Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: Ambitious billion-dollar Tehuantepec rail corridor aims to grab more international trade; GrubMarket acquires Houston-based foodservice distributor; Production of Mexican-built cargo trucks rise in June; and Metrobi launches delivery service in Texas.
Ambitious billion-dollar Tehuantepec rail corridor aims to grab more international trade
Mexico’s government funded Isthmus of Tehuantepec Railroad completed its first cargo shipment, with officials heralding the transaction as the start of a new trade corridor that will promote investments across the country’s long under developed southern region.
“This strategic objective will allow the use of railways for the transport of passengers and cargo, which will promote investments in commercial, corporate, industrial, social and tourist activities,” Mexico’s president-elect Claudia Sheinbaum said during a news conference Wednesday.
Sheinbaum won Mexico’s presidential election on June 5 and will take office Oct. 1.
The Isthmus of Tehuantepec Railroad 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.
Known as the Isthmus of Tehuantepec’s Interoceanic Corridor (CIIT) project, the initiative is projected to cost anywhere from $2.8 billion to $5 billion.
The Tehuantepec corridor initiative is one of the main economic development projects by out-going Mexican President Andres Manuel Lopez Obrador.
His vision includes turning the Isthmus of Tehuantepec into a hub for global trade in the southern region of the country. The goal is to create jobs and prosperity for a region that has been economically depressed for decades.
Mariana Raphael, director general of Mexico City-based Connecting Mexico, said the high-profile project should lead to more development and investment opportunities for the country. Connecting Mexico is a firm focused on promoting investment in the country by helping clients develop and execute successful investment strategies.
“It was one of the main projects for President Lopez Obrador and also one of the projects that was better seen by the private sector and by the whole country, regardless of political preferences, because it’s something that makes a lot of sense,” Raphael told FreightWaves in an interview. “Claudia Sheinbaum is expecting to keep moving with this project. Because of the meetings that I have had with her team, I think she has a more realistic view of how to make it work.”
The Isthmus of Tehuantepec Railroad completed its first freight movement on June 30, transporting a total of 13,500 tons of white corn from the Port of Salina Cruz to the Port of Veracruz. The operation took three trips and utilized 45 bulk grain hopper cars.
Officials in the Lopez Obrador Administration have said the Tehuantepec rail corridor eventually might rival trade flows through the Panama Canal, which accounts for about 5% of global maritime trade and $270 billion annually.
However, Jorge Canavati, principal at J. Canavati & Co., said the Isthmus rail line could never compete with the canal.
J. Canavati & Co. is a San Antonio-based company that provides international logistics and trade consulting. Canavati is also chairman of the San Antonio chamber of the Global Chamber of Commerce.
“With the Panama Canal, you’re talking about vessels that handle 12,000 to 15,000 containers per vessel at a time,” Canavati told FreightWaves in an interview. “A domestic railroad, there’s no way they can do that. You’re talking about handling too much.”
The Panama Canal handles about 13,000 to 14,000 container ships and over 8 million twenty-foot equivalent units annually, according to the Panama Canal Authority. In comparison, the Isthmus of Tehuantepec’s Interoceanic Corridor aims to handle about 1.4 million containers annually.
“With an ocean vessel, you move it across the Panama Canal. With a railroad, you have to get it into a port, unload the container, put it on the railroad, transport it to the other port, take it off the railroad, put it on the other vessel on the other end of the isthmus on the Pacific. That’s ridiculous to even consider it to compete with the Panama Canal,” Canavati said.
Related: Mexico aims to compete with Panama Canal by using cargo trains
Sheinbaum’s plan includes the continued development of the passenger-focused Mayan Train and the commercial Isthmus of Tehuantepec Railroad across Mexico’s Yucatan Peninsula. Both projects are aimed at creating jobs while attracting more investments to Mexico’s southern states, including parts of Veracruz and Oaxaca, and areas of Chiapas and Tabasco.
