Mexico - The End of Transition : A Review of the Transport Sector

Document of THE WORLD BANK FOR OFFICIAL USE ONLY GC-CONFIDENTIAL Report No. 12654-ME MEXICO THE END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR May 31, 1994 FILE COPY Country Department H Infrastructure and Energy Operations Division Latin America and the Caribbean Regional Office FILE COPY This document has a restricted distributiol performance of their official duties. Its coi World Bank authorization. CONFIDENTIAL Report No: 12654 ME Type: SEC CURRENCY EQUIVALENTS Currency Unit = Peso (Mex$) US$1.00 = Mex$ 3.345 (May 5, 1994) FISCAL YEAR January 1 - December 31 UNITS OF WEIGHTS AND MEASURES Metric: British/US Equivalent 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 kilogram (kg) = 2.20 pounds (lb) 1 metric ton (m ton) = 2,205 pounds 1 liter 0.26 gallon (gal) ACRONYMS API Administraci6n Portuaria Integral ASA Aeropuertos y Servicios Auxiliares BANOBRAS National Bank for Public Works and Services (Banco Nacional de Obras y Servicios Piblicos) BOT Build, Operate and Transfer CAPUFE Federal Highways and Bridges Authority (Caminos y Puentes y Servicios Conexos) CGAP Coordinaci6n General de Autoridades Portuarias c.i.f cost, insurance, freight CONACAL Comisi6n Nacional de Carreteras Alimentadoras y Aeropistas DF Distrito Federal EDI Electronic Data Interchange EVE Entidades Viales Estatales FNM National Railways of Mexico (Ferrocarriles. Nacionales de Mexico) f.o.b. free on board GDP Gross Domestic Product GOM - Government of Mexico IMT Instituto Mexicano del Transporte PM Mexican Ports Authority (Puertos Mexicanos) PRONASOL Programa Nacional de Solidaridad ACRONYMS (Cont.) NAFTA North American Free Trade Area PCR Programa de Cambio y Re-estructuración SCT Ministry of Communications and Transport (Secretaría de Comunicaciones y Transporte) SECOFI Secretaría de Comercio y Finanzas SHCP Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público) TMM Transportes Marítimos Mexicanos MEXICO TRANSPORT SECTOR STRATEGY STUDY Table of Contents Paee No. EXECUTIVE SUMMARY (i)-(xiii) I. MAIN TRANSPORT SECTOR DEVELOPMENTS SINCE 1986 ............... 1 A . Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 B. The Macroeconomic Context and Sector Finances ........................ 1 C. Institutional Responsibilities ...................................... 3 D. Deregulation and Privatization .................................... 7 E. Environmental Improvement ..................................... 12 II. TRANSPORT SUPPLY ......................................... 14 A . Introduction . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 B. Road Transport .............................................. 14 C . R ailw ays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 D . Ports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 E . A ir Transport . ........ ...................... .. ........ .. .... 19 III. TRANSPORT DEMAND IN A CHANGING ENVIRONMENT ................ 21 A . The Users' Perspective ........................................ 21 B. Transport Corridors .......................................... 25 C. Intermodal Transport and Information Systems Development .................. 26 D. NAFTA, Transport andDistribution................................. 29 IV. THE CURRENT FINANCIALSITUATION ............................ 32 A. Introduction ....... 32 B. Parastatal Financing ........................................... 32 C. Financing of Highway Construction and Maintenance ...................... 32 D. Toll Road Financing .......................................... 34 V. A POLICY FOR CONSOLIDATION AND GROWTH ..................... 41 A . A Policy Framework .......................................... 41 B. Regulatory Framework ......................................... 41 C. Continued Restructuring and Privatization ............................. 42 D. Financing of Road Infrastructure .................................. 43 E. The Impact of Increased International Trade ........................... 45 F Distribution for NationalMarkets .................................. 48 G. Institutional Responsibilities ...................................... 48 H. Environmental Impacts of Transport Investment and O perations ........................................... 49 I. Government and Bank SectorStrategies ............................... 51 The report is based on the findings of a World Bank mission which visited Mexico in June, 1993. The mission team consisted of Robin Carruthers (Transport Economist and Task Manager) and Malise Dick (Transport Specialist). The peer reviewer was Ms. Frida Johansen. Ms. Migdaha Quijada assisted in the production of the report. The Country Department Director is Edilberto L. Seguna, and the Division Chief is Martin Staab Table of Contents (cont'd) Paze No. TABLES 1.1: Macroeconomic Indicators, 1986-1992 ............................ 53 1.2: Net Transfers from Transport Agencies, 1986-1992 .................... 54 1.3: Railway Financial Results, 1986-1992 ............................. 55 1.4: Highway Maintenance Costs and User Charge Revenue, 1992 .............. 56 1.5: Ports Financial Results, 1989-1992 .............................. 57 1.6: Mexico - Transport Sector Investment, 1986-1992 ..................... 58 1.7: Classification of the National Road Network ........................ 59 1.8: Mexico - Public Vehicle Fleet, 1986-1992 ......................... 60 1.9: Private Toll Roads: Costs, Traffic and Tolls ......................... 61 2.1: Condition of the Federal Highway Network ......................... 62 2.2: Highway Public Sector Investment, 1986-1992 ....................... 63 2.3: Port Traffic, 1988-1992 .. ................................... 64 2.4: Airport and Air Transport Traffic, 1989-1992 ....................... 65 3.1: Demand for Domestic Freight Transport 1980, 1986, and 1989-1992 ......... 66 3.2: Comparison of Truck Dimensions and Weights ....................... 67 4.1: Private Toll Roads: Expected, Actual and Possible Rates of Return ..................................... 68 4.2: Variation of Finance Cost with Loan Period and Interest Rate .............. 69 6.1: Previous Sector Loans, 1995-2000 ..............................70 ANNEX Estrategia del Sector Transporte - Marco de Referencia y Proyectos Estrat 7gicos .......................................... 71 MAP IBRD Transportation Network and Industrial Port Locations ................... 96 EXECUTIVE SUMMARY A. OVERVIEW The Economy 1. The Mexican economy and with it the transport sector has changed character since 1987 when the last transport sector strategy for Mexico was formulated. The economy has been opened to external trade at the same time as the government has stopped trying to control and regulate every aspect of economic activity. It has relied increasingly on competition and market forces to fulfill this role. 2. Opening of the economy has been achieved through import tariff reduction, with the average tariff reducing from over 25% in 1986 to less than 12% in 1993. Reduced intervention in the economy is reflected in a public sector debt reducing from 62% to 20% of GDP over the same period, and a public sector surplus of 0.5% in 1993 rather than a deficit of 10% in 1986. Public sector capital investment in the transport sector has declined in real terms by more than 50%. The Sector 3. The transport sector has been substantially deregulated and privatized, with most transport activities now operated under concessions. The two state controlled airlines have been sold and airport operations are now being concessioned; the railways are in the process of concessioning all maintenance activities, including track, locomotives, wagons and communications and signalling; over 60 port terminal concessions have already been awarded; and most spectacular of all, more than 4,300 km of private toll roads have been constructed and are in operation, and a further 1,500 km of concessions are ready to be awarded. The Strategy 4. The objective of government strategy for the next six years, as described in the SCT's Estrategia del Sector Transporte (Transport Sector Strategy), March, 1994), is to create a stable policy environment in which the new transport policy can function and in which private and public investment for maintenance and expansion of infrastructure can be made with confidence. 5. This will be achieved by a continuation of present policies in respect of deregulation and the continued devolution of operations and investment to the private sector through concessions. A new regulatory and institutional structure will be created to monitor and regulate the activities of the sector. Intermodal transport will be encouraged and measures will be taken to increase environmental protection throughout the sector. 6. This strategy will be supported by the Bank through a lending program which takes account of the Bank's comparative advantage in providing technical assistance and where its experience is - ii - complementary to that of other financing sources and where the Government considers that it can make an impact on sector policy implementation. B. SUMMARY I. Main Transport Sector Developments Since 1986 7. The last review by the Bank of the Mexican transport sector was made in 1987, before implementation of the government's strategy to reform the economy and the sector started in earnest. Since then, both have undergone substantial change. The period has been one of transition from excessive regulation and government intervention to more open competition and increasing private participation and investment. Macroeconomic Context 8. The Salinas Government came into office with the aim of accelerating the economic changes initiated by the previous administration. Average tariff protection has been reduced from over 25% in 1986 to less than 12% in 1993, public debt has been reduced from 62% to 20% of GDP over the same period and the public sector balance changed from a deficit of 10% in 1986 to a surplus of 0.5% in 1993. The effects of these policies on public sector capital expenditure have been substantial, with a decline in real terms of more than 50% in the transport sector. Many of the changes in the transport sector were predicated on an annual growth of more than 4% in GDP and the lower realized growth has had negative consequences for the sector, including misdirected investment and low financial returns. Sector Finances 9. The four principal transport sector agencies showed an overall financial loss in the last three years following three years of net financial transfers to the government. Instability in the revenues of Caminos y ftentes Federales (CAPUFE), the public toll roads agency, is mostly responsible for the variation in the overall result, although increasingly negative results from Ferrocarriles Nacionales de Mexico (FNM),' the railway agency, and Puertos Mexicanos (PM), the ports operating agency also contributed. Aeropuertos y Servicios Auxiliares (ASA), the provider of airport services, reported consistent positive results. The overall sector financial result was a consistent positive transfer if the implicit tax on transport fuels is included, the revenue from which is used as a general revenue source by the Government. 10. Total investment, public and private, in the transport sector increased from about US$1 billion in 1986 to US$1.6 billion in 1992, after peaking at almost US$2.5 billion in 1991 with the private toll roads initiative. Private investment now represents about 46% of the sector total. Road investment has increased from less than 55% to more than 70% of the total but this balance is expected to be redressed as private investment in railways, ports and airports gets underway. - iii - Institutional Responsibilities 1. Changes in institutional responsibilities have been an essential condition for the transition. Institutional structures designed for a highly regulated sector are no longer appropriate. At the beginning of the period, SCT still had both direct and indirect responsibility for the regulation of and investment in all modes of transport and direct responsibility for operations in railways, ports, airlines and airports. With deregulation of road transport and domestic air transport, introduction of the private toll roads program, transfer of the rail track division of SCT to FNM and increased commercial and managerial autonomy for FNM, consolidation of the ports in Puertos Mexicanos and its subsequent transfer from SCT to SHCP, and the proposed concessioning of airport services, SCT's role as a direct participant in sector operations has been evolving into one of strategic policy making and indirect supervision. 12. FNM is a parastatal organization reporting to SCT, with an internal structure typical of a production oriented railway, with a large number of directorates reporting directly to the Director General (DG). Despite the changes implemented in the last few years, the current allocation of responsibilities is still that of a production rather than commercially oriented railway. 13. In 1986 there was a proliferation of government departments and agencies operating in the ports subsector. Responsibility for PM was transferred from SCT to SHCP early in 1993, to accelerate the privatization of port activities. PM is now in the process of being liquidated with the creation of a new administrative body with responsibility for managing the individual new port agencies. 14. Despite the deregulation of domestic air transport in 1989 and the publication of a draft air transport law in 1993, there have been no major changes in the institutional framework for civil aviation. SCT continues to be responsible for both the infrastructure of airports and navigation facilities and for the provision of ground services at airports and the operation of navigation aids although all of these are now potentially concessionable. Deregulation and Privatization 15. Prior to deregulation in 1989, freight'and passenger road transport was heavily regulated by a legal framework dating from the late 1940's and which resulted in service that was unreliable, of high cost and inadequate to satisfy the needs of a growing economy. Deregulation provided: freedom of transit on all federal roads for all, freight vehicles to transport any load; the removal of all restrictions on loading and unloading; te replacement of fixed tariffs by maximum tariffs; simplification of the granting of vehicle permits and removal of the requirement to join an existing company. Vehicle weight and axle loan regulations continued unchanged. 16. The private toll roads program was initiated in 1989 with the aim of having 4,000 km of four lane private toll roads in operation by thd end of 1994. This has already been achieved, with the opening of the Cancin - Mdrida highway in October 1993 bringing the total length of private toll roads in operation to 4,060 km with a further 300 km under construction. Private investment obligations exceed US$10 billion. Completion of the expanded program, at a cost now estimated to exceed US$15 billion, will result in an overall increase the length of the Federal network by some 15% since the beginning of the program. - iv - 17. Under the new Ports Law introduced by SHCP in June 1993, ownership of the ports will remain in the public sector, as required by the Constitution, but all port activities are potentially concessionable for renewable periods of up to 50 years. By April 1994, over 60 port terminals had already been concessioned with an anticipated investment of almost US$500 million. New administrative agencies have been created for three of the busiest ports with six more to be created before the end of 1994. 18. Proposals for privatization by concession, sale and lease back and simple contracting of railway services are at an advanced stage. Once these concessions have been awarded, FNM will have become a model of a new style of public sector railway, responsible only for strategic planning, train operations of and the supervision of concessions. 19. Both domestic airlines were privatized in 1989 at the same time as domestic air transport was deregulated, allowing for competition and the market determination of tariffs. New airlines are being formed, but competition is likely to force some of the less financially secure new airlines out of business as the larger airlines adopt aggressive marketing strategies. Aeropuertos y Servicios Auxiliares (ASA) will be transformed by a new Air Transport Law into a regulating and promoting agency and its operations will be concessioned. Environmental Improvement 20. Previous failures to take account of the environmental impacts of transport have resulted in a large backlog of problems to be resolved. The most apparent problems are in Mexico City and it is here that the first Bank supported transport environmental project is being executed. The Medium-Size Cities Urban Transport Project, also being supported by the Bank, addresses the impact of transport on air quality, noise, visual intrusion and community segregation in other cities. 21. The 1993 Mexican emission standards for light vehicles are similar to those presently in force in the US. The timing for adoption of the stricter standards of the new US Clean Air Amendments Act still remains to be determined, as does the timing of adoption of emissions standards for heavy vehicles. Fuel pricing policy, while encouraging the use of lead-free gasoline for engines with catalytic converters should also aim to discourage its use for vehicles powered with conventional engines. 22. The interrelationship between traffic-induced (mobile source) environmental impacts and those derived from fixed sources is recognized in the Border Areas Environmental Project;- which deals with environmental improvements on a more comprehensive basis than would be possible through independent sector projects. II. Transport Supply 23. Despite the continued Bank operations in the sector, the 1980's were a period of substantial neglect of transport infrastructure in Mexico, both in terms of making additions to meet the increasing demand and in maintenance of what already existed. This neglect is evident-in ports, railways and airports but is most clearly demonstrated in the highway subsector. - Road Transport 24. By 1987 the inadequate provision for maintenance of the 46,000 km of federal, 61,000 km of state and 100,000 km of rural roads was becoming apparent and maintenance expenditure has continued to decline in teal terms, The impact has been exaggerated by a sub-optimal choice of maintenance strategies. The current condition of the network is unsatisfactory, with only 22% in good and almost 40% in bad condition. The status of the primary network is even worse with only 10% in good and 60% in bad condition. The on-going Highway Rehabilitation and Traffic Safety Project includes provision for a study of highway maintenance financing strategies. It is expected that this study will lead to the adoption of a mechanism for adequate planning and funding of maintenance for the federal network. 25. Interurban trucking remains highly fragmented despite deregulation of the previous regime, which discouraged the formation of medium and large scale trucking companies and protected the large number of small operators, grouped together in cooperatives to protect their local monopolies. Some US trucking companies have entered into operating agreements with Mexican operators which in time will lead to genuine cross border operations. Railways 26. FNM has a core network of 13,000 km which carries about 85% of all rail traffic. Only the most densely used part of the network, the 970 km between Mexico City and Monterrey, is provided with centralized train control. Since 1992, concessions have been awarded for the operation of two intermodal and five specialized terminals ("Ferropuertos") with an expected private sector investment of some US$20 million in the next few years. Other terminals will be offered on a concession basis, encouraging even more private investment and efficiency of operations. 27. Two actions which signify a change in operational thinking for the railway are the implementation of the Programa de Cambio y Reestructuraci6n (PCR) and the revision to the working rule book. Implementation of the PCR signifies acceptance by FNM of its commercial role and opens the way for the privatization of most railway activities - infrastructure maintenance, locomotive and wagon maintenance, supply of signals and communications capacity and the marketing of services. Modification to the Rule Book, will for the first time allow a significant increase in both labor and locomotive productivity, and is symbolic of a recognition by the unions of the changed role of the railway. 28. The concessioning of the locomotive workshops should increase the availability of locomotives to between 85% and 90%. The introduction of radio train control, together with other measures such as computerized train and crew planning, should increase the utilization of each available locomotive by about 25%. The overall impact of these and other measures will be a 40% reduction in the locomotive fleet, with comparable savings in investment and operating costs, a consequent reduction in tariffs and an improvement in the competitive position of the railway. - vi - Ports 29. The ports system comprises 73 ports, terminals and marinas, of which 39 are on the Pacific coast and 34 are on the Gulf of Mexico and Caribbean coast. Twenty two ports handle international traffic and six of these account for about 80% of the country's total tonnage of just under 30 million tons, 86% of container movements, 75% of bulk solid movements and 92% of bulk liquid movements. The most serious operational problems arise in the handling of general cargo, whether or not it is containerized and a general lack of operating equipment and facilities. Efficient general freight operations require appropriate measures to ensure that seaward, port, customs and landward operations are well integrated and the provision in Mexico has hardly started. Air Transport 30. Of a total of more than 240 airports and airfields, 82 provide services for commercial aviation and the 58 most important of these are administered by ASA. At present only Mexico City's airport,with 20% of the national total commercial aircraft movements, is close to capacity in terms of runways, although several other airports are operating close to or beyond their passenger terminal capacity. The number of domestic trunk airlines has increased from two to six since deregulation. Together with the rapid expansion of the route networks of the two original airlines, this is causing operating problems at many airports, where the passenger terminals were designed to serve one or at the most two airlines. 31. A new Air Transport Law will allow all ASXs operations to be concessioned. The intention is to start with the concessioning of those airports which are most financially viable, while trying to increase the viability of the remainder, before concessioning those in a second stage. M. Transport Demand in a Changing Environment The Users' Perspective 32. Early in 1993, a survey was undertaken of the transport activities of manufacturing firms in Mexico. The firms included in the survey covered a wide range of the manufacturing sector, including chemicals, food products, electronics, car components, fertilizers and paper products. The sample was not intended to be representative of all manufacturing industry but to include companies with a wide range of transport requirements. Four aspects of user opinion were investigated. a) Modal Choice 33. The overwhelming importance of trucking, with about 85% of land freight transport, as the main mode of transport is confirmed by this survey. The few firms using rail transport use it predominantly for products with low unit values and acceptably low costs of keeping buffer stocks to compensate for irregular and unreliable services. - vii - b) Trade Facilitation 34. More than 95% of US-Mexico trade is by land, with a small proportion using air transport and a negligible proportion going by sea. Neither the physical nor the institutional facilities for dealing with this high volume of trade are seen as adequate and are a frequent source of critical comment. There are many complaints of long delays resulting from apparently unreasonable actions on the part of customs agents or others involved with the passage of trailers or wagons between one country and another. Despite attempts by authorities on both sides of the border to reduce delays, these still inhibit the free flow of freight between the countries. c) Satisfaction 35. The respondents to the survey indicated an overall high level of satisfaction with the performance of the transport system as a whole and in particularly with the quality and price of road transport, but significant dissatisfaction with the quality and reliability of rail transport. d) Tariffs 36. Users in the principal corridors to the US border have a strong bargaining position and can negotiate low road and rail tariffs. Those whose demand is in corridors with less competition, or whose demands are smaller or less regular, are not in such a strong negotiating position and confront higher charges than before deregulation. Competition seems to be the most influential factor in determining tariffs. Low rail tariffs were not usually considered sufficient to compensate for the low frequency and reliability of the services offered. Intermodal Transport and Electronic Information Systems 37. In 1981 a monopolistic parastatal company "Multimodal" was created to develop national intermodal transport services. Multimodal's inexperience in this field inhibited development and in 1989 the monopoly was abolished, although the company continues to operate. Now any Mexican company can provide intermodal transport services, provided it satisfies minimum operational and financial conditions. Intermodal services require inland customs facilities rather than at border crossings and sea ports, but so far only one Inland Clearance Depot (ICD) has been authorized. The reluctance of the established interests of customs, customs agents and shipping lines must be overcome, as it has been in other countries, if the benefits of intermodal transport are to be realized. 38. Electronic Data Interchange (EDI) is not yet widely used in Mexico. Countries with which it is in competition for markets in industrialized products, such as Singapore and Korea, already use EDI for most transactions. The physical and legal requirements for EDIs development in Mexico are in place or can easily be provided, but its implementation will need a stimulus from outside the transport sector before its use becomes more general. - viii - NAFrA and Transport 39. Although it is widely expected that following the implementation of NAFTA, US- Mexico trade will double by the end of the decade, this rate of increase would not be significantly different to that achieved over the last five years. In practice, the impact of NAFTA on land trade and land transport is likely to be much greater not only because of a positive stimulus to trade between the countries but also because of the location of new production away from the border region. 40. In addition to increasing international transport movements from 7% to almost 10% of the national total within ten years, NAFTA will change the way freight is moved across the border, with trucks and locomotives eventually being free to move in all three countries. It will also result in common vehicle size and weight standards, and in doing so will change the relative competitiveness of US and Mexican truckers and that between road and rail. How competition will be affected will depend on agreements still to be reached on what size and weight standards will be applied. IV. The Current Financial Situation Parastatal Financing 41. There are four principal parastatal enterprises in the transport sector. Two of these, ASA and CAPUFE, improved their financial situation between 1987 and 1992, while the deterioration in the other two, FNM and PM, was so great as to cancel the gains made by the first two, increasing the overall annual deficit to more than US$400 million. Highway Construction and Maintenance 42. At least in the last ten years, road expenditure has never reached a level sufficient to either maintain the existing network in an adequate condition or to provide adequate capacity increases to match the increases in road traffic. The total federal budget allocation for the federal road network increased substantially in 1990 and 1991 compared to 1989, mostly in the category of modernization, while maintenance expenditure was reduced to less than 10% of the total. 43. Despite increases in user charges, heavy vehicles are still not contributing in proportion to the maintenance costs they impose, largely because the price of diesel fuel is only just about equal to its opportunity cost. A comprehensive review of highway maintenance administration and financing strategy is to be undertaken in the context of the Bank supported Highway Maintenance and Safety Project. Toll Road Financing 44. The BOT (Build, Operate and Transfer) mechanism used for the private toll road program is being used successfully in at least ten other countries. Implementation in Mexico has brought mixed results, with more than 4,300 km of road being opened or under construction in less than - ix - five years, but with most of the traffic remaining on the existing roads, the concessionaires are in serious financial trouble and the national banks are reluctant to become involved in financing further toll roads under the present scheme. These problems have their origins in two particular features of the scheme - the information available to potential bidders and the way in which it has been used, and the criteria for awarding the concessions. 45. Bids have been based on final designs and traffic forecasts provided by SCT, which were not sufficiently reviewed by the bidders and which turned out to be even less reliable than usual. The experiment of awarding concessions on the basis of the shortest required period has not been successful. Bidders have proposed very short periods, knowing that if within that period the accepted rate of return was not earned, it would be extended under the terms of the guarantee. 46. Means of improving the financial viability of existing and new concessions have been reviewed and substantial improvements made for future concessions. Some of the measures would apply to all concessions, existing or new, but most would apply only to new concessions. Some measures to improve existing concessions are also being implemented. Changes to the scheme for new concessions include: (a) changing the basic parameter for awarding concessions to the lowest level of toll to be charged, with a fixed concession period long enough for recovery of investment costs through toll revenues; (b) providing design standards rather than final designs; (c) increasing the equity stake of the concessionaire, and; (d) eliminating the rate of return guarantee; 47. The conditions for improving the performance of existing concessions are being determined on a case by case basis. In addition to applying the guarantee conditions of the concession agreement, which extends the period of the concession if a specific rate of return on investment is not being achieved, enhancement is being achieved by adding other revenue generation sources, such as CAPUFE roads, already constructed federal roads, service stations and restaurants and hotels, to the concessions. In some cases the concessionaires themselves are refinancing their debt as a way of reducing costs. Revenue enhancement by adding facilities to existing concessions without going through a competitive bidding process gives wrong signals to future concessionaires as well as failing to maximize government revenues from the concessioning process, and is not recommended. V. A Policy for Consolidation and Growth 48. The next sexenio will be one of completion of the changes which have already been initiated, consolidation of the benefits which have been gained through fine tuning of measures already taken and providing a framework for private investment. There are some areas of transport activity where competition and private initiatives will not by themselves be enough, and in these cases continued government intervention will be justified. 49. The areas in which policy changes will be needed include: (a) the establishment of a regulatory framework for the management of competition, (b) the financing of public and private road infrastructure; (c) completion of the restructuring and privatization of the railway, ports and airports; (d) providing capacity for increased international trade; (e) stimulating multi-modal transport; (f) establishing new institutional responsibilities; and (g) reducing the adverse environmental impacts of transport investments and operations. (a) Regulatory framework 50. The policy of deregulation has provided immediate and significant improvements in transport infrastructure and the range, quality and cost of transport services. As transport operators gain experience operating in the more competitive environment, their propensity to enter into market controlling arrangements will increase. An appropriate regulatory framework to limit these actions is still not in place and should be prepared and implemented before competition becomes constrained. (b) Financing of Road Infrastructure 51. For 1994, the balance of federal expenditure between maintenance and new construction has moved significantly in favor of the former after a long period in favor of the latter. It is desirable that some mechanism be introduced which would ensure that sufficient funds would be available to maintain road infrastructure in a reasonable condition. 52. The devolution of responsibility for feeder and rural roads to the states is being hindered by lack of agreement as to how they should be financed. If it is determined that more financial responsibility should lie with the states, then appropriate revenue generating powers should also be granted to them. Without such powers, the states will not accept the responsibility and if it is forced on them, they will ignore it. 53. The decision to construct an extensive system of private toll roads was a far reaching initiative which has changed the way in which infrastructure finance will be managed in the foreseeable future. It is probable that the next concession awards will be made on a different basis to those already awarded and that the conditions of some of the current awards will be substantially revised. - xi - (c) Restructuring and Privatization 54. The schemes for restructuring and privatization of the railways, ports and airports is now under way and is only the first stage in making them technically efficient, commercially viable and financially independent. To fulfill their new responsibilities, new institutional structures will be needed and should be created as the schemes are implemented rather than afterwards. (d) Increased International Trade 55. The policies for providing additional transport capacity for international traffic now depend extensively on the private concession programs in the roads, railways and ports subsectors. If these programs achieve their hoped for attraction to private investment, sufficient resources should be available to provide the needed capacity on a timely basis. Public sector funding will be needed as a supplement in specific and well defined situations. 