For many years ‘El Chepe’ was the only passenger train that operated in Mexico, traveling through part of the impressive Tarahumara mountain range, in the north of the country.
This changed in September, when Andrés Manuel López Obrador inaugurated half of the route (the rest is still under construction) of the Mexico-Toluca interurban train.
But the real giant step for Mexico’s railway infrastructure will come in December, when the first stage of the famous and controversial Mayan Train is scheduled to come into operation in the southeast of the country, one of the star projects of the Mexican president.
However, another emblematic work of his six-year term that has gone much more unnoticed is that of the Tehuantepec Isthmus Corridor, which will revive kilometers of old train tracks to transport passengers before the end of the year between the states of Oaxaca and Veracruz.
But it is not its passenger service that is creating greater expectations but rather the capacity it will have to transport goods between the Atlantic and Pacific oceans, given that the train line runs through the narrowest part of Mexico, connecting both coasts.
Considering that the Panama Canal, the dominant interoceanic waterway on the American continent, is going through one of its worst crises due to water scarcity, which has led to restrictions on ship traffic—since November only 31 will be able to transit a day—they are not Few have turned their gaze to the new transportation option that is now opening in Mexico.
In this scenario, will the Interoceanic Corridor train of the Isthmus of Tehuantepec be real competition for the historic Panama Canal as a key point in global maritime merchandise trade?
Competition for the Panama Canal?
Precisely the Panamanian canal was the reason for the first failure in the history of the Mexican corridor.
At the beginning of the last century, 60 daily trains ran through it from coast to coast after the ports of Salina Cruz and Coatzacoalcos were built, and General Porfirio Díaz inaugurated it in 1907.
But when the canal opened in Panama just seven years later, the Mexican alternative was forgotten.
Now, the Mexican government wants to resurrect the corridor by reviving the old roads and building new infrastructure. In September, López Obrador symbolically inaugurated the freight railway line to the joy of the residents of the towns on the isthmus who saw trains running again more than a century later.
Asking about how the current crisis in the Panama Canal could influence the success of the new Mexican corridor, the president considered that it could be a great advantage.
“A plug has already been made there [de barcos a la espera de cruzar]. This has to do with world trade and anyone knows that the option in such a situation is the Isthmus of Tehuantepec. That is why we are working on this project, because it is an alternative,” he said in August.
In a virtual meeting with BBC Mundo and other international media, the administrator of the Panama Canal, Ricaute Vásquez, acknowledged in September that “the Mexican solution could definitely be a potential threat” to the water problem.
However, he clarified that “the only alternative that could replace the Panama Canal is if we were in a situation where there was no water at all, and that is something that we do not anticipate happening,” since they trust that the Central American country soon approve the construction of a new reservoir that guarantees water for the operation of the infrastructure.
Advantages and disadvantages
However, both Mexican and Panamanian experts consulted by BBC Mundo agree that the Isthmus of Tehuantepec train could be an alternative to alleviate the high demand for ships that currently want to cross through Panama, but in no case do they see it as direct competition in economic terms.
“I don’t think it’s a threat. In the Panama Canal it is not that there is little demand for ships, quite the opposite, so creating an alternative option I do not think will have a great impact or take away mobility from the canal. In any case, what I would take away is what is extra,” analyzes Panamanian economist Felipe Argote.
Benjamín Alemán, former director of the Rail Transport Regulatory Agency in Mexico, considers that the new corridor does not yet have the necessary infrastructure to attract the deep-draft ships that transit through Panama.
“Ships with smaller loads, not necessarily containers, could arrive in Mexico and go to other destinations in the United States other than the east coast. It could even be interesting for companies from Mexico that want to distribute products in the Mexican southeast,” he tells BBC Mundo.
The route between Asia and the US east coast is, by far, the most used by customers traveling through the Central American channel. And that is why the location of the Mexican corridor, closer to these destinations, would be a point in its favor.
However, the time saved on that journey through Mexico could be lost again if we consider that, in addition to the time necessary to unload the merchandise from the ship to the train and load it on the other side, the isthmus that is crossed is much wider than 80 km long of the canal.
In addition, Panama also has train tracks for customers who prefer that option instead of crossing directly by boat, which usually takes between eight and ten hours.
“Maybe due to the current problem with the water crisis in the Panama Canal, where the average wait to pass through in September was almost eight days, which led some ships to pay millions in auctions to avoid lines, Some companies measure time and the option of Mexico may be more interesting and cheaper for them,” Argote acknowledges in an interview with BBC Mundo.
However, far from being competition, he believes that the fact that the Mexico corridor is so close to Panama would be complementary.
“Having more alternatives in the area, ships will not deviate from this route instead of opting, for example, for the Suez Canal. The second alternative now could be Mexico, and that benefits us all,” says the Panamanian specialist in business administration.
Investment in industrial parks
Leaving aside the temporary water crisis that the Panamanian canal is experiencing, experts agree that there is a measure that the Mexican corridor must bet heavily on if it wants to be attractive to companies that now transit through Panama.
“To compete with the time it will take for companies to load and unload the train, Mexico has to lower rates to be competitive,” says Luis Antonio Andrade, doctor in economics and researcher at the La Salle University of Mexico, taking advantage of the fact that that the investment in this project could be reduced thanks to the reuse of existing railway tracks.
“In fact, considering the demand in Panama, they will continue to maintain their passing prices there, which is why I don’t see it as direct competition because it won’t make prices move,” he adds.
Another aspect to be considered by Mexico to attract clients, analysts say, is to guarantee security on this land route with respect to possible crime, road blockages or the susceptibility of suffering natural disasters in the area such as hurricanes and earthquakes.
But, in addition to the railway, the Interoceanic Corridor project of the Isthmus of Tehuantepec is presented as a multimodal logistics platform that also includes other infrastructures such as a dozen industrial parks. There it is expected that the companies that transport their containers can settle, transform their raw materials along the way and generate hundreds of jobs in the area.
According to Andrade, “those other attractions of generating industry and foreign investment are what the Panama Canal does not have and what will be the real business of the isthmus train in Mexico.”
According to Mexican government sources in July, only the first five development poles will achieve private investment of around US$7 billion. In addition, they announced tax subsidies for companies that settle in the area.
Benjamín Alemán, founding partner of the economic consulting firm Alttrac, agrees that this could be the greatest benefit of the corridor project for the benefit of the population of one of the areas of Mexico with the highest rates of poverty and historically forgotten by the authorities.
“In addition to the train, I see it as an investment project in order to improve the economic development of the southeastern Mexican region. More than thinking about whether it can compete with the Panama Canal, I think it is something positive to bring infrastructure to this area and make it more attractive for investment in general,” he concludes.
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