What To Expect From The Transisthmic Corridor In 2021By Pedro Alcalá | Thu, 06/03/2021 - 14:23
As one of the flagship projects of the current administration, the Transisthmic Corridor is expected to bring economic development to the Mexican southeast, as well as consolidation to the country’s position as a key logistics hub in America. However, challenges remain regarding its construction and overall development. Experts weigh in on the positives and negatives of this project as it nears completion.
Unlike the Mayan Train or the Santa Lucia Airport, the Transisthmic Corridor is not an original proposal but an infrastructure project that has been historically sought after for over a century. “The issues with the Transisthmic Corridor are not new. Interest in taking advantage of this geographical region has existed since the end of the 19th century,” said Jesús Enrique Pablo-Dorantes, Advisory Board Chairman of the Mexican Academy of Environmental Impact.
The project is supposed to be finished, or at least up and running to an extent, by the end of this year. Oaxaca Minister of Economy Juan Pablo Guzmán breaks down the project into three components: the rehabilitation of rail lines between Salina Cruz and Coatzacoalcos, the modernization of the Salina Cruz and Coatzacoalcos ports and the construction of 10 “Welfare Development Poles” between Oaxaca and Veracruz. “As of February, the 80m extension of the Coatzacoalcos harbor presents 97 percent of progress, while highway connectivity development presents 98.7 percent of progress. At the Salina Cruz port, 11 percent of all construction work has been completed while environmental remediation has been carried out successfully, including the protection of sea turtle sanctuaries and the relocation of 614 purple snails so far. Rail line renovation has progressed at a rate of 23 percent averaged from five segments, starting in Veracruz with the first segment, from Medias Aguas to Ubero, at 7 percent of progress; segment two from Ubero to Mogoñe at 2 percent; segment three from Mogoñe to La Mata at 30 percent; segment four from La Mata to Col. Jordan at 64 percent and segment five from Col. Jordan to Salina Cruz at 39 percent,” said Guzmán.
Positive expectations regarding the corridor’s progress are echoed by other prominent players in the public and private sector. Arturo Reyes, President of the Mexican Confederation of Custom Agent Associations (CAAAREM), said that his expectations were firm. “The corridor will be ready this year, in line with the promise made by President López Obrador. Obviously the first thing we expect to see finished is the work being done on both ports on either end of the project, which have gone through important transformations to receive larger ships,” said Reyes. In terms of rail work, 16 trains will traverse 300km every day. As for industrial parks, Reyes said these will start to arrive by the end of 2021 and throughout 2022. “Companies will want to see that everything is working perfectly and that the region presents conditions ripe for investment,” he added.
Members of the private sector remain somewhat cautious but they are seeing the project come to fruition. According to Nowports Founder & CEO Alfonso de los Ríos, if the corridor were to begin operations in September, this would coincide with a seasonal increase in Asian imports. “The Coatzacoalcos port is quite developed already, so the challenge will be to get the Salina Cruz port up to spec in order to take as much advantage as possible of this opportunity,” he said.
De los Ríos expects the necessary tendering, procurement and contracting for industrial park construction to begin this year. However, the region still needs the adequate technological infrastructure and urban conditions to attract specialized talent. He also highlights highway development, which is still in its planning stages. “I would expect all rail lines to go online this year and to start networking with nearby systems. Meanwhile, the Tecún Uman rail project in Guatemala is still working on the remodeling of its terminal. Once that project is finished, it could represent an important international connection for the corridor, also opening doors to the Central American market,” he added.
However, Pablo-Dorantes pointed to the project’s ongoing social and environmental compliance issues, which could be an obstacle to its operation in 2021. “The environmental and community controversies surrounding the Transisthmic Corridor project arose from a lack of adequate planning. The current administration lacks a transversal planning vision. The environmental impact evaluation (EIA) is seen not as an opportunity to develop the project in an integrated fashion but as a mere bit of paperwork that SEMARNAT must issue,” he said. Fauna overpasses, for example, were included as part of the project’s environmental impact manifest (MIA) but their design, quantity, location, construction specifications and cost were not included in the project's budget, highlighted Pablo-Dorantes. “The resulting overbudget will have an impact on the project's financial evaluations.”