56. Although progress has been made in attracting some private investment in rail freight terminals, further incentives are needed if this is not to become a bottleneck to future operations. FNM needs to completely rethink its approach to the transport of general freight under intermodal contracts, with the operation of dedicated unit trains between specialized freight terminals on the peripheries of cities and conurbations and with excellent road connections to urban and industrial areas. Private sources will provide almost all port investment and most airport investment over the next six years. 57. There is a lack of physical capacity for increased international air freight. Few airports have adequate specialized facilities and customs arrangements are generally not compatible with the efficient and rapid handling needed. When the provisions of the new Air Transport Law are applied throughout the subsector, the private sector will be the source of most future airport investment. (e) Intermodal Transport 58. Intermodal transport is developing in Mexico more slowly than users would like. This is partly due to the legal status of freight forwarders, partly to a lack of internal facilities for reception of containers, but predominantly to the reluctance of shipping lines and customs to permit the clearance of sealed containers at inland depots and to the slow development of Electronic Data Interchange (EDI), in turn partly a function of the inadequate communication system. Strong pressure for more rapid development is needed from at least one major participant in the transport chain. The obvious actor is the customs authority, but it has only recently begun to show interest. If Mexico is to remain competitive in world markets, customs will need to adopt EDI for its own purposes and in so doing bring advantages throughout the logistics chain of international trade. 59. The studies of urban transport being undertaken in the context of the Medium-Size Cities Urban Transport Project are already providing evidence of the need for additional freight terminals located away from the historic centers of cities and close to the nodes of the transport network. These would be multi-functional and multi-modal terminals and serve as interchange points between long distance transport and shorter distance final distribution within the metropolitan region. - xii - 60. Proposals for the development of new out of town terminals are already coming from private interests, but to encourage them to proceed with the lengthy and expensive task of obtaining permissions, a government policy initiative is needed. Given the many environmental and economic benefits of such terminals, some financial participation by federal and state governments may be necessary to ensure their realization. (f) Institutional Responsibilities 61. The restructuring of the transport sector and changed role of the federal government in planning, regulating, providing services and financing infrastructure will require a new institutional order to match the new responsibilities. 62. The SCT will continue to be the principal agency for management of the sector. It should retain responsibility for management of the parastatal transport agencies, for the regulation of concessionaires and private sector transport operators and to a lesser extent for the road network. It should not undertake any transport operations on its own account. 63. The creation of an Infrastructure Financing Facility, for all infrastructure concessions and not just for transport, would go far in creating common conditions and criteria for all concessions and provide a reasonable assurance of an efficient allocation of resources between sectors and projects. Under the current proposal, its main function would be to provide conditional guarantees of post construction refinance, predicated on successful completion of civil works at an agreed cost, satisfactory reassessment of financial projections and the existence of satisfactory operating contracts. The Facility would be managed by a reputable private institution with a strong international reputation. The Facility would be capitalized through the contributions of first risk funds from its managing agency, equity from bilateral and multilateral financial institutions and other investors including potential borrowers, public offerings, and finally through capital callable by the government. (g) Environmental Impact 64. By far the most environmentally damaging impact of transport is from road vehicle emissions. The policy of the federal government is to complement existing emissions standards for light vehicles with new standards for heavy vehicles within the next two years, and to encourage municipalities to use common standards for the testing of emissions of all vehicles. Design standards for emissions will need to be revised and updated periodically to reduce the impact of emissions on air quality, within a program of air quality management which takes account of the cost-effectiveness of various measures in containing and reducing harmful emissions. 65. There is an acute shortage of trained technical staff to operate and maintain air quality measuring equipment. Equipment suppliers should be required to include training with their equipment and multilateral agencies making loans for air quality measuring and control equipment should ensure that adequate operating budgets are provided for their operation. 66. SEDESOL as the normative agency for environmental control has already had an impact on the conduct of industrial activities in transport, particularly railways and ports. SCT and - xiii - SEDESOL will need to achieve better coidiniti6i`f their roles in respect to setting and implementing design standards for vehicles if the advantages of new environmental regulations are to be realized VI. Proposed Bank Strategy 67. The role of the Bank for infrastructure lending in Mexico is changing from one of support for the transition to a market based system, to one in which it supports private investment and operation where necessary . The success of the transition policy has resulted in private agencies now being the principal operators in the sector and their rapidly becoming its major source of investment funding. The new strategy is aimed at supporting that confirmed in a new SCT sector policy document, Estrat9gia del Sector Transporte (March 1994), which aims at establishing a stable and sustainable context for the continued expansion of the transport sector as an essential component of economic growth. Bank strategy focuses on a few specific issues where its financial resources and experience are complementary to those of the private sector. The issues are: (i) strengthening the regulations to limit practices which abuse the freedoms of competition; (ii) developing an environment that facilitates private financing of infrastructure; (iii) investing directly where the financial rewards are insufficient to stimulate private investment but where economic benefits are substantial; (iv) improving the logistics of international trade, and; (v) reducing the environmental impact of transport activities. 68. Two projects, a Railway Restructuring Project and an Urban Transport Development Project, are in an advanced stage of preparation and are considered as projects prepared in consultation with the current administration. The first Project to be prepared with the new administration would be a Port Sector Project, to be co-financed with the Interamerican Development Bank. The Bank would respond positively to initiatives in respect of support for projects related to highways which have an economic justification, but which would not be viable for concession if their only revenue source were to be from tolls. Similar consideration would be given to proposals for projects related to intermodal transport and transport related environmental impacts. I. MAIN TRANSPORT SECTOR DEVELOPMENTS SINCE 1986 A. Introduction 1.1 The last full transport sector review for Mexico was in 1987, before the implementation of the government's strategy to reform the transport sector had started in earnest. Since then the Mexican economy and with it the transport sector has undergone substantial change. The period has been one of transition from a situation characterized by excessive regulation and government intervention to one of more open competition and increasing private participation and investment. The objective of this study is to review developments between 1987 and 1993, and recommend an appropriate strategy for completing the process of transition and arriving at a mature transport sector which adequately serves the needs of a rapidly expanding productive economy. 1.2 The remainder of this Section of the Report describes the most important developments in the sector since 1987. It starts with an assessment of the macroeconomic context within which the sector has functioned and goes on to describe changes in the institutional responsibilities of different public sector agencies, and the specific actions taken by them in respect to deregulation and privatization and the impact of these changes on the environment. The following Sections provide: (i) an examination of current transport supply; (ii) an analysis of the dynamics of transport demand; (iii) a review of current and prospective sector financing mechanisms; (iv) suggestions for a sector strategy for the period of the next administration, and; (v) a proposed Bank lending strategy. B. The Macroeconomic Context and Sector Finances Macroeconomic Context 1.3 In medium to large size economies, the transport sector typically accounts for between 6% and 12% of Gross Domestic Product (GDP). In Mexico it accounts for almost 10%, up from just over 7% in 1986, reflecting the growth in transport activity as a result of the government's new policy (Table 1.1). In 1987, transport infrastructure investment accounted for about 8% of federal government capital expenditure. The overall percentage today is rather less, as government participation in the sector has reduced and government investment in transport has been constrained more than in other sectors. However, the importance of the sector to the national economy is such that its activity must be considered within a macroeconomic framework. Mexico depends for its economic growth on the development of its trade with other countries and for this growth to be sustained, transport infrastructure and services have an importance far greater than their direct participation in the economy. 1.4 Not only has the transport sector been in a state of transition since 1986, but the whole economy has been passing through a period of rapid change towards a modern open economy, culminating in the implementation of the North American Free Trade Area (NAFTA) with the United States and Canada. As a result of these changes, the macro-economic context is now very different to what it was in 1986. Then, the economy was stagnant and in particular, the total public sector current account balance was significantly negative, with expenditure one and a half times revenues (Table 1.1). -2- 1.5 The current Administration came into office with the aim of accelerating the economic changes initiated by the previous administration. The principal objective was to stimulate a faster rate of growth by opening the heavily protected economy. This was to be achieved by reducing trade barriers and reducing the role of the state in the economy. These policies would also help in the reduction of the budget deficit and the related high inflation and interest rates. 1.6 The measures taken to implement these policies have had a marked impact on the public sector finances, international competitiveness, inflation and interest rates but the economic growth has so far proved more elusive. In terms of opening the economy, average tariff protection has been reduced from over 25% in 1986 to less than 12% in 1993. Public finances have been improved through reduction of the external public debt from 62% of GDP in 1986 to 20% in 1993. The public sector balance was reduced from a deficit of almost 10% of GDP in 1986 to a surplus of 0.5% in 1993. The effects of these policies on public sector capital expenditure have been substantial, with a decline in real terms of more than 50% in the transport sector. This decline has been partially compensated by the effects of the substitution of private for public capital expenditure in road construction. 1.7 The failure of the rate of growth of the economy to meet the high initial expectations at the start of the administration, was as much a result of the continued slow growth of the world economy as to over-optimism. Nevertheless, there was a substantial improvement from an average growth of less than 2% in 1986/87 to 2.7% in 1991/92 after peaking at 4.5% in 1990. However, many of the changes in the transport sector were predicated on growth of more than 4% and the lower outcome has had negative consequences for the sector, including premature investments to cater with higher traffic levels which have not materialized and consequent low financial returns. Sector Finances 1.8 Direct comparison of the performance of the finances of the public sector transport agencies between 1986 and 1992 is difficult because of the divestiture of many of the agencies and the consolidation of others. The agencies which ceased to be in the public sector include Concarril, previously responsible for constructing railway rolling stock, Adromexico and Mexicana, two airlines and Transbordadores, a ferry operator. Port operations were consolidated in Puertos Mexicanos in 1989 and responsibility for the construction of new rail lines was transferred from Was F6rreas, part of the Ministry of Communications and Transport (Secretarta de Comunicaciones y Transporte (SCI)), to the national railways, FNM in the same year. The agencies which have remained in the public sector have had mixed financial results over the period. 1.9 In 1986, FNM had operating costs of US$1,117 million, only about 10% more than revenues but by 1992 costs had increased to more than US$1,680 million (Table 1.3) and revenues had fallen to less than US$853 million widening the deficit to almost 90% of revenues. The deterioration largely resulted from the impact of deregulation of road transport for which the railways were ill-prepared. Not only did they lose a significant proportion of both freight and passenger traffic, but their ability to maintain tariffs was restricted by the intense competition generated within the road transport sector. Costs increased through higher unit labor costs and increased provision for pensions. Expenditure on maintenance materials was inadequate to maintain the assets of the railway in an acceptable condition. -3- 1.10 The roads subsector generated revenues from user charges (including fuel taxes, calculated as the difference between revenue from fuel sales and the sum of border and distribution costs, license revenues, plus CAPUFE toll revenues) of US$2,000 million in 1986, compared with expenditures on maintenance of about US$380 million and total expenditure on roads of US$525 million (Table 2.2). By 1992, these total revenues had increased to an estimated US$2,560 million while maintenance expenditures fell to between US$309 and US$354 million depending on the method of calculation, and total expenditure to US$517 million. A study completed for SCT in 1992 found that a desirable level of expenditure was more than US$1,000 million, but taking into account budget constraints, recommended a maintenance expenditure of US$426 million (Table 1.4). Total federal road expenditure, including new construction and improvement, amounted to US$517 million. The public sector account had therefore significantly improved at the same time as maintenance had fallen even further below that desirable. The reduction in total public expenditure was more than compensated by the emergence of significant new private investment in toll roads, estimated to have been US$700 million in 1992 (Table 1.6). 1.11 No data for the ports subsector is readily available for the period before the formation of Puertos Mexicanos in 1989. But from that date, the net operating deficit increased from an estimated US$63 million to more than US$150 million in 1992 (Table 1.5). The aviation subsector generated net operating revenues of US$100 million in 1986 and US$170 million in 1992 but these were offset by investments of US$180 million and US$30 million respectively. 1.12 Total sector investment (Table 1.2) was gradually reduced from about US$960 million in 1986 to only US$790 million in 1988 but saw a dramatic increase with the private toll roads initiative to more than US$2 billion in 1991 before reducing to US$1,680 million in 1992. Even before the start of the program, the road subsector accounted for more than half of total transport investment, but as a result of the success of the program, roads accounted for more than two thirds of sector investment by the end of the period. With the imminent implementation of similar initiatives in other subsectors, total sector investment is set to increase dramatically, and the . exceptionally high participation of the roads subsector in the last three years will be seen as a temporary phenomenon. C. Institutional Responsibilities 1.13 Changes in institutional responsibilities have been an essential condition for the transition to a more open and competitive transport sector. Institutional structures and responsibilities appropriate for the management of a highly regulated sector with significant government participation in investment and operation are no longer appropriate in a sector driven more by competition with an emphasis on private investment. This process of change is still underway. Although the objectives are clear, the path for reaching them and the details of how the new institutions will function have still to be fully defined. The role of SCT 1.14 One change is in the role of SC` as the principal transport public sector institution. At the beginning of the period, SCe still had both direct and indirect responsibilities for the regulation of and investment in all modes of transport and direct responsibility for operations in railways, -4- ports, airlines and airports. With deregulation of road transport and domestic air transport, the introduction of the private toll roads program, the transfer of the rail track division of SCT to FNM and the increased commercial and managerial autonomy of FNM, consolidation of the ports in Puertos Mexicanos and its subsequent transfer from SCT to SHCP, and the proposed concessioning of airport services, SCT's role as. a direct participant in sector operations has been evolving into one of strategic policy making and indirect supervision. 1.15 The current organizational structure of SCT is still that of a conventional Secretariat charged with civil works construction and operating transport services. It has changed little in response to SCT's new responsibilities of indirect supervision and monitoring of concessions and contracts. The Subsecretariat for Infrastructure handles all public sector infrastructure development and is responsible for operational, regulatory and tariff matters. These functions have moved within the Subsecretariat between different Directorates General, along with the changes in transport policy, and their internal structures have not yet adapted to their new responsibilities. 1.16 An increased importance has been given to the role of planning, with a strengthening of the Coordinaci6n General de PlaneaciJn, with the function of coordinating all planning within SCT. With a substantial part of sector activity in the private sector, the method of implementing plans is in a process of change. The planning function will require more monitoring of what is happening in the sector, and fine tuning of the sector strategies to ensure that distortions in the allocation of resources are being avoided and that the services the users reasonably demand can be provided. An Environmental Affairs Unit for the sector has also been created. SHCP has established an investment unit to review all major investment proposals and to provide better coordination between the modes. SCT has prepared an Action Plan to consolidate these changes. 1.17 Public participation in the development of SCT's investment program is required by law. In 1989, SCT called public meetings in a number of cities to discuss transport modernization, with participants from federal, state, and local levels as well as users of the transport system, chambers of commerce, equipment and vehicle manufacturers, labor unions and professional associations. The agreements reached were incorporated into the National Program for Transport Modernization. SCT periodically evaluates the results of its efforts, using the Program as a guide and reports to Congress on these evaluations. Road Transport 1.18 A new regulatory policy for road transport established in 1989 provided an opportunity for substantially revising the institutional arrangements for road transport, but the changes made were superficial and did little to create a new environment for the subsector. The most significant change was the creation of national chambers of Road Freight and Passenger Transport. SCI continues its much reduced function of regulation but with a more decentralized administration than before. 1.19 As part of its decentralization program, the Government is strengthening the capacity of the state governments to plan, finance, implement, operate and maintain basic public services. One of the new state responsibilities will be to administer the state and rural road networks. To do this, they need to develop their technical and organizational skills and acquire the resources to develop and maintain these roads. There.are many uncertainties about the implementation of this program -5- and it has fallen behind schedule. Several states will not accept responsibility for roads that are not in good condition; most states lack a highway agency; and there is no general mechanism for financial compensation from the federal government to go with the transfer of responsibility for these roads. Under the Bank supported Decentralization and Regional Development Project (Loan 3310-ME) and a feeder roads project under preparation by the Inter-American Development Bank (IDB), steps are being taken to improve the capability of some states, but unless more effort is expended and more resources are made available to the states, the policy will be seriously impeded. Highways 1.20 Although the federal highway system, (which includes the public toll roads operated by Caminos y Puentes Federales (CAPUFE)) is the one on which most public attention is focussed; it accounts for only 20% of the total road network, and the private toll roads account for only a further 2%. Table 1.7 shows the composition of the national road network. Feeder roads, Carreteras Alimentadoms Estatales, are administered by the decentralized Comisi6n Estatal de Caminos, while rural roads are administered directly by SCT, through Residences General de Construcci6n y Conservaci6n de Obras. In both cases, financing of construction and maintenance is through the Comisi6n Nacional de Carreteras Alimentadoras y Aeropistas (CONACAL), a fideicomiso established within the Banco Nacional de Obras y Servicios Pdblicos (BANOBRAS) for channeling resources from the federal government to these subsectors. Provision of non-federal finance is the responsibility of Entidades Viales Estatales (EVE). Railways 1.21 FNM is a parastatal organization reporting to the SCT, with an internal structure typical of a production oriented railway, with a large number of directorates based on production units reporting directly to the Director General (DG). Despite the institutional changes implemented in the last few years, the current structure and the allocation of responsibilities is still inappropriate for what is intended to be a commercially oriented organization. 1.22 In the years prior to 1987, FNM had absorbed the few remaining public sector railways, and in the course of this administration has taken over responsibility for Direcci6n de Was F6rreas from the SCT. Following this consolidation, FNM created five Regional administrations, delegating to them many functions of the DG, re-assigned responsibilities and appointed a Coordinador Ejecutivo, essentially a Deputy Director General, to whom all Regional Managers report directly. This has relieved the DG of many of the day-to-day responsibilities and allowed him to concentrate more on the strategic issues facing the railway. 1.23 The benefits of this change are already apparent with the acceleration of measures to restructure the railway. One of the first acts of the new DG appointed in 1992 was to propose Un Programa de Cambio Estructural, a radical program for restructuring the railway. This Program implies a reorientation of FNM with the declared objectives of creating an efficient, profitable and competitive railway, financially self-sufficient and able to maintain a long term development plan, as well as fulfilling its strategic support functions for the country's economic development program and the opening of the national economy to external competition. The Program was approved by -6- the federal Economic Cabinet in late 1992 and is now being implemented. The objectives of the Program are not always compatible and it remains to be seen where long term priorities will be established, but in the short term at least the financial self-sufficiency objective is being given priority Ports 1.24 In 1986 there was a proliferation of government departments and agencies operating in the ports subsector, some with duplicating responsibilities. SCT rationalized the situation in 1989 with the creation of Puertos Mexicanos (PM), which centralized the planning functions and became the channel through which major investments were processed. At the same time, the Port Service Companies (ESPs) which were already in place and in charge of port operations (except at Tampico/Altamira), were accorded a greater degree of de facto autonomy. 1.25 Since PM's creation, three significant institutional changes have occurred. First, the port of Veracruz, where cargo handling responsibilities were in the hands of four unions, was taken over by SCT in mid-1992 and responsibility for these activities was transferred to three private operators. Second, PM developed a strategy for the gradual concentration of national container traffic in four ports (Manzanillo and LAzaro CArdenas in the Pacific, Veracruz and Tampico/Altamira in the Gulf), with other ports to concentrate on feeder and cabotage services. Finally and most significantly, responsibility for PM itself was transferred from SC[ to SHCP early in 1993. This was intended to accelerate the process of privatizing port activities. Under the new ports privatization law introduced by SHCP in Jine 1993, ownership of the ports will remain with SCT, but all port activities are potentially concessionable for up to 50 years renewable. By April 1994, over 60 specialized port operations had been concessioned. 1.26 Each port will be administered by its own Integral Port Administration (Administmci6n Portuaria Integral-API), made up of local and state interests to begin with but constituted as commercial enterprises, with a view to selling shares to the private sector at a later stage. They will function as the port landlord, responsible for port administration, the setting of port dues and the collection of concession fees from operators (see below) but not undertaking any operations, except by default. To make investment financially viable concessions will be for up to 50 years. A co-ordinating body, the Coordinaci6n General de Autoridades Portuarias (CGAP) has already been formed under the jurisdiction of SCT to regulate the activities of the APIs. The former Director General of P.M. was recently made the D.G. of CGAP. Two APIs have already been legally constituted, namely Manzanillo, and Veracruz. It is expected that during 1994 and 1995, another 19 APIs will be formed. Most of these are not expected to be financially viable without subsidies, on the basis of current port revenues from dues and operations. Air Transport 1.27 Despite the deregulation of domestic air transport and the publication of a new draft Air Transport Law in 1993, there have been no major changes in the institutional framework for civil aviation. SCT continues to be responsible for both the infrastructure of airports and navigation facilities and for the provision of ground services at airports and the operation of navaids. The Subsecretary for Infrastructure retains responsibility for infrastructure, and the Subsecretary for -7- Communications for air navigation services:' However; the exercise of these responsibilities is in the process of change with proposals to privatize many airport terminal activities and with SCT becoming more of a supervisor and manager of concessions than a direct provider of services. D. Deregulation and Privatization Complementarily of Deregulation and Privatization 1.28 Privatization and regulatory reform are complementary activities to restore competition as the ruling paradigm in an area of economic activity. Deregulation by itself is pointless if the major operators are still state controlled and privatization by itself could make the inefficiencies of a highly regulated system even worse by simply replacing state with private monopolies. The Government has moved on both fronts in the transport sector, with the early emphasis being on deregulation. The initial phases of both processes are now being completed, with the sector now substantially deregulated and the state's participation in operations significantly reduced. However, the changes have been implemented so quickly that a period of fine tuning is now needed to ensure that the final results achieve their objectives. In particular, some regulatory reform needs to be completed, some new regulations introduced particularly in monopoly control and anti-trust regulation, and yet others need to be clarified to ensure that the details of the deregulated system are clearly understood by all participants. 1.29 Privatization is a term which covers a variety of ways in which state participation can be terminated or reduced. The most extreme case is where an operation is sold completely to private interests, either in a single or in phased sales. Where complete sale is not appropriate, the state can retain a controlling or minority interest while selling a minority of shares or even a majority but retaining certain policy vetoes. If the state wishes to retain ownership, concessioning of operations is a viable alternative. Another possibility is the granting of a license for an activity not previously permitted or for one in which the state no longer wishes to be involved. All of these have been employed in the transport sector. Privatization in the transport sector has been part of a much broader policy of disinvestiture of state operations which has seen the privatization of more than 1,200 state enterprises and a realization of more than US$17 billion in sales, along with the wholesale deregulation of the economy. 1.30 In 1986, the Government was moving towards subsectoral deregulation in road and domestic air transport, but the enabling legislation in both subsectors was not passed until 1989. By 1993 road freight and passenger transport and domestic airline operations had been substantially deregulated with significant benefits to users. Only since the end of 1993 have rail, port and airport operations included significant private sector activity, so the structure of the regulatory framework is only now relevant, to ensure that competition is maintained. Now that further privatization is under way, revision of the current regulations is needed to provide a genuine competitive environment. 1.31 Privatization has been successful in providing new capacity on the federal road network, in the provision of air transport services and in cargo handling services in one port. While this does not appear to be an impressive list of achievements, it does reveal a remarkable change of policy in what was until recently a highly state dominated economy. Many more privatization are in progress and are expected to be completed by the end of 1994. If current plans are fully -8- implemented private interests will be dominant in all aspects of transport investment and operation and the state's role will have been reduced to the management and regulation of private sector activities. Road Transport 1.32 Prior to the deregulation in 1989, freight and passenger road transport was regulated by a legal framework dating from the late 1940's and provided a service that was unreliable, of high cost and inadequate to satisfy the needs of a growing economy. Two categories of road freight transport license were issued, one a franchise for general freight which enabled the transport of any product but only over specified routes, and the other a franchise for specialized freight, which permitted the transport of a single product but over any route on the federal road. Restrictions also applied to the loading and unloading of trucks, which were only permitted at specified freight terminals. Company affiliation for a general franchise holder was compulsory. 1.33 This restrictive and artificially constructed system led to inefficiencies and inevitable abuses. Truck tariffs, which were fixed by the SCT on the advice of transport agencies, were more than double those for similar movements in other countries. While in theory there were no large companies since no individual could be granted more than five vehicle franchises, in practice some individuals controlled up to 500 vehicles through nominees. If an individual was lucky enough to be granted a permit for general freight, he still had to be accepted by an established company, and this constituted an impassable barrier to entry. The obligatory use of freight terminals and their first come-first served system of allocating loads removed any incentive for provision of good service. One of the supposed benefits of a highly regulated system such as this was that it provided an equal level and cost of service to all users, but even this was not achieved. Rates were actually higher and service quality worse on low-traffic routes, just the opposite of what was intended. 1.34 A government study prior to deregulation estimated that owners of freight terminals were earning more than a 35% annual return on their investment and that truck operators were able to achieve a two-year pay back period on theirs. Annual monopoly rents from freight franchises and permits were estimated to generate more than US$500 million. After determining that these inefficiencies could no longer be tolerated, the new policy of reformed regulations was introduced after much consultation and negotiation in July 1989. The new regulatory framework eliminated or substantially reduced the restrictive regulations of the old system. Freedom of transit was granted on federal roads for all freight vehicles to transport any load (with some restrictions for toxic and explosive products); all restrictions on loading and unloading were removed; fixed tariffs were replaced by maximum tariffs; the granting of vehicle permits was greatly simplified and the requirement to join an existing company was removed. Vehicle weight and axle loan regulations continued unchanged. 