VENTURES WAIT IN WINGS FOR RAIL PRIVATIZATION

VENTURES WAIT IN WINGS FOR RAIL PRIVATIZATION

Mexico's national railroad, Ferrocarriles Nacionales de Mexico, must be state- owned according to the Mexican Constitution.

That may change soon, as Mexican President Carlos Salinas de Gortari has said he wants to amend the document to allow at least partial privatization and the introduction of foreign capital into the nation's rail system.Explosive growth in trade between the United States and Mexico is putting

pressure on the transportation systems connecting the two nations. FNM has capital and development needs that it now is unable to satisfy from domestic or government sources.

Until the law is changed, however, U.S. railroads are participating in a number of joint ventures to take advantage of growing traffic to and from Mexico.

In at least one case, a joint venture is also a way for a U.S. railroad to get into Mexico markets it might not otherwise be able to reach.

Traffic to and from Mexico is one of the brightest areas of traffic growth for Western railroads.

It already accounts for about $200 million in annual revenue for Southern Pacific Lines and is expected to grow further, according to Edward L. Moyers, the railroad's new chief executive. SP has more border crossings than any other U.S. carrier.

"Joint ventures provide an opportune way to do business in Mexico," said Robert G. Thruston, Southern Pacific vice president of Mexican operations. San Francisco-based SP does not have any joint ventures operating yet, but Mr. Thruston said, "we are discussing some projects with potential joint-venture partners." He said it was premature to reveal specific projects.

Mexico traffic for Union Pacific Railroad generated more than $300 million in 1992, up more than 20 percent from $250 million in 1991. This year, said Randy Blackburn, assistant vice president of Mexico operations, traffic is likely to be relatively flat, reflecting a sluggish Mexican economy. UP has experienced good growth of around 20 percent in northbound business but flat to slight decreases in southbound traffic.

Burlington Northern Railroad, headquartered in Fort Worth, Texas, is the only major Western railroad with no direct connection of its own to FNM. BN relies on joint ventures to gain participation in Mexican markets.

Protexa Burlington International is a joint venture of the U.S. carrier with Mexico-based Grupo Protexa that hauls railcars across the Gulf of Mexico

from Galveston, Texas, to connections with FNM at the Mexican Port of Coatzacoalcos. Service began in April.

Four barges, each with a capacity of 54 railcars, are used in the operation. Most of the traffic has been grain bound for central and southern Mexico destinations. Each sailing involves two of the barges and once the cars are unloaded in Mexico, they make up three 36-car trains.

A BN spokesman said the company expects to expand operation to two more ports at Altamiras near Tampico and Veracruz. Frequency also will be increased

from the current weekly sailing, he said.

For northern Mexico markets, Burlington Northern relies on the little South Orient Railroad Co., a short line that hauls BN traffic from Fort Worth to its border crossing at Presidio, Texas. The interline movement isn't ideal, but the route is the shortest from North Texas to the border.

Dedicated double-stack container trains are about the only traffic moving directly through the border. Much U.S. intermodal rail traffic bound for Mexico "de-ramps" at Laredo and continues by truck south of the border, said Randy Blackburn, assistant vice president of Mexico operations for Union Pacific.

Union Pacific is working with Mexican rail authorities to develop and publish joint rates for conventional intermodal traffic so it, too, can move by rail all the way from origination to destination.

Mr. Blackburn said a few trailers also are moving through the border on railcars. Efforts are under way to expand in-bond operations that would allow more traffic to move directly to interior points.

Mr. Blackburn said Union Pacific has several cooperative arrangements with the Mexican railroad. "We've had run-through locomotives with FNM since 1987," he said. UP has leased locomotives to FNM in the past, but the Mexican carrier returned the UP power this year.

Richard K. Davidson, Union Pacific chairman and chief executive, said his company is involved already in joint ventures and may become more so.

"We've actually made very little investment at this point," he said earlier this year. "We have committed to make some investments in intermodal facilities and to help implement improvements in communications technology. We are keeping an ear to the ground for opportunities of a similar nature."

UP has joined an intermodal facility partnership north of Mexico City. Mr. Blackburn cites Huehuetoca International, a $12 million joint venture. Following delays and loss of a partner, UP is looking for viable partners for the project.

"Our purpose is to develop modern facilities that can support our growth objectives and to have some influence over location and facilities development," Mr. Blackburn said.

Working as a contractor rather than in a joint venture, Union Pacific Technologies is helping to install a transportation control system so FNM can improve its terminal and dispatching operations.

Union Pacific is a subcontractor to Civil Engineering Associates, the largest construction company in Latin America, which holds a contract to maintain track for FNM.

CSX Corp. is considering setting up a cross-Gulf operation from New Orleans and/or Mobile, Ala., that would give it direct access to FNM. Sources say the company has determined to go ahead, but that final arrangements will not be determined until later this year.

With its CSX Transportation rail subsidiary, American Commercial Barge Line and Sea-Land Service steamship operations, CSX could operate a joint venture within its corporate house.

Kansas City Southern Railway Co. owns deep-water frontage at Port Arthur, Texas, and a spokesman said the railroad is actively trying to develop Mexican business, either through joint ventures that might involve railcars moving across the Gulf of Mexico or handling the rail portion of import-export traffic.

Southern Pacific, which has gateways from California to Texas, operates run-through double-stack container trains with FNM to Mexico City through its El Paso, Texas, border crossing.

The Atchison, Topeka & Santa Fe Railway, which connects with FNM at El Paso, Texas, allows its trailers to cross the border on trips to Chihuahua, while double-stack trains operate straight through to Mexico City and the Pantaco terminal.