INTRO: With 14500 km of the National Railways of Mexico (FNM) system now operated by the private sector, FNM should see its operating role disappear by the end of this year as bids are invited for the remaining short lines. Head of Restructuring Jorge Machado outlined progress so far and the tasks yet to come to Robert Preston

With three major systems, one short line and a Mexico City terminal company already in the private sector, the next phase of FNM privatisation began on March 24 when expressions of interest were invited for four route groups to be operated under 30-year concessions. Technical and financial bids for the Tijuana - Tecate, Nacozari, Chiapas/Mayab and Oaxaca railways are due by June 10, and Head of Restructuring Jorge Machado expects FNM privatisation to be concluded by September this year.

The Chiapas/Mayab and Oaxaca concessions include traction and rolling stock, but future operators of the Tijuana - Tecate and Nacozari routes, currently operated by RailTex and Ferromex respectively, would be required to provide their own equipment. Machado thinks that the Southern system with its industrial traffic base could be divided between the Mexico City terminal company (Los Reyes - Cuautla) and a possible fifth short line concession (San Lorenzo - Atencingo), depending on market response.

The route across the Isthmus of Tehuantepec from Medias Aguas to Salina Cruz is seen to have potential as a container landbridge and is to remain in public ownership. It may in time pass to the port authority charged with developing Coatzacoalcos and Salina Cruz, which would manage and maintain the infrastructure for operators such as Ferrosur or the Chiapas/Mayab concessionaire. Any lines not included in the Tehuantepec route or the five groups on offer to the private sector are likely to close.

Growth on the main lines

Considering the privatisation process to date (Table I), Machado says that it is perhaps ’a little early’ to draw any firm conclusions but believes that ’the balance is favourable’. As controls on public spending grow tighter, the railway subsidy requirement is being reduced considerably. In business plans submitted during the bidding process, the private operators committed themselves to investment totalling 19·6bn pesos over the first 10 years of the concessions (Table II), investment which the Mexican government was not in a position to undertake itself.

Investment in new equipment and upgrading infrastructure is crucial to winning back traffic lost to road, and Machado has the impression that traffic growth following privatisation has been ’considerable’. With the concessionaires working to improve productivity, service quality, safety and security, preliminary figures prepared by the government’s Secretariat of Communications & Transport (SCT) suggest that the railways carried 74·9 million tonnes of freight in 1998. This compares with 52·5 million tonnes in 1995 when FNM had 12·5% of the national land transport market.

SCT estimates suggest that 79·7 million tonnes will be carried in 1999 with a market share of 17·6%. Machado thinks that the 24% share historically enjoyed by FNM is ’perfectly achievable’ for the private operators, although the sharp increases in traffic registered immediately after start-up stand to level off further into the 50-year terms of the three major concessions. The government receives 0·5% of each concessionaire’s gross income; railway infrastructure remains the property of the nation.

The three main concessions were structured to give a certain degree of competition, with Mexico City served by TFM, Ferromex and Ferrosur through the jointly-owned terminal company and more than one operator serving major traffic generators such as the port of Veracruz and the industrial city of Monterrey. And although the privatised structure makes, for example, provision for TFM to exercise trackage rights over Ferromex to Guadalajara and in return grants Ferromex rights over TFM to Monterrey via San Luis Potosí, Machado notes that at present the competitive impulse comes mainly from road. Trackage and haulage rights could provide some captive customers with a modicum of choice, but Machado says that the major concessions have still to reach agreement on exercising these rights, with the question of fees being the principal issue to be resolved.

Residual activities

In addition to the short lines, FNM is still responsible for the railway telecommunications network. Machado says that its sale is ’pending’ as options for its disposal are discussed. He suggests that this activity would be too large for one of the major concessionaires to take on by itself, so it may be sold to a grouping of two or three or to a third party who might look to market spare capacity outside the railway.

One of the most notable aspects of Mexican rail privatisation has been the fact that all labour liabilities have been assumed by the government. When concessions have been transferred to the private sector, all FNM staff involved have retired or been given what Machado sees as a favourable redundancy package. The incoming concessionaires have then been free to hire staff according to their needs and their recruitment preferences. As a result, FNM staff numbers had fallen from around 50000 before privatisation to 5000 at the end of February this year.

Machado expects that a ’few hundred’ personnel involved in supervising the concessions will transfer to SCT, with FNM ’no longer an operating railway’ after the end of 1999. Other staff are involved in selling off property such as the wagon works at Aguascalientes and the combined locomotive and wagon facility at Matías Romero, expected to be put on the market in April or May alongside the short lines, as well as the rolling stock surplus to the requirements of the new concessionaires.