1.35 The first benefits of this change in policy became apparent almost immediately and the longer term advantages are still being realized. The number of trucks registered for freight service increased by over a third between 1989 and 1990, and by 24% and 10% in the following two years so that by the end of 1991 the available capacity was more than 60% higher than in 1989 (Table 1.8). There is only incidental and anecdotal evidence on changes in truck tariffs, but all the evidence points to a reduction of the order of 25% in real terms. The combination of lower tariffs -9- and improved service, with a wide variety of alternatives,available, has induced some agricultural and industrial producers to give up their own truck fleets and contract their transport services from outsiders. It is the elimination of some of these private fleets which has provided the vehicles for the expansion of the for-hire fleet. 1.36 Not all the results were beneficial and in some cases truckers created local monopolies and increased tariffs. These problems have been partly resolved by joint action through the newly created Comit9s de Autotrunsporte, but as in other transport subsectors, monopoly and anti-trust legislation needs to be strengthened to prevent abuses of the new freedoms. Highways 1.37 The most ambitious and far-reaching privatization in the transport sector has been the introduction of concessions to the private sector to build, operate toll roads, to be transferred to SCT at the end of the concession. The program was initiated in 1989, when there were only 800 km of four lane roads, with the aim of having 4,000 km of four lane private toll roads in operation by the end of 1994. Although this program was ambitious, its early successes led to the setting of an ever more ambitious target of 6,000 km with an unchanged deadline. The mechanics of the program and the financing structures have been modified in the light of experience and as Mexico's access to international capital markets has improved. The original target was passed in October 1993 with the opening of the Cancdn-M6rida highway which brought the total length of private toll roads in operation to 4,060 km. Private investment obligations so far entered into exceed US$6.9 billion. Completion of the program, at a cost now estimated to exceed US$15 billion, will increase the length of the Federal network by some 15%. While this is a substantial investment in new capacity, it should be viewed against an increase of only 3% in the length of the paved network between 1985 and 1990 and a growth of about 40% in vehicles during the same period, so there is still a large backlog to be made up. A description of the method of awarding concessions, of the more serious problems that have emerged and their possible solutions is provided in Chapter 4, Section D, while suggested criteria fbr formulating a new program are proposed in Chapter 5, Section D. Ports 1.38 At present, all major ports in Mexico are owned by the government. Until recently, port operations in major ports - with the exception of Tampico-Altamira - were given by parastatal companies (Empresas de Servicios Portuarios - ESPs). In 1991, however, the Government of Mexico (GOM) abolished this system in Veracruz, the country's busiest port. It awarded cargo handling concessions to three private companies and the administration of the port was taken over by Puertos Mexicanos (PM), the government agency responsible for ports, which replaced (by Presidential Decree) the Union-dominated ESP. Two of the three operating companies are affiliates of the principal ship operating companies, and the third belongs to a consortium of transport enterprises and Customs clearing agencies. The introduction of an element of competition almost immediately increased the efficiency of operations, partly also due to the arrival of major items of equipment owned by PM. Other items of equipment were purchased by the operating companies. An indication of the increased efficiency is the increase in the number of containers discharged per - 10 - ship hour, from an average of 8 per hour under the previous system to more than 25 per hour by the private operators. 1.39 Operations such as cargo handling on board ship and on shore, towing, mooring and other services to the vessel, are expected to be concessioned to private operators. Up to 100% foreign ownership of the concessionaires will be allowed, but the APIs themselves will be permitted a maximum of 49% foreign participation. The Dredging Department of PM has been divided into five regional packages which are in the process of being awarded to private bidders. In the context of this new law, more than 60 port terminal concessions have already been granted, the majority to the sole users of specialized terminals for periods of up to 20 years, and with a total planned investment of US$196 million. There is reticence on the part of potential operators to bid for other concessions until the structure of the APIs is better defined, particularly the situation with regards to the recruitment of non-union labor. Railways 1.40 Proposals for privatization by concession, sale and lease back and simple contracting of services of FNM are at an advanced stage. The basic principle behind the privatization scheme is that ownership of infrastructure and control of trains must remain within FNM's domain, at least until and if the constitution is modified, but that all other activities can be concessioned. The main proposals are: i) to concession each of the five groups of workshops, comprising the 13 remaining from an original total of more than 30 before the rationalization program began. Each package will include a number of locomotives for which FNM will guarantee an operational lease for a minimum period, probably five years. A similar arrangement will be made for wagon maintenance workshops, with the difference that each package will include a number of wagons to become the property of the concessionaire. These wagons can be reconstructed and then sold or leased to clients of FNM, or possibly to FNM itself. The first three concessions have already been awarded; ii) to eliminate passenger services which have no chance of financial viability and for which there is no social need, and concession remaining services. The requirement that all trains, including passenger trains, must be hauled by FNM locomotives with FNM crew and subject to FNM train control could make the concessions unattractive unless some imaginative ideas are used to overcome these restrictions; iii) to sell the train control and communications systems with a lease back clause, with the buyer being free to sell spare system capacity to third parties. This could be an attractive proposition given that the domestic telephone service will be open to competition from 1996. It is expected that the present train control system will be replaced by one based on radio communications. FNM will retain responsibility for using the systems; - 11 - iv) to contract the maintenance of the principal track network comprising about 10,000 km on a regional basis, with the contractor being responsible for both periodic reconstruction and routine maintenance; and (v) to contract FNM's commercial activities to smaller customers, recognizing that marketing is only an ancillary activity to the two principal railway functions of providing track infrastructure and operating trains. FNM will then only operate trains for which a remunerative proportion of the capacity has been contracted; 1.41 Once these concessions, sales and contracts have been completed, FNM will have significantly changed its function and will concentrate on providing track, operating trains and managing the concessions. This will require an internal reorganization around these functions and make possible an eventual separation into an Infrastructure Division and an Operations Division. Either of these could then be concessioned if it were to be the policy of the Government to go further along the path of privatization. 1.42 Alternative schemes for restructuring the railway are being considered even while progress with the above scheme is being implemented. FNM was formed by the merger of five regional railways over a period of more than thirty years, the last independent railway being incorporated into FNM's structure in 1989. Many of the present operating regions of FNM retain the operating characteristics of the previous regional railways and some of the administrative functions were never fully centralized before the process of decentralization was initiated. An alternative to the proposed scheme of restructuring would therefore be to extend the process of decentralization and devolve much more authority to the regions, with a view to the possible future concessioning of them to private operators. Another course of action would be to corporatize the railway, making it at least initially a state owned corporation with clearly defined operational and financial objectives and with freedom from state intervention in its day to day activities and operational strategies but operating within an institutional framework which regulated its potential monopolistic powers. Another alternative would be to separate the railway into business units, each responsible for a different type of railway operation and serving different markets but with sufficient overlap for them to compete with each other. The costs and benefits of these alternatives relative to those of the scheme being implemented are now to be thoroughly reviewed, taking account of any constitutional change necessary, until now considered as an unsurmountable obstacle. Air Transport 1.43 Liberalization of air transport regulations started in 1987 with a new bilateral agreement with the United States, which allowed US airlines increased direct flights to Mexican destinations and similar rights for Mexican airlines to fly to US cities. At about the same time a process of rationalization started in the two state airlines, Aerom6xico and Mexicana, which had become prime examples of inefficient public sector airlines. Both airlines were privatized in 1989 after Aerom6xico had filed for bankruptcy the previous year. At the same time domestic air transport regulations were relaxed, allowing competition against the two principal airlines and tariff freedom for all of them. As a result of these policies, air transport in Mexico is passing through a process of development similar to that experienced in the United States in the 1980's. New airlines are being formed, most of them with a regional basis, and increased competition has led to an increase in the number and variety of services at the same time as substantial reductions in tariffs. - 12 - Competition is likely to force some of the less financially secure new airlines out of business as the larger airlines adopt aggressive marketing strategies. Aerovtas, the holding company controlling Aerom6xico, has already taken a minority but controlling interest in Mexicana. Current anti-trust regulation appears to be too weak to control the most predatory practices and this is one area where the regulatory framework needs to be strengthened. 1.44 Aeropuertos y Sericios Auxiliares (ASA) is the agency of SCT responsible for the management and operation of 58 airports. Private investment in some facilities such as hotels, airport parking, commercial concessions and terminals for general aviation have been permitted at larger airports such as Mexico City, Guadalajara and Cancdn. The provision of basic airport and aviation services such as air traffic control and en route navigation are considered strategic and not appropriate for privatization, but almost all other services, including the construction and operation of passenger and freight terminals, come under the terms of a new Air Transport Law which will transform ASA into a regulating and promoting agency, concessioning its operations, at least at the smaller airports. Even with a monopoly of operation, ASAs activities at the smaller airports result in financial deficits and it is hoped that the concessioning would provide an incentive for long neglected investment as well as deficit elimination. 1.45 As in other subsectors, the difficult transition to a competitive policy has been made with benefits to users of the system. However, there is still a reluctance to apply the principals of deregulation throughout the subsector, such as in the unwillingness to privatize ASAs profitable monopoly operations at the larger airports. This indicates that the understanding of the objectives of deregulation and privatization have still not been fully accepted and that vigilance will be needed to ensure that new legislation goes far enough for all the potential benefits to be realized. E. Environmental Improvement 1.46 Concern with the environmental impacts of transport operations and investment has developed significantly since the previous sector review, which did not even mention them. Policies for the review, assessment and control of the impact of transport operations and infrastructure on environmental conditions have proceeded cautiously but systematically. 1.47 The rapid growth of urban areas and associated increase in congested road traffic conditions are major sources of transport-induced environmental degradation. Assessment of the impact of traffic on air quality standards in Mexico City and implementation of measures to reduce their impact are being addressed through the Bank supported Mexico City Air Quality Management Project. The Medium-Size Cities Urban Transport Project, also being supported by the Bank, addresses the impact of transport on air quality, noise, visual intrusion and community segregation in other cities. Programs for the upgrading of urban and interurban earth and gravel roads to paved roads will also reduce dust, while vehicles using the new toll roads with improved gradients and curvatures will have reduced fuel consumption and thus emission reduction. 1.48 New passenger cars and light duty trucks sold in Mexico have been subject to emission standards since 1985, but only since 1991 did these standards become stringent enough to require the use of catalytic converters. The Mexican 1993 model year standards require vehicles to be equipped with three-way catalytic converters and computerized engine control systems, similar to those required in the USA. Emissions standards for new medium duty gasoline vehicles are not - 13 - yet so strict, except those for minibuses in Mexico City which are equipped voluntarily with catalytic converters. Diesel engines are subject only to a smoke opacity standard and emissions from these vehicles are still a cause for concern. 1.49 The declared policy of the Government is to move toward full compatibility with US emission standards for all vehicles. The 1993 Mexican standards for light vehicles are numerically equal to those presently in fbrce in the US but are not identical, as the US standards include many provisions for compliance over the life of the vehicle, emissions warranties and the recall of non- complying vehicles, which have not yet been incorporated into Mexican standards. The timing for adoption of the more stringent standards enacted in the US Clean Air Amendments Act still remains to be determined, as do the timing of adoption of emissions standards for heavy vehicles and the adoption of adequate monitoring and control systems. 1.50 Mexico's fuel economy standards for new vehicles are already in line with US standards. Unleaded gasoline is now widely available within Mexico City and with recent expansions to refinery capacity will soon become more generally available in the rest of the country. A low sulphur diesel fuel has also recently been introduced. Use of the lower contaminant fuels would be higher but for the fuel pricing policy, which still puts a premium on them compared to standard grades. However, fuel pricing in Mexico is not as straightforward as it might appear, as a preference for unleaded fuel might encourage its use in vehicles for which it was not appropriate, resulting in unnecessary refining costs and higher fuel consumption. The objective of fuel pricing policy is to discourage the misfueling of vehicles with catalytic converters with leaded gasoline, while discouraging misfueling of vehicles without converters with unleaded gasoline. 1.51 The interrelationship between traffic-induced environmental impacts and those derived from other sources is recognized in the Border Areas Environmental Project which deals with environmental improvements on a more comprehensive basis than would be possible through independent sector projects. The objective of this Project is to provide a context for a wide range of environmental improvement measures in the areas close to the border with the US, as well as funding for their implementation where appropriate. 1.52 Previous failures to take account of the environmental impacts of transport related industrial activities have resulted in a large backlog of problems to be resolved. In the railways and ports subsectors these problems have come to light as preparations for the concessioning of these activities has advanced and the government has had to clarify its responsibilities for past actions in the terms of the concessions. 1.53 In the railways, one of the gravest problems is that of soil and water contamination from oil and fuel leaks and discharges from workshops. Remedial actions have recently been initiated as SEDESOL has acquired the financial and human resources needed to implement its environmental standards. In ports, the environmental detrimental effects are of a rather different nature from those in highways and railways, insofar as they often occur a significant distance from the source of the problem. For example, discharge or spillage of waste from ships in port often ends up somewhere else. Perhaps more insidiously, almost all coasts are subject to littoral drift - the movement of material along the coast, driven by tidal, wave and wind action. The establishment of artificial entrances to ports, or even the deepening of natural ones, interrupt these flows, often resulting in significant coastal erosion. The proposed site for a new port north of the existing port of Veracruz was chosen largely on the basis of such environmental considerations. - 14 - II. TRANSPORT SUPPLY A. Introduction 2.1 Transport services are provided by the interactions of infrastructure and vehicles and are influenced by the regulatory context. It is these interactions as much as the physical infrastructure and vehicles themselves which determine whether supply is adequate to meet the demands of users of the system. 2.2 The 1980's were a period of substantial neglect of transport infrastructure in Mexico, both in terms of making additions to meet the increasing demand and in maintenance of what already existed. This neglect is evident in ports, railways and airports but is most clearly demonstrated in the highway subsector, where by the beginning of the 1990's, 60% of the network was classified as being in poor or very poor condition and the total length of the federal paved network had grown by less than 1 % over a ten year period. 2.3 The lack of competition in road transport resulted in declining standards of service, particularly in respect to the quantity and quality of the vehicle fleet, at least until the deregulations of 1989. From that time on, the road vehicle fleet available for both freight and passenger transport increased in size and improved in quality, as did the aircraft fleet serving domestic routes. 2.4 The deregulations of 1989 also stimulated a change in the way that transport companies were organized and the privatization in the ports and railways subsectors are beginning to change the'industrial structure in these modes. The net result of deregulation, privatization and industrial reorganization is an increasing efficiency with which the vehicle fleets are being used and a consequent improvement in the service provided to users. Transition has provided better infrastructure and vehicles, more efficient operations and, as will be shown in the next Chapter, more satisfied users. B. Road Transport Infrastructure 2.5 The principal positive feature of the national road network is the length which is paved while the principal negative feature is its poor condition. Of the total national road network (Table 1.7), some 36,000 km are paved road almost all of which were built before the present administration came to office. The paved network now connects virtually all urban areas with a population greater than 50,000. However, even by 1987 the inadequate provision for maintenance was becoming apparent and maintenance expenditure has continued to decline in real terms since, despite a small recovery in 1991. It is not surprising that the current condition of the network is unsatisfactory, with only 22% classed as being good and almost 40% in bad condition. The status of the primary network is even worse with only 10% in good and 60% in bad condition .1/ Highway Rehabilitation and Traffic Safety Project SAR, WB, 1993. - 15 - (Table 2.1). The inability of the federal government to provide adequate funding to maintain and improve the primary road network was the principal impetus for the introduction of the private toll road scheme introduced in 1989. The toll roads do not yet suffer from maintenance problems. In the case of CAPUFE, this appears to be due not only to the organization having an explicit obligation to maintain its network but also a recognition that traffic and revenue could be lost if the roads were not well maintained. The private toll roads do not yet need significant maintenance but the same arguments apply, especially as the roads are to be returned to GOM in good condition. 2.6 Federal expenditure on highways peaked in 1991 at US$641 million and declined in 1992 to US$517 million, about the same as the 1986 level. The distribution of expenditure between the three road classes has changed little, with about 70% going to the primary network, about 20% to the feeder network and just 10% to rural roads (Table 2.2). Expenditure on feeder roads recovered to its 1986 level in 1992 after several years of reduced spending, but the allocation of that expenditure between new construction and maintenance has moved significantly in favor of new construction. Rural roads expenditure had also returned to close to its 1986 level by 1992, but after higher rather than lower levels in the intervening years. The balance between new construction and maintenance is little changed. The proportion of both networks in good condition is acceptably in excess of 30% but will not remain so for state roads unless a higher proportion of expenditure is allocated to maintenance. In contrast, there is now a program under way to construct a further 10,000 km of state roads and 27,500 km of rural roads. The likely outcome of this program is that the new roads will maintain the proportion of the network in good condition but lack of maintenance will result in the decline of much of the remainder to bad condition. 2.7 The ongoing Highway Rehabilitation and Traffic Safety Project includes provision for a study of highway financing strategies, to be completed by the end of 1994. It is expected that this study will recommend a mechanism fbr ensuring adequate planning and funding of maintenance for the federal network. Although the private toll road program provides a partial solution to the provision of new road capacity, there is not as yet a solution proposed to resolve the problem of financing the maintenance of existing federal, state and rural roads. Transport operations 2.8 Inter-urban trucking remains highly fragmented despite deregulation of the previous regime, which discouraged the formation of medium and large scale trucking companies and protected a large number of small operators, who grouped together in cooperatives to protect their local monopolies. The conditions imposed by this regime resulted in so much inefficiency that many industrial concerns created their own transport units. It will take time for a high enough level of confidence in new trucking companies to emerge to persuade these manufacturers to disband their own transport units and depend on the contracting of independent operators. However, the increase in the trucking fleet registered for public operations could only have come about through a large scale transfer of vehicles from non-transport enterprises to trucking operators, so this is evidence that the process has started. 2.9 Since deregulation, several large trucking companies have been formed to operate on the principal corridors between Mexico and Guadalajara and the US border, but they have had little impact on the much larger market of internal truck transport which continues to be dominated by - 16 - small operators. It is in the corridors to the US border where competition between organized transport companies has developed and this is reflected in the lower tariffs and better service offered. Although prevented by continued regulations from operating openly in Mexico, some US trucking companies have entered into operating agreements with Mexican operators which in time will lead to genuine cross border operations. At present only trailers can cross the border, the tractor vehicles having to remain in their own country. The NAFTA will result in a phased relaxation of these restrictions. 2.10 The benefits of deregulation of road transport are to some extent being dissipated in the accesses to inadequate terminals in inappropriate locations. The inefficiencies of freight terminals is in large part a consequence of the requirement until 1989, that all trucks operating under general permits load and unload at specified, controlled terminals. The structure of the distribution industry, particularly for perishable products, with a large number of intermediate agents between producer and consumer, also contributes to a high rate of loss through damage and theft. C. Railways Infrastructure 2.11 The interactions between the components of rail infrastructure are more complex than those for road, as they include not only the track and terminals but also the operational control systems and maintenance facilities. FNM now has some 20,000 km of mainline track, of which a core network of 13,000 km carries about 85% of the traffic. Until the incorporation of Was F6rreas in FNM in 1989, track reconstruction was the responsibility of SCT, which succeeded in maintaining at least the core network in good condition. The design standards were such that even with inadequate routine maintenance by FNM, the track has remained in generally good condition. A categorization of track by condition will be available before the end of 1993. 2.12 Only the most densely used part of the network, the 970 km between Mexico City and Monterrey, is provided with centralized train control, the rest of the network being controlled until recently by an antiquated manual train orders system. The Programa de Cambio y Estructural (PCE) has led to the introduction of a cost effective radio train control system which was in place over the core network by the end of 1993. This system will ensure that at least for the next five years there will be adequate track and train control capacity. 2.13 Terminal facilities and their operation have been one of the weakest parts of FNM's activities. Private investment in, and operation of, intermodal and specialized product terminals has been encouraged in the last few years. Since 1992, concessions have been awarded for the operation of two intermodal and five specialized terminals ("Ferropuertos"). The PCR is expected to lead to private investment of some US$200 million in the next few years. Operations 2.14 Until recently, railway operating policies resulted in very low operational efficiency especially in the use of locomotives and wagons. At the end of 1992 FNM had a fleet of 1,253 - 17 - locomotives (with an additional 331 awaiting scrapping), of which only about 945 (74%) were available for service on any day. This does not create any unsurmountable capacity problem because of the decline in demand for railway services over the last ten years. However, it imposes a high operating cost and is a very inefficient way of operating a railway. Availability of the 42,200 wagons is also low and there are problems of capacity with respect to some types of wagon; tank, container and refrigerated wagons and grain hoppers. 2.15 Two actions which signify a change in operational thinking for the railway are the implementation of the PCE and the revision to the working rule book. Implementation of the PCR signifies acceptance by FNM of its commercial, instead of the social and developmental role, which has dominated its previous thinking. The working rule book had endured for many years without modification due to pressure from the unions and acquiescence to this pressure from the railways administration. Modification to this book, which for the first time has allowed a significant increase in both labor and locomotive productivity, is symbolic of a recognition by the unions of the changed role of the railway. Their cooperation is essential for the success of any program of further change and it appears that such cooperation is assured for the PCR. 2.16 The concessioning of the locomotive workshops should increase the availability of locomotives to about 90%; the introduction of radio train control together with other measures such as a computerized method of train and crew planning should increase the utilization of each available locomotive by about 25%. The overall impact of these measures will allow a 40% reduction in the locomotive fleet, or an increase in traffic of the same amount without a need to add more locomotives. 2.17 A similar improvement is possible in wagon utilization. If an improved system of wagon control currently being introduced produces the anticipated benefits, wagon utilization could improve by up to 20%. This system, together with planned reconstruction and conversion of specific wagon types, and the proposed sale of wagons for use by individual clients, should resolve any remaining problems of wagon capacity for the foreseeable future. 2.18 FNM continues to operate most of its trains as it has for the last fifty years. However, an increasing number of direct origin to destination trains are being operated, with corresponding efficiency increases. The longest delays in delivery of freight by rail occur when wagons enter marshalling yards and it is in the reduction of these movements that the greatest potential improvements in efficiency occur. Not only do marshalling yards take up a lot of wagon transit time, they also consume large amounts of other costly resources, including staff and locomotive time. About 20% of locomotives are currently allocated to marshalling yard and other terminal activities. One of the objectives of the PCR is to increase the proportion of direct trains which do not pass through marshalling yards and therefore to reduce the resources allocated to them. D. Ports Infrastructure 2.19 With a total of 73 ports, 34 on the Pacific coast and a further 39 on the Gulf and Caribbean coast, and 22 ports handling international traffic, Mexico has an excessive number of ports but a - 18 - lack of port capacity. The six most important ports account for about 80% of the country's total tonnage of just under 30 million tons (excluding petroleum), 86% of container movements, 75% of bulk solid movements and for 92% of bulk liquid movements. 2.20 Port capacity has expanded in recent years, partly through investment in infrastructure (notably at Manzanillo, Topolobampo and Altamira) but also through substitution of containerized for breakbulk general cargo traffic. Containerized traffic has increased by more than 50% in the last five years, and by more than 26% between 1991 and 1992 alone. Under normal operating conditions, containerized traffic is loaded and discharged at a rate several times that of breakbulk cargo. 2.21 As with other parts of the state-owned transport infrastructure, the ports are now recovering from a long period of misguided investment and lack of maintenance. Until the end of 1992, the four container ports had just four specialized container cranes between them, all more than ten years old. As part of the ongoing Ports Modernization Project supported by the Bank (Loan 2946-ME), existing berths and yard areas have been upgraded and, in the case of Manzanillo a new container terminal has been built. New container cranes have been installed in the four most important container handling ports. The modernization program also includes extensive maintenance activities, principally dredging, the construction of regional port facilities and the encouragement of private sector investment in specialized cargo terminals, marinas and cruise ship wharfs. New multi-purpose ports have been constructed at Pichilingue and Topolobampo and a new grain terminal has been completed at Progreso. The recently announced concession of 27 port terminals is expected to lead to an investment of more than US$200 million. Operations 2.22 The principal operational problems in ports arise from the handling of general cargo, whether or not it is containerized. Efficient general freight operations, particularly containerized, require appropriate measures to ensure that seaward, port, customs and landward operations are well integrated. Development of such integration is still limited in Mexico, largely as a result of domination of port activities by powerful unions which have not had maximizing efficiency as their main objective. There are strong indications that this situation also is changing and that the proposed program of concessioning of port activities will have the support of the principal unions. The creation of three cargo handling concessions at Veracruz has had a dramatic impact on container handling rates, increasing the average number loaded/unloaded from 8 to 25 per hour and similar improvements can be expected at other ports. 2.23 Further planned privatization by concessioning even more port activities will increase efficiency and capacity. Although concessions will be awarded for terminals in all ports, the result of the process is expected to be a further concentration of container movements in the four ports currently handling most of them and an increased specialization of the other ports. The success of the program will largely depend on how responsibilities are shared between the new private operators, the new port authorities, the unions and the federal government. If the private operators are not to be directly responsible for non-commercial activities such as maintenance dredging, maintenance of navigation aids, training and employment of pilots and the coordination of the interface between the port and the urban area, then these will become the responsibility of the new port authorities who will need to charge for them either directly to users or indirectly through the - 19 - concessionaires. If the private concessionaires are responsible for these activities, then an appropriate agency needs to verify compliance with the terms of the concessions. Environmental protection functions now performed by PM will be shared between the new port authorities and the federal government. E. Air Transport Infrastructure 2.24 Mexico has the largest network of airports in Latin America, with a total of more than 240. Of these, 82 provide services for commercial aviation and in the last thirty years have provided adequate capacity for rapidly growing domestic and international air transport. The 58 most important of these airports are administered by the decentralized public agency Aeropuertos y Servicios Auxiliares, nine more are administered by state governments, four by municipalities, nine by other federal agencies are two are private. 