Mexican Railways Lack Competition, Antitrust Agency Finds

By Anthony Harrup

MEXICO CITY -- Lack of competition in Mexico's private railway systems leads to high tariffs for users and delays that ultimately hurt production and economic growth, antitrust officials said Wednesday.

Grupo Mexico SAB and Kansas City Southern de Mexico, a unit of Kansas City Southern, the two firms said to benefit from the lack of competition, are able to set prices for interconnection and restrict access to their lines, raising the cost of rail transport, said Carlos Mena, head of investigations at the Federal Competition Commission.

Mining and railroad company Grupo Mexico operates the Ferromex and Ferrosur railways, and KCSM operates another network, which together with joint-venture Ferrovalle control nearly three quarters of Mexico's railways.

The companies and other interested parties have 20 days to respond to the findings, and the commission another 30 days to confirm or reject the preliminary ruling. Confirmation could lead to transport authorities taking action to address the lack of competition.

A spokesman for KCSM said the company would make a statement later Wednesday. Grupo Mexico couldn't immediately be reached to comment.

Rights of way allow trains of one company to use the lines of another for a fee, but since the railway companies operate both railway lines and freight services, there is an incentive to restrict passage of rival trains, according to the antitrust commission.

The probe found that the tariff on lines other than the one where a journey begins averaged 8.3 times the tariff on the original line, Mr. Mena said. Users have also suffered delays of up to a week if their train cars have to switch to a locomotive of the other company. Only once have the railways made a right-of-way agreement since privatization in the mid-1990s, and that was limited, the official said.

"Without effective competition in the transport sector, our country can't hope to become a logistics platform for domestic and international trade, which would condemn us to low economic growth and persistent inequality between regions," he said.

The commission said uncertainty over delivery times and costs encourages the use of more expensive or less efficient modes of transport such as roads and ports.

Rail freight is used extensively in Mexico by the agricultural sector, and heavy industries such as mining, cement and automotive.

"We also identified that there are companies that use railways to transport their goods in other countries, but in Mexico they don't because of the prices..and they decide to do it by road or by ship," Mr. Mena said.

Write to Anthony Harrup at anthony.harrup@wsj.com

(END) Dow Jones Newswires

March 15, 2017 16:26 ET (20:26 GMT)

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