Identifier | Created | Classification | Origin |
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07MEXICO4614 | 2007-08-27 22:30:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Mexico |
VZCZCXRO1443 PP RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM DE RUEHME #4614/01 2392230 ZNR UUUUU ZZH P 272230Z AUG 07 FM AMEMBASSY MEXICO TO RUEHC/SECSTATE WASHDC PRIORITY 8645 INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE PRIORITY RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY RULSDMK/TRANSPORTATION DEPT WASHDC PRIORITY RUEAHLA/DEPT OF HOMELAND SECURITY PRIORITY RHEHAAA/WHITE HOUSE WASHDC PRIORITY |
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UNCLAS SECTION 01 OF 02 MEXICO 004614
SIPDIS SENSITIVE SIPDIS STATE FOR WHA/MEX COMMERCE FOR 4320/ITA/MAC/WHA/ONAFTA/GERI WORD DOT FOR FRA/SNEWCOMER DHS FOR ABULLOCK WHITE HOUSE FOR HSC/JHOFFMAN STATE PASS TO GSA FOR SPEPPLER E.O. 12958: N/A TAGS: EIND ELTN ETRD EINV MX SUBJECT: UNION PACIFIC MEXICO TALKS COLOMBIA RAILROAD CROSSING, PUNTO COLONET PORT Summary and Introduction -------------------------- 1 (SBU) Summary. FCSOffs and EconOffs met with Juan Manuel Carreon, President of Union Pacific de Mexico (UP), to discuss issues currently affecting the company. Carreon was clear that UP is not planning on moving to any new bridge in the Laredo area. He did say that there were conditions that would make the Colombia rail bridge more economically feasible and push UP to consider moving. He said that UP and Hutchinson Port Holdings have ended their joint venture to purchase Punto Colonet. UP is working towards a resolution on the trackage rights negotiations while they will remain outside of any merger discussions. End Summary Colombia Rail Crossing -------------------------- 2. (SBU) Carreon began the discussion with talks on the Colombia Rail Crossing and UP's position on the crossing. He explained that the issue is very complex and not many people in UP have a complete knowledge of the situation. He said that UP does not support any of the current alternate rail plans -- Colombia or Kansas City Southern's alternative -- and further does not see itself supporting the Colombia crossing any time in the near future. He said that the project is one with strong political backing but not strong financial backing and that, thus far, it does not make financial sense for any of the railroad companies to sign on. 3. (SBU) Carreon explained that the Colombia Rail Crossing is a pet project of the state of Nuevo Leon, but the people involved do not have a good sense of the business cost that would be required from a rail company that diverts its routes through Colombia. He further said that the state governor, Jose Natividad Paras, has not pursued the matter extensively in the first 4 years of his term and only has two remaining to push the matter. He said that if Ferromex wins the concession to extend from their line to Colombia, the bridge may gain more economic feasibility and UP would consider using it. Without another rail company taking the lead in investment, UP will not plan on making the move. Punta Colonet Port and Rail Line -------------------------- 4. (SBU) Carreon also discussed the current status of Punto Colonet. He said that UP has ended its partnership with Hutchison Port Holdings to purchase the concession. He said that, with the expansion of the Panama Canal, operated as a concession by Hutchison, the need for Punto Colonet is not as strong as when the plan was first conceived. He also explained that UP met resistance from local farmers against its plan to extend the Punto Colonet rail lines across the border at Yuma, AZ to connect with its current lines. The current likely plan, to cross at Calexico, CA, is less desirable and likely to be met with even more resistance from farmers and environmental groups. He also said that the dispute over the previously issued mining concession that previously stalled the plan appeared to be ongoing despite the government of Mexico's (GOM) assertion that it had been settled. He did say, however, that UP was willing to work with whoever ultimately wins the Punto Colonet concession. Other Rail Issues -------------------------- 5. Despite the ruling by the Mexican Federal Competition Commission (Cofeco), Carreon believes that the merger is not dead yet. He said that Ferromex's majority owner, Jorge Larrea and his Group Mexico, is not ready to take no as a final answer. He also explained that the Secretariat of Communications and Transportation (SCT), specifically Undersecretary for Transportation, Manuel Rodriguez, support the merger and are looking for ways to give SCT the ability to approve it. He said that UP has been called upon at times to mediate, but is too involved in the issue to be a proper good office. (Note: Ferromex is 26% owned by UP with Grupo Mexico holding the remaining 74%. The other merger company, MEXICO 00004614 002 OF 002 Ferrosur is owned by Grupo Carso, Mexican monopolist Carlos Slim's conglomerate.) 6. Carreon also discussed the renegotiation of trackage rights in Mexico and says that 28 of the 34 problems have been solved. However, he was clear that resolving the majority of the problems does not equal success on the issue as a whole. He said that the remaining issues are the most difficult to resolve. (Comment: Competitor Kansas City Southern de Mexico (KCSM) has come out strongly against the lowering of trackage right costs for their portion of the rail. They feel that SCT is pushing them on this issue while simultaneously supporting the merger that they feel will further undermine the credibility of the railroad industry in Mexico. Many in the railroad industry feel that KCSM paid too much for the concession in the beginning and that they should not be able to continually pass on the cost of their poor investment to other companies that need to use the lines for which they have operating rights. End Comment.) Comment -------------------------- 7. Comment: Both the Colombia rail project and Punto Colonet are being actively pursued by the GOM. The Cameron Station-Colombia rail concession is included in President Calderon's National Infrastructure Program (NIP) with a value of 1.1 billion Mexican pesos (100 million USD) and plans for it to be jointly funded by the federal government and the private sector. The 61 km rail spur would begin along the current line to Laredo, but divert to Colombia. It would also include a crossing. As mentioned previously, however, it could be a decade or more before any of the rail road companies see a reason to begin investment in new lines and/or yards. Until that time, the private funding needed to begin construction will likely be unavailable. 8. Punto Colonet figures prominently in the NIP as the largest rail project planned valued at 20.9 billion Mexican pesos (1.9 billion USD). The NIP also calls for it to be financed exclusively with private sources. It seems that UP will have a smaller role in the project that originally planned but are not completely abandoning the project. The issue of trackage rights will likely be resolved in the near to mid future, but Post will continue to monitor the developments. UP has stayed out of the merger discussions and will likely continue to do so. End Comment. Visit Mexico City's Classified Web Site at http://www.state.sgov.gov/p/wha/mexicocity and the North American Partnership Blog at http://www.intelink.gov/communities/state/nap / GARZA |