In terms of social issues, Pablo-Dorantes said current Mexican legislation does not require projects like this one to present an evaluation of social impact (EIS) although it does not prohibit it, either. “Given the social fragmentation that exists in a state like Oaxaca, a preliminary evaluation of this kind as part of the project’s planning stages would have been greatly helpful. Now, with all of these problems weighing down on it, the administration should halt the project and begin a more inclusive process that takes into account the voice of all communities and environmental experts. It would be preferable to start everything over than to continue developing the project on such a frayed basis.”
Guzmán disagrees with this assessment, making clear that all community and environmental issues are being addressed by INPI and SEGOB through consultations with local and indigenous communities and the management of permitting processes with SEMARNAT. He also addressed the relationship between the state governments of Oaxaca and Veracruz through the project’s federal leadership headed by Rafael Marín Mollinedo, which encompasses 79 municipalities that make up the corridor, 33 in Veracruz and 46 in Oaxaca. “As a matter of fact, a work team has been formed between the two states to coordinate the co-financing of some of the corridor’s development, including the executive project for railway rehabilitation, as well as the master plan completed through the contracting of Singapore company Surbana Jurong.”
The project, however, has also been subject to scrutiny from the Superior Auditor of the Federation (ASF). Proceso reports that the auditor’s criticisms specific to the Transisthmic Corridor were focused on the project’s “unverifiable” claims as far as promised economic development goes. That has not stopped experts from being quite positive and even bullish on the matter. Even if they do not agree on the project’s progress for the end of the year, they all agree on its potential. Naviera Integral CCO César Vera makes this optimism readily apparent. “Immediate opportunities of creation, modernization and extension will appear in construction of ports, shipyards, airports, rail lines, highways and industrial parks, digitalization and energy infrastructure, both traditional and alternative,” said Vera.
Once the corridor is operational, new opportunities will arise for hospitals and clinics, wholesale and retail, customs, storage, hotels and tourism, along with the needed transportation to reach previously remote locations. The environmentally sensitive nature of these regions will mean that environmental and health protection services will have to be made available, creating even more opportunities, stated Vera. “The key to all of this is sustainable planning. This also includes the management of all social issues to ensure communities are not trampled over but involved and incorporated into this economic process. All of this work requires capital, which in itself also represents an immense opportunity for investors, consulting companies and capital management enterprises. This is all assuming that the federal government can provide certainty regarding the project’s continuity and openness toward the private sector under clear and permanent rules.”
Reyes agrees with this grand vision, adding that “the Transisthmic Corridor is the most important logistical project that has been built in Mexico in decades.” Ships would save up to ten days of travel by not having to cross through the Panama Canal, which could represent around US$2 billion in savings, he said. “Speaking on behalf of custom agents, all of our investments in the ports of Coatzacoalcos and Salina Cruz would benefit from this. We would be working with more vessels that are either in transit, looking to export or arriving for a more permanent stay in Mexico,” Reyes added. De los Ríos also mentions the project’s competitiveness against the Panama Canal in his ultimate assessment of its potential. “Considering the saturation faced by the Panama Canal, the increased fees and rates of transit and the price of fuel, the Transisthmic Corridor project is a more profitable alternative now than it was a couple of years ago.” He also agrees with the 10 days of saved time calculated by Reyes, adding that this could also represent savings of US$1 million in fuel consumption per trip.
Industrial parks along the corridor would also open the doors to the export of Mexican products to the whole world, particularly inside containers that tend to be empty in their journey back from the US to Asia, said Reyes, which would grant a higher degree of management and control over Asian imports. “This is all without mentioning the great amount of jobs that will be generated by the construction and operation of this infrastructure project. This will support the reactivation of Mexico’s southeastern regions following the pandemic.”
According to Guzmán, the Transisthmic Corridor expects to pay off the debt of social inequality in Mexico, providing social justice to rural communities, as well as opportunities for development. “With USMCA and this corridor, Mexico will become much more attractive to investment and will also develop its logistical potential,” Reyes added.