With drought at the Panama Canal and conflicts in the Red Sea and other global shipping lanes disrupting trade, officials in Mexico predict 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, Mexican authorities said.
“The Isthmus of Tehuantepec dry corridor offers a promising alternative to traditional routes like the Panama and Suez Canals,” Oliver Contla, the trade and economy director for the Mexican Embassy in Germany, recently blogged on LinkedIn. “By leveraging its geographic advantage, Mexico has the potential to become a major logistics hub, serving not only North America but the global economy.”
Contla said 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,” Contla said. “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,” Pawan Joshi, executive vice president of products and strategy at e2open, told FreightWaves. “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?”
Austin, Texas-based e2open is a supply chain software provider. e2open’s cloud-native global platform for supply chains connects more than 480,000 manufacturing, logistics, channel and distribution partners in multienterprise networks tracking over 15 billion transactions annually.
Joshi said 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 to that,” Joshi said. “The Canadian Pacific Kansas City Southern railroad is looking to start to invest some money on the Panama side to build more infrastructure and provide an alternative.”
Joshi said 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.
“I think there has to be coordination, not just with the Panama Canal authorities or the Mexican railroad authorities. I think there should also be cooperation between the origin and destination ports and the ocean liners,” Joshi said. “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.”
Joshi also said 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,” Joshi said. “There’s a lot of cooperation that is needed and coordination that is needed. I have a strong belief that if all the stakeholders come together, you will come up with a much better solution and a much more efficient, faster, effective and much more profitable solution for everyone.”
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