Full steam ahead for rail company CPKC's Mexico operations

Rail operator Canadian Pacific Kansas City (CPKC), formed after Canadian Pacific’s (CP) US$25bn acquisition of Kansas City Southern (KCS), has big plans for Mexico.

Two projects are underway and a US$500mn investment in maintenance and new infrastructure confirmed for this year. Participation in three more projects is on the radar, as are opportunities arising from nearshoring.

CPKC president, Óscar del Cueto, who previously headed Kansas City Southern México (KCSM), talks to BNamericas about the plans and the potential of a rail connecting North America.

BNamericas: How has the transition progressed after CP received the green light to acquire KCS for US$25bn and it was decided that you remain in charge of Mexico?

Del Cueto: We’ve been registered as a single operator since April 14. We will be the first and only operator with a single line connecting Mexico, the US and Canada. This is a great opportunity to connect the countries within the USMCA [free trade] framework, strengthen border trade in Mexico and serve our clients by offering them a connection without exchanges, without borders.

BNamericas: What do these plans imply for Mexico?

Del Cueto: We will respect part of the investment we committed. I think it is a great opportunity for both exporters and importers in our country because now they are opening up new markets that we previously did not serve as a single line.

We will make the transport connection to provide 12-24 ports, and as you know Mexico is the US’s second biggest trade partner, Canada the biggest, which will help us move more goods, especially considering attempts to decouple from China.

It is a great opportunity for us to offer a connection service to ports, to big consumption centers such as Monterrey, Querétaro and San Luis Potosí and even Guadalajara. So, a good opportunity is coming.

More than US$133mn are just for direct investment in infrastructure, equipment and projects. But, in addition, we achieved finishing the Libramiento de Celaya rail bypass and we announced this new rail bridge in Nuevo Laredo. So, including the direct investment and the two investment projects I mentioned last year, we are announcing more than US$500mn of direct investment.

BNamericas: Will the US$120mn investment plan announced in June remain unchanged?

Del Cueto: Correct. These are important projects that will grow. We are exploring strategies to connect Lázaro Cárdenas port [in Michoacán] and the northeast of the US. It would be a direct service without borders to bring auto parts from the US and Canada to Mexico, and now we are doing this connection between Lázaro Cárdenas and Chicago and Houston.

We are competing with ports in the western US. I believe that part of the attraction of the [CP-KCS merger] is Mexico, especially because of the opportunities offered by being able to bring more investment from other countries to our country as part of nearshoring. 

I think we are the player that will be able to attract these investments. As you know, those who invest in our country want to have highway infrastructure, connectivity, and I believe that we are going to be the backbone that can support these investments.

BNamericas: What can you say about President Andrés Manuel López Obrador announcing after a May 2 meeting that CPKC will handle the Mexico City-Querétaro high-speed train, which the previous government tried to build?

Del Cueto: That was part of a commitment we made where we were offering to conduct the study to identify requirements for new passenger services between Mexico City and Querétaro.

There was already a proposal, but we want a study to discern volumes, capacities, origin and destination, type of service and everything else that is required, especially the infrastructure.

In short, whatever the study finds, we’ll develop it, and that was our commitment to the president, [who sought] to carry out the study with a company that knows this type of project and that tells us what is required.

BNamericas: You were also offered participation in the Maya train and Tehuantepec isthmus corridor.

Del Cueto: I think there is a very frank and transparent interest on the part of the president to connect the rail network with his two priority projects … and we agreed to collaborate in jointly exploring ways to share the initiatives, including sharing our experience, best practices, technology for services and seeing how we can establish interconnection exchange points to carry goods.

If the goods go through our rail network, we’ll jointly look at these options and come back with a proposal and see how we can connect both to the train and the corridor.

BNamericas: What is your view on the senate’s approval of a communication routes law reform which gave five public entities concessions to operate rail lines?

Del Cueto: I believe that the intention of the reform is to protect these two flagship projects of the government, the Maya train and the interoceanic corridor. These allocations are protected under a regulatory framework and are permanent.

I believe that the objective of the administration was met and, well, there is no direct impact on our concessions or on our investments.