Last year, the Mexican government began accepting bids for six of the 10 industrial parks planned to be built along the 188-mile rail line that the government is restoring between the Port of Salina Cruz and the Port of Coatzacoalcos. Both ports are undergoing modernization projects to create major container and import/export facilities on each coast.
“One of the things President Lopez Obrador established for the project is that he wanted the government to have more control than to just make it into a private sector project,” Raphael said.”Regarding private investment, the view is for international companies to take part in it. One of the big announcements that was made last year was by a Danish company regarding hydrogen energy [production] in Oaxaca.”
In December, Denmark-based Helax Istmo announced a $10 billion investment to build a plant to produce green hydrogen energy in the Mexican state of Oaxaca along the Isthmus of Tehuantepec rail corridor.
Raphael said the Mexican government is still refining the investment process for foreign companies to bid on projects along the Tehuantepec corridor. Some of the challenges the Tehuantepec project faces include funding and planning, she said.
“Funding will be one of the challenges and how will the government be involved, how exactly is it going to work,” Raphael said. “One of the reasons northern Mexico has had a lot more development and success than the southern part of the country is because of its proximity to the U.S.”
Mexico’s southern states are more rural with mostly indigenous communities that are less developed, Raphael said.
Officials also hope that more development in Mexico’s southern states through projects like the Tehuantepec corridor will help create jobs in the region and slow down the flow of migrants attempting to cross the U.S.-Mexico border.
“We also have a very big migration problem, so maybe this is going to connect to some of the initiatives that the government has for the south of Mexico,” Raphael said. “I do think that if done correctly, this can be something very big and very important for this new administration.”
Production of Mexican-built cargo trucks rise in June
Production of Mexican-built heavy-duty trucks increased 12% year-over-year in June to 22,050 units, according to the latest data from Mexico’s National Association of Bus, Truck and Tractor Producers (Anpact).
While production was up in June, members of ANPACT reported a 3.6% y/y decrease in exports with 15,477 units.
The decline in heavy vehicle exports during June is mainly due to the moderation of demand from trucking companies in the U.S., which is Anpact’s main export market, accounting for 96.4% of total exports so far in 2024, Anpact officials said in a news release.
Freightliner was the top truck producer and exporter in Mexico in June. The company produced 11,764 trucks, a 7% y/y increase, and exported 9,609 units, a 5% y/y decrease.
The 10 truck makers and two engine producers in Mexico that are members of ANPACT are Freightliner, Kenworth, Navistar, Hino, International, DINA, MAN SE, Mercedes-Benz, Isuzu, Scania, Cummins and Detroit Diesel.
GrubMarket acquires Houston-based foodservice distributor
San Francisco-based GrubMarket has acquired Brothers Produce, one of the largest foodservice distributors in Texas.
“This acquisition enables GrubMarket to further strengthen our presence across Texas and the Southwestern U.S.,” Mike Xu, CEO of GrubMarket, said in a news release.
Terms of the transaction were not disclosed.
Houston-based Brothers Produce currently operates three distribution centers across the state that serve fresh fruits and vegetables, specialty goods and processed items. The company’s customers include more than 6,000 foodservice, education, restaurant, grocery and retail customers in Texas, Louisiana, Oklahoma and Mississippi.
Founded in 2014, GrubMarket is a food technology company operating in the food supply chain and e-commerce markets for both business-to-business customers and consumers.
Metrobi launches delivery service across Texas
Delivery fulfillment startup Metrobi recently expanded into the Texas market to connect local businesses with on-demand delivery drivers.
The Metrobi platform is available for drivers interested in gig opportunities in Austin, Houston, Dallas and San Antonio.
Metrobi is already operating in New York, Boston, Chicago, Los Angeles, San Francisco, Denver and Washington D.C.-Maryland-Northern Virginia area.
Founded by MIT alumni and CEO Oguzhan Uyar, Metrobi leverages a platform to match delivery drivers with businesses, facilitating same-day delivery services.
“Our expansion into Texas is expected to create numerous job opportunities, contributing to the local economy,” Uyar said in a news release.