History of the Mexican Trains Ferrocarriles - Research Paper Example

? History of the Mexican Trains "Ferrocarriles" History and Political Science 14 May Table of Contents Introduction 3 Background of the Mexican Railway 5 Expansion under Porfirio Diaz 7 Nationalization under Diaz 8 The Mexican Revolution and After 9 Struggle for Survival 10 Privatization and the Future 13 Future Projections 15 References 16 Introduction Infrastructure is vital to the economic development of any nation. The domain of infrastructure aids in expanding the economy by allowing faster and cheaper services such as transportation, utilities, trading and the like. Nearly all modern nations that have prospered in economic terms using infrastructure enhancements have had a strong affliction for infrastructure. The transportation network has had a major part to play in the economic progression of every nation on the planet. A well constructed and collaborative transportation network is the only guarantee that goods, people and services can be located from one part of the country to another with speed, flexibility and at little cost. Transportation can be seen as having a direct link to economic expansion and sustenance. It is unrealistic to expect that one region or nation has the ability to produce all that it consumes. In a similar manner, it is unrealistic to assume that a region can consume all that it produces. In order to strike the balance between demand and supply of various kinds of goods and service it is essential to have a well planned and integrated transportation network to rely on. Only such a transport network could allow the impeccable coordination required between various sectors of the economy such as agriculture, mining, manufacturing, retailing etc. While the provision of a transport network is highly relevant to the modern economic system, but this was not always the case. Instead, a well integrated transportation network was required by nearly all great nations for keeping up with their military ambitions. Economic priorities remained secondary when the creation of a well integrated transportation network was taken into account during the nineteenth and twentieth centuries. Given the need to move economic goods as well as military goods, the preferential method of enhancing the transport network was to use railway links. This also coincided with the fact that road based automobiles were neither common nor highly appreciated in the nineteenth century. Instead, the railway networks of the era were highly preferred given the technical expertise in manufacturing and operating railway linkages. Another major factor that contributed to the growth of the railways in the era related to disposable incomes and the cost of early automobiles. Early automobiles were not only expensive to buy but were equally fiscally demanding in terms of operating and maintenance costs. The problem was compounded by the fact that the majority of people did not have the kinds of disposable incomes to buy and use road based vehicles as yet. In this scenario, it made far greater sense to set up railway linkages in order to enhance the overall transport infrastructure rather than concentrating on roads and automobiles. Vehement development of the railway networks continued throughout the nineteenth century and through the early to mid parts of the twentieth century around the world. Contemporary super powers and countries looking for economic development all looked towards large railway networks in order to support and sustain their economic growth. It is from this era that the British railway networks emerged and spanned nearly half the globe ranging from Africa to the Tibet plateau. In a similar manner, the United States was bent upon enlarging the existing railway network to connect the East Coast to the West Coast. A number of different strategies were adopted in order to provide impetus for the expansion of the existing railway network. Conditions in Germany and France were similar with Germany attempting to bridge the Middle East and Europe using a railway link through Iraq. However, in most depictions representing these facets of progress, it is seldom realized that a developing nation such as Mexico was just as busy enlarging its transport network by expanding the railway links across the country. The growth of the Mexican railway network served as an important impetus for further economic growth and integration. The railway links in Mexico can truly be attributed with shaping both the economy and the society in Mexico as they are today. This paper will trace the various developments from the time of Porfirio Diaz to the current day that helped the Mexican railway network take shape. The conglomerations of the early days and its evolution into one joint government owned and operated company to the privatized structure in use today will be looked at in detail throughout the current paper. Moreover, the paper will also look into various kinds of impacts that the railway network expansion had on Mexico as a whole. Background of the Mexican Railway The earliest attempts at building a railway network across Mexico date back to 1837. The government of Mexico granted a concession in order to construct a railroad that stretched between Veracruz located on the Gulf of Mexico to Mexico City. Although the concession was granted but no action was taken by either party to start construction on any railroad project. The second attempt at creating a railway link was a personal initiative taken by Don Antonio Escandon in 1857. Escandon secured the right to build a railway link that would connect Veracruz to Mexico City and would then proceed onto the Pacific Ocean. This idea was partially based on the first attempt at creating a railroad