA, explained to TBY, adding, “This is why we have many offices and will continue to open new ones as we see where our clients need us to be. I see us having total coverage of Mexico and the whole of Central America and the Caribbean. My goal is to continue to establish TIBA as the major player in this part of the world.” The company currently has 10 offices and nearly 300 staff in Mexico, and is present in Cuba, Panama, El Salvador, Guatemala, and the US.

Security provider SkyAngel pioneered the sector by implementing a GPS tracking system to help its clients transport cargo. Roche and Maersk Line are two important customers that rely on SkyAngel to protect their deliveries. “At least 70% of our clients are multinationals,” Rubén Almonte, Director General of SkyAngel, told TBY. “We have great knowledge of security in Mexico.”