2.25 It has been beyond the financial and operational capacity of ASA to cater for the rapid growth in the numbers of air passengers, averaging more than 17% per year since 1970 and even more than 8% in the period 1989 through 1992. Of the 14.7 million domestic and 9.9 million international passenger movements handled in 1992, more than 70% passed through the six busiest airports and these same airports handled almost 50% of the total commercial aircraft movements. At present only Mexico City's airport is close to capacity in terms of runways, with 20% of the total commercial aircraft movements, but several other airports are operating close to or beyond their passenger terminal capacity. Mexico City airport is also saturated in terms of passengers with more than 14 million in 1992. Despite an ongoing program of terminal expansion, it has been necessary to designate Toluca and Cuernavaca as alternative airports in times of peak congestion. The SCT and SHCP have recently announced a plan to invest up to US$350 million in a second Mexico City airport, 60% of which will be sought from private sources. 2.26 Recognition of the lack of financial and operational capacity of ASA has finally been instrumental in bringing about the introduction of a new Air Transport Law, under which ASAs operations can be concessioned, but it appears that there is a -reluctance to implement the concessioning of those airports which are financially viable as it will remove the source of cross subsidy for the non-viable airports which at present have no alternative financing source. At the busier airports, concessioning of specific commercial services on a cofinancing basis has been under way since 1986, with the result that private investment in aviation infrastructure in now about 58% of the total of some US$115 million per year. The reluctance to concession all commercial activities at all airports indicates only a partial acceptance of the arguments for privatization, which go beyond simple public accounting and include competition, efficiency and quality of service considerations as well. Operations 2.27 Air transport services are provided by a total of 56 national and 30 foreign airlines and air transport companies, but of the former only six offer nationwide services and thirteen operate - 20 - regional routes. The total number of national air companies has changed little since 1986 but the number offering a network of routes has increased from two to six. 2.28 The number of aircraft registered for commercial operations has increased by almost 100% since 1986 to more than 1,000 at the end of 1992, but of these only 157 are used on national and regional routes. Aeromdxico and Mexicana still dominate domestic airline operations with about 75% of this fleet of aircraft, but the four other national airlines are expected to account for more than 40% of the fleet within five years. Mexicana has reduced the routes over which it operates and the number of seat km offered by about 10% since privatization, and Aerom6xico has also reduced its route network in the same period. The rapid expansion of the route networks of the other airlines is causing problems at many airports where the passenger terminals were designed to serve only one, or at the most two airlines. - 21 - HI. TRANSPORT DEMAND IN A CHANGING ENVIRONMENT A. The Users' Perspective 3.1 One of the objectives of deregulation and privatization is to provide transport services which better reflect the needs of the users of the transport system. The identification of these needs is sometimes made by interpreting users behavior when faced with situations of choice, at other times it is made by analyzing their written or oral communications with those directly responsible for making policy decisions or those able to influence policy makers, and occasionally by asking them directly through questionnaires or interviews. 3.2 To help determine whether the recent changes in transport policy were resulting in a system which meets the users needs, early in 1993 an interview survey was undertaken of the transport activities of manufacturing firms in Mexico. Information was obtained on the location of their production facilities, the way they organized their transport movements, how they chose their mode of transport and particular carrier, what they thought of the quality and price of the services available and some detailed information on the costs of transport, in particular of for-hire trucking. Interviews took place with firms located in the Mexico City Metropolitan Area, several of which have operations throughout the country. 3.3 The firms covered a wide range of activities in the manufacturing sector, including chemicals, food products, electronics, car components, fertilizers and paper products. The sample was not intended to be representative of all manufacturing industry but to include companies with a range of transport requirements, from bulk products to high value electronic equipment, from short distance to very long distance, and from companies with regular transport needs to those whose needs change from one month to the next. In this way it was hoped that as wide a range as possible of opinions would be received and that all potential users of the transport system would be able to identify with at least one of the respondents. 3.4 The results of the survey are presented in relation to four specific issues, which previous studies and reviews of opinion have shown to be important - what mode and carrier choices are made and the basis for those choices, perceptions of the trade facilitation arrangements for transport of goods to and from the United States, levels of satisfaction with the range and quality of transport services currently available, and the charges that are made for these services. a) Modal Choice 3.5 The overwhelming importance of the trucking industry as the main mode of transport in Mexico is confirmed by this survey. About 80% of all domestic transport and 85% of the land transport of industrial products is made by road. Despite recent innovations such as the use of double stack unit trains on a few routes, the few firms using rail transport, use it predominantly for low value products, fbr which the costs of keeping buffer stocks to compensate for irregular and unreliable services are acceptable. This reflects a general satisfaction with the quality and price of road transport and dissatisfaction with the quality and reliability of rail transport. Previously the railway has tried to compensate for poor performance by offering low tariffs, but this has been both a commercial and financial failure. The survey revealed an increasing demand - 22 - for reliable transport services, and that although price was important, low tariffs cannot compensate for the high costs to the user of an unreliable service. 3.6 It is this poor image, largely justified on the basis of previous performance, and disastrous financial outcome that the new commercially oriented policy of the railway is designed to remedy. Some of the foreign automobile manufacturers established in Mexico have started to use rail transport for the movement of their final products to the US. The railway was able to win these contracts by offering a service with a guaranteed transit time. The negotiating power of large automobile manufactures is such that they can demand a high quality of service and the railway, building on this experience, is beginning to offer similar guaranteed transit times to other users. 3.7 Variations in the size and destination of shipments, and unpredictability of demand, make truck the preferred transport mode for domestic product movements. Medium sized and larger firms typically manage domestic distribution through a network of distribution centers spread over the country with emphasis on the central and northern part of the country. The size of trucks employed for trunk distribution is the same as elsewhere, mostly five or six axle semi-trailers of up to 40 tons capacity, and for distribution to/from major warehouses, smaller trucks down to about 3 tons capacity. b) Trade Facilitation 3.8 More than 95% of US-Mexico trade is by land, with a small proportion using air transport and a negligible proportion going by sea. Products destined for Japan and Asia are also often first transported by land to a US West Coast port. More than 60% of this land transport of freight passes through the frontier at Nuevo Laredo, making it the most important "port" for Mexican foreign trade. Neither the physical nor the institutional facilities for dealing with this high volume of trade are seen as adequate and were a frequent source of critical comment in the user survey. 3.9 ' The main agents for trade facilitation at the US border are the brokers who typically charge a fee of 0.45% of the declared value of the goods. Whereas this service was previously regulated, custom broker fees were freed from government control two years ago. However, fees are still uniform and competition appears in the form of additional services that the broker may offer. The broker often takes care of the hiring of transport from the port of entry to the destination of the imported goods, especially in the case of smaller firms. Under present bilateral arrangements, US trucks cannot enter Mexico, although trailers, loaded or empty can operate in both countries. Through contracting of a truck movement from within the US to a destination inside Mexico and vice versa has become more frequent in the last few years as some US companies have established operating agreements with Mexican companies. 3.10 Rail freight suffers similar delays at the frontier as locomotives cannot pass from one country to another although wagons registered with the America Railroad Association (ARA) are unrestricted. Customs inspections for goods entering Mexico have been speeded up, although a point of contention with several shippers is that each wagon of a unit train is considered a separate entity when being sampled for inspection. A whole train can then be delayed while a single wagon is examined instead of that wagon being taken out of the train, which could then continue on its journey. - 23 - 3.11 Despite attempts by authorities on both sides of the border to reduce delays, these still inhibit the free flow of freight between the countries. There are many complaints of delays of several days resulting from apparently unreasonable actions on the part of customs agents or others involved with the passage of trailers or wagons between one country and another. With the implementation of NAFTA, the factors leading to delay need to be reviewed and remedial actions taken. c) Satisfaction 3.12 The respondents to the survey indicated an overall high level of satisfaction with the performance of the transport system, although several shortcomings were highlighted. Satisfaction with road transport was much higher than with rail. Firms requiring the services of for-hire trucking companies are clearly satisfied with the increased flexibility that the deregulation of the trucking industry has brought about in allowing companies to operate throughout Mexico instead of the former specific routes. However, the majority of users indicated that for transport within a specific corridor, they continue to use the same transport company as before deregulation. Apart from maintaining long standing business relationships, the rational for this seems to be that these transporters are able to offer better rates. One of the major shortcomings identified was the lack of communication systems to trace or locate cargo. Improvements in this area are underway through satellite connection devices for the more advanced and bigger transport firms. More advanced facilities along the new toll roads which allow drivers to call their company from their vehicle will encourage the use of these roads by the trucking industry. 3.13 Trucking capacity was considered to be adequate to meet demand, confirming the indications given by the increase in size of the truck fleet since 1989, although a small number of firms indicated some seasonal problems of capacity, as demand for their consumer oriented products, such as food and beverages, typically increases during the last quarter of the year. Road transport users do not have a problem with the length or regularity of transit times. Some transport contracts establish a maximum period of time between reception and delivery of freight and these times are generally respected. The times are much less than those for comparable rail transport and more reliably met, which allows for better planning of production. Use by the trucking industry of toll roads, and in particular of the new private toll roads, has been much less than expected. Tolls charged by the latter are among the highest in the world and on average, between 100 and 150% above those charged on the CAPUFE operated roads. Reduction in transit time is not in itself a justification for the higher out-of-pocket cost of using a toll road and in particular the higher priced private toll roads. For example, from Nuevo Laredo to Mexico City use of the toll road would save about six hours of free highway time of 24 hours. For a manufacturing firm, such a difference in time does usually justify the high toll cost which could add US$300 per trip for a large semi-trailer. A few of the firms interviewed insisted on the use of toll roads by their transport contractors and are willing to finance the toll charge through higher tariffs. This is more to ensure security of the cargo than to benefit from time savings. 3.14 The truck deregulation of 1989 made it possible for companies to use in commercial for- hire contracting the same vehicles as used to transport their own products. This deregulation was aimed at increasing the utilization of vehicles used for companies' own transport. At the same time, the increased availability and possible reduction in costs of for-hire transport would encourage the use of this form of contracting. The user survey was too small to provide clear - 24 - indications as to when a company would use its own vehicle fleet and when it would contract for its transport needs, although the statistical evidence (Table 1.8) is of a large increase in contracted transport. d) Tariffs 3.15 The evidence of changes in truck tariffs since deregulation is contradictory and it is difficult to make general conclusions. This reflects what has probably happened, with some users finding that tariffs have increased while others have found the opposite. Whereas before deregulation, official tariffs showed little variation between one route and another, and certainly did not distinguish between products. There is now a wide variation of tariffs between routes and corridors, for different products and for clients with different transport needs. A majority of firms participating in the survey say that their cost of road transport has decreased slightly in real terms compared to some three years ago. Bigger users of for-hire transport tend to confirm this to a stronger extent than do smaller ones. On the other hand, firms that have a larger part of their transport needs covered by own trucking and only contract for a limited amount outside their firm tend to find that the cost of road transport increased in real terms over the past few years. 3.16 The situation now is that users who have a strong bargaining position appear to be able to negotiate lower tariffs, while those whose demand is in corridors with less competition or who have smaller or less regular demands, are not in such a strong negotiating position and find charges higher than before deregulation. Competition seems to be the most influential factor in determining tariffs. 3.17 Movements in the Nuevo Laredo-Mexico City corridor command the lowest tariffs per vehicle mile, while those in the Veracruz-Mexico City corridor have the highest rates. Apart from the fact of a shorter distance and more difficult geographical conditions in the second of these corridors, both of which result in higher unit costs, the more intense competition on the Nuevo Laredo-Mexico City route is keeping the rates particularly low. This is the corridor where FNM is able to compete most effectively as the physical and market conditions are most favorable for rail transport. Now that FNM is adopting a more aggressive marketing policy particularly for the longer distance international freight, it is in this corridor that truck tariffs are most influenced by competitive forces. Typical truck tariffs for medium value industrial products are about US 4 cents to US 5 cents per ton km in this corridor compared with up to double this level in the corridors with less competition. 3.18 The experience with the level of, and geographical variation in tariff closely corresponds with that found from interviews undertaken by Mexican Institute of Transport (IMT) some two years ago, which found that truckers were charging in accordance with short-run marginal costs where the alternative was empty running, and compensating by charging above long run marginal cost where competition was less perfect. It also concluded that while there was dissatisfaction with various agencies in the international transport chain, significant improvements in trucking services had occurred as a result of deregulation 1. 2/ Trade Facilitation and Transport Reform. LAT Regional Studies Program Report No. 25, September 1992. - 25 - B. Transport Corridors 3.19 In the transport context, a corridor is a physical and/or institutional entity which provides the means of movement of goods between two points, either of which can be outside the country. A corridor includes transport services and distribution and trade linkages as well as physical infrastructure. With the location of its main industrial and commercial centers inland and long land accesses to the USA, the principal source and destination of international freight movements, land transport in Mexico is concentrated in well defined corridors. 3.20 Early in 1992, BANOBRAS prepared a corridor identification study3 which concentrated on international corridors for the movement of three products (cars, car parts and electrical equipment) which, on the basis of a study by Kearney*, are believed to have the best export growth prospects, and on three main areas of production (Guadalajara, Aguascalientes, and Puebla/Tlaxcala). The corridors examined were from these central areas to Nuevo Laredo, within a corridor from Manzanillo to Altamira, and an integral Gulf corridor. 3.21 The study concluded that deficiencies in transport infrastructure and services were an obstacle to the export potential of the products studied. The cities included in the study are expected to become more attractive as centers of industrial expansion as the attractions of the border cities are eroded and the larger conurbations suffer increasingly from traffic congestion. However, unless their transport infrastructure is substantially improved, multinational companies which would otherwise choose them would favor other centers such as Querdtaro and San Luis Potosf. 3.22 It was further concluded that the international transport requires a higher level of service than local transport. The extent to which this higher quality can be provided will depend on the extent to which foreign, principally US, truckers can penetrate the Mexican market, and how Mexican truckers react to this penetration. It was feared that the further opening of the Mexican transport market to US operators indicated in NAFTA could well find Mexican operators unprepared, obliging them to act as no more than subsidiaries of US companies. Increased competition in the trucking industry since deregulation was seen as an inhibiting factor to profitability and thereby reducing the ability of Mexican truckers to compete with US carriers. This weakness was seen as being reinforced by the establishment of consolidation services by US companies (e.g. Roadway) to obtain backhaul loads to the US. 3.23 The BANOBRAS study identified four groups of Mexican truckers serving the industries and cities studied, each of which is being affected in a different way by the 1989 deregulation. The groups are: a) those concentrating on the Mexico City to Nuevo Laredo corridor, and who are benefitting from association with US truckers. They are being forced into efficiency for survival, and are developing reliable services in association with US 3/ Proyecto Corredores de Transporte, Propuesta Preliminar. BANOBRAS, September 1992. 4/ Developing a Marketing and Promotional Plan for Attracting Foreign Investment to Mexico. American Investment Board, third interim report by A. T. Kearney. November 1991. - 26 - truckers, particularly for the cross-border changeover of tractors. They are among the larger companies with an average of more than 100 vehicles; b) other companies of similar size, operating in several corridors, including east-west regional routes such as Mexico City to Veracruz and with both a national and international traffic base; c) small companies with about 30 vehicles, offering regional services, usually with well established client relationships established before deregulation. With cargo centers still exerting an influence on their operations, these companies will be the most vulnerable to further deregulation under NAFTA; d) owner operators, acting as sub-contractors to companies in the previous groups. Their lack of organization and cohesion limits their influence on the structure of the industry but their low operating costs and current excess capacity are important factors in keeping down freight transport rates. They are particularly important in the movement of perishable foodstuffs. 3.24 A second stage of the BANOBRAS study will be to determine strategies to strengthen the competitive position of the first group relative to its US competitors, to increase competition within the second and third groups with a view to creating companies able to compete with larger carriers and to provide a longer term balance between supply and demand in the fourth group. C. Intermodal Transport and Information Systems Development Intermodal Transport 3.25 Multimodal transport is defined as the carriage of goods under a single contract by at least two different modes of transport (UNCTAD Draft Rules for Multimodal Transport Documents). In practice it usually refers to the movement of unitized general cargo, particularly in containers. In 1981 the GOM decided to create a monopolistic parastatal company 'Multimodal' with the intention of developing indigenous intermodal transport services. Multimodal's inexperience in this field inhibited development and in 1989 the monopoly was abolished, although the company continues to operate. 3.26 There is a concentration of intermodal land movements on the corridors to Nuevo Laredo, which in 1990 accounted for half of US exports (in value) to Mexico, four times as much as the second busiest route through Ciudad Jurez. The number of truck units through Laredo was estimated as 1,500 per day about half of which carried containerized cargo. The proportion of international railway traffic passing through Nuevo Laredo increased from 33% in 1984 to 41 % in 1991, partly due to increased container traffic. Since 1990 when the double-stack container train system was introduced, annual container movements increased from 5,000 to more than 45,000. The number of containers moving through the maritime ports has increased to more than 500,000 per year with more than 40% passing through Veracruz. There has therefore been a significant increase in both land and sea based transport suitable for intermodal contracting, much of it in each case passing through one point of entry/exit. - 27 - 3.27 The rapid increase in the international tiaffic which is suitable for intermodal carriage has coincided with the abolition of Multimodal's monopoly and now any Mexican company can provide intermodal transport services, provided it satisfies minimum operational and financial conditions. The combination of traffic growth and deregulation has caused a rapid growth to more than 20 in the number of Mexican companies registered to offer intermodal services, including 8 port operating companies. The major international freight forwarders whose function is to arrange the most cost effective transport for their clients, have grown to be very large multinational organizations but the legal monopoly of Multimodal prevented these agencies from operating in Mexico. 3.28 Despite the elimination of Multimodal's monopoly, there still exists a legal obstacle, unique to Mexico in Latin America, to the development of intermodal transport. Mexican freight forwarders are not allowed to consolidate cargo into large consignments, a function which is their principal source of efficiency gain in other countries. Until intermediate agencies are allowed to undertake this function, Mexican transport operations will fail to realize their full potential efficiency of operation. 3.29 At present, the provision of 'substantial' intermodal services is limited to transport operators themselves, FNM through its double-stack container services, TMM (the Mexican Shipping Line), and US trucking companies operating through their Mexican associates. The services offered by these operators are not genuine intermodal operations and consultants to the IMT have observed that "in Mexico...one cannot really talk of properly defined intermodal services...". 3.30 For sea transport, which is still the mode in which containers are most used, the two traditional INCOTERMS6, free on board (f.o.b.) and cost, insurance and freight (c.i.f.) are still by far the most commonly employed. Exports are usually transported f.o.b. with the seller responsible for the goods until they are loaded on the ship, while c.i.f. is employed for imports, the Mexican importer taking over responsibility at the ship's rail. More recent alternatives to these traditional forms of contract which provide for multimodal consignments without a change of responsibility at the ship's side have not yet been used on a large scale in Mexico. The successful development of intermodal transport will require an abandonment of f.o.b/c.i.f.contracts in favor of the more flexible contracts now available. 3.31 Intermodal services require inland customs facilities rather than at land frontiers and sea ports. So far there is only one Inland Clearance Depot (ICD), the FNM facility in Mexico City. The reluctance of the established interests of shipping lines, who prefer that their containers do not leave the ports, and Customs, who see an increased risk in allowing unbounded freight outside their immediate port jurisdiction, must be overcome if the benefits of intermodal transport are to be realized as they have been in other countries. If containers must be opened and inspected at the point at which they enter the country, there is little benefit in integrating their domestic and international transportation. 5/ "El Transporte de Contenedores en M6xico: Desarrollo y Potencialidad". Altec SA for IMT. December 1992. 6/ Terms of Carriage developed by the International Chamber of Commerce, Paris. - 28 - Electronic Data Interchange (EDI) 3.32 Efficiency in the international transport of goods depends on four related factors: infrastructure, equipment, services and information. Many of the inefficiencies inherent in the lack of infrastructure and equipment are being tackled successfully, the quality of services is being improved through increased competition and pressure is now being exerted to improve the fourth factor which inhibits further productivity improvements. EDI is the electronic transfer from computer to computer of commercial or administrative data using an agreed standard to structure the transaction. EDI messages are generally (though not universally) accepted as substitutes for paper communications. The principal advantage is speed of communication and the advantages this brings although there is also a considerable direct cost saving, recently estimated to be about US$ 25 per transaction. Furthermore, the scope for error in EDI is considered to be significantly less than by paper transaction. 3.33 With such potential advantages, EDI use should be widespread, but it has usually required an external impetus to get the system widely operational. In the US as in several other countries this was provided by US Customs, which some five or six years ago applied pressure on traders to present documents electronically. Countries in competition with Mexico for markets in industrialized products, such as Singapore, Korea and Australia already use EDI following the establishment of systems under pressure from the national governments. 3.34 Although EDI is used in Mexico, it is not yet widely accepted. A recent IMT study concluded that the conditions for general EDI use in Mexico do not yet exist although they could be easily provided. The requirements are for: a) adequate software, both for communications and translation. In the initial stages of EDI development, it is usually more cost effective to use the services of an intermediary for translation and commercial software packages for communications, rather than to develop 'tailor-made' individual systems. The intermediaries (Value Added Networks - VANs) need a legal framework within which to operate and this is not yet established in Mexico; b) sufficient computers. The commonly used LINX system can be handled by widely available IBM 386/486 or compatible micro-computers; c) communications infrastructure; modems, telephone lines, microwaves or satellites. These are also widely available, but Mexico is still far behind the USA and Canada in the number and reliability of telephone lines; d) suitably trained staff. Although they are not yet trained in sufficient numbers, if the experience of other countries is repeated in Mexico, commercial courses will provide the necessary training at an accessible cost; and e) an organization to promote national standards and a major interested party which can force development. It is not clear which agency would fulfil this role in Mexico but in many other countries this has been Customs. - 29 - h) a major interested party whih can"' f6rceidevelopment. In many other countries this has been the customs agency. 3.35 The physical and legal requirements for EDI development are in place or can easily be provided. However there are only three significant current users of EDI in Mexico: Customs, the most advanced user, Transportes Marftimos Mexicanos (TMM) and parent US firms and their local affiliates or subsidiaries. A fburth system more directly related to transport operations is close to being implemented. The three major US auto manufacturers are developing new EDI transaction sets to use in reporting auto component content to US customs. This agreement will ultimately include more than 10,000 component suppliers in the US, Canada and Mexico. By 1995, all trailers and railcars used in interchange services in the three NAFTA countries will carry automatic equipment identification transponders which will allow them to be tracked anywhere they operate. The system and standards were developed jointly by the Association of American Railroads, American Trucking Associations and the International Standards Organization. Used in conjunction with fixed "interrogators" located alongside the highways and rail tracks, the transponders will transmit data to remote computers. The high cost of implementing the system, estimated at up to US$500 million, would be financed from private sources and the cost recovered in user fees. D. NAFTA, Transport and Distribution NAFTA and Transport 3.36 The most often quoted impact of NAFTA on transport is that it will double the volume of trade between Mexico and the US by the end of the decade, and that the impact of increased trade with Canada on land transport will be small. The doubling of US-Mexico trade implies an annual growth rate of about 10%, which is little more than that achieved over the last five years. More thoughtful projections are that it will add little to trade volumes in the first two years, but will then increase the current growth rate to about 15% for about three years and then to about 11% or 12% per year for the rest of the decade. Most of the growth will be in land transport. 3.37 The impact on total transport demand measured in ton km will be even greater as the advantages of maquiladora industries locating near the border are eliminated and new growth will be in industrial centers closer to the center of the country and at longer distances from the US. The estimated impact of longer distances to transport both import and export traffic is that it will add a further 40% overall to the ton km of international freight, bringing the proportion of international transport in the national total to about 10%, concentrated in the corridors leading to the US border. 3.38 Within its overall objectives of liberalizing trade between its member countries, NAFTA includes many provisions relating to transportation and transport services. The impact of these provisions will have both direct and indirect effects on the need for transport infrastructure and the provision of transport services. Although emphasis has been placed on the infrastructure needs that will arise as a result of projected increased trade, the regulations relating to transport services are likely to have at least as important impact on the growth of trade and the relative advantage that each country will have from that trade. - 30 - 3.39 The most important provisions of NAFTA in relation to transport concern cross-border vehicular movement, and cross-country company ownership. At present all freight must be interchanged at the border to a national carrier of the destination country (there are some limited exceptions to this rule for freight which has a destination close to the border). Although the US- Canadian Free Trade Agreement liberated transport regulations, neither road tractors nor rail locomotives are allowed to operate between the US and Mexico. Since a memorandum of understanding in 1991, in preparation for NAFTA, Mexican and US truck drivers are allowed to drive in each others territory, but these provisions have had little impact because of the restriction on tractor movements. The memorandum does not extend to rail crews. 3.40 The NAFTA provides that by December 1995 the free movement of road vehicles between border states in both countries will be permitted. The main effect should be to reduce transport costs to reduce border congestion (though customs inspection will still take place there) and to expose trucking operations in the border states to full competition. On the Mexican side, competition will come from more efficient US operators, while on the US side competition will come froin lower cost Mexican companies. By the end of 1999, similar benefits will apply throughout the three countries as free access for the movement of international traffic will be permitted. Domestic movements will continue to be restricted to nationals. Foreign ownership of transportation companies is also foreseen under NAFTA. Within three years of its implementation up to 49% foreign ownership of transport companies will be permitted, increasing after seven years to 51% and after ten years to 100%. These provisions go beyond those in recently proposed Ports and Air Transport Laws which continue to limit foreign participation to 49%. 