in Mexico but this idea effectively took things to another step with an attempt to connect the Atlantic Ocean to the Pacific Ocean. The need to develop such a railroad link was obvious. The Panama Canal was not to be built for another three quarters of a century and there was dire need to connect the Atlantic Ocean to the Pacific Ocean. If this attempt succeeded, it would make Mexico the preferred destination to trade from and it would lead to making Veracruz and Mexico City worth international fame. However, this attempt failed to materialize for nearly a decade after the right for construction was secured. The real problem lay with revolution and political instability that haunted Mexico and dissuaded economic growth. However, construction on the idea was made possible when financing was made available in 1864 in the regime of Emperor Maximilian. A new company known as the Imperial Mexican Railway Company was created to take onto the construction of the proposed railroad. Work was slow due to political instability and nearly a decade later the initial segment stretching from Veracruz to Mexico City was opened up in 1873. The President of Mexico, Sebastian Lerdo de Tejada encouraged further development of the railway infrastructure by providing generous concessions to foreign investors. By the end of his regime, Mexico boasted around 640 km of railway tracks. Most of these railroads were the exclusive property of the British owned and operated Mexican Railway (Bazant). Expansion under Porfirio Diaz Porfirio Diaz can be seen as the father of modern Mexico given his immense contributions to the economic development of the country. Diaz can be credited with bringing the much need political stability to Mexico that it was previously lacking. Using his policies, Diaz was able to win over the Church, the capitalists, the army and the landowners. The scale of economic progress can be gauged from the fact that the Mexican economy grew at an average of eight percent per annum under Diaz’s protracted regime. In a similar manner, the population increased by one half to reach some fifteen million people. In addition to these developments, Diaz was able to spur economic progress of many different fronts at the same time. The mining industry took to significant growth during the regime of Diaz as did agricultural exports. Notable among agricultural exports remained coffee and sugar. Industrial development under Diaz was also significant as textile exports boomed and Mexico created its first steel plant early in the twentieth century. The economic progress under Diaz would not have been possible if it were not for the massive growth in the transport network. As mentioned before, the integration of the economy requires the coordinated efforts of various sectors of the economy that can only be achieved using a reliable transportation network. In the case of Mexico, this was only made possible as new regions were integrated into the national economy using the prowess of the Iron Horse. Agricultural and mining produce was taken out of the interior regions of Mexico and transported to the ports for export abroad. Similarly foreign manufactured goods largely being industrial equipment for the textile, sugar, mining, railways and the like was imported and transported to various regions in Mexico in order to spur local economic growth (Signor and Kirchner). The expansion of the Mexican economy and the creation and expansion of the railway network can be seen as interrelated in a dynamic fashion. The economic progress was able to offer the kind of initiatives to foreign investors for creating more and more railroads while the expansion of the railroad was able to integrate more and more economic sectors and regions. The railroad was the chief mechanism through which Mexico was able to export zinc, lead and copper. Overall the volume of Mexican exports grew by some eight and a half times during the Diaz regime. By the year 1880 it was actually possible to take a train in Mexico City that would go all the way to Chicago. The expansion of the railways under Diaz was phenomenal to say the least. When Diaz had assumed the seat of government, the total railroad length was around 640 km. When Diaz ended his second term in government in 1910 the Mexican railway network boasted an impressive total length of 24,720 km (Trennert). Most of the railroad track built during the Diaz regime had been constructed by American, French as well as British investors. The investors had invested in Mexico expecting long term governmental favor but the government’s actions soon upset the apple cart. Nationalization under Diaz In the latter years of the Diaz regime, there was a growing move towards nationalism. Diaz did his best to keep up with political realities of the day and in order to side with the nationalistic favor he decided to nationalize the national railroad infrastructure. Diaz’s finance minister Jose’ Yves Limantour drafted up the plan to nationalize all of the major railway architecture. The bulk of railway assets were to be nationalized. The plan was put into action in 1909 and in a short amount of time it managed to create a new government owned corporation to run the railways which was known as the Ferrocarriles Nacionales de Mexico (FNM). This corporation was provided with the responsibility of control over the major railroad lines and was also provided with a majority share in the overall railways structure. The Mexican Revolution and After The relative period of calm and political stability in Mexico came to an end in 1910 with the start of the Mexican Revolution. In terms of modern history, the Mexican Revolution is considered to be the single most important upheaval in Mexican history during the twentieth century (Knight). What