Mexico’s announcement this summer of plans for a multibillion-dollar investment by China in a new deep-water port and a railroad that would reach New Mexico’s border could expand international trade in the state exponentially.
Yet the proposed deal is so large – the more than $750 million reportedly planned for the railroad would far outstrip what China has invested in Mexico since 1999 – that it raises questions about its likelihood. At the same time, New Mexico’s buy-in to any cross-border rail plan would be crucial, yet the state has been largely on the sidelines.
New Mexico and its Mexican counterpart, Chihuahua, had been talking for years about the possibility of cross-border cargo rail at the fast-growing Santa Teresa port of entry. But New Mexico still had a call for proposals for a feasibility study when two Mexican governors traveled to Beijing in July and announced an agreement with developer China Hyway Group Ltd. and the China Development Bank. Chihuahua’s El Diario newspaper reported a planned investment of more than $750 million in a rail line and a $1 billion investment over four years in the construction of a deep-water port in the west coast state of Nayarit.
Did Mexico put the boxcar before the horse? How real is the deal anyway?
New Mexico wasn’t part of the Beijing deal, but state Economic Development Secretary Jon Barela expressed optimism the project will get built.
“We’ve been briefed, and we have high aspirations that it will be under construction and completed,” he said, adding that China’s export industry has been hurt by long wait times at California ports and could benefit from the competitive advantage a new port and rail to the United States could offer.
Some business and economic development leaders in Chihuahua and New Mexico expressed doubts that the project amounts to much more than political posturing by Mexican governors eager to make marquee announcements about investment and job creation.
How seriously one views the plan may depend which side of the border you’re on.
Chihuahua Public Works Secretary Eduardo Esperón said firm interest from investors is a precursor to getting the ball rolling in Mexico; feasibility comes second.
“It’s important to have the people who want the business on board, because it gives the project credibility,” Esperón told me last week. “If we didn’t have that, the project would be more up in the air.”
China’s history of investment in Latin America may also offer some clues.
“It’s not unheard-of for there to be loud, flashy announcements of Chinese investment in Latin America,” said Eric Farnsworth, vice president of the Washington, D.C.-based think tank Council of the Americas.
China has been doing a lot of business in Latin America over the past decade – but not much in Mexico. President Enrique Peña Nieto is trying to change that and has made the relationship with China a centerpiece of his administration.
Mexico saw a paltry $310 million in Chinese foreign direct investment from 1999 to 2014 – not including the proposed rail project – compared with $173 billion in U.S. foreign direct investment, according to Mexico’s Economy Ministry.
The proposed railroad would link a proposed deep-water port in Mexico’s west coast state of Nayarit with a nascent industrial hub west of Ciudad Juárez known as San Jerónimo, which shares a border and port of entry with Santa Teresa.
For the cross-border rail project to work, it would likely need buy-in from the major railroad already operating in Santa Teresa, Union Pacific, which this year opened a massive $400 million east-west intermodal hub there. It doesn’t appear to have that backing.
“We don’t foresee anything in terms of a north-south link for Santa Teresa,” Union Pacific spokesman Mark Davis told me.
The Chinese tend to take “a very long perspective” on major infrastructure investments, said Ken Hammond, a China historian at New Mexico State University. Obstacles that might deter a less well-financed private investor don’t faze China’s state-backed banks and developers.
“They may feel there are sufficient benefits to front-load this,” he said. “Maybe they have a ‘field of dreams’ attitude: If they build it, the Americans will have to take advantage of it.”
UpFront is a daily front-page news and opinion column. Comment directly to Lauren Villagran in Las Cruces at firstname.lastname@example.org. Go to www.abqjournal.com/letters/new to submit a letter to the editor.