3.41 The impact of these agreements on trucking companies will vary according to the extent of competition in the market in which they operate. Companies which presently operate exclusively on international movements are likely to become more closely associated with or absorbed by US companies. Those which operate in both international and domestic trade will continue to receive some degree of protection and so will be able to offer competitive services in the international market and to offer the advantages of efficiency gained from this competition to their domestic clients. Companies involved only in domestic trade outside the principal corridors will still be protected and not be subject to strong competition from operators in the previous categories, who will tend to concentrate their efforts on the faster expanding markets. They will not increase their efficiency at the same rate as the companies more exposed to international competition. This leaves the prospect of 'two nations' developing in trucking, the first rapidly increasing efficiency to international levels, with the other improving much less rapidly and possibly not at all. 3.42 It is not determined in the NAFTA agreement how vehicle dimension and weight regulations will be standardized between the countries. The way that this is done, if it is done, will have a significant impact on the relative competitivity of road and rail transport and of US and Mexican road transport operators. At present, Mexico has among the world's most liberal vehicle dimension and weight limits and even these generous limits are rarely enforced (Table 3.2). Among the many consequences, are that Mexican roads need to be constructed to higher standards and at higher costs than US roads and that vehicle operating costs per unit of cargo are much lower, as the higher road costs are not recovered in road user charges. If the Mexican standards were to be adopted throughout the NAFTA area, or if Mexican trucks were allowed to operate up to their own limits, Mexican operators would be at a definite advantage over US operators and -31 - over rail transport. On the other hand, if US siaridaidtf adopted, Mexican operators will be at a disadvantage in the US as their vehicles are designed to carry much higher loads than US trucks and therefore will have higher unit operating costs. Resolution of the standardization of road vehicle dimensions and limits will therefbre be an early priority of the post implementation negotiations of NAFTA and in any event will need to be in place before the end of 1995. 3.43 NAFTA allows US and Canadian companies to invest in Mexican port facilities to handle their own cargo and, with Mexican Foreign Investment Commission permission, in other facilities. The restrictions on fbreign ownership under the current Port Privatization Law have been revised to ensure compatibility with the NAFTA. Air transport, being regulated by bilateral agreements, is not affected by NAFTA. NAFTA and Distribution 3.44 Mexico suffers from a chronic shortage of both storage and modern distribution centers. This is one of reasons why containers and their contents remain for long periods in ports, where storage charges are uneconomically low but where capacity is available and, at the other end of the scale, for excessive losses of perishable products. The private sector is being encouraged to invest in bulk storage facilities at intermodal facilities, and a number of privately financed grain silos have recently come into operation. Several projects which would provide intermodal distribution facilities are now being evaluated by their potential private backers. The most advanced of these is a proposal to establish a distribution center about 200 km north of Distrito Federal (DF), directly linked to both the main highway and the Mexico-Quer6taro-Nuevo Laredo railway. A large site has been identified, and approval in principle has been obtained from GOM and the State of Quer6taro, to acquire the land and undertake the development. The project would provide a rail/truck interchange and storage center for freight coming from and destined to the US, vehicle maintenance facilities, hotels, a truck driver training school and serve as a distribution center for the northern side of DF. 3.45 There are still unresolved problems of the distribution of freight which has entered the country by road or rail from the United States. The lack of inland clearance and distribution depots means that almost all freight and all vehicles are subject to inspection at the point of entry to the country, but a lack of coordination and unclear allocation of responsibilities between the various bilateral, federal, state and municipal agencies have prevented any planned expansion of facilities. The implementation of EDI systems will contribute to resolution of the problems of identification and documentation of cargoes but will not eliminate the need for border inspections. Although the preferred solution would be the creation of many more inland distribution centers, even when in operation, they will not provide a complete solution to the problem, and the situation at the border will still need to be resolved if freight is to be transported freely between the countries. - 32 - IV. THE CURRENT FINANCIAL SITUATION A. Introduction 4.1 There are four principal parastatal enterprises in the transport sector. Two of these improved their financial situation between 1987 and 1992 while the deterioration in the other two was so great as to wipe out the gains made by the first two, increasing the overall deficit to more than US$400 million. The two enterprises to improve their financial position were ASA and CAPUFE. The enterprises incurring the large deficits were Puertos Mexicanos and FNM. The financial situation of the public roads sector, excluding CAPUFE, is also a cause for concern. The awarding of private sector concessions for the construction and operation of new highways, has not yet produced the anticipated benefits and further progress is currently stalled and the problem of financing maintenance of the federal, state and rural roads is not yet resolved. B. Parastatal Financing 4.2 The parastatals reviewed here are not the only ones in the transport sector, but they are by far the most important. The period of review is from 1989 to 1992. Prior to 1989, Puertos Mexicanos had not been formed and other parastatals did not provide conventional financial accounts. Between 1989 and 1992 the financial position of each of the four parastatals changed significantly but each one in a different way. In the past, the financial objective of parastatals was rarely explicit and the implicit objective varied from one parastatal to another. During the current Administration, the implicit objective has shifted from one of simply providing a service to one in which revenue generation has assumed more importance. 4.3 The net transfers from the government to FNM were greater than that indicated by the operating results through the inclusion of non-operating costs such as pension payments. The difference will be even greater for 1993 with the inclusion of payments to those who accepted the voluntary redundancy terms and are also eligible for pensions. The redundancy payments themselves will show up in the operating account as an interest charge as the payments were financed by a loan from Nacional Financiera (NAFINSA), a government development bank. 4.4 Transfers to PM doubled over the period from 1989, more through an increase in working costs than through a reduction in revenue. ASA provided generally increasing positive transfers for each year since 1986, although with large variations from one year to the next. The variations in CAPUFE's net transfers to the government were even greater and were largely responsible for the swings between overall negative and positive transfers between the government and the transport parastatals. The negative transfer reached its highest value in 1992 with more than US$400 million (Table 1.2). C. Financing of Highway Construction and Maintenance 4.5 In 1986 SCT estimated that the desirable level of annual highway expenditure was about US$1 billion of which about two-thirds was for the federal road network. Total maintenance expenditure by the Federal government was only US$216 million in 1986 and has declined consistently since. Annual expenditure in the last ten years has never reached a level sufficient to either maintain the existing network in an adequate condition or to provide adequate capacity increases to match the increases in road traffic (Table 2.2). Until recently, the allocation of - 33 - maintenance funds had been less than optimal, with too.little going to reconstruction and too much going to simple resurfacing. When pursued over a long period of time, this policy results in structural damage to the road. 4.6 A more recent study made for SCT concluded that the federal highway maintenance and reconstruction budget allocation in the period 1990 through 1992 was only about one third of the estimated need of about US$700 million per year. Based on this study, the Government updated its federal highway maintenance policy and prepared a new program for 1993 through 1996. The government is expected to allocate a minimum of US$360 million per year for federal highway maintenance and to assign any additional resources to this use, either through additional budget allocations or through extra-budgetary sources such as voluntary user charges. The 1994 budget exceeds this target by about 50%. 4.7 If resources allocated to transportation are to be used in the most efficient manner, demand should also be at an economically efficient level. This can best be achieved when users face the short term variable cost, including externalities, of their use of transport facilities. However, this generally results in a financing gap, because long term variable costs are higher than those in the short term, and this gap must be met from general revenue sources. Deviations from distribution optima can be minimized and full user cost funding of maintenance achieved if costs are fully recovered from users in such a way that charges above variable costs are in inverse proportion to the price elasticity of demand. A study made in 1989 showed that as a whole road users were contributing through user charges only about 45% of the amount necessary to fund the total desirable level of expenditure, but it was not considered feasible at that time to raise charges to a level sufficient to fund the full program and allocate the funds for that use. 4.8 However, the yields from road user charges, annual vehicle license fees, tolls and the implicit user charge on fuel (pump prices less border prices and delivery costs) have all increased since 1989. The annual truck licensing fee increased by more than 200% in real terms between 1989 to 1992, the fuel charge on gasoline, which was negative in 1986, became positive in 1991 and has remained so ever since and the charge on diesel fuel is now (March 1994) just about positive. Despite these increases, heavy vehicles are still not contributing in proportion to the maintenance costs they impose (Table 1.4). A more comprehensive review of highway financing is being undertaken within the context of the Bank supported Highway Maintenance and Safety Project. This review will take account of the recent study to identify federal highway maintenance needs, allocation of the costs and the benefits of road maintenance to different categories of road user and other sectors of the community, and ways of recovering the costs from the beneficiaries. In particular, the review will consider the appropriateness of different methods of administering and financing road maintenance. It is expected that the review will be completed by the end of 1994 and result in recommendations to the future administration for the finance of maintenance of the federal road network. 4.9 Although the federal system carries about two-thirds of total traffic, the remaining, much longer state (carreteras alimentadoras) and local (caminos rurales) system is still very important, especially for local distribution. The physical condition of these roads is as unsatisfactory as is the federal network; 24% of the former and 41 % of the latter are reportedly in bad condition. 4.10 The financing of non-federal roads is through CONACAL which in turn obtains its funds partly from GOM and partly from the states. The states' proportion has increased in recent years - 34 - to 45% and total funding, in real terms, nearly doubled from 1989 to 1992. During the period, two-thirds was expended on feeder roads, nearly all on rehabilitation and maintenance, the rest on rural roads - nearly all construction/reconstruction. As a result of the poor state of these roads, the government, with the assistance of the Inter-American Development Bank (BID) have identified a total need for modernization and improvement of 98,000 km non-federal roads, from which 6,000 km have been identified for a BID loan to finance 50% of the total cost of the program. D. Tl Road Financing The Present Scheme 4.11 Recognizing the continued inefficiency of the public sector in providing adequately for development of the road network, in 1989 the federal government embarked on an ambitious program of constructing new roads through concessions to private operators. The BOT (Build, Operate and Transfer) mechanism used for this program is conceptually simple and has been used successfully in many other countries. Consortia bid for concessions to finance, build, and then operate the roads until the end of the concession period, at which time they pass to the responsibility of the government. Implementation in Mexico has brought mixed results, with more than 4,000 km of road being constructed or under construction in less than five years, a rate surpassing even that of France and Spain at the height of their toll road programs, but with most of the traffic remaining on the existing roads, the concessionaires in deep financial trouble and the national banks reluctant to become involved in financing further toll roads under the present scheme. 4.12 In the Mexican version of this program, concessions are granted after a two stage bidding process. The first involves a prequalification of interested bidders and the second is the award to the bidder.requiring the shortest concession period. Once a concession is granted, an independent trust is established to oversee the construction and maintenance of the road. Members of the trust include the contractor for the construction, the project financiers, SCT and in some cases SHCP. 4.13 The basic route alignment and final design are provided by SCT, as are traffic projections. The concessionaire is responsible for constructing, financing, maintaining and operating the road to agreed standards until the end of the concession period, at which time responsibility passes to the SCT. Ownership of the road remains in the public sector. The terms of the concession determine its period (with a legal maximum of thirty years but in practice much less), the tolls which can be charged (including an inflation formula), the standards of maintenance and a target financial rate of return for the concessionaire. This target rate of return is that which would be earned if traffic volumes and construction costs are as predicted by SCT. If traffic is less than predicted, the concession term can be increased, and it can be terminated once it is determined that the target rate of return has been achieved. 4.14 The bidding consortia usually comprised a construction company interested principally in the civil works component of the concession and a commercial bank interested in providing finance for the construction. The arrangement was for the construction company to build the road, borrowing from the bank for the loan component of the construction cost, and in turn to be compensated from the toll revenues. The consortium is responsible for contributing equity to the project, on average just under 30%, but even this has often been financed through borrowing. Only a small proportion of this equity is usually provided by the construction company, which is - 35 - therefore exposed to minimum risk and leaving the bank with the problem of recovering the costs of the project from toll revenue. 4.15 The problems which have arisen in the application of this program have their origins in two particular features of the scheme - the information available to potential bidders and the way in which it has been used, and the criterion for awarding the concessions. When most of the concessions were awarded, the commercial banks were still in the public sector and not in a strong position to reject pressure to provide loan finance for the consortia. 4.16 In relying on the information provided by SCT, the concessionaires failed to make the necessary detailed traffic analyses and revenue forecasts needed to determine the financial viability of the concessions. Traffic projections by the SCT were based on simple annual increases in traffic in the relevant corridors with over-optimistic assumptions about the proportion which would be attracted to the new roads and failed to take account sufficiently of the high tolls needed to produce a financial return within the short concession periods. Tariffs have averaged more than US$20 per 100 km for cars and up to seven times higher for trucks. As examples, the total toll on the recently opened 260 km toll road between Cuernavaca and Acapulco is more than US$70 each way for a private car and on the Mexico - Toluca road, the toll is an amazing US$7 for just 16 km. On the latter, traffic is less than 20,000 vehicles per day compared with the originally projected 75,000. When account is taken of the over-optimism of the initial forecasts and then of the impact of high tariffs, the current low traffic levels do not appear so surprising. Of 16 concessions reviewed recently, five had traffic less than half of that projected, and only three showed traffic higher than projected (Table 1.9). The main financial impact of cost overruns and revenue shortfalls has been that the banks now hold about US$6 billion of toll road debt, much of it with inadequate revenue sources to service it. 4.17 The final designs produced by SCT have turned out to be even less reliable than usual. Cost overruns of up to 40% are typical in Mexico because of the method of producing designs in which much of the final design is left to the contractor to complete as the work progresses, with the inevitable increases in cost. Some of the toll roads have had cost overruns of more than 200%, with an average approaching 60%. The average construction cost for a sample of 29 concessions has been US$2.7 million per km (Table 1.9). 4.18 The experiment of awarding concessions on the basis of the shortest period required to give an acceptable rate of return has not turned out in the way expected. Bidders have proposed very short concession periods, none for more than twelve years, and some as short as five years, knowing that if within that period the accepted rate of return was not earned, the period would be extended under the terms of the guarantee, sometimes as high as 40%. There are no generally accepted criteria for awarding concessions of this type and preferences vary according to the objectives of the program and previous experience in the country of the application of different criteria. Simple criteria are preferred to weighted combinations of different parameters of the bid, not only for more openness of evaluation but also to avoid the structuring of offers to accommodate the evaluation process rather than to improve the quality of the bid itself. Whatever bid evaluation criteria are used, concession periods as short as those offered for the Mexico road concessions are exceptional for infrastructure projects, which typically require more than twenty years for the cost of construction to be recovered and an acceptable rate of return to be earned. - 36 - 4.19 As a result of the high costs and low revenues, few of the roads built under this scheme are now expected to obtain the required rate of return within the original concession period. Only two out of twelve roads reviewed are expected to obtain financial rates of return over 20% and eight will probably result in negative rates. These compare with an average expected rate of return at the time of award of the concessions of about 25% (Table 4.1). Most of the concessionaires have approached the government requesting an extension of this period under the terms of the guarantee. There is also a reluctance for participants in current concessions to be interested in bidding for additional concessions under the same or similar conditions. This reluctance has forced the government to review the whole process of awarding concessions. 4.20 Until recently there has been a moratorium on the awarding of new concessions until a more acceptable scheme was devised. The Government sought ways to improve the financial viability of the existing concessions without assuming more of the financial risk themselves, and of making new concessions more attractive to potential bidders. Many of the measures aimed at resolving the first of these issues will also go some way to resolving the second of them. 4.21 Invoking the guarantee condition should be sufficient in many cases to provide an adequate return on investment, but there are some cases where even with the maximum concession period of 30 years, the financial rate of return would be inadequate (Table 4.2). Extending the concession period from about ten years to more than twenty years is not an attractive possibility for an investor looking for a relatively short period of exposure before earning a return on the investment. Extending the concession period not only lengthens the pay back period and increases many of the risks, it also will involve the consortium in an unplanned reconstruction of the road so that it can be returned to SCT in a condition compatible with that specified in the concession. Possible Modifications to the Scheme 4.22 The Government's first priority has been to resolve the urgent financial problems of existing concessions. Some of these measures proposed for this purpose would be beneficial to all toll road concessions, new as well as current, while others are specific to existing concessions. The measures include: (a) Measures of benefit to all concessions 4.23 Vehicle regulation: A proposal given serious consideration by the federal government is to prohibit large trucks from the untolled network, or at least those parts of it where a tolled alternative exists. Such a proposal should be rejected on at least two grounds. First, regulation of this type would be an economically and technically inferior solution to the increased implementation of vehicle weight and axle load regulations, although practically it might be more enforceable. A new Road Transport Law (January 1994) introduced new vehicle and axle load limits and proposed increased implementation with a view to reducing the proportion of seriously overloaded trucks on the federal road network to less than half the current level within three years. The Bank is strongly supporting this new Law through the on-going Road Rehabilitation and Safety Project and in particular the strict implementation of maximum vehicle weight and axle load .regulations. Second, the present toll road program is predicated on the constitutional requirement to provide free access to a federal road network. Any attempt to restrict access to this network would require a prior proving of its constitutionality. - 37 - 4.24 Fuel tax allocation Another suggestion is that,.a proportion of fuel tax revenue should be transferred to concessionaires in compensation for a reduction in tolls. The rationale advanced is that since such taxes are used to pay for maintenance of all federal roads and that a proportion of the fuel is consumed on toll roads, so a proportion of the tax revenue should be allocated for the maintenance of toll roads. An allocation of a proportion of fuel tax revenue to the concessionaires would allow then to reduce tolls and this would in turn encourage greater use of the toll roads, generating more revenue for the concessionaires in a multiplier effect. Such an allocation has worked successfully in Argentina, although there it is the existing rather than new road network which has been tolled. Although conceptually attractive, the revenue which might be allocated would be small and would need to be divided between concessionaires in proportion to the vehicle km or fuel consumption on each toll road. It would only be worthwhile considering this measure if an additional fuel charge for financing a highway maintenance fund were to be proposed. 4.25 End of concession arrangements: The expected behavior of concessionaires in the last years of a concession can be influenced by the terms under which they must return a road at the concession's expiration. Unless there is a strong incentive to do otherwise, there is a high risk that the condition of the road will be allowed to deteriorate. One way to provide such an incentive would be to auction the concessions at the end of their life, with a proportion of the auction revenue accruing to the concessionaire. This procedure should be incorporated in all new concession agreements. A number of variations on this theme have been worked out but not in enough detail to assess their practicability. Several existing concessions were granted for very short periods, and it will soon be necessary to consider what will happen when they reach the end of their term. Allocating a proportion of the proceeds of an auction to the concessionaire, as proposed above, would amount to a windfall gain to the concessionaire, not expected at the time the concession was awarded. However, such a provision could be taken into account in any renegotiation of the concession terms, fur example when application of the terms of the guarantee are being considered. (b) Measures to benefit existing toll concessions 4.26 Refinancine: A number of the toll roads are now sufficiently mature that refinancing of the existing debt with funds raised from institutional lenders or by the issue of bonds using the revenues as security is possible. There are two uncertainties which increase the initial cost of borrowing for a toll road, those related to the construction costs and those related to potential revenues. Confidence in the borrower and in the country in which his principal risks are located are important additional determinants of the cost of international borrowing, and the local interest rate is important for national borrowing. Increased confidence allows debt to be contracted for longer periods and often at lower cost. In addition, the short original concession periods set an upper limit on the period over which loans could be amortized. With the concession period extended by application of the guarantee provisions, loans can be refinanced over much longer periods than the original loans. 4.27 Once the road has been built and in operation for a few years, these uncertainties are greatly reduced. The only civil works costs remaining uncertain are those of maintenance and eventual reconstruction, much more predictable and less significant in present value terms than the initial construction costs. The revenues are much more predictable after a few years of operation, even if the early experience was with tolls different to those to be charged in the long term. - 38 - Confidence in the larger concessionaires is much higher now than it was when the early concessions were granted, as is confidence in Mexico as a country for long term investments. Refinancing under these conditions, with a lower interest rate (typically from about 18% to about 13%) and longer amortization period (for example, from 8 to 15 years), can produce a cost savings of up to 30% in terms of the annual cost of debt (Table 4.2). Refinancing has benefits for the banks, the project and the bond holders. Repayment of a long term loan increases the original lending bank's liquidity and frees funds for perhaps more rewarding loans. With a lower interest rate from a long term bond issue made in the certain knowledge of the construction cost and with a clear indication of potential revenues, either the toll needed to provide an acceptable rate of return is lower or a shorter period is needed to provide that rate of return. For the new bond holders, the refinancing offers an attractive interest rate coupled with a risk commensurate with the expected financial returns. 4.28 Although many of the existing toll roads were financed with local loans at particularly favorable rates, at least three roads have been refinanced in this way and it is an option which is always available to a concessionaire and was anticipated at the inception of the toll road program. The refinancing of the first, a US$208 million securitization of the toll revenue of the Mexico - Toluca road, was only a qualified success, but drawing on the lessons learned, the other two have been more successful. Several further refinancing schemes are in an advanced stage of preparation and are expected to be completed this year, probably once the terms of the concessions have been revise following the application of the guarantee conditions. 4.29 Revenue enhancement: There are a number of ways in which the revenue stream of a concession can be increased. In some cases a concession can be enhanced by adding to it a concession with a proven revenue stream such as a toll road operated by CAPUFE. The costs of the CAPUFE concession have been largely amortized and their revenue generation possibilities are proven. The transfer of an asset in this way is a way of subsidizing the concessionaire, which will give the enhanced concession a much higher chance of generating sufficient revenue to make the project viable, and can even make refinancing more attractive. This form of revenue enhancement has been used several times. Although adding a CAPUFE toll road is the clearest form of revenue enhancement, there are others in which a new toll road can be added to an existing concession. This is rather more than a revenue enhancement because the concessionaire must make further investment and the new revenue stream is unproven. This arrangement is adopted where the proposed new toll road can act as a feeder road to the existing toll road. Other similar forms of revenue enhancement include adding ancillary service concessions, such as restaurants, hotels, service stations and other amenities. However attractive these proposals might be to a concessionaire, they detract from the credibility of the openness of the toll road scheme, as they are in effect granting new concessions to an existing operator without competition. It would be better to award the feeder and existing CAPUFE concessions on the same criteria as the other toll roads. The owner of the ailing concession would be able to bid for it in the same way as anyone else. Recommendations for existing toll concessions 4.30 In all existing concessions, maximum advantage is expected be taken by the concessionaires to invoke the guarantee conditions, refinance debt and optimize toll levels to maximize revenue. However, any action by the Government other than to apply the guarantee conditions to extend the period up to thirty years, would be detrimental to the long term interests of the program. The - 39 - concessionaires of toll roads in financial difficulties should be in a strong position to win revenue enhancing concessions in open competition. In the event that they do not succeed, and all other measures fail to make the project financially feasible, then eventually the concessionaire should be declared bankrupt and cede his grant to the government, which would then re-bid the concession. 4.31 The macro-economic impacts of the failure of some concessions could be less than is sometimes feared. The recommended methods for improving the viability of currently badly performing concessions should ensure that at least half of them become viable. In addition, if the re-bidding of failed concessions is on a sale basis, with any net revenue from the sale going to the original concessionaire, this could be used to pay off some or all of the debt. The few expected concession failures should not therefore put at risk the stability of the national bank's which currently hold most of the debt. So long as concessionaires can be certain that the Government will subsidize failed concessions, then unrealistic bids will continue to be made on the expectation of a bail out if necessary, and eventually even more subsidies will be needed. Allowing some concessions to fail should have long term beneficial impacts for the viability of the toll road scheme as a whole. Revisions to the scheme for new concessions 4.32 Despite the mixed results to date of private toll roads, extension of the scheme would be beneficial as a means of mobilizing private resources for what are essentially public sector projects. A proposal to construct a further 6,000 km of toll roads is about to be started. Few of these projects would be financially feasible if they were granted under the same conditions as the current concessions. The Government has recently turned its attention to the conditions under which the new concessions will be granted. The system has been substantially revised and improved, to such an extent that any concessions made under the system now being proposed have a high probability of being successful both from the Government's point of view of producing a positive socio- economic return and from the concessionaire's point of view in providing an adequate financial return. The following four fundamentally different features of the new proposals should provide a better chance that only financially feasible projects are implemented and that the costs of new projects are such as to maximize their chances of achieving such feasibility. 4.33 Criteria for awarding concessions: Use of the required length of the concession period as the principal criteria for awarding concessions has not been successful, and is to be replaced by a more conventional criterion, that of the lowest required toll over a fixed concession period, but with a different period for each road depending on the time needed to provide an acceptable financial return, expected to be a minimum of twenty years. 4.34 Change in responsibility for design: One of the reasons for the high costs of existing toll roads is the lack of competition in the design process. With the concessions granted until now, SCT has provided the design to which the concessionaire has constructed the road. Apart from doubts as to whether the SCT designs have been the most cost effective, they have also been subject to substantial changes after the concession has been granted. 