had begun as an uprising against a dictatorial regime soon escalated into a full scale civil war that lasted well into the 1920’s. It is generally agreed that the Mexican Revolution ended in 1917 but fighting continued between larger factions up to 1920. Moreover, sporadic skirmishes continued across the countryside well into the 1920’s such as the Cristero War between 1926 and 1929. Among other things, the Mexican Revolution decimated the economy and forced the railway network into continuous decline and decay. When a stable centralized regime was created in 1929, the remaining portions of the Mexican railway system were nationalized. The move for nationalization began in 1929 and continued up to 1937. The two consecutive rounds of nationalization represent the reversal of fate that the Mexican railway system has not been able to recover from since. One chief problem in nationalizing the Mexican national railway system was the procurement of large funds required to do so. The period of speculation as per the Mexican railroad ended with the signing of the Bucareli Agreements in 1922. Under the terms of these agreements, the Mexican government was provided with a single consolidated loan which was used in turn to repay the debts accumulated during the Mexican Revolution. Part of these payments went as damage claims paid to American investors who claimed that their portions of railway lines were damaged during the war although these railway lines fell under the overall umbrella of FNM. These new loans from United States bankers amounted to some half a billion pesos. By assuming new loans, the government effectively limited its ability to restructure the railway network. In this manner, the government also limited its ability to restructure the overall economic structure that could have acted to strengthen the railway network. As mentioned before, the railway network and the overall economy and its integration depended on each other dynamically. Reducing one at the expense of the other only meant that both would assume decreases. This stood true and the Mexican railway network went into steady decline following the massive changes in the 1920’s. Struggle for Survival Following the presidential order of Lazaro Cardenas to nationalize all remaining railway networks in 1938, the entire railway system was taken over the FNM as a government company. Previously the FNM had acted as a semi governmental enterprise because it was the majority shareholder of the railway network. However, with this step the FNM was the sole owner of the railway network in Mexico. As soon as nationalization set in, the FNM stopped making payments to its previous debtors such as SP de Mex. The freight operations being carried out by companies such as SP de Mex to transfer freight to Mexican lines was not paid for. For example, by the March of 1938, the FNM owed the SP de Mex around a million pesos. This situation continued unabated till companies such as SP de Mex were unable to pull their own weight and had to go into liquidation at the hands of none else but the Mexican government. However, by this point in time the Mexican government had exhausted its fiscal resources by paying up Mexican railroad workers. This meant that although an offer was present to buy up the offered lines but it could not be availed due to a lack of fiscal resources. Consequently, companies such as SP de Mex continued to suffer until they chose to stop their operations altogether. Following the Second World War, most companies were exhausted enough to sell off their assets in the Mexican railway network for as much as they went. SP de Mex chose to forego its shares in the Mexican railway network for as little as a few million dollars that were not enough to pay for the scrap value of the railway engines alone. However, faced with no other options to deal with these companies had to sell off their assets one by one to Mexican authorities in order to salvage any possible resources (Lewis). These tactics by the Mexican government saw the continuous decay of the railway infrastructure. Expansion was a thing of the past as the existing structure was laid to waste. Old steam locomotives and new diesel engines were scrapped simultaneously due to inefficiency in maintenance and repair leaving the railway structure with huge losses. Initially the nationalization kept the railway system intact as a whole but later it was divided into five different regional railroads. It was hoped that the smaller railway structures would be able to support better management and efficacy but the situation on ground was altogether different. The division of the cohesive railway structure into regional entities failed to produce the desired results so that the FNM structure as a whole suffered immense losses. It is estimated that the FNM ended up with a loss of some $550 million (which was roughly thirty seven percent of its operating budget) for the fiscal year 1991. In the wake of nationalization, initially the railway structure had suffered from outdated equipment and facilities along with corruption but as time progressed, the road network began to figure prominently in the overall equation. The decaying railway structure meant that cargo and passengers were often delayed. These delays could last from several hours to several weeks depending on the exact problem encountered. Given the inefficacy of the railway structure and the increasing reliability of the road network and automobiles, the predominant mode of cargo transport became the road network. Additionally the need for moving goods from the Atlantic Ocean to the Pacific Ocean had been solved by the Panama Canal and this in turn made the Mexican railway system irrelevant. In terms of the passengers, the lower