(Bloomberg News circulated the following story by Thomas Black on January 25, 2010.)
MEXICO CITY — Mexico’s two largest railroads will have to resolve a dispute over using each other’s tracks within a month or the government will step in and impose a settlement, said Humberto Trevino, deputy minister of transportation.
Kansas City Southern de Mexico, the Mexican unit of Kansas City Southern, and Ferrocarril Mexicano, the railroad known as Ferromex owned by Grupo Mexico SAB, are close to reaching an agreement after more than a decade of dispute, Trevino said at a rail conference today in Monterrey.
“If it’s not resolved through an agreement between the companies, which the law accounts for, the government without a doubt will resolve this unilaterally,” Trevino told reporters.
Ending the dispute over so-called trackage rights by setting lease fees will improve efficiency and give customers more options to move cargo, Trevino said. The government played a pivotal role in pushing for an agreement, said Lorenzo Reyes Retana, deputy general director of operations for Ferromex.
“We’ve identified very clearly the ways in which we can overcome our differences,” Reyes Retana said.
An agreement will allow the railroads to offer new routes at clearly defined costs, said Oscar del Cueto, vice president of operations for Kansas City Southern de Mexico.
“In the next few days we should have a solution,” Del Cueto said. “The customer will receive the most benefits.”
Kansas City Southern fell 22 cent to $30.79 at 4:15 p.m. in New York Stock Exchange composite trading. Grupo Mexico rose 27 centavos to 28.28 pesos in Mexico City trading.
Investment Outlook
Kansas City Southern will increase investments in Mexico 15 percent this year to $121 million, mostly to improve infrastructure, del Cueto said. Cargo volumes for the company may rise 10 percent this year after a 24 percent decline in 2009, he said.
Ferromex will raise investment 26 percent this year to $121.6 million, Reyes Retana said. Cargo volume may decline 1.4 percent in 2010 after it dropped 2.4 percent in 2009, he said.
Ferrosur, a railroad which Grupo Mexico agreed to buy in 2005 from Carlos Slim’s Grupo Carso SAB, plans to invest 503 million pesos ($39 million) in 2010, almost double the 264 million pesos it spent in 2009. The acquisition of Ferrosur is being contested by Mexico’s antitrust agency.
Ferrovalle, a railroad that operates around Mexico City, plans to invest $12.5 million this year and Ferrocarril del Istmo de Tehuantepec, a government-owned hauler in southern Mexico, will invest $19.9 million.