4.35 This problem is also being rectified in the proposals for new concessions, for which SCT will stipulate design parameters, and leave the design itself to the bidder. Although this is a desirable change, in other countries, concessionaires have been reluctant to invest the high cost of design (typically up to 8% of the total investment cost) in a bidding process in which they do not - 40 - have a high probability of winning. Various methods have been tried to overcome this problem, none of them with consistent success. A possible solution would be for the losing bidders to be partly compensated for their legitimate design costs. In this way the winning bidder would have the possibility of including innovative concepts from other designs. 4.36 Elimination of the guarantee arrangement: The combination of use of the concession period as the criteria for award and the inclusion of a guaranteed financial rate of return (para. 4.13) has been a principal contributory cause of the problems of the current system. The new concession agreements will not a have a guaranteed rate of return (and its converse, the threat to curtail a concession which is providing too high a rate of return) or any other guarantee related to revenues or traffic levels. 4.37 This is a result of a better appreciation of the allocation of project risk. Traffic related risks can now be insured against through commercial contracts and the cost of such insurance would be reflected in the required toll to make the road profitable. The concessionaire would need to make reliable traffic projections to be sure that the revenue projections were realistic, in order to minimize the cost of such insurance. Insurance would be available through the proposed Infrastructure Finance Facility and other sources for some aspects of sovereign risk and exchange rate risk, but not for those related to traffic. Lack of a guaranteed rate of return will introduce more discipline into the design and construction phase of the concession. 4.38 Increased equity financing: The debt component of the finance for many current concessions has been too high, resulting in high finance charges which cannot be recovered from toll revenues. SCT is convinced that the debt component of the project finance should reduce from the present average of about 80% to 30% or less. This should be achieved by increasing concessionaire's equity contribution. A less satisfactory proposal is to increase government equity, either from including some federal or CAPUFE roads in the concession agreement or providing the land for construction of the road, to about 30%, on the assumption that new concessions would have a high proportion of economic and social benefits expected to accrue to non-users of the roads (through the generation of agricultural and industrial production through the lowering of production costs), and therefore not realizable through toll charges. Estimation of the level of such benefits is unreliable, and the possibility of their use to increase government equity in what would otherwise be financially unsound projects would likely result in the construction of many dubiously justifiable roads. 4.39 The original concessions were granted when Mexico still had not earned a high international credit rating, so most of the project finance had to be sought from national banks. More recently the creditability of Mexican borrowers has improved to the extent that the larger construction companies can now float their own long term bonds for periods of up to 15 years in the international markets and international bonds to finance specific Mexican projects can now have terms of up to 10 years. With these advances it is no longer necessary for bidders to rely only on loans from national banks, and many innovative and less costly financial sources are available and will be used in putting together bids for future concessions. - 41 - V. A POLICY FOR CONSOLIDATION AND GROWTH A. A Iblicy Framework 5.1 The transport sector is coming towards the end of a period of transition and entering one in which competition and private initiatives rather than regulation and state intervention will be the tools of management and development. The success of the transition process is such that most future investment will come from private sector sources. The measures to initiate this transition have required policy ventures into new areas for Mexico and while going a long way to achieving the expected results, have also produced some unforeseen negative consequences. There are also some areas where the new policies are still being implemented and further change is needed. The policy framework for the next sexenio, to be implemented in a context of continued economic structural change and growth, and an increase in the demand for transport services, will therefore be one of: (a) establishing an appropriate regulatory framework for the management of competition, particularly in preventing the creation of market dominating entities - monopolies, duopolies, oligopolies, cartels, etc.; (b) completing the restructuring and privatization of the railway, ports and airports, and enhancing the opportunities for private investment by creating a more favorable financial context. It is inevitable that some fine tuning of measures already taken will be needed to consolidate the benefits already gained; (c) continued government intervention where competition and private initiatives will not be enough by themselves to bring about economically justified investments, particularly in the secondary road network; (d) creating an appropriate context for increased international trade in goods, particularly with the US; (e) ensuring the efficient distribution of primary, intermediate and final products for national markets; (f) revising the institutional responsibilities of the sector to take account of the changed role of the public sector, and; (g) providing a stronger management of the environmental impacts of the sector. B. Regulatory Framework 5.2 The policy of deregulation has provided immediate and significant improvements, in transport infrastructure and the range, quality and cost of transport services. As the transport operators gain more experience of operating in the more competitive environment, their propensity to enter into market controlling arrangements will increase. Although each mode of transport is in competition with another for at least a proportion of its market, this is not enough to prevent - 42 - the creation of competition limiting arrangements between operators. An appropriate regulatory framework to limit these actions is still not in place and should be prepared and implemented before the competition becomes constrained. 5.3 The problem of regulating private sector concessionaires of public sector operations is not limited to the transport sector, similar problems arise with privatization of all public sector utilities. For this reason, it will be necessary to strengthen the general anti-trust and monopolies legislation, as well as to create appropriate sectoral and subsectoral regulatory policies. The sectoral regulatory function should remain with the SCT. 5.4 Experience from other sectors of the economy and from the transport sector in other countries, shows that it is difficult to resolve the conflict of interest between privatizing a large operating entity intact to maximize the financial gain to the state, and privatizing by breaking the entity into smaller units to create more competition. In the transport sector in Mexico it is only the airlines which have been privatized intact, Puertos Mexicanos and FNM are being privatized through concessioning separate units (individual ports and ancillary activities respectively), but the risks of creating potential regional monopolies still exist in both cases. 5.5 Management of toll road concessions is on an ad hoc and case by case basis by SCT, without having any policy guidelines for the decisions taken. In the case of port terminals, the mechanism for granting concessions includes a national agency to oversee the awards and to ensure that regional monopolies are not created. Although the agency has instruments available to use in the case of non compliance with the conditions of concessions, it is still not known how it will apply existing legislation and other available instruments to deal with possible collusion or later amalgamation among port operating concessionaires. In the context of the railways, control of the concessionaires and contractors will be internal to FNM rather than by regulation, and design and implementation of an appropriate system is included in the Railway Restructuring Project, currently under preparation. Deregulation of airlines has already resulted in one holding company having a major financial interest in the two largest domestic airlines and the ability to use its market dominance to limit competition from emerging new airlines. The privatization of airport activities has not yet progressed far enough to know how collusion between concessionaires will be managed. C. Continued Restructuring and Privatization 5.6 Policies of restructuring and privatizing by concession are only just being implemented in the railways, ports and airports subsectors. As the policy for private toll roads is in need of revision, so the policies in the other subsectors will inevitably require modification as they are being implemented. In all three subsectors the chosen path of restructuring is a gradual one. This has advantages in allowing for assessment of one phase before progressing to the next but also runs the risk that the impetus for change will be lost. If the gradualist policies are to be pursued, then it will be necessary to have a firm idea of where they are heading and not to develop the policy as it progresses. It is only in the railways that sufficient progress has been made for an assessment and projection of future policy to be made. 5.7 Transition in the railway subsector has only just started although the benefits of preparation for restructuring have already become apparent. Apart from a first increase in traffic for more than ten years and a reduction of more than 25% in the number of employees, the most significant - 43 - change is that in the attitude of railway management which is now committed to commercial viability of the enterprise. 5.8 The scheme for restructuring and privatization which is now under way is only the first stage in converting the railway into a commercially viable and technically efficient organization. The role of the railway is now changing, with less emphasis on ancillary operations and a focus on the tasks in which a railway operating company has a comparative advantage in planning of infrastructure and operating services. Added to this function is that of supervising the various concessions and contracts for ancillary activities, such as track, communications and locomotive maintenance. To fulfill this new set of responsibilities, a new organizational structure will be needed. 5.9 FNM will continue to be responsible for planning and executing investment in the core railway activities as well as operating commercially viable services, including those for which funding is provided through contracts with the government for socially needed, commercially unjustified services. The new organizational structure should be based on the execution of these activities, with a clear separation between activities related to planning and investment of infrastructure and those related to the operation of trains. The logical conclusion of this process of privatization would be an eventual separation into two separate agencies and the privatization of one or both of them. Privatization of train operations would be technically simpler, first with the possibility of private trains running in competition with FNM's services and then with the concessioning or sale of FNM's services to private operators. Complete privatization of rail infrastructure has proven difficult if not impossible to implement anywhere outside the United States, but countries such as Chile and to a lesser extent Argentina, as well as others in Asia, now have experience of partial privatization that could be appropriate in Mexico. 5.10 The privatization of many maintenance activities will reduce the need for FNM investment. In particular, the concessioning of the locomotive and wagon workshops will eliminate the need for investment in workshop buildings, equipment and wagons. If the locomotive fleet is sold on a lease back basis, the need for massive capital investment will be replaced by annual operating charges for the use of the locomotives. Reduced tariffs for clients using their own wagons or those leased from the concessionaires will also reduce FNM's gross revenue. FNM's direct investment will be limited to track reconstruction and even that could in time become the responsibility of the concessionaires. 5.11 Privatization of ports and airports has only just started to gain momentum and much progress is expected in the remaining period of the present administration. It is expected that the momentum will continue at least into the first years of the new administration, at which time a review of progress should be made before embarking on the final round of concessions. D. Financing of Road Infrastructure a) Maintenance of Federal Roads 5.12 In the last years of the present administration, the balance of roads expenditure between maintenance and new construction has moved significantly in favor of the latter, although for the federal network the trend has been the opposite (Table 2.2 (a) and (e)). Despite well intended - 44 - commitments for greater allocations to maintenance, the trend to allocate most funds to new construction or "improvement" will continue unless positive action is taken to increase maintenance expenditure and to change the way in which highway maintenance is managed. In addition, there is little certainty that the finance to maintain this program will be available unless revenue from new user charges is used to support it. In the past, highway maintenance has not been given the priority or afforded the continuity of funding which is necessary to avoid consumption of the capital stock of road infrastructure and SCT has not seen its function as guarding the value of a national asset, the road network, trusted to its care. It is therefore desirable that a more autonomous system be introduced to increase the probability that funds would be available to maintain the stock of road infrastructure in a reasonable condition. 5.13 Within the context of the on-going Highway Rehabilitation and Safety Project, proposals for the development of new structure for managing and financing highway maintenance are being reviewed in a study being jointly supervised by SHCP and SCT. It is expected that the next federal administration will react positively to the study recommendations. The study will take account of Bank objections to the earmarking of taxes by recommending that all existing taxes should continue to contribute to the general revenue fund and that a new Highway Maintenance Agency be funded from new specific user charges. The Agency would be charged with preparing a rolling investment plan which would maintain the value of current highway assets. The Agency would include representatives of principal road user groups such as Trucking Associations as well as SHCP and SC7 among its directors. By this means, it is expected that previous deficiencies in prioritizing maintenance activities would be avoided. The user charges would be determined so that each vehicle type contributed at least its marginal cost of road damage and that charges in excess of this amount were in inverse proportion to demand elasticities, so as to minimize distortions in demand. The financing plan would also include mechanisms to avoid the creation of large surpluses, possibly by making the fund self liquidating every ten years or so, or by automatically transferring large surpluses to SHCP. b) Development and maintenance of feeder and rural roads 5.14 The devolution of responsibility for feeder and rural roads to the states is being hindered by lack of agreement as to how they should be financed and such an agreement is by its nature more political than technical. The technical contributions to such agreements could come through estimates of the distribution of benefits of development of maintenance of this network between users, non-users within the state in which a road is located and out of state non-users and through the identification of alternative sources of revenue. If it is determined that more expenditure responsibility should lie with the states, then at the same time appropriate revenue generating powers should also be granted to them. Decentralization of responsibility without decentralization of the ability to generate resources will neither improve the condition of the roads nor contribute to economic growth. c) Toll Roads 5.15 The present administration made bold decisions about the way in which new road capacity should be provided and financed. The decision to construct an extensive system of private toll roads was a far reaching initiative which has changed the way in which infrastructure finance will - 45 - be provided in the foreseeable future. The program has resulted in spectacular increases in capacity in the principal transport corridors but has now reached a point of reflection before further progress can be made. Further concession awards will be made on a different basis to those already awarded and the conditions of some of the current awards will be substantially revised through negotiation. Continual review of the new basis for awarding toll concessions should be a high priority. 5.16 Implementation of the new structure for concessions should ensure that: (a) there is a satisfactory allocation of risk between the participating agencies in toll road projects - government, sponsors, investors and contractors - such that each bears the risks that it is most able to deal with. Then the method of concessioning should ensure that each participant receives a satisfactory expected return to cover the apportioned risks. Sponsors and investors will bear a higher proportion of the risk than in the present scheme with its guaranteed financial rate of return, but this would be balanced by higher potential returns. Under the new scheme, the rewards for a well managed concession will be higher, but so will the costs for a poorly managed one; (b) maximum flexibility is made for the use of alternative methods and sources of finance, so as to minimize the impact of financial charges on toll levels and road users; (c) the concessions are awarded on criteria which do not adversely affect the operation of the roads or the volumes of traffic which they will attract; (d) the design process produces the lowest construction cost compatible with established design standards, traffic safety requirements and the avoidance of environmental problems; and (e) finance is available only fbr roads which demonstrate an adequate economic rate of return, and that it is not available for roads which fail to demonstrate their economic justification. 5.17 Similar criteria should be applied in the revision of those current concessions which are not performing well, and to avoid allegations of discrimination, will possibly need to be applied to all current concessions. A large degree of commonality between the measures needed to satisfy the criteria in relation to current and new concessions is to be expected. If, after all the measures applied to a particular current concession, it is still financially unviable, then the risks of the market should apply and the concession should be taken over by the government without compensation, other than assignment of the revenue from a possible sale of the concession (para 4.31). A new concession should then be designed which will be attractive to new private investors. E. The Impact of Increased International Trade 5.18 Implementation of the NAFTA will substantially increase the rate of growth of international traffic between Mexico and the US, which has been increasing at almost 10% per year for at least - 46 - the last five years. The provisions of the Agreement take away the tariff preference of the border states for industries serving the US and will make it possible for the maquiladora industries to service the national as well as the US market. It is therefore highly probable that both road and rail transport in the corridors leading to the US border, will increase substantially more than the projected national average of 3% to 3.5% for the next ten years. 5.19 The policies for providing additional transport capacity for international traffic now depend extensively on the private toll road and other concession programs. If these programs are successful, sufficient resources should be available to provide the needed capacity on a timely basis. Although road capacity has increased through the construction of new toll roads, this increase is still not compatible with the increase in road traffic during the 1980's and early 1990's and will be far from sufficient to deal with the expected growth in the next sexenio. All the other subsectors have serious capacity problems but these can mostly be resolved through better management of existing capacity. 5.20 It is only in freight terminals and in specific parts of the network, particularly in the corridor Mexico City to Nuevo Laredo, that the railway has any capacity problems. Although progress has been made in attracting some private investment in freight terminals, further incentives are needed if this is not to become a bottleneck to future operations. FNM needs to completely rethink its approach to the transport of general freight under multimodal contracts, with the operation of dedicated unit trains between specialized freight terminals on the peripheries of and with excellent road connections to urban and industrial areas. Potential partners of FNM have reported protracted and fruitless negotiations for even the simplest of terminal investments, indicating that FNM still has not developed a sufficiently strong commercial attitude. 5.21 The proposed introduction of radio control of trains and eventually of CTC, combined with a new system of planning and scheduling train movements, will provide sufficient capacity in the key corridors to the US border, until early in the next century, even if the most optimistic assumptions about traffic growth are realized. With the railway, the problems of the coming years will be to increase operational efficiency and the capacity of existing infrastructure, traction and rolling stock, rather than to provide additional physical capacity. 5.22 Port investment will also largely be the responsibility of the private concessionaires with their compensation coming through the tariff revenues. Their current plans for investment in new cargo handling equipment and terminal capacity, should be sufficient to deal with projected increases in demand. Unlike previous plans of PM, the private concessionaires have access to financial resources to ensure their implementation. 5.23 There is evidence of a lack of adequate resources for increased transport of international air freight, seen as a high potential growth area given the relatively low level of current activity. Few airports currently have adequate specialized facilities for air freight and customs arrangements are generally not compatible with the movement of freight which requires efficient and rapid handling to expedite its delivery. Provided that the new Air Transport Law is flexible enough to encourage rather than deter private sector investment and operation, this will be the principal source of such investment in the future. - 47 - Intermodal Transport 5.24 Intermodal transport is developing in Mexico, but as revealed in the user survey, more slowly than users would like. This is partly due to the legal status of freight forwarders, partly to a lack of internal facilities for reception of containers, but predominantly to the reluctance of shipping lines, and customs, to encourage the movement of sealed containers inland. The slow development is also closely linked with the slow development of EDI and 'paperless transactions' which in turn is partly a function of the inadequate Mexican communication system. Strong pressure for more rapid development is needed from at least one major participant in the transport chain. The obvious actor is Customs, but it has so far shown little evidence of interest. The implementation of NAFTA is another source of pressure, as satisfaction of its reporting requirements will depend on EDI based systems. Closer links between Mexican and US transport operating companies will lead to the faster dissemination of new technology in Mexico, and need to be encouraged rather than deterred as they are by current regulations. Fear of dominance of national operators has been the justification for discouraging closer collaboration between US and national companies but the cost of slow and incompatible documentation is much higher than the possible cost of dominance by foreigners. 5.25 Intermodal transport development is a highly technical field requiring wide experience to avoid costly errors. There is insufficient professional expertise in this area in Mexico at present to ensure a rapid and orderly development. Accordingly, a two-track, parallel approach will be required. First, detailed analysis of the key elements in introducing improvements should be undertaken by experienced practitioners, building on the work already undertaken for the Instituto Mexicano de Transporte (IMT). These analyses would lead to institutional actions by the relevant government agencies in permitting innovative freight handling methods, new documentation procedures and new communications systems. It would be the responsibility of operators and agents to take advantage of these new freedoms and new systems. 5.26 In parallel, a review should be undertaken with Customs, customs agents and freight forwarders of the physical and institutional actions necessary to achieve specific levels of intermodal transport operation and EDI development. Such targets could be in terms of quality of service and specific operating methods. Following completion of these studies an action and investment program for trade facilitation would be produced, which would distinguish between the roles of the public and private sectors. Freight Terminals 5.27 Terminal facilities for international trade movements are inadequate for present trade volumes and unless rapid increases are made, the lack of terminal capacity will soon become a constraint to further trade growth. The results of the user survey highlighted the problems arising from inadequate facilities at the border crossings and in some of the larger metropolitan areas. The inadequacies mentioned relate to the volume, location and efficiency of operation. There are already well developed proposals for constructing large intermodal freight interchanges to serve Mexico City and it is inevitable that similar terminals will soon be provided to serve other cities. 5.28 To fully realize their potential and to make a significant contribution to the movement of international freight, the movement of bonded freight by road and rail to and from these centers -48 - will have to be permitted. This will require the cooperation of the Customs authorities and the development and application of EDI. F. Distribution for National Markets 5.29 There is a risk that the focus on improvement to international transport links could be at the expense of action needed to improve the purely internal transport system. Results of the user survey indicated concern about internal transport inefficiencies, particularly the losses through theft, damage and product deterioration resulting from a lack of adequate terminal facilities. The survey results although conclusive in these respects, did not provide enough information on which to base a strategy for improvement in domestic transport systems. 5.30 The studies of urban transport being undertaken in the context of the on-going Medium- Size Cities Urban Transport Project are already providing information on the impact of production and distribution facilities located close to city centers, and of the desirability of relocating them closer to the circumferential distributor roads nearer the limits of urban areas. Other studies of freight distribution in the metropolitan region of Mexico City have led to proposals for the development of new freight terminals and distribution centers for perishable products well outside of the present built up area. These centers would be multi-functional and multi-modal and serve as interchange points between long distance transport and shorter distance final distribution within the metropolitan region. 5.31 Proposals for the development of new out of town terminals should come from private interests, but to encourage them to proceed with the lengthy and expensive task of obtaining permissions, a government policy initiative is needed. Given that there are many environmental and traffic benefits of such terminals, some financial participation by federal and state governments should be encouraged, perhaps through the development of road and rail accesses and simplifying the procedures for obtaining the necessary authorizations, and conditional on equivalent private participation. In the longer term, the problem of efficient freight distribution cannot be resolved independently of revision of the whole logistic systems for primary, intermediate and final products. The IMT is ideally placed to review these systems and to recommend those changes needed to reduce the distribution costs of national freight. G. Institutional Responsibilities 5.32 The restructuring of the transport sector and changed role of the federal government in planning, regulating, providing services and financing infrastructure will require a new institutional order to match the new responsibilities. Until now there has been little significant change to the specification and allocation of institutional responsibilities within the federal government, other than those such as SHCP assuming responsibility for Puertos Mexicanos to accelerate the concessioning of port activities. 5.33 The SC[ will continue to be the principal agency for management of the sector, but it requires restructuring to fulfill its new role as manager rather than operator of the transport system. It should retain responsibility for management of the parastatal transport agencies, for the regulation of concessionaires and private sector transport operators and to a lesser extent for the - 48 - will have to be permitted. This will require the cooperation of the Customs authorities and the development and application of EDI. F. Distribution for National Markets 5.29 There is a risk that the focus on improvement to international transport links could be at the expense of action needed to improve the purely internal transport system. Results of the user survey indicated concern about internal transport inefficiencies, particularly the losses through theft, damage and product deterioration resulting from a lack of adequate terminal facilities. The survey results although conclusive in these respects, did not provide enough information on which to base a strategy for improvement in domestic transport systems. 5.30 The studies of urban transport being undertaken in the context of the on-going Medium- Size Cities Urban Transport Project are already providing information on the impact of production and distribution facilities located close to city centers, and of the desirability of relocating them closer to the circumferential distributor roads nearer the limits of urban areas. Other studies of freight distribution in the metropolitan region of Mexico City have led to proposals for the development of new freight terminals and distribution centers for perishable products well outside of the present built up area. These centers would be multi-functional and multi-modal and serve as interchange points between long distance transport and shorter distance final distribution within the metropolitan region. 5.31 Proposals for the development of new out of town terminals should come from private interests, but to encourage them to proceed with the lengthy and expensive task of obtaining permissions, a government policy initiative is needed. Given that there are many environmental and traffic benefits of such terminals, some financial participation by federal and state governments should be encouraged, perhaps through the development of road and rail accesses and simplifying the procedures for obtaining the necessary authorizations, and conditional on equivalent private participation. In the longer term, the problem of efficient freight distribution cannot be resolved independently of revision of the whole logistic systems for primary, intermediate and final products. The IMT is ideally placed to review these systems and to recommend those changes needed to reduce the distribution costs of national freight. G. Institutional Responsibilities 5.32 The restructuring of the transport sector and changed role of the federal government in planning, regulating, providing services and financing infrastructure will require a new institutional order to match the new responsibilities. Until now there has been little significant change to the specification and allocation of institutional responsibilities within the federal government, other than those such as SHCP assuming responsibility for Puertos Mexicanos to accelerate the concessioning of port activities. 5.33 The SCT will continue to be the principal agency for management of the sector, but it requires restructuring to fulfill its new role as manager rather than operator of the transport system. It should retain responsibility for management of,the parastatal transport agencies, for the regulation of concessionaires and private sector transport operators and to a lesser extent for the - 49 - road network. The staffing of SCT will be very different from that of a few years ago, with a relatively small number of highly experienced managers rather than a large number of administrators. 5.34 The transfer of responsibility of Puertos Mexicanos to SHCP is a short term measure to expedite the process of restructuring and privatization. Both FNM and ASA should continue to be responsible to SCT. However, the relationship between all three agencies and SCT should be much more flexible and with much more devolved power to the agencies. The role of SC[ should be limited to review and approval of their rolling long term plans and to an annual audit of how their achievement corresponds to their plans. The plans should include financial and technical objectives, much like the Corporate Plan of a private company. Management of the agencies should be divided between a politically appointed President and technical Director General. The latter should work on a fixed contract basis, with renewal dependent on a satisfactory annual audit. 5.35 So far as is possible, management of the trunk highway network should proceed on similar principles. It is expected that the review of the management of the highway network will result in a recommendation to establish a highway agency to manage at least the trunk road network, and funded principally from new user charges but with some federal participation. The ageicy would be answerable to SCr for its overall management of the road network. This could be achieved by approval by SCT of its five year rolling plan and for an annual review of its annual performance against its planned objectives. 