Interoceanic Corridor in Mexico and Investments by Car Manufacturers

The Secretary of Economy, Raquel Buenrostro, expressed that the Mexican Government has spoken with global automobile, auto parts, and steel manufacturers to invest in the Interoceanic Corridor in Mexico on the Isthmus of Tehuanantepec planned for the southern part of the country.

Project features

The Oceanic Corredor in Mexico project is presented as a multimodal logistics platform whose main objective is to boost productive activity in southeast Mexico. Above all, the project is being done considering that the National Council for the Evaluation of the Social Development Policy of Mexico indicated that it was in the States of Veracruz and Oaxaca where poverty grew the most in recent years.

For this reason, the project anticipates advances in different areas: railway, airport, port, and industrial development. At the railway level, the project proposes to modernize 309 kilometers of railways on the Isthmus of Tehuantepec that connect the ports of Coatzacoalcos, in Veracruz, with Salina Cruz in Oaxaca. There will also be an exclusive train for passengers between both points.

With this modernization, the travel time from port and port will be less than six hours. The project also will encompass a connection of the Gulf of Mexico with the United States rail system, specifically with Mobile, Alabama.

Similarly, the infrastructure of ports, highways, and rural roads will be strengthened. In addition, there is a plan to modernize the existing gas pipeline in the Isthmus, and ten industrial parks are envisioned that will have fiber optics to guarantee good connectivity.

“What we want is for companies from different countries to arrive with their containers, with the option of being able to stay on the road, in one of the parks, with raw materials that they can transform, add value to, and generate the jobs for the area. Then, they will have the option of exporting them to any relevant markets,” says Rafael Marín Mollinedo, general director of the Oceanic Corredor project.

Interoceanic Corridor in Mexico: an alternative to the Panama Canal

Marín believes that the construction of industrial parks differentiates the project from the Panama Canal. “We don’t call it an alternative; we prefer to talk about it as being complementary,” he says.

“It turns out that the Panama Canal is saturated and cannot cope with increasing demand. That is why our objective is not to do what the Panama Canal does, where the ships come, cross and go to their final destination. We want to create a new route that passes through the Isthmus, with the advantage that companies can set up in one of the industrial parks in the corridor,” he adds.

The automotive industry is a natural for the Interoceanic Corredor in Mexico

According to Economy Secretary Raquel Buenrostro, Mexico has spoken with some of the world’s largest auto, auto parts, and steel makers about opportunities to invest in southern Mexico’s narrow strip of land.

The government has proposed to General Motors and Toyota, among others, to seek opportunities in the Interoceanic Corridor in Mexico, Economy Secretary Raquel Buenrostro said in a recent interview.

“We have had several conversations with executives in the automotive industry, for example, the auto parts industry and also some industries related to the steel industry and metallurgical parts that are complementary to the development of electromobility,” Buenrostro said during a visit to New York to meet with investors “We have flown over the area with business leaders so they can get to know it.”

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The project is part of a push by Mexico’s president, López Obrador, to attract business to less-developed states in southern Mexico rather than concentrating further economic activity in the central and northern parts of the country. Buenrostro said the southern region has several advantages, including a good water supply and wide availability of clean energy.

Despite these favorable features, the Oceanic Corredor in Mexico is a tough sell for automakers who have long preferred buildings in the North for easy access to the US market. GM and Toyota confirmed that they had had discussions with Mexican officials about the Isthmus but said they had no investment plans to announce for the foreseeable future.

Honduras, Costa Rica, Guatemala, and Nicaragua have announced projects in recent years to compete with the Panama Canal, but all of these have yet to progress with minimal success.

“We have had several meetings with our executives and their work teams to bring our supply chain closer together and review investment opportunities in the Interoceanic Corridor in Mexico,” said Teresa Cid, GM spokesperson in Mexico. “In addition, we have shared lists of new potential suppliers that could come to Mexico so that Mexican officials can contact them to show them the opportunities in the corridor.”

Toyota confirmed that its local unit participated in meetings organized by the Mexican government to learn more about the project. “However, there are no specific discussions about investment plans,” company executives said.

Mexico is also in talks with Taiwanese companies in the auto and semiconductor industries, Buenrostro said without elaborating.

Last month, the government of President Andrés Manuel López Obrador took control of a 120-kilometer stretch of a railway line in the area owned by Grupo México, raising questions about the certainty of investments in the country.

In this regard, Buenrostro reiterated the president’s argument that it was not a takeover but a change in the company’s exploitation concession and pointed out that he has guaranteed investors their money is safe in Mexico.

Investors concerned about President Andrés Manuel López Obrador’s move and a legislative proposal that would make it easier for the government to terminate contracts are being influenced by “disinformation,” he said.

Manufacturers demand guarantees to install plants on the Isthmus

The automotive industry would be willing to install production plants in the region of the Isthmus of Tehuantepec, where the Interoceanic Corridor in Mexico project is being developed, if there are operating conditions and guarantees for investment, recently communicated Odracir Barquera, general director of the Mexican Association of the Automotive Industry (AMIA).

“Companies in the automotive industry in Mexico are mostly concentrated in the Bajío and northern regions of the country because there is already developed infrastructure and human capital generated, where the logistical conditions to produce and export that production already exist. If the necessary infrastructure is built in the south-southeast, it will be a location that companies will consider for part of their strategies”, he assured.

The government has insisted on the issue of water use in regions such as the North, where water stress is suffered at certain times of the year, as happened recently in Nuevo León.

Julio Galván, manager of Economic Studies of the National Auto Parts Industry (INA), said that the proposal to advance the ten development poles in the Interoceanic Corridor and take advantage of the region’s water and energy resources could be positive to expand the production of the auto parts industry in the country.

“The invitation to be able to install new plants is an added value and, without a doubt, is supported by INA. We see the project in a positive light because it will increase the dynamism of the industry, especially because of the limits that are put on the North and in the Bajío region due to limited availability of water,” he highlighted.

The Interoceanic Corridor in Mexico on the Isthmus of Tehuantepec seeks to establish poles of development for economic and social well-being. This is a delimited geographical area in Southern Mexico that provides the conditions to attract investment and enhance productive capacities in order to trigger economic and social development in the region.