Home Business-newBusiness What is the Interoceanic Corridor and how does Mexico want to compete with the Panama Canal?

What is the Interoceanic Corridor and how does Mexico want to compete with the Panama Canal?

by Yucatan Times
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For many years, ‘El Chepe’ was the only passenger train operating in Mexico, traversing part of the impressive Sierra Tarahumara in the northern part of the country.

This changed in September when Andrés Manuel López Obrador inaugurated half of the route (the rest is still under construction) of the Mexico-Toluca interurban train.

However, the real breakthrough for Mexico’s railway infrastructure will come in December when the first stage of the famous and controversial Tren Maya is expected to start operations in the southeastern part of the country, one of the flagship projects of the Mexican president.

Nevertheless, another emblematic project of his six-year term that has gone largely unnoticed is the Isthmus of Tehuantepec Corridor, which will revive kilometers of old railway tracks to transport passengers between the states of Oaxaca and Veracruz before the end of the year.

But it’s not the passenger service that is generating the most anticipation but the capacity it will have to transport goods between the Atlantic and Pacific Oceans, as the railway line crosses the narrowest part of Mexico connecting both coasts.

Considering that the Panama Canal, the dominant interoceanic route in the Americas, is facing one of its worst crises due to a water shortage, which has led to restrictions on ship traffic—only 31 ships per day will be allowed to transit from November onwards—many are now looking at the new transportation option opening in Mexico.

In this scenario, could the Interoceanic Corridor of the Isthmus of Tehuantepec become a real competitor to the historic Panama Canal as a key point in global maritime trade for goods?

Competition for the Panama Canal?

Interestingly, the Panama Canal was the reason behind the first failure in the history of the Mexican corridor.

In the early 20th century, 60 trains crossed it daily from coast to coast after the ports of Salina Cruz and Coatzacoalcos were built, and General Porfirio Díaz inaugurated it in 1907.

However, when the Panama Canal opened just seven years later, the Mexican alternative was gradually forgotten.

Now, the Mexican government wants to revive the corridor by bringing back the old tracks and building new infrastructure. In September, López Obrador symbolically inaugurated the railway line for goods, much to the joy of the residents of isthmus towns who saw trains running again after more than a century.

When asked how the current crisis at the Panama Canal might affect the success of the new Mexican corridor, the president suggested it could be a significant advantage.

“A bottleneck has occurred there [with ships waiting to cross]. This is related to world trade, and anyone knows that the option in such a situation is the Isthmus of Tehuantepec. That’s why we are working on this project because it is an alternative,” he said in August.

In a virtual meeting with BBC Mundo and other international media, the administrator of the Panama Canal, Ricaute Vásquez, acknowledged in September that “the Mexican solution could definitely be a potential threat” to the water problem.

However, he clarified that “the only alternative that could replace the Panama Canal is if we were in a situation where there is no water at all, and that is something we do not anticipate happening,” as they trust that the Central American country will soon approve the construction of a new reservoir to ensure water for the operation of the infrastructure.

Advantages and disadvantages

However, both Mexican and Panamanian experts consulted by BBC Mundo agree that the Isthmus of Tehuantepec railway could be an alternative to alleviate the high demand for ships currently crossing through Panama, but it is by no means seen as a direct economic competitor.

“I don’t think it’s a threat. There is no shortage of demand for ships at the Panama Canal, quite the opposite. So, creating an alternative option, I don’t think will have a great impact or take away much mobility from the canal. In any case, what it would take away is the excess demand,” analyzes Panamanian economist Felipe Argote.

Benjamín Alemán, former director of the Regulatory Agency for Railway Transportation in Mexico, believes that the new corridor does not yet have the necessary infrastructure to attract large ships that transit through Panama.

“Smaller cargo ships could arrive in Mexico, not necessarily containers, and they could be bound for different destinations in the United States other than the East Coast. It could even be interesting for Mexican companies looking to distribute products in the southeastern part of Mexico,” he tells BBC Mundo.

The route between Asia and the U.S. East Coast is by far the most used by customers passing through the Central American canal. That’s why the location of the Mexican corridor, closer to these destinations, would be in its favor.

The Interoceanic Railway of the Isthmus of Tehuantepec in numbers:

– 2 oceans connected between Coatzacoalcos (Veracruz) and Salina Cruz (Oaxaca).

– 303 km of coast-to-coast travel.

– 6 hours for containers to cross.

– 1.4 million containers per year can be transported.

– The new port of Salina Cruz will have a depth of 24 m (14 m for the original port and the one in Coatzacoalcos).

– 2 additional lines will connect it to Palenque/Tren Maya and Ciudad Hidalgo/Guatemala.

However, the time saved on this journey through Mexico could be lost again when considering that, in addition to the time needed to unload cargo from the ship to the train and load it on the other side, the isthmus being crossed is much wider than the canal’s 80 km length.

Furthermore, Panama also has train routes for customers who prefer that option instead of crossing directly by ship, which usually takes between eight and ten hours.

“Due to the current problem with the water crisis in the Panama Canal, where the average waiting time to pass in September was almost eight days, leading some ships to pay millions in auctions to avoid queues, some companies may measure the time and find the Mexico option more interesting and cheaper,” Argote acknowledges in an interview with BBC Mundo.

However, far from being competition, he believes that the fact that the Mexican corridor is so close to Panama would be complementary.

“With more alternatives in the area, ships will not deviate from this route instead of opting, for example, for the Suez Canal. The second alternative now could be Mexico, and that benefits us all,” says the Panamanian business management specialist.

TYT Newsroom

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