5.36 Management of the remainder of the road network should be devolved as far as possible to the states, with SCY's residual responsibility being to ensure that its own funds were being used as intended. It would be useful if SCT could enter into periodic contracts with the states, which would define the objectives for road management in the state, priorities for development and provide agreed financial contribution for approved projects. 5.37 The creation of a proposed Infrastructure Financing Facility, for all public sector concessions and not just limited to roads, would go far in creating common conditions and criteria for all infrastructure concessions. Under the current proposal, its main function would be to provide conditional guarantees of post construction refinance, predicated on successful completion of civil works at an agreed cost, satisfactory reassessment of financial projections and the existence of satisfactory operating contracts. The Facility would be managed by a reputable private international financial institution, and be capitalized through the contributions of first risk funds from its managers and equity from bilateral and multilateral financial institutions and other investors through public offerings, and subordinate debt of one or more national development banks, possibly funded by the Bank, and finally capital callable by the government. I. Environmental Impacts of Transport Investment and Operations 5.38 The stricter control of environmental standards is now well advanced but it could not seriously be claimed that Mexico is yet nearing the end of transition in this respect. Vehicle emissions in urban areas are by far the greatest source of environmental impact of transport investment and operations. Although Mexican standards for the design of new small vehicles are amongst the most stringent in the world in respect to emission requirements, the standards for - 50 - heavy vehicles are still being developed and the standards for control of emissions from vehicles in use are still variable from one state to another. 5.39 The policy of the federal government is to implement the revised standards for new heavy vehicles within the next two years and to encourage municipalities to use common standards for control of vehicle emissions. Design standards for emissions will need to be revised and updated periodically to reduce the impact of emissions on air quality, within a program of air quality management which takes account of the cost effectiveness of various measures in containing and reducing harmful emissions. 5.40 In municipalities in the arid north of the country, dust raised from vehicles operating in unpaved roads is a significant source of air pollution. Within the context of the Border Environmental Project, the federal government has proposed an expenditure of more than US$100 million for the paving of roads in an effort to improve air quality. 5.41 There is an acute shortage of trained technical staff to operate and maintain air quality measuring equipment. Apparatus provided under various aid projects has remained unused for long periods of time through lack of staff to operate them, or worse, through lack of budget allocations to finance their operation. Offers of equipment for air quality measuring and technical assistance from US border cities and states to their Mexican counterparts have not been taken up through lack of staff to operate the equipment. Equipment donors should be encouraged to include training along with the equipment, and multilateral agencies making loans for air quality measuring and control equipment should ensure that adequate operating budgets are made for their operation. 5.42 As public opinion has become more sensitive to environmental issues, SEDESOL as the normative agency for environmental control has started to apply its environmental standards more strictly and has already had an impact on the conduct of industrial activities in transport, particularly railways and ports. FNM has started on a large project to reduce the consequences of many years of environmental neglect in its workshops and has recently created a division specifically to take care of environmental matters. It is expected that this division will work closely with SEDESOL in ensuring that national environmental standards are fully observed in the future private operation of railway workshops. Responsibility for environmental issues within the road transport sector is too diffuse to be effective, and the Highways Directorate of SCT still has a tendency to consider the application of environmental controls of vehicle operation to be a policy to restrict transport activity and therefore contrary to its mandate. 5.43 Other than in Mexico City, with its scheme which limits the days of circulation of private vehicles according to their registration number, no city has yet reached the stage where consideration of limiting transport activities to reduce their environmental impact has become a serious consideration. It is still more a research function of the Universities to project the long term implications of increased dependence on private cars for urban transport, but funding from the Federal government could help ensure that such research is undertaken. The uncontrolled growth of Mexico City in the recent past and the projected rapid growth of other urban areas is evidence of the need for a strategy of urban development to be prepared and implemented. - 51 - I. Government and Bank Sector Strategies Government Strategy 5.44 In parallel with the preparation of this Sector Review, the SCI prepared its own review of the transport sector and its outline sector strategy for the next administration. The two reviews have been undertaken in close collaboration, and although highly compatible, remain the independent products of SCT and the Bank. The SCT's review of the sector is contained in the five volume Estudio para el Desarrollo de la Estrat6gia del Sector Transporte, (SCT, October, 1993), which provides a comprehensive review of the developments of the sector under the current administration and an assessment of the current state of infrastructure and services in the sector as a whole and in each of the sub-sectors (Roads, Railway, Ports and Aviation). The conclusions from the analysis of this diagnostic study in terms of future transport strategy are included in the Estrat9gia del Sector Transporte, (SCT, March 1994), reproduced the Annex A. 5.45 This strategy is based on sub-sector strategies and follows the same general policies as those outlined in the following paragraphs as the Bank's strategy. In respect of road infrastructure, the strategy proposes establishing new mechanisms for financing maintenance of the federal road network, consolidating and extending the program of toll roads and the construction of a number of transverse East-West roads to complete the federal road network. A new regulatory institution within SCT is proposed for the administration and supervision of the toll road concessions and another for strengthening the road transport industry in face expected competition from US operators. Also in relation to the NAFTA, it is proposed to introduce a training program for road transport operators so that they better understand how the US road transport industry functions. 5.46 The proposed rail transport strategy is for a continuation of the present policies, with emphasis on completion of the program of concessioning and contracting activities not restricted to FNM by the Constitution, and modernizing terminals, marshalling yards and track infrastructure. It is proposed to continue with passenger services, but to increase the freedom of FNM to establish its own fares. The proposed port strategy is also a continuation of the current concessioning program, with a requirement for a study of the alternative courses of action for those ports and terminals which are not financially viable. It is proposed to establish a national Port Administration to monitor and supervise the concessionaires. The same basic strategy is proposed for airports, but with a suggested joint consideration with the Bank of how to finance the operation of non-viable airports which are considered to have social and economic development benefits. Throughout the sub-sector strategies there is an emphasis on the development of intermodal transport, with an encouragement of EDI, intermodal terminals and intermodal operations. The strategy includes various proposals for reducing the impact of transport operations on the environment. Bank Strategy 5.47 The Bank's strategy is aimed at helping to establish a stable and sustainable context for the continued expansion of the transport sector as an essential component of economic growth. This can best be achieved by completing the process of transition to a market driven sector, financed by the private sector where this will bring additional resources and the more efficient utilization - 52 - of resources already dedicated to the sector. To ensure that the private sector operates to achieve these objectives, a more appropriate institutional and regulatory framework needs to be established. Bank strategy is to support the national sector strategy as outlined in the Estrat9gia del Sector Transporte, but focuses on a few specific issues where the Bank has a comparative advantage, where its experience is complementary to that of other financing sources and where it can make an impact on sector policy. These issues are among those indicated in the previous Section as being those where a significant redirection of national policy is now desirable. The strategy aims: (i) to support, through technical assistance, the institutional and regulatory changes required in the sector; (ii) to support the preparation and use of an Infrastructure Financing Facility; (iii) to support improvement of that part of the federal and state road network that has an economic justification but where new construction would not be financially viable if it depended on toll revenues; (iv) to continue the improvement of urban transport; (v) to encourage intermodal transport operations and improvements to the local distribution of national freight; improvement to the infrastructure linkages between principal ports and the national transport networks, and; (v) to accelerate the reduction of negative transport impacts on the environment. While some of the policy issues would be approached through new projects, others would be dealt with through the technical assistance components of on-going projects. 5.48 There has been a reorientation of Bank transport sector lending in the last six years. Projects implemented at the beginning of the period were still aimed principally at resolving investment problems, whereas more recent projects have had a much higher policy content. This not only reflects a change in the needs of the sector but also a more willing acceptance by the federal government of Bank activity in policy matters. Six years ago, most projects were aimed at increasing the stock and quality of transport infrastructure, a role now more appropriate for the private sector. Following on from the innovative Road Transport and Communications Deregulation Project (Loan 3207-ME), the three latest sector projects, the Medium-Size Cities Urban Transport Project (Loan 3559-ME), the Highway Rehabilitation and Traffic Safety Project (Loan 3628-ME), a Railway Restructuring Project and an Urban Transport Development Project, now in an advanced stage of preparation, are all aimed at supporting important policy initiatives by the government more than satisfying investment needs. This trend would be continued by the proposed Strategy. 5.49 The transport sector lending program for Mexico now has about US$600 million in undisbursed loans. The recently effective Medium-Size Cities Urban Transport Project together with the transport component of the Border Environmental Project, the proposed Railway Restructuring Project and the Urban Transport Development Project, would bring the total value of current loans to more than US$1.5 billion and of loans made or substantially prepared during the current administration to over US$1.2 billion - substantial amounts by any standard. These projects will by themselves not go far in meeting the investment needs of the transport sector, estimated at more than US$16 billion over the next five years. 5.50 Implementation of the proposed strategy would imply a reduction in the rate of lending compared with that of the last six years, in line with the Bank's regional strategy of concentrating lending in the social sectors. It would however go some way to implementing the proposed infrastructure initiative, particularly through support of the proposed Infrastructure Financing Facility. - 53 - Table 1.1 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR MACRO ECONOMIC INDICATORS Indicator Units 1986 1987 1988 1989 1990 1991 1992 GDP at constant 1980 prices $Mex b 4,736 4,824 4,887 5,047 5,272 5,464 5,607 GDP growth -38% 1.9% 1.3% 33% 45% 36% 2 6% Transport as % of GDP % 7 2% 7 1% 76% 7.5% 8.3% 84% 98% Gross Fixed Capital Formation (GFCF) US$m 25,197 25,880 33,082 37,465 45,413 55,663 70,968 Public % of GFCF % 336% 282% 262% 265% 262% 235% 192% Government current account balance % of GDP -5 7% -6 1% -9 0% -4 9% 0 8% 0 6% 0 5% Long term external debt USSb 909 98 5 86 5 80 1 83 3 86 7 82 9 Public sector debt US$b 75 8 84 3 80 6 76 1 77 5 79 0 72 2 Exports US$m 26,339 32,975 36,712 42,397 48,673 51,401 55,299 Imports US$m 21,805 23,894 34,143 42,426 51,535 60,508 73,617 Trade balance US$m 4.534 9,081 2,569 -29 -2,862 -9,107 -18,318 Note Public sector debt includes private guaranteed long term debt Source International Finance Statistics, July 1993 Mexico CEM Fostenng Private Sector Development in the 1990's (Report 11823-ME) - 54 - Table 1.2 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR NET TRANSFERS FROM TRANSPORT AGENCIES US$ million Agency 1986 1987 1988 1989 1990 1991 1992 Railways FNM -691.0 -416.1 -416.1 -428.1 -442.3 -644.8 -723.2 Ports PM -16.1 -24.2 -32.3 -63.2 -108.4 -200.4 -226.9 Airports ASA 9.7 12.9 15.8 121.9 175.2 142.6 94.5 Highways CAPUFE 322.6 483.9 645.2 918.1 43.2 467.1 361.9 Transport Sub total -374.8 56.5 212.6 548.7 -332.3 -235.6 -493.7 Notes: i. Positive values indicate transfers from agency to government. ii. Negative values indicate transfers from government to agency. through inclusion of non-operating costs in this Table. ii. Transfers of fuel tax revenue are not shown in this Table. Source: Estudio para el desarrollo de la estrategia del Sector Transporte, SCT, October 1993. - 55 - Table 1.3 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR RAILWAY FINANCIAL RESULTS US$ million Units 1986 1987 1988 1989 1990 1991 1992 Revenue USom 1,017 776 983 1,008 997 909 888 Working Costs US$m 889 946 1,190 1,136 1,211 1,192 1,405 Depreciation US$m 228 351 324 309 290 259 277 Operating Costs US$m 1,117 1,297 1,514 1,446 1,502 1,451 1,682 Working Profit US$m 128 -170 -206 -128 -214 -283 -518 Operating Profit US$m -100 -521 -531 -438 -505 -542 -794 Working Cost/Revenue Ratio 0.87 1.22 1.21 1.13 1.21 1.31 1.58 Operating Cost/Revenue Ratio 1.10 1.67 1.54 1.43 1.51 1.60 1.89 Freight traffic billion ton-km 54.39 55.48 57.28 53.88 50.95 46.39 48.77 Unit revenue USc/ton-km 18.70 13.99 17.17 18.71 19.57 19.60 18.20 Working Cost/TU USc/ton-km 16.34 17.05 20.77 21 09 23.78 25.69 28.81 Operating Cost/TU USc/ton-km 20.54 23.37 26.43 26.84 29.47 31.28 34.48 Working Profit(Loss)/TU USc/ton-km 2.36 -3.06 -3.60 -2.38 -4.21 -6.09 -10.61 Operating Profit(Loss)/TU USc/ton-km -1.84 -9.38 -9.26 -8.13 -9.90 -11.68 -16.28 Source. Mission estimates based on FNM dates and travel reports. - 56 - Table 1.4 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR HIGHWAY MAINTENANCE COSTS AND USER CHARGE REVENUE, 1992 US$ million Light Heavy vehicles Vehicles Total Highway maintenance costs Actual 39 315 354 Recommended 48 378 426 Desirable 104 901 1,006 Road user charge revenue Fuel tax 1,169 0 1,169 Vehicle licences 1,187 12 1,199 CAPUFE tolls 132 59 191 Total 2,489 70 2,559 Revenue less cost Actual 2,450 -244 2,205 Recommended 2,441 -308 2,133 Desirable 2,384 -831 1,553 Notes: i. All data applies only to trunk network of 45,965 km. ii. Actual costs are for 1992. Own allocation between vehicle types. iii. Recommended costs are those indicated in SAR of Loan 3628-ME. iv. Desirable costs are those proposed by consultants to SCT. v. Fuel tax user charge defined as pump price less border price and distribution cost. In February 1994 this was zero for diesel. Source: Highway Rehabilitation and Traffic Safety Project, SAR Report No. 11720-ME. - 57 - Table 1.5 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR PORTS FINANCIAL RESULTS US$ million Units 1989 1990 1991 1992 Revenue US$million 36.62 82.57 85.51 86.04 Working Costs US$million 59.22 113.99 167.47 155.02 Investment US$million 40.17 77.00 118.48 93.22 Working Profit US$million -22.6 -31.4 -82.0 -69.0 Operating Profit US$million -62.8 -108.4 -200.4 -162.2 Working Cost/Revenue Ratio 1.62 1.38 1.96 1.80 Operating Cost/Revenue Ratio 2.71 2.31 3.34 2.89 Freight traffic tons million 27.50 28.60 27.40 29.80 Unit revenue US$/ton 1.33 2.89 3.12 2.89 Working Cost/TU US$/ton 2.15 3.99 6.11 5.20 Operating CostfTU US$/ton 3.61 6.68 10.44 8.33 Working Profit(Loss)fTU US$/ton -0.82 -1.10 -2.99 -2.31 Operating Profit(Loss)fTU US$/ton -2.28 -3.79 -7.32 -5.44 Source: Estudio para el desarrollo del Sector Transporte, SCT, October 1993. 58 Table 1.6 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR MEXICO TRANSPORT SECTOR INVESTMENT, 1986 - 1992 (US$ million equivalent) Public investment 1986 1987 1988 1989 1990 1991 1992 Road 525.3 367.7 445.7 391.3 460.0 641.0 516.7 Rail 218.7 257.9 266.3 226.6 224.7 263.0 284.6 Air 177.9 129.2 53.6 31.1 17.0 25 6 47.9 Ports 42.3 60.1 27.6 21.3 94.8 102.2 66.6 Sub total 964.2 815.0 793.2 670.4 796.5 1031.8 915.9 Private investment 1986 1987 1988 1989 1990 1991 1992 Road 350.0 1050.0 1400.0 1400.0 Rail Air 0.8 9.7 21.3 66.7 Ports Sub total 0.0 0.0 0.0 350.8 1059.7 1421.3 1466.7 Total investment 1986 1987 1988 1989 1990 1991 1992 Road 525.3 367.7 445.7 741.3 1510.0 2041.0 1916.7 Rail 218.7 257.9 266.3 226.6 224.7 263.0 284.6 Air 177.9 129.2 53.6 31.9 26.7 46.9 114.6 Ports 42.3 60.1 27.6 21.3 94.8 102.2 66.6 Sub total 964.2 815.0 793.2 1021.1 1856.2 2453.1 2382.6 % private investment 1986 1987 1988 1989 1990 1991 1992 Road 47.2% 69.5% 68.6% 73.0% Rail Air 2.4% 36.5% 45.5% 58.2% Ports Total 34.3% 57.1% 57.9% 61 6% % distribution by mode 1986 1987 1988 1989 1990 1991 1992 Road 54.5% 45.1% 56.Z% 72.6% 81.3% 83.2% 80.4% Rail 22.7% 31.6% 33.6% 22.2% 12.1% 10.7% 11.9% Air 18.5% 15.9% 6.8% 3.1% 1.4% 1.9% 4.8% Ports 4.4% 7.4% 3.5% 2.1% 5.1% 4.2% 2.8% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Sources: Evolucion del Gasto en Infraetructura Carretera de Ia SCT, 1983-1992. Ferrocarriles Nacionales de Mexico, 1993. Informes de Labores, SCT, January 1992. Own estimate of private sector investment distribution by year. - 59 - Table 1.7 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR CLASSIFICATION OF THE NATIONAL ROAD NETWORK Road classification km % of total Federal roads 45,956 19% High priority for maintenance 14,956 6% Basic network 13,200 5% Low priority for maintenance 17,800 7% Feeder roads 61,108 25% Rural roads 99,869 41% Localroads 33,129 13% CAPUFE roads 1,625 1% Private toll roads 4,060 2% TOTAL 245,747 100% Source: Highways Rehabilitation on Traffic Safety Project, SAR, Report 1720-ME. - 60 - Table 1.8 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR MEXICO PUBLIC VEHICLE FLEET, 1986 - 1992 a) Registered federal vehicle fleet Vehicle type 1986 1987 1988 1989 1990 1991 1992 Bus 31,100 32,200 33,545 35,189 36,593 39,305 41,600 General truck 72,549 73,565 74,045 79,421 105,966 256,256 280,000 Specialized truck 77,951 78,772 79,358 84,589 117,017 20,669 23,100 total trucks 150,500 152,337 153,403 164,010 222,983 276,925 303,100 Total 181,600 184,537 186,948, 199,199 259,576 316,310 344,700 b) Annual growth of registered federal vehicle fleet Vehicle type 1986/87 1987/88 1988/89 1989/90 1990/91 1991/92 Bus 3.5% 4.2% 4.9% 4.0% 7.6% 5.6% General truck 1.4% 0.7% 7.3% 33.4% 141.8% 9.3% Specialized truck 1.1% 0.7% 6.6% 38.3% -82.3% 11.8% total trucks 1.2% 0.7% 6.9% 36.0% 24.2% 9.5% Sub total 1.6% 1.3%, 6.6% 30.3% 21.9%, 9.0% Source: Estudio pare el desarrollo del Sector Transporte, SCT, October 1993. * 61 - Table 1 9 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR PRIVATE TOLL ROADS COSTS, TRAFFIC AND TOLLS Road Estimated Actual Cost Estimated Actual Estimated Actual Actuall Length Cost Cost Increase Cost/km Cost/km traffic traffic Estimeted Car toll No Road Section km US$m US$m % LS$ US$ vehoday veh/day % US c /km 1 Periferico de Monterrey 110 170 6 258 6 51 6% 1 6 24 5,052 1,460 28 9% 8 6 2 Cordoba-Veracruz 98 123 7 2534 1049% 1 3 26 3,390 2,054 60 6% 145 3 Zopotlanalo-Legoo do Moreno 152 1666 2670 603% 1 1 1 8 4,400 4,532 1030% 10 3 4 Mendo-Concun 250 1403 2159 539% 06 09 1,500 1,250 833% 11 2 5 Monterrey-Nuevo Laredo 147 1150 212.6 849% 08 1 4 2,450 3,023 1234% 108 6 Lib Ponionts Tampico 15 163 360 120 1% 1 1 25 2,500 800 320% 29 8 7 Punta Diamente 20 553 654 181% 2 8 33 4,500 241 8 Cadereyta-Roynosa 175 2274 328 8 446% 1.3 1 9 3,115 2 3 9 Touana-Tecate 42 383 95.1 1482% 0.9 23 4,326 2,544 588% 93 10 Tecate-Mexicali 140 2403 319 7 330% 1 7 2 3 5,500 16 2 11 S M Texmel-TIaxcela-El Molin 22 12 2 22 7 85 7% 0 6 1 0 4,500 3,700 82 2% 11 8 12 La Tinale-Cosoleacaqua 250 6333 819 1 293% 25 33 5,200 12.8 13 Libramitnto NE Queretero 38 71 7 110 7 544% 1 9 30 6,600 2,100 31 8% 11 3 14 Arriaga-Huottle 209 201 5 220.1 9 2% 1 0 1 1 3,000 104 15 Campeche-Champoton 56 577 89 3 549% 1 0 1 6 2,350 8 7 16 Lbram Oriento S L. Potos, 34 463 735 586% 1 4 2.2 4,243 1,458 344% 12 6 17 Ecatepac-Parmodeso 22 290 53 1 830% 1 3 24 8,760 8,750 999% 104 18 Cons-Refo/LaVto-Marquess 20 600 123.0 1460% 25 6 1 25,000 19,100 764% 22 5 19 Armeria-Manzandilo 37 42 1 87 1 1068% 1 1 24 3,500 2,450 700% 13 2 20 Chamape-Locheria 27 1637 278 3 70 1% 6 1 10 3 10,000 285 21 Gomez Palacio-Cuencame 103 927 160 2 729% 09 1.6 37,500 1,525 41% 136 22 Cuencome-Yorbanis 32 31 5 61.1 937% 1 0 1 9 1,750 257 23 ourango-Yorbania 105 191 2 201 9 56% 1.8 1 9 1,750 5 5 24 Plan do Barrences 17 484 160 2 231 2% 2.9 9 6 5,625 3,633 646% 355 25 Leon-Leg Moreno-Agueocal 112 1600 305 8 91 1% 1 4 2 7 4,838 14.1 26 Esperanze-Mandoza 55 2260 250 2 107% 4 1 45 5,470 165 27 Cuwrnevaca-Acapulco 247 493 3 1,571 8 2186% 20 64 4,578 6,616 1445% 22 3 28 Maravatio-Zapotianajo 340 1,193 3 1,1835 -0.8% 35 36 4,650 12 1 29 Mazaton-Culiacan 292 342 7 629 1 83 6% 1 2 2.2 3.500 9 5 Total 3166 5,3805 8,4530 57 1% 1 7 2 _ Source Mission Estimates based on SCT on SCHCP data - 62 - Table 2.1 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR CONDITION OF THE FEDERAL HIGHWAY NETWORK a) Primary highway network, by condition (km) Road Traffic Good Fair Poor Very Poor Total category level 1 <300 1,647 4,609 5,372 1,677 13,305 2 300-1,000 1,073 3,838 6,830 2,590 14,331 3 1,001-2,000 768 1,793 2,838 1,064 6,463 4 2,001-6,000 143 400 859 225 1.627 5 >6,000 0 28 8 28 64 Sub total trunk roads 3,631 10,668 15,907 5.584 35,790 Feeder roads 18,943 26,276 15,888 61,108 Rural roads 19,997 42,994 36,995 99,986 Total _ 42,572 79.938 68,790 5,584 196,884 b) Primar highay network, by condition (%) Road Traffic Good Fair Poor Very Poor Total category level 1 <300 12% 35% 40% 13% 100% 2 300-1,000 7% 27% 48% 18% 100% 3 1,001-2,000 12% 28% 44% 16% 100% 4 2.001-6,000 9% 25% 53% 14% 100% 5 >6,000 0% 44% 13% 44% 100% Sub total trunk roads 10% 30% 44% 16% 100% Feeder roads 31% 43% 26% 0% 100% Rural roads 20% 43% 16% 0% 100% Total _ 22% 41% 35% 3% 100% Source: Highway and Rehabilitation and Traffic Safety Project, SAR, Report 11720-ME. - 63- Table 2.2 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR HIGHWAY PUBLIC SECTOR INVESTMENT, 1986 - 1992 a) Federal Highway expenditure (US$ million) Activity 1986 1987 1988 1989 1990 1991 1992 New construction 77 46 36 37 35 52 60 Modernization 164 123 144 132 241 326 260 Maintenance 124 64 118 107 66 93 34 Sub total 365 0 233 3 298.3 276.3 342 0 471.3 353 7 b) Feeder network expenditure (US$ million) Activity 1986 1987 1988 1989 1990 1991 1992 New Construction 41 37 35 23 61: 55 114 Maintenance 797 600 507 9 3 6.31 0.3 2.7 Sub total 120.7 96.7 85.7 32 3 67.71 55.3 117.0 c) Rural network expenditure (US$ million) Activity 1986 1987 1988 1989 1990 1991 1992 New construction 27.7 18.3 31.0 48.3 30.3 85.0 330 Modernization 0.0 11.3 11 0 17.0 7.0 22.0 1.3 Maintenance 12.0 8.0 19.7 17.3 13.0 7.3 11.7 Sub total 39.7 37.7 61.7 82.7 50.3 114.3 46.0 d) Total roads expenditure (US$ million) Activrty 1986 1987 1988 1989 1990 1991 1992 New construction 146 101 102 108 127 192 207 Modernization 164 134 155 149 248 348 261 Maintenance 216 132 189 134 86 101 48 Sub total 525.3 367.7 445.7 391.3 460.0 641.0 516.7 e) Distribution of expenditure by activity (%) Activity 1986 1987 1988 1989 1990 1991 1992 New construction 27.8% 27.5% 230% 27.7% 27.5% 29.9% 40 1% Modernization 31.2% 36.5% 34.7% 38.2% 53.8% 54.3% 50.6% Maintenance 41.1% 36.0% 42.3% 34.2% 18.6% 15.8% 9.4% Sub total 100.0% 1000% 100.0% 100.0% 100.0% 100.0% 100.0% f) Distribution of expenditure by type of road(%) Type of road 1986 1987 1988 1989 1990 1991 1992 Federal 69.5% 63.5% 66.9% 70.6% 74.3% 73.5% 68.5% Feeder 23.0% 26.3% 19.2% 8.3% 14.7% 8.6% 22.6% Rural 7.6% 10.2% 13.8% 21 1% 10.9% 17.8% 89% Sub total 100.0% 100.0% 100.0% 100.0% 100 0% 100.0% 100.0% Source Estudio pars el desarrollo de Ia estrategia del sector transporte SCT, Octubre de 1992. - 64 - Table 2.3 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR PORT TRAFFIC million tons a) Growth of traffic at principal six ports 1988 1989 1990 1991 1992 Manzanillo 1.6 2.1 3.1 3.0 4.0 Lazaro Cardenas 1.8 3.5 4.3 4.7 5.1 Altimira/Tampico 6.0 5.9 6.0 4.7 4.7 Veracruz 4.2 4.0 4.2 4.1 5.0 Guayamas 1.2 1.6 1.6 2.1 1.9 Coatzacoalcos 1.8 2.2 2.7 2.7 2.7 Sub total 16.5 19.4 21.9 21.3 23.4 Total all ports 18.2 23.4 28.6 27.4 29.8 % in four principal ports 90.9% 82.8% 76.7% 77.6% 78.4% b) Distribution of three principal products between ports, 1992 Bulk Bulk Port Containers solid liquid Manzanillo 0.5 1.2 0.0 Lazaro Cardenas 0.4 0.0 0.3 AltimirafTampico 1.0 0.8 0.5 Veracruz -1.8 1.5 0.6 Guayamas 0.0 0.7 0.4 Coatzacoalcos 0.0 0.4 1.7 Subtotal 3.7 4.6 3.5 Total all ports 4.3 6.1 3.8 % principal ports 86.0% 75.4% 92.1% Source: Estudio para el desarrollo de la estrategia del Sector Transporte, SCT, October 1993. - 65 - Table 2.4 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR AIRPORT AND AIR TRANSPORT TRAFFIC Activity Units 1989 1990 1991 1992 Commercial Flights Domestic thousand 392 452 556 664 International thousand 115 142 149 168 Total thousand 507 594 705 832 Annual growth % 17.2% 18.7% 18.0% Passengers Domestic thousand 10,681 12,163 13,718 14,749 International thousand 8,350 9,011 9,574 9,918 Total thousand 19,031 21,174 23,292 24,667 Annual growth % 11.3% 10.0% 5.9% Passenger km Domestic million 9,043 9,830 10,942 11,661 International million 20,458 22,402 23,342 26,319 Total million 29,501 32,232 34,284 37,980 Annual growth % 9.3% 6.4% 10.8% Passengers per flight Domestic 27 27 25 22 International 73 63 64 59 Average 38 36 33 30 Annual growth % -6.0% -7.3% -10.3% Average trip length Domestic km 847 808 798 791 International km 2,450 2,486 2,438 2,654 Average km 2,450 2,486 2,438 2,654 Annual growth % 1.6% -1.9% 8.8% Source: Estudio para el desarrollo de Ia estrategia del Sector Transporte, SCT, October 1993. - 66- Table 3.1 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR DEMAND FOR DOMESTIC FREIGHT TRANSPORT, 1980 THROUGH 1992 a) Total demand in millions of tons Mode 1980 1986 1989 1990 1991 1992 Road 253.0 290.0 309.0 315.0 328.0 340.0 Rail 60.6 57.2 53.9 51.0 46.4 48.7 Cabotage 29.3 23.2 29.0 30.4 30.5 31.5 Air 0.2 0.1 0.1 0.1 0.2 0.2 Total 343.1 370.51 392.0 396.5 405.1 420.4 1980/86 1 1989/86 1 1990/89 1 1991/90 1 1992/91 % annual growth 1.3% 1.9% 1.1% 2.2% 3.8% b) Percentage modal shares Mode 1980 1986 1989 1990 1991 1992 Road 73.7% 78.3% 78.8% 79.4% 81.0% 80.9% Rail 17.7% 15.4% 13.8% 12.9% 11.5% 11.6% Cabotage 8.5% 6.3% 7.4% 7.7% 7.5% 7.5% Air 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% Total 100.0%, 100.0% 100.0% 100.0% 100.0% 100.0% Source: Estudio pare el desarrollo de la estrategia del Sector Transporte, SCT, October 1993. - 67 - Table 3.2 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR COMPARISON OF TRUCK DIMENSIONS AND WEIGHTS Vehicle width and height (mts) Mexico Canada United States Europe Width 2.60 2.60 2.60 2.50 Height 4.15 4.15 4.10 4.00 Vehicle length (mts) Mexico Canada United States Europe Semi-trailer 14.7 14.6 14.6 12.0 Full-trailer 14.7 Provincial 8.7 12.0 Rigid truck 14.0 Provincial State (up to 18.3) 12.0 Tractor-semi-trailer 19.5 23.0 State (up to 118.3) 16.5 Truck-full trailer 28.0 - State (up to 15.2) 18.4 Tractor-semi-trailer- semi-trailer 28.5 23.0 State(up to 19.8) - Axle load and gross vehicle weight (tons) Mexico Canada United States Europe Single axle 10 9.1 9.1 10 Tandem axle 18 17 15.4 18 Triple axle 22.5 21 19.1 24 Gross vehicle weight 5-axle semi trailer 42.5 39.5 36.3 40 7-axle twin trailer 62.5 53.5 36.3 - Source: American Trucking Association Estudio para el desarrollo de la estrategia del Sector Transporte, SCT, October 1993. - 68 - Table 4.1 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR PRIVATE TOLL ROADS: EXPECTED, ACTUAL AND POSSIBLE RATES OF RETURN Expected Actual Potential IRR %with IRR IRR extension extended No. Road Section % % years concession 3 Zapotlanejo-Lagos de Moreno 17% 10% 20.0 19% 5 Monterrey-Nuevo Laredo 80% -4% 20.0 14% 6 Lib. Poniente Tampico 27% -2% 30.0 11% 10 Tecate-Mexicali 21% -7% 30.0 2% 11 S.M. Texmel-Tiaxcala-El Molin 29% 22% n.a. n.a. 16 Lib.Oriente S.L. Potosi 17% -13% 30.0 3% 17 Ecatepec-Piramides 16% -3% 30.0 9% 18 Cons-Refo/LaVta-Marquesa 76% 20% n.a. n.a. 19 Armeria-Manzanillo 15% -6% 30.0 4% 21 Gomez Palacio-Cuencame 37% -5% 30.0 6% 24 Plan de Barrancas 31% -6% 30.0 5% 27 Cuernavaca-Acapulco 18% 8% 20.0 13% Source: Mission Estimates based on SCT and SHCP data. - 69 - Table 4.2 MEXICO THE END OF TRANSITION VARIATION OF FINANCE COST WITH LOAN PERIOD AND INTEREST RATE Consruction cost/km 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Equity 150,000 150,000 150,000 1 50,000 150,000 Debt 850,000 850,000 850,000 850,000 850,000 Loan Period (Years) 10 10 15 15 20 Interest Rate (%) 18.0% 13.0% 13.0% 18.0% 13.0% Annual repayment 189,137 156,646 131,531 166,942 121,001 % reduction in repayment 0.0% 17.2% 30.5% 11.7% 36.0% - 70 - Table 6.1 MEXICO END OF TRANSITION A REVIEW OF THE TRANSPORT SECTOR TRANSPORT SECTOR LOANS, 1984 THROUGH 1994 Project title Loan Year Loan Amount Number US$m Highway Sector II 2428 ME 1984 200 Industrial Ports 2450 ME 1984 76 Fifth Railway Project 2575 ME 1985 300 Port Reconstruction 2946 ME 1988 50 Sub total 626 Road Transport and Telecom. Deregulation 3207 ME 1990 380 Medium-Size Cities Urban Transport 3559 ME 1993 200 Highway Rehabilitation and Safety 3628 ME 1993 400 Railway Restructuring Project n.a. 1994 100 Urban Transport Development Project n.a. 1994 250 Sub-total 1,330 Total 1,956 ANNEX A - 71 -== == ESTRATEGIA DEL SECTOR TRANSPORTE MARCO DE REFERENCIA Y PROYECTOS ESTRATEGICOS INDICE 1.- MARCO DE REFERENCIA 2.- RESUMEN DE ESTRATEGIAS 2.1 Transporte Carretero 2.2 Transporte Ferroviario 2.3 Transporte Marítimo-Portuario 2.4 Transporte Aéreo 3.- PROYECTOS ESTRATEGICOS 3.1 Carreteras 3.2 Ferrocarriles 3.3 Marítimo-Portuario 3.4 Aéreo 3.5 Comunicaciones - 72 - 1.