Mexico Wants to Compete with the Panama Canal Using Trains

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Mexico Wants to Compete with the Panama Canal Using Trains

Posted 12/04/2024

With drought at the Panama Canal and conflicts in the Red Sea and other global shipping lanes disrupting trade, officials in Mexico believe that they have a golden opportunity for the country’s $2.8 billion Isthmus of Tehuantepec’s Interoceanic Corridor (CIIT) project.  The initiative is converting the isthmus in southern Mexico, which represents the shortest distance between the Gulf of Mexico and the Pacific Ocean in the country, into a 188-mile rail corridor that could handle up to 1.4 million twenty-foot equivalent units annually by 2033.  The project could transform the Isthmus of Tehuantepec into a hub for global trade.The Isthmus of Tehuantepec dry corridor offers a promising alternative to traditional routes like the Panama and Suez Canals.  By leveraging its geographic advantage, Mexico has the potential to become a major logistics hub, serving not only North America but the global economy.  Investments in technology will be key to the CIIT project’s viability.  The success of the project critically depends on the implementation of cutting-edge technology at the ports of Coatzacoalcos and Salina Cruz, as well as on the railways. This technology must be capable of handling and transporting an immense volume of containers efficiently, ensuring seamless movement between the ports. Achieving this goal requires collaboration between the government and the private sector.

While Mexican authorities are bullish on the CIIT’s prospects, global logistics operators said they are skeptical it could ever replace or even compete with the Panama Canal, which handles about 14,000 vessels and 8 million TEUs annually.  The challenge really is that the Panama Canal is about 50 miles long, and the railroad to get from the Pacific to the Gulf is around 200 miles, so it’s a much longer track.  Another challenge — how many containers can the railroad move?  It’s also about the ports on either end, whether they’re able to unload those containers; do they have the appropriate infrastructure?  

The CIIT project could offer another option when global disruptions or droughts interrupt trade flows.  At the least it provides an alternative and I think a lot of companies are looking for that.  The Canadian Pacific Kansas City Southern railroad is looking to start to invest some money on the Panama side to build more infrastructures and provide an alternative.  For the CIIT project to become a viable complement to the Panama Canal, Mexico, the U.S. and other countries need to cooperate and invest in technology, infrastructure and planning in the region.

There has to be coordination, not just with the Panama Canal authorities or the Mexican railroad authorities.  There should also be cooperation between the origin and destination ports and the ocean liners.  It’s important for countries like China and the U.S. to make sure that trade routes continue to operate and it’s profitable to the companies on either side of the nations.  More cooperation between shippers and global port facilities could benefit shipping and transportation lanes around the world.

If I can take 10%, 15% or 20% of the traffic that is going through the Panama Canal headed to Houston and actually move it intermodal using rail, by docking the ship in Long Beach and moving it over rail car, then all of a sudden, the viability of the Port of Houston starts changing.   There’s a lot of cooperation and coordination that is needed.  There is a strong belief that if all the stakeholders come together, they will come up with a much better solution and a much more efficient, faster, effective and more profitable solution for everyone.

CIIT (Corredor Interoceánico Istmo de Tehuantepec)

https://www.newsroompanama.com/news/mexico-wants-to-compete-with-the-panama-canal-using-trains-1