A new railway connection is set to link Mexico with the US and Canada. Canadian Pacific Kansas City (“CPKC”) will be the resulting entity from the USD 29 billion merger between the North American cross-border railroad companies Canadian Pacific Railway Ltd. and Kansas City Southern (“KCS”). The deal will combine the two railroads, creating a network to connect the US, Mexico and Canada.
Mexico will benefit from the deal particularly due to greater competition with road transport services, improved sustainability as CPKC has agreed to comply with the Paris Climate Agreement, and a stronger freight transportation connectivity which will enhance regional trade.
An executive at a Mexican railway company was delighted, “Many industries could benefit from this, from the primary sector to auto parts. It’s a win for security, time, logistics and volume. You give diverse industries the opportunity to get products to and from all over North America in an agile and safer way with excellent routes and quick access to vital seaports and industrial hubs. It’s going to be great.”
“It’s a win for security, for time, for logistics and volume […] It’s going to be great.”
Executive, Railway company, Mexico
However, KCS is not expected to make any immediate major investment in Mexico, as it will continue to use existing infrastructure. Notably, there are three specialised intermodal terminals in Monterrey, San Luis Potosí and Toluca which also connect the network to the main Lázaro Cárdenas and Veracruz ports.
In addition to grain, automotive, auto parts and energy sectors, retail products are expected to benefit the most from the resulting railway integration. Óscar del Cueto, president of KCS Mexico argued that retail companies favour the transportation of their products by train, which are able to transport full containers unloaded from vessels and preferring road vehicles for the final kilometres of their deliveries.
Mexican President Andrés Manuel López Obrador (“AMLO”) has not made any public comment on the creation of CPKC. However, he is a strong advocate of developing railway projects in the country. AMLO has planned 2,000 kilometres of railway infrastructure, resuming projects originally conceived by his predecessor Enrique Peña Nieto and promoting new ones to connect Mexico City with the main ports of the country.
The railway executive commented, “To guarantee AMLO’s support, it is important that the United States-Mexico-Canada trade agreement (USMCA) runner represents an achievement for the 4T (Government’s fourth transformation), without that medal, they will not attract his support.”
“The main challenge, as in all large infrastructure works in the country, is to guarantee the right of way.”
Former transport advisor to the Mexican government
Another challenge is related to the right of way, according to a former transport advisor to the Mexican government, “The main challenge, as in all large infrastructure works in the country, is to guarantee the right of way. The SCT (Secretariat of Communication and Transport) is practically inoperative, they have not even been able to resolve the right of way for their own works, entire sections have been stopped by opposition from local residents.”