- MARCO DE REFERENCIA A partir de 1988 la economía mexicana y, por supuesto, el sector transporte, ha experimentado importantes cambios. De una economía cerrada que se caracterizaba por una regulación extrema, prácticamente en todas las actividades, además de una extensa intervención gubernamental, se ha transitado hacia una economía que empieza a tener como rasgo distintivo una mayor apertura y con ella una mayor competencia y más inversión y participación privada. La actual administración aceleró los cambios que empezaron a darse en la anterior, con el propósito esencial de estimular un más rápido crecimiento mediante la apertura de la economía y la eliminación del excesivo proteccionismo hasta entonces prevaleciente. Se han eliminado barreras comerciales y-reducido sustancialmente la participación estatal en la economía, coloborando con ello a la reducción del déficit, la inflación y las tasas de interés. Las medidas adoptadas han tenido una importante repercusión en las finanzas públicas, en la competitividad internacional y en el comportamiento de la inflación y de las tasas de interés; sin embargo, el crecimiento económico al que se aspiraba no se ha dado en la medida de las expectativas. Las finanzas públicas han mejorado gracias a la reducción de la componente externa de la deuda pública que en 1986 representaba el 61.9 del Producto Nacional Bruto, a 20.3% en 1993. La cuenta corriente del gobierno se redujo de un 16% del Producto de 1986, hasta mostrar un excedente de 0.5% en 1992, esperándose resultados similares para 1993. Las expectativas que en materia de crecimiento económico se tenían al principio de la administración no se han cumplido, en parte, del lento crecimiento observado en la economía mundial. De un crecimiento menor al 2% en 1986-1987, se pasó a 2.7% en 1991-1992, pasando por un repunte de 4.5% en 1990. El comportamiento de la economía en 1993 puede describirse o caracterizarse atendiendo a los dátos que proporciona el Instituto Nacional de Estadística, Geografía e Informática (INEGI) y tratar de encontrar explicación a las variables económicas. Como resultado de una política monetaria restrictiva, de la apertura comercial y del proceso 'en marcha para reestructurar el aparato productivo, se observa que el producto interno bruto de la industria manufacturera sufrió una baja de 1.5% durante los nueve primeros meses de 1993, un retroceso muy importante en lo que va del año para este sector y la caída acumulada más drástica en esta industria en los últimos cinco años. - 73 - Los siniestros padecidos en algunas zonas del país, así como la recomposición productiva en la que está etnpeñado el sector agropecuario, silvicultura y pesca, lo condujo a un abatimiento de 1.2% en el PIB sectorial en el mismo período enero y septiembre de este año, con lo cual puede preverse que por segundo año consecutivo este rubro de la producción reportará una baja, al concluir 1993. Como respuesta inmediata a la severa contracción de la demanda interna, el sector de comercio, restaurantes y hoteles registra una evolución desfavorable durante el tercer trimestre, por lo que la baja de 0.8% registrada en el segundo trimestre y el aumento de sólo 2.1 entre enero y marzo, podría traducirse en un decrecimiento de este sector, cercano a 1% al término de 1993. Se estima que los resultados negativos de esos tres sectores, colaboraron a que el PIB nacional sufriera una baja cercana al 1% entre julio y septiembre de 1993. En tales condiciones, si se busca que al término de 1993 el PIB muestre un incremento positivo cercano al 1%, la actividad económica debiera crecer alrededor de 2.1% durante el período octubre-diciembre. Hasta septiembre, la producción total acumuló un crecimiento de 0.5%, el más bajo para un período de nueve meses registrado en los últimos cinco años. Con un crecimiento acumulado de 4.4% en los primeros nueve meses de 1993, la producción de electricidad, gas y agua aparece como el rubro más dinámico de la economía. La industria de la construcción muestra un incremento acumulado de 3% hasta septiembre pasado, lo cual implica que aun registrando un crecimiento positivo al concluir 1993, este sector reflejará un dinamismo inferior al observado en los últimos cinco años. Sólo en el tercer trimestre de 1992, este sector reportó un crecimiento positivo de 15.1 %. El sector servicios aumentó su producción 1.4% entre enero y septiembre de 1993, siendo los servicios financieros el rubro más dinámico dentro del sector, con un incremento superior a 4%. La minería se mantuvo sin variación entre enero y septiembre pasado, en tanto que comunicaciones, transporte y almaceniiiento reportó un crecimiento cercano al 2% en el mismo período. Dentro del sector manufacturero, la industria de la madera fue la que registró la caída más importante, 8.6% hasta el tercer trimestre, seguido por los productos textiles, vestido y cuero con una baja de 8.4%; el papel, imprenta y editorial que mostraron una baja de 3.7% y los productos metálicos, 4.2%. - 74 - Los crecimientos positivos, correspondieron a los sectores de alimentos, bebidas y tabaco que, hasta septiembre, reportaron 2.2%; el de productos minerales que muestra 2.3%; la industria metálica que refleja 4.2%; y el de otras industrias manufactureras que registró 5.1% de incremento acumulado hasta septiembre. El análisis específico del tercer trimestre de 1993 indica que la industria en México registró un desplome en su producción de algo más del triple de la caída del PIB nacional, al situarse en 3.5%, contra 1.1 del promedio del país. Once de las doce ramas productivas resintieron pronunciadas bajas en su producto bruto en el período. Los descensos más importantes fueron en madera y sus servicios, 19.5%; imprenta y editorial, 8.1%; textiles, vestido y cuero, 8.1%; y en químicos y derivados del petróleo, caucho y plástico 6.6%. En servicios los datos de INEGI indican que en el comercio, restaurantes y hoteles también se abatió, en 3 puntos, la participación porcentual. La desaceleración resulta notablemente grave para algunas ramas productivas que, desde el segundo trimestre .de 1992, la padecen, como el caso de productos metálicos, maquinaria y equipo, cuya caída ha pasado de 11.2 en el período enero-marzo del año pasado a 3.7 positiva todavía, pero después ya regisira cifras negativas, acumulando más de un año de bajas persistentes. Otros sectores, que tradicionalmente se mantenían en bandas positivas, también han sufrido impresionantes bajas en su actividad. Tal es, por ejemplo, el caso de alimentos, bebidas y tabaco, en el cual ya se observan saldos negativos de 0.2 y 2.2 % para el segundo y tercer trimestres, respectivamente. La construcción, que había logrado mantenerse en posiciones favorables, también ha experimentado la declinación de su participación. En el período abril-junio tuvo un descenso de 5%, aunque todavía mantuvo resultados positivos con 2.6%. Sin embargo, para el lapso julio-septiembre la caída llevó a la actividad a cifras negativas. El único rubro que logró sostenerse con cifras positivas fue el de electricidad, agua y gas, pero ya empezó a disminuir su participación al pasar de 5.5 a 4.4 puntos porcentuales entre el segundo y tercer trimestre de este año. En el sector textil, vestido y cuero, la baja ha persistido durante 18 meses; en ninguno de los tres trimestres se observan resultados favorables. Las bajas han sido de 6.7% en el primero; 10.4% en el segundo; y 8.1% en el tercero. - 75 - En el sector madera y sus productos, aparece una notable tendencia a la baja. En 1992, con menos de 2% y con un ligero repunte en el período enero-marzo de 1993, las cifras se disparan negativamente en el segundo y tercer trimestres con 13.8 y 19.5, respectivamente. Para el sector extractivo la situación tampoco se muestra benévola, pues sólo en el período abril-junio tuvo escasos 1.9 puntos porcentuales positivos. Por su parte, imprenta y editorial lleva 21 meses de resultados negativos y la baja más pronunciada la tuvo en el tercer trimestre de este año, al disminuir 8.1%. En 1992, la baja anualizada en el sector fue de 1.6%. En el sector primario, ya hay una ligera recuperación puesto que entre julio y septiembre pasados se observa un repunte de 3.3%. El comercio lleva un semestre con movimientos adversos. En el segundo y tercer trimestres las caídas fueron de 0.4 y 3.0%, respectivamente. Finalmente, también transporte, almacenes y comunicaciones está presentando una tendencia a la baja, aunque todavía se mantienen cifras positivas. En los tres trimestres pasados se observan 4.3 2.8 y 1.4, respectivamente. En las condiciones descritas, con una economía en la que prácticamente todos los sectores están mostrando resultados negativos y cuyas perspectivas para finales de año no son muy halagüeñas, el iransporte puede jugar un papel de primordial importancia dado su involucramiento en todas las actividades humanas. Vale la pena indicar que desde 1969-1970, un informe del Banco Mundial, preparado con la participación de la entonces Secretaría de la Presidencia y dependencias involucradas en el transporte, advertía ya que los peligros que para la economía nacional introducían los desequilibrios existentes en el sector transportes. De aquel entonces a la fecha poco se ha hecho -en proporción a lo que el sector demanda- para corregir el rumbo que toman los tráficos: mientras el autotransporte sigue captando mayores volúmenes de cortos y hasta largos recorridos, la ineficiencia de los ferrocarriles y la falta de estructura en el transporte marítimo les ha conducido y obligado a ceder sus espacios de largas distancias y grandes volúmenes. El impacto qúe esta situación provoca puede presumirse de grandes y graves consecuencias para los sectores agropecuario, industrial, comercio y, consecuentemente, para el conjunto de la sociedad, pues se ve obligada a pagar los mayores costos que sobre bienes y servicios induce el transporte. - 76 - En 1992, del total de los pasajeros y carga movilizados por el sistema nacional de transporte, el 98 y 60% respectivamente, correspondieron al autotransporte; en tanto que el 1 y 12% de las demandas, las absorbieron los ferrocarriles. El transporte marítimo participó escencialmente en carga con aproximádamente el 28% y el transporte aéreo con el 1% de los pasajeros; en estos subsectores las participaciones fueron prácticamente nulas en pasajeros para el marítimo, y en carga para el aéreo. Las cifras anteriores ponen en evidencia los graves desequilibrios que desde hace más de 20 años están presentes en el sector transporte, los cuales repercuten negativemente sobre toda la economía. Prácticamente desde la década de los 60 se ha advertido, en forma reiterada, sobre esta circunstacia y sobre la necesidad de dar solución a tales desequilibrios, sin embargo, hasta ahora, las políticas aplicadas han privilegiado al subsector carretero, en detrimento de otros subsecto-es y de la economía en conjunto, como una mala copia, por demás parcial, de lo realizado en otros países con economías distintas a la mexicana. El resultado obtenido ha sido y sigue siendo, para México, una economía fuertemente gravada por elevados costos de transporte y transferencias, que en varias épocas ha sufrido descalabros importantes por tal circunstancia. Al observar el comportamiento de la economía nacional en los últimos años resulta relevante el hecho de que los sectores que se incorporan a la crisis hasta últimas fechas son, precisamente, el de energía y el de transporte, una vez que todos los demás sectores ya pagaron largamente su cuota a la crisis. Se considera que el transporte puede inducir ahorros importantes a los demás sectores de la economía, así como al interior del propio sector, y por tanto colaborar al logro de algunas mejoras en los índices de desempeño, a condición de que se le someta a cambios estructurales de fóndo en los que juegue un papel importante la solución a relaciones intermodales no resueltas adecuadamente hasta la fecha. El propósito esencial de este trabajo será, pues, establecer una estrategia sectorial y subsectorial que permita lograr el objetivo fundamental de hacer del Sistema Nacional de Transporte unó- verdaderamente eficiente que apoye a todos los sectores de la economía y los impulse a un desarrollo sostenido. Para que tal condición se cumpla deberán eliminarse cuellos de botella; prácticas viciosas y reglamentaciones que no han permitido el sano desarrollo del sector; y también deberán resolverse los desequilibrios intersectoriales que elevan los costos de operación del sistema de transportes y que, al trasladarse a otros sectores ponen en entredicho a la economía en su conjunto. - 77 - 2.- RESUMEN DE ESTRATEGIAS 2.1 Transporte Carretero Financiamiento de la Conservación de Carreteras - Ante la limitación de recursos financieros para atender la conservación y reconstrucción, se hace necesaria la busqueda de nuevos mecanismos y fuentes de financiamiento, como puede ser el de analizar con mayor amplitud y profundidad los cargos a los usuarios, la concesión a los particulares y otros que tendrán que evaluarse. Estos nuevos mecanismos serán adicionales a los existentes, los cuales también se analizarán; así como las mezclas estratégicas entre los nuevos y los actuales mecanismos, para una optimización de los recursos disponibles. Consolidación del Programa Nacional de Autopistas - En la modernización integral de México, se considera vital y estratégico el contar con una red carretera de altas especificaciones, que haga eficiente y económico el traslado de personas y mercancías por los principales corredores de transporte. Por ello, se considera de alta prioridad el continuar con el desarrollo de este tipo de carreteras, por lo que, se requiere fortalecer el esquema financiero de concesión, en el que participen también los gobiernos federal y estatal, mediante la ejecución de estudios realistas que determinen para los nuevos tramos, y a nivel sistema de carreteras de altas especificaciones, los plazos de concesión necesarios para que el proyecto sea rentable, los niveles de tránsito realistas, el monto de las cuotas que debe ser acces.ible para los usuarios, y otros elementos que deben deifinirse claramente. Asimismo, deberá considerarse en el. análisis, los servicios de apoyo, como son estaciones de combustible, paradores, talleres mecánicos y otros similares; además de definir el número de carriles de altas especificaciones que requieren los tramos, en función de-sus volúmenes de tránsito. Conclusión de ejes transversales - La determinación de corredores de transporte a partir de la aplicación del Esquema Director del Subsector Carretero, definirá la necesidad de reforzar ejes principales longitudinales y transversales, como el Mazatlán-Durango, Saltillo, Monterrey, Matamoros. Para lo cual se "precisarán los tramos por construir y/o modernizar; ello producirá derramas económicas en las regiones - 78 - comunicadas por los ejes carreteros y proporcionará fluidez al comercio nacional e internacional. Consolidación de la desregulación del autotransporte La apertura del sector transportes será progresiva y rápida, ésto representa un reto desde el punto de vista de la competitividad tanto a nivel nacional (dentro de los mismos transportistas) como a nivel internacional, y de planeación estratégica. Por ello deberá fortalecerse el esquema de desregulación del autotransporte, como de apoyo al intercambio comercial. La apertura ha provocado, entre otros aspectos, que el mercado interno de autotransporte de carga, sea dominado en un 60%, por pequeños operadores (hombres-camión), los cuales han creado algunas distorsiones del mercado y su efecto en las tarifas; por ello, existe la necesidad de reforzar la legislación, que regule la competencia entre los operadores. Nueva estructura institucional - La necesidad de contar con una planeación integral del Subsector Carretero, que contenga una visión de conjunto, que contemple las interacciones intrasectoriales, intersectoriales, multimodales y regionales, será fundamental para los próximos años, para lo cual se requerirá fortalecer institucionalemente a la SCT en sus dependencias centrales y en los centros SCT; se tendrán que crear nuevos mecanismos de consulta intersectorial y se apoyará la descentralización de funciones operativas a los gobiernos estatales. Se deberán concentrar las funciones normativas, financieras y de control en las dependencias federales centrales, y se desconcentrarán o descentralizarán las de carácter operativo, a los gobiernos estatales y a la inciativa privada. Aunado a lo anterior, será necesario considerar la creación de una entidad financiera para todas las concesiones de infraestructura (no sólo para transporte), la que podría generar condiciones y establecer criterios para todo tipo de concesiones y proporcionar una certeza razonable respecto de la eficiente asignación de recursos entre sectores y proyectos. Sin embargo, se considera que la - creación de esa Entidad Financiera exige un análisis cuidadoso que a la luz de los.objetivos que se persiguen, y se defina la forma más conveniente para su inserción en el sistema financiero, así como también su estructura, organización, etc. - 79 - Impulso al transporte multimodal en los principales corredores - Un corredor de transporte, concebido como el conducto físico y logístico de un flujo de carga entre dos puntos origen-destino altamente generadores de movimiento puede- implicar un soporte infraestructural de gran capacidad (supercarretera, vía férrea para doble vía), así como una ágil articulación en sus extremos a través de plataformas de transferencia (ferropuertos, terminales marítimas), de recolección, consolidación y distribución. Tales plataformas deberían a su vez ser apoyadas por empresas de servicios conexos que llevan a cabo las actividades logísticas asociadas al movimiento y seguimiento de la carga puerta a puerta. En este sentido el autotransporte necesita mejorar su capacidad para participar con el gobierno para identificar, mejorar, expandir y hacer accesibles los corredores intermodales de largo itinerario. Medidas para enfrentar el TLC - La demanda de transporte aumentará a tasas significativas como resultado del TLC, y buena parte de ese crecimiento será en el transporte terrestre. En ese entorno, será posible que las empresas nacionales que actualmente manejan movimientos internacionales exclusivamente, se asocien con empresas norteamericanas o sean absorbidas por éstas. Por ello, se suguiere que la SCT instrumente cursos de capacitación para mejorar la eficiencia de los transportistas que realizan el servicio nacional e internacional y a su vez conozcan, por ejemplo, la normatividad que sobre la materia existe en EEUU. Sistematización de las comunicaciones (EDI). - Los requerimientos físicos y legales para el desarrollo de sistemas de intercambio electrónico de información (EDI) se encuentran disponibles y pueden fácilmente porporcionarse, sin embargo su implantación demanda un estímulo externo al sector antes de que su uso se generalice. Se deja entrever que ese estimulo externo puede partir del sector aduanal; sin embargo, debe considerarse, por una parte, que aún existen déficits en infraestructura que deberán cubrirse antes de que Aduanas haga uso generalizado de sistemas EDI; y por otro lado, y no obstante que existen transportistas y usuarios dispuestos a incorporar dichos sistemas a sus operaciones, previamente se requiere incorporar mejoras a sus redes de comunicación. -.80 - Medidas para protección ambiental - Se deberá cumplir con la normatividad que se establece en la materia, para lo cual deberá construirse, conservarse y modernizarse la infraestructura carretera, incorporando el componente ambiental en todos los proyectos. - Se deberá modernizar el parque vehicular del autotransporte de carga y pasajeros, considerando la incorporación de equipos y aditamentos anticontaminantes.. - Se deberá mejorar la calidad -de los combustibles de los vehículos, y se intensificarán las acciones del programa de control de emisiones de los vehículos. - Se dotará a las ciudades medidas que lo requieran, de libramientos carreteros, para evitar la saturación del tránsito de vehículos en los accesos y en las salidas de dichos centros de población. - Se armonizarán las normas de prevención de la contaminación con otros países, (principalmente Estados Unidos y Canadá), en materia de transporte carretero. 2.2 Transporte Ferroviario - Mantenimiento de la red, del equipo y de las instalaciones. En este aspecto será necesario elevar la calidad de la vía, hasta alcanzar estándares similares a los de los ferrocarriles de Estados Unidos y Canadá, en cuando menos los 8,500 kilómetros de rutas principales hacia la frontera norte y los puertos marítimos para permitir el ágil intercambio y movimiento seguro de los equipos pesados que se operan en los ferrocarriles extranjeros, para lo cual se requiere contar con vía elástica y riel soldado continuo de 112 lb/yd como mínimo. Se deberán reorganizar las labores de mantenimiento y reconstrucción de vías de altas especificaciones, mecanizando los trabajos que realiza la empresa, contratando con la industria privada de la construcción aquéllos que exc¿dan la capacidad actual del organismo. Parte importante para el buen funcionamiento del sistema recae en la rehabilitación y reorganización de los principales patios y estaciones, diagnosticados como críticos en el horizonte de planeación considerado; en el - 81 - equipamiento y operación de las instalaciones, por lo que se deberá continuar promoviendo la participación privada en estos renglones; y en la integración de servicios puerta a puerta. Asimismo será conveniente atender prioritariamente las instalaciones ferroviarias ubicadas en los puertos marítimos de altura para mejorar el intercambio modal de carga, en cuando menos un 100% en relación a las condiciones actuales. Completar la adecuación de la capacidad de carga de los puentes y alcantarillas, y de la amplitud de gálibos en puentes y túneles en las rutas principales, para permitir el tránsito de equipos de gran dimensión y peso, dando prioridad a las rutas actuales y potenciales para el tráfico de contenedores en doble estiba, þara lo cual se requiere contar con estructuras con capacidad de carga Cooper E-72 en las rutas del centro hacia la frontera norte y a los puertos marítimos, así como ampliar los gálibos en los túneles de la ruta Guadalajara - Manzanillo. Con la finalidad de que el organismo se concentre más en lo que es su función primordial, se deberá contratar con la iniciativa privada el mantenimiento mayor de los equipos tractivo y de arrastre y el organismo sólo atenderá los trabajos menores. - Desregulación y canalización de acciones al sector privado. Para incrementar el tráfico de carga será necesario implantar un sistema flexible de tarifas, que permita generalizar la negociación del precio de los fletes en función de volúmenes, regularidad de los embarques, y forma de organización. Asimismo, el sistema deberá ofrecer la posibilidad de manejar tarifas reducidas para el aprovechamiento de los recorridos en vacio o para la utilización del equipo inmovilizado. Se deberá continuar alentando y ajustando la participación privada en las funciones ferroviarias. El principio básico detrás del esquema de privatización es que la propiedad de la. infraestructura y el control de los trenes deben permanecer dentro del campo de los FNM, a menos que se modifique la Constitución, por lo que prácticamente casi todas las actividades podrían ser entregadas en concesión. Las principales propuestas son: o Ceder en concesión los talleres de locomotoras y vagones que están siendo racionalizados en la actualidad, clausurando los talleres redundantes y reorganizando el trabajo de reparaciones y rehabilitación de locomotoras y vagones; - 82 - " Contratar el mantenimiento de la red principal de vías comprendiendo cerca de 10.000 km, en basé regional, siendo responsables los contratistas tanto de la reconstrucción periódica como del mantenimiento de rutina; " Eliminar los servicios de pasajeros que no tienen posibilidad de viabilidad financiera y para los cuales no existen necesidades sociales, y ceder en concesión los servicios restantes; " Vender el control de trenes y el sistema de comunicaciones con una cláusula de retorno, en la que el comprador está en libertad de vender la capacidad sobrante en el sistema a terceras partes. Esta puede ser una propuesta atractiva dado que el servicio telefónico doméstico se abrirá a la competencia desde el año 1996. Se espera que el sistema actual de control de trenes será reemplazado por uno basado en comunicaciones por radio. Los FNM retendrán la responsabilidad de usar los sistemas; " Contratar las actividades comerciales de los FNM con clientes más pequeños, reconociendo que la comercialización es sólo una actividad. auxiliar a las dós funciones primordiales de los ferrocarriles, provisión de infraestructura de vías y operación de los trenes. - Reestructuración del servicio de pasajeros y de carga. a) Servicio de pasajeros Principalmente, los esfuerzos deberán ser dirigidos hacia el mejoramiento e impulso de los servicios de segunda clase de mayor demanda, garantizando siempre la 'seguridad de los usuarios y mantener en operación los trenes de eminente función social, buscando progresivamente, que las tarifas cubran los costos de éstos servicios. Deberán suprimirse los trenes de baja demanda, los que al registrar bajos coeficientes de utilización, generan fuertes pérdidas en su operación. En cuanto a los trenes con servicio de dormitorio, bar, comedor y primera clase, éstos podrán sostenerse en aquellas rutas donde se puedan cubrir los costos de transportación concesionando los servicios a bordo de los trenes. - 83 - b) Servicio de carga Se deberá aplicar una política de comercialización activa para captar nuevos mercados y recuperar otros, con base en la oferta y cumplimiento de servicios eficientes, oportunos y con la calidad necesaria, que permita atraer y mantener la confianza de los usuarios. Establecer vinculos eficientes con. los ferrocarriles extranjeros y con otros medios de transporte que participen, junto con los ferrocarriles mexicanos, en el transporte de mercancías con origen - destino o en tránsito, dentro del territorio mexicano, mediante convenios para la prestación de servicios mancomunados con tarifas integradas. Permitir la contratación de trenes completos por usuarios, para que éstos puedan comercializar fletes con terceros. Se promoverá intensamente la construcción y operación de terminales especializadas de carga y de intercambio modal con la participación de la iniciativa privada. Se buscará también la asociación con agentes de carga para proporcionar los servicios integrales puerta a puerta y se establecerá una mayor vinculación con otros modos de transporte y con prestadores de servicios conexos, para la consolidación de carga general y la realización de trámites aduanales de tráficos internacionales. Sistematizar en forma computarizada la información a clientes respecto a tarifas, equipo disponible y situación de embarques. - Modernización del equipo e instalaciones. El organismo está adquiriendo, instalando y operando equipos modernos, para avanzar tecnológicamente en las actividades prioritarias del tránsporte ferroviario en general- y en el manejo y control de las operaciones del transporte en particular. Deberá continuarse en esa línea, sobre todo a la luz de la instalación del sistema de control directo de trenes (CDT), la entrada en operación de la doble vía electrificada México - Querétaro y de las nuevas exigencias impuestas por las condiciones de la demanda. - 84 - - Política de tarifas. Los ferrocarriles deberán cubrir, a través de las tarifas, los costos variables a largo plazo y contribuirán a sufragar los gastos fijos. El ferrocarril tendrá flexibilidad en el manejo de la tarifa cuando se trate de estimular las exportaciones; cuando se considere manejo de volúmenes importantes de carga por un período determinado; para optimizar el uso de la capacidad de carga y; la contribución del usuario para mejorar la eficiencia en la operación ferroviaria. Por su parte, la tarifa aplicada del transporte de pasajeros, deberá cubrir por lo menos el costo evitable del servicio, en el caso de los servicios de alta calidad, la tarifa aplicable deberá cubrir el costo variable a largo plazo incluyendo el de amortización y los intereses del equipo, para asegurar la recuperación de las inversiones requeridas. - Impulso al transporte multimodal Se promoverán alianzas entre ferrocarriles y autotransportistas, para que éstos realicen tractoreo urbano, en tanto los primeros efectúan arrastres de largo itinerario. Asimismo, se promoverán movimientos consolidados en trenes unitarios desde origen a destino, en regímenes de prioridad. 2.3 Transporte Marítimo Portuario - Mantenimiento de puertos y equipo. Los requerimientos físicos y de mantenimiento de infraestructura básica portuaria, que pudieran presentarse sobre todo al principio de la instrumentación del nuevo esquema de organización portuario, serán atendidos por las API'S y el organismo portuario federal y administrativo, previo análisis de mecanismos y esquemas de financiamiento, así como de su instrumentación. Será necesario determinar, con la mayor celeridad, los requerimientos de servicios públicos portuarios y los ingresos que se generen para clarificar los apoyos financieros que permitan atender programas de mantenimiento de infraestructura básica portuaria diferidos por insuficiencia de recursos y eventualmente determinar el tratamiento administrativo de aquellos puertos cuyos ingresos portuarios no satisfagan los requerimientos de inversión, principalmente en reforzamiento y mantenimiento de obras exteriores, - 85 - protecciones costeras afectadas por las instalaciones portuarias, dragado de mantenimiento en canales de acceso y dársenas, señalamiento y ayudas a la navegación y mejoramiento de accesos carreteros y ferroviarios en condiciones deficientes de enlace. - Eficiencia en la operación portuaria. A fin de garantizar un eficiente desarrollo del sistema portuario en coordinación con los otros modos de transporte, se redimensionará y fortalecerá la autoridad portuaria y se consolidará el órgano regulador y normativo de autoridad marítima portuaria de la Secretaría de Comunicaciones y Transportes, al nivel central y de las Capitanías de Puerto. Con lo anterior, queda de manifiesto que el subsector marítimo- portuario se encuentra en una fase de reestructuración con un alto ingrediente de descentralización en todos los -órdenes a fin de lograr autonomía administrativa y financiera y estímulo de la participación de . usuarios, inversionistas y gobiernos estatales y municipales. Al ser el gobierno federal el poseedor de la totalidad de las acciones de las API's, estas empresas estarán sectorizadas en la Secretaría de Comunicaciones y Transportes, por lo que será conveniente que se agrupen en una entidad que organice sus objetivos, metas y programas bajo una directriz congruente con los propósitos del gobierno y que a su vez otorgue la suficiente autonomía de gestión para que se desempeñe con eficiencia y agilidad y responda con prontitud a los requerimientos locales. Será conveniente que la relación administrativa con los puertos individuales o agrupados que sean administrativos por una API estatal, se realice de manera que asegure una coordinación efectiva con los programas de desarrollo y sea acorde con lo que se emprende en cada puerto principal, especialmente los de la zona costera cercana o aquellos con los que comparta su área geográfica de servicio. Se deberá revisar el papel que desempeñarán los puertos cuyos ingresos no son suficientes para el mantenimiento de infraestructura básica, principalmente los que se localizan en las márgenes de ríos con requerimientos considerables de dragado. - .86 - - Impulso al transporte multimodal El tráfico portuario demandará que la red de transporte terrestre disponga de la capacidad suficiente para que la carga se distribuya desde y hacia los puertos con fluidez y eficiencia y además que los enlaces intermodales sean operados con eficiencia y modernidad. Se deberá instrumentar una efectiva coordinación entre el transporte marítimo y el terrestre, principalmente en lo relativo a los accesos carretero y ferroviario. Se modernizarán y ampliarán los enlaces terrestres en los principales puertos que permitan, en su conjunto y con una creciente simplificación administrativa de autoridades portuarias, el rápido arribo y desalojo de la carga en los puertos. Se promoverá la formación de empresas de prestación de servicios integrales de transporte y se fomentará el establecimiento de servicio§ de cabotaje regular, que se articulen con efectividad al transporte terrestre. Muchos puertos en México ya han estado participando en forma limitada en el transporte multimodal. El desafío es el de habilitar a todos los empresarios y sectores mexicanos para que se beneficien del concepto y obtengan al máximo ahorro posible en transporte. El sector puertos puede ayudar mejor en este proceso por medio de una expansión rápida de su uso del intercambio electrónico de datos y de estadísticas computarizadas para el movimiento y depósito de carga, así como para el movimiento de camiones, trenes y embarcaciones, por medio del mejoramiento de sus equipos para el manejo de cargas y productividad de la mano de obra y por medio de la expansión en el uso de zonas de estacionamiento e instalaciones para depósitos remotas para los otros modos de transporte (ferrocarril, carreteras y costera y fluvial), para asegurar el rápido movimiento a través del escaso y valioso terreno portuario. El TLC ha hecho posible un incremento de inversiones extranjeras en compañías e instalaciones de transporte en México, por consiguiente abriendo el país a técnicas innovadoras para el manejo de cargas, actualmente en uso o a prueba en los EE. UU. Se necesita que existan reglamentaciones y leyes en efecto para apoyar y clarificar estos acuerdos comerciales. También los procedimientos aduaneros deben ser afinados para mantener el ritmo con los volúmenes generados por el TLC. - 87 - - Impulso al uso de sistemas de información como el EDI. Entre los factores que tienen mayor relevancia para la realización de un transporte multimodal se cuentan las comunicaciones y el intercambio de información. En la medida en que estas operaciones se llevan a cabo en un marco de alta confiabilidad, con un mínimo de fallas o errores, se posibilita el que transacciones / operaciones. tan complejas como las que se producen en el transporte multimodal se efectúen con seguridad. Por ahora los sistemas electrónicos para intercambio de información son los que mayor soporte pueden prestar para abreviar los tiempos y abatir los costos en los procesos de transferencia de documentos e información, que demanda el transporte, sobre todo en su acepción multimodal. La generalización en el uso de contenedores que permite un ágil tráfico de carga y que ha implicado costosas infraestructuras y equipamiento para lograr abatir sustancialmente los costos de maniobra, ha exigido, también, la adopción de sistemas que permitan, igualmente, la rápida transferencia de documentos e información asociados a la carga, para abatir los costos de su proceso. Si bien estos sistemas de información surgen a la manera de diversos formatos que deben requisitarse y dan orígen a otros documentos sucesivos, la evolución tecnológica hace aparecer, con apoyo de la teleinformática, los sistemas para intercambio electrónico de información (Electronic lata Interchange Systems) en los que actualmente se pone gran énfasis para su instrumentación e implantación como complemento indispensable para lograr el tráfico ágil de bienes, en el sector transportes. - Desregulación y canalización de acciones al sector privado. Será importante que se continúe con la intensificación de la desregulación y simplificación en los puertos, la inspección de embarcaciones y el ejercicio de los servidios obligatorios de practicaje y remolque en la medida en que se detecte madurez en la organización y operación portuaria. Los actos de autoridad locales deberán mantenerse y los administrativos simplificarse en forma coordinada con todas las autoridades que tienen ingerencia en la actividad; la comercialización de los servicios e instalaciones con la participación del sector privado, en grado intensivo debe sustentar las finanzas de los puertos, manteniendo el principio de competitividad y eficacia, apoyados en el incremento de la calidad en la prestación de servicios y disminución de las tarifas; asimismo se deberá simplificar el sistema - 89 - La nueva Ley de Puertos se sustenta, en gran parte, en principios de descentralización gubernamental en materia operativa, administrativa y de dictado de políticas de desarrollo, entre los principales, a través de la creación de las API's, que inicialmente serán constituídas por el gobierno federal en los puertos principales, y estatal en los menores, principalmente pesqueros. La citada Ley no indica un plazo para que total o parcialmente se liciten o vendan las acciones de las API's y se transfieran hacia los gobiernos estatales, municipales y al sector privado, por lo que persiste la posibilidad de que se mantenga por un amplio período dicha propiedad federal de las API's y por lo tanto su esquema de funcionamiento en la realidad sea parecido al actual de las empresas paraestatales de los puertos en lo relativo a su órgano de decisión, línea de mando, principios de comportamiento y de ejecución que obedece a esquemas centralizados. En este aspecto, la estrategia de desarrollo del subsector debe apoyar en gran medida su determinación, ya que si no se logra, de manera real y palpable, evolucionar a esquemas modernos de descentralización hacia las entidades federativas y municipales, con los necesarios y suficientes controles que aseguren la conducción coordinada de los puertos a nivel nacional, podrían retrasarse las expectativas de desarrollo acelerado del subsector. Se considera necesario, por tanto, delinear una estrategia específica para transferencia gradual de la propiedad de las API's, flexibilizar sus órganos de control, administración, operación y formación de cuadros directivos de alto nivel para que local, municipal y estatalmente se logre alcanzar la madurez profesional. 2.4 Transporte Aéreo Consolidación de la desregulación y proyecto de ley del transporte aéreo. En torno a la expedición de una nueva ley en materia de transporte aéreo, conviene hacer algunos señalamientos sobre cuestiones relevantes para el desarrollo ordenado y sostenido del subsector. Primeramente, es importante destacar que la mayor participación privada a través del concesionamiento de aeropuertos integrales, grupos de ellos o de actividades específicas, plantea la necesidad de estabelcer "reglas del juego" precisas, que le den certidumbre al inversionista y que fijen, también, las necesarias regulaciones a las que deberá someterse dicha participación. La nueva ley deberá enfatizar el carácter de servicio público de interés estratégico e indicar la sujeción de los nuevos prestadores de servicios aeroportuarios a la normatividad fijada por la autoridad aeronáutica en materia de seguridad, disponibilidad (no discriminación entre usuarios), calidad y capacidad de servicio. - 90 - Se estima que el esquema general que deba regir la participación privada en los aeropuertos es el concesionamiento, preservando la propiedad pