Freight Rail Transport in Mexico and Its Growth Rate

By @dM1nBlog
Like many countries globally, Mexico is in a delicate position due to various social and political challenges, while still dealing with the aftermath of the 2019 pandemic. Freight rail transport is no exception to these crises, although it was one of the least affected sectors. Thanks to the 2022 National Railway Program, in which the federal government is heavily investing in rail transport—both freight and passenger—the rail industry is poised for a revival in the coming years. This project includes six projects under construction, four in the early stages, and five more being studied. Altogether, these efforts involve an investment of 672 billion pesos, which will add 4,413 kilometers to the country’s rail network.

The Connection Between AIFA and the Railway Industry

After seeing the growing confidence in freight rail transport, it’s encouraging to note that one of the oldest industries is experiencing a resurgence after years of being underestimated. As an example of this positive trend, freight volume saw 11.5% growth in the first quarter of the year, with 77.09 million tons transported by rail. Other noteworthy figures related to the leading railway companies include:

  • Ferrovalle experienced a 69.8% increase, moving 1.74 million tons.
  • Kansas City Southern de México (KCSM) reported 46.03 million tons transported at the end of 2021, a 4% increase compared to 2019.
  • Admicarga reported 140,000 tons transported in 2019 and 200,000 tons in 2021, marking a 42.8% rise.

The types of goods most frequently transported via freight rail include those from the industrial, agricultural, and mining sectors. In the current landscape, an emergency measure was recently announced to help curb inflation through the use of the rail system.

Capping Rail Freight Rates

You’ve likely noticed rising prices for basic groceries and food products at the supermarket in the past year. In an effort to combat inflation, the federal government introduced the Anti-Inflation and Scarcity Package. The measure, known as the “Emergency Directive for the Welfare of Freight Rail Transport Users,” is intended to last for six months. It would impact the country’s major private concessionaires, KCSM and Ferromex, who handle nearly all freight transport. This action is quite complex, but in short, it would fix service charges and interconnection fees, theoretically reducing the cost of essential goods like corn.

It’s important to remember that rail transport is responsible for moving 83% of soy and 66% of wheat in Mexico. However, a challenge for this emergency directive is that only 26% of total rail cargo is agricultural, with the rest coming from other types of freight transport that will not face rate caps. Some experts argue that the impact of this measure may be minimal and inefficient for improving the economic conditions of Mexicans.

What do you think of the government’s Anti-Inflation and Scarcity Package? Do you believe it’s unnecessary, or do you think freight transport could offer some help in controlling inflation? Share your thoughts with us!

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