Mexico Freight Transportation Report Q2 2008

At the end of November 2007 Mexican communications and transport minister Luis Tellez announced a package of new infrastructure projects including highways, airports and seaports, intended as part of President Felipe Caldern's plan to boost economic growth and reduce poverty during the remainder of his six year term in office (which runs to 2012). To some extent this was a re-packaging of earlier announcements made during the course of the year, but the administration's plans are impressive nevertheless. The National Infrastructure Plan forecasts public and private average annual investment of MXN420bn (US$38.44bn) across the 2007-12 period. It is designed to address current transport bottlenecks, which have acted as a drag on economic growth. It proposes 100 new highway projects, including the development of an interstate highway system and 4,000km of new roads in rural areas.

Three new airports are to be built, with capacity expansions at a further 31. New intermodal railway corridors will be built, taking the total up to 18 from eight at present. Three suburban passenger rail lines are also due to be built in the Mexico City area. The infrastructure plan also calls for the construction of five new seaports and the modernisation and expansion of 22 existing ports. Container handling capacity is to be boosted from 4mn teus to 7mn teus. The plan came in the context of presidential announcements aiming to boost average annual GDP growth in the country to 5%. The government also announced a 2008 budget that boosted public sector investment by 45%, the highest annual increase in over two decades, based on a tax reform package which boosted expected government revenues. Deputy finance minister Alejandro Werner said that spending on public sector investments would total around US$50bn in 2008, and would help the Mexican economy weather the expected slowdown in the US. 'These things are going to act as mechanisms to compensate for whatever might be happening externally' he was quoted as saying by Reuters news agency.

BMI's newly released Mexico Freight Transport Report notes that Caldern will encourage continuing growth in trade with the US and Canada - Mexico's North America Free Trade Agreement (NAFTA) partners - and has specifically committed himself to boosting highway construction across the country.

We are forecasting average annual road haulage growth in 2008-2012, measured in million-tonne km (mntkm), of 4.4%. Maritime freight growth will average 4.5% per annum (not least due to the increased movement of cargo through Mexican ports to avoid congestion in US ports). Over all modes, Mexican freight growth will average 5.1% in 2008-2012, ahead of GDP expansion of 3.8% a year. BMI concludes that the value of the Mexican transport and communications will rise to US$131bn by 2012, representing 11.5% of the country's total GDP.

During the presidential election campaign in 2006 Caldern spoke of trying to emulate the big transport infrastructure investment surges in European economies like Ireland and Spain, which in his view underpin their current strong growth rates. BMI rates Mexico's regulatory and competitive environments highly in relation to other regional markets. In this report, in fact, we set the country's overall freight rating score at 50.6 (out of a maximum of 100). This is a respectable score in the context of the major Latin American freight markets that we cover.

The total value of transport and communications GDP will rise to US$131bn in nominal terms by 2012, representing 11.5% of Mexico's GDP. The transport and communications sector employed 1.92mn people, or 4.6% of the labour force, in 2006. We see that figure rising to 2.04mn by 2012, although as a proportion of the labour force it will remain constant at 4.6%.