Surplus stock includes a large number of coaches, as FNM’s once-extensive network of passenger and mixed trains has been contracting over recent years. As FNM had determined that it was uneconomic for the government to continue to support passenger trains on routes where there was an alternative road service, official policy has been to maintain them only where the lack of roads makes them a social necessity. By July this year, passenger service will be provided only on the Chihuahua - Los Mochis, Piedras Negras - San Luis Potosí, Ciudad Frontera - Sierra Mojada, Torreón - Aguascalientes, Ciudad Victoria - Tampico, Mexico City - Veracruz - Coatzacoalcos, Puebla - Oaxaca and Campeche - Ciudad Hidalgo routes.

Where these services operate over routes now in the private sector, the concessionaires provide haulage for FNM which takes the fares, except in the case of the Chihuahua - Los Mochis service which is operated by Ferromex and the Ciudad Frontera - Sierra Mojada service provided by the Coahuila-Durango concessionaire. On the Oaxaca and Chiapas/Mayab routes, bidders will be asked to operate the existing passenger service with government support. n

CAPTION: Rail freight’s market share is expected to reach 17·6% this year

CAPTION: Double-stack container freight is probably the most promising business for Mexico’s railways, with agreements in place with US and Canadian rail operators providing a North American marketplace for the rail mode

CAPTION: A few passenger services have servived. This is the Mexico City - Veracruz service

CAPTION: TFM is trading-in its 22 electric locos for new GE AC4400 diesel-electrics, while the remaining 11 have been offered for sale by FNM. Despite this, the overhead electrification remains in place and energised to prevent cabling being stolen

TABLE: Table I. Concessions awarded to date

Railway Length No No Freight traffic2 Staff Concessionaire Winning Hand-

km of of million million bid3 over

locos vehicles1 tonnes tonne-km m pesos

Northeast 4282·7 371 10800 24·5 15482·0 8736 TFM 11072·0 23/06/97

Pacific-North 6524·3 405 12789 29·7 18349·2 14011 Ferromex 3940·9 19/02/98

Ojinaga - Topolobampo4 943·2 30 479 1·9 753·0 1366 Ferromex 414·0 19/02/98

Coahuila - Durango 973·9 21 754 3·7 692·2 675 Coahuila - 180 31/03/98

Durango SA de CV5

Mexico City Terminal 296·8 46 192 2·8 763·4 3375 Terminal Ferroviaria - 30/04/98

del Valle de México

Southeastern 1479·1 170 4373 9·7 3697·9 4974 Ferrosur 2898·0 17/12/98

Note: Figures for length, locomotive and vehicle fleets, freight traffic and staff refer to 1996 prior to privatisation

1. Includes wagons for commercial service and internal use, cabooses and passenger coaches

2. Includes trackage rights

3. TFM’s bid was for 80% of the Northeast and 25% of the Mexico City Terminal. Bids for the Pacific-North and Southeastern systems were both for 100% of each system and 25% of the Mexico City Terminal

4. Ferromex exercised its option on this route as winner of the Pacific-North concession

5. Consortium of Industrias Penoles SA and Grupo Acerero del Norte; operation contracted to Genesee & Wyoming

TABLE: Table II. Investment commitments over first 10 years

Concessionaire Pesos, m

TFM 8718·9

Ferromex (Pacific-North) 5497·6

Ferromex (Ojinaga - Topolobampo) 638·3

Coahuila-Durango 319·5

Ferrosur 4450·0

Mexico City suburban

With Mexico City now covering some 1500 km2 and 16·3 million inhabitants in 1997, FNM’s Head of Restructuring Jorge Machado says that the need for commuter services in this metropolis is ’unquestionable’. In the face of serious air pollution caused principally by the 3·5million vehicles using the roads of the Federal District and surrounding municipalities, the Secretariat of Communications & Transport is developing plans for three commuter systems totalling 239·5route-km.

Each comprises a core route and branches, and the first would make use of the double-track electrified route from Mexico City’s Buenavista terminus to Querétaro and Mariscala. It is hoped that all three systems would eventually be electrically-operated, but this will depend on the availability of funding as some infrastructure investment by the government or city authorities will be required.

Total cost of the scheme is in the order of US$400m, and SCT hopes to offer a 30-year operating concession for the first system this year. Responsibility for providing rolling stock would rest with the operator.

Mexico City commuter service proposals

System 1 77 km

Buenavista - Cuautitl