middle class, the lower class and some strands of the middle class continued to enjoy train services across Mexico. However, the high value clients from the elite class and the upper middle class stopped using train services for transportation. The alternative was aircrafts. Receding airfares in the seventies and eighties made air travel a possibility for a lot of people and this eroded the railway’s strength further. The once mighty Mexican railway network that had transported literally millions across Mexico was no more a preferred method to travel. A few tourist services remained active into the seventies but eventually withdrew their operations given the massive operating losses. Competition from alternative modes of transport such as trucking, aircrafts and shipping meant that the railways had lost a large amount of market share by the 1990’s. It is estimated that by the early 1990’s the railway had lost its major market standing for freight transport and stood at only nine percent of the market. This stood in contrast to the market share from just a decade ago which was around eighteen percent. The massive drop in market share meant that the Mexican railway network was headed for more trouble. The bulk of revenue generated by the FNM came from freight transport as passengers had already migrated over to roads and the air. The decrease of freight market share was perhaps the last straw required by the central government to spring into action. Privatization and the Future The Mexican government announced its intention to privatize the railway network in the mid nineties. According to the proposal, the FNM structure would be privatized after being divided into four different railroad systems. Since passenger services were not economically feasible anymore, FNM halted all forms of passenger service in 1997 to curb the losses. As part of the privatization program, the Northeast Railroad concession was procured by a joint venture between Transportacion Maritima Mexicana (TMM) and the Kansas City Southern (KSS) in 1996. This stretch of the railway connected the Pacific Ocean to Mexico City and then to the United States border. In 2005 KSS was able to buy out TMM altogether to form the Kansas City Southern de’ Mexico (KCSM). This enabled the KCSM to connect the hinterland of Mexico to the hinterlands of the United States. Another joint venture between the Grupo Mexico and the Union Pacific Railroad managed to acquire the Northwest Railroad in 1998. This stretch of the railroad connects Mexico City to the Pacific Ocean and to a number of crossings across the United States border. The venture later assumed the name of Ferromex and concentrates on moving freight across from the Pacific to Mexico City and towards the United States border. Compared to other railroad systems around Mexico, the North West railway link has hauled more freight than all the other railway systems around Mexico. Ferromex managed to haul some twenty three thousand million ton kilometers worth of freight in the first two quarters of 2010 alone (Railway Gazette). Other than the two northern concessions were the two southern concessions that were merged shortly after being awarded. The joint merger was formed in 2000 and is known as Ferrosur. This company is responsible for operating the historical railroad link between Mexico City and the port of Veracruz. In the current configuration of the Mexican railway system, the central focus is on Mexico City which serves as the largest junction for the entire system. The rail links in and around Mexico City are jointly owned by the three major railroad operators mentioned above. In addition, the railway system from this joint venture is looking into the possibility of a tram system to operate within Mexico City. Future Projections The privatization of railway links around Mexico ensured that the railway structure was put to good use to vitalize the economy and to earn revenue. The success of the freight trains has sparked interest in passenger trains for service around Mexico. However, the proposition plans to install new high speed rail links that will allow trains to travel around three hundred kilometers per hour. It is expected that this would allow the provision of cheap and affordable yet high quality transportation services that could rival road transport and aircrafts. Current projections show that the proposed system would cost Mexico around twenty five billion United States dollars and would be complete by the year 2015 (Arizona Central). The renewed interest in passenger trains indicates that Mexico’s long haul from a decaying railway network is coming to an end. Decades of stagnation have meant that the railway network has not expanded but renewed interest such as that for the high speed rail link could indicate future expansion. References Arizona Central. Mexico reviving travel by train. 2006. 15 May 2012 . Bazant, Jan. A Concise History of Mexicao from Hidalgo to Cardenas 1805-1940. New York: Cambridge University Press, 1977. Coatsworth, John H. Growth against Development: The Economic Impact of Railroads in Porfirian Mexico. DeKalb, Illinois: Northern Illinois University Press, 1981. Driscoll, Barbara A. The Tracks North. University of Texas Press, 1999. Knight, Alan. “The Mexican Revolution.” History Today 30 (5) (1980): 28. Lewis, Daniel. Iron Horse Imperialism: The Southern Pacific of Mexico, 1880-1951. Tucson, AZ: University of Arizona Press, 2007. Railway Gazette. Railway Gazette: A record half. 2010. 15 May 2012 . Signor, John R. and John Kirchner. The Southern Pacific of Mexico and the West Coast Route. San Marino, CA: Golden West Press, 1987. Trennert, Robert A. “The Southern Pacific Railroad of Mexico.” The Pacific Historical Review 35(3) (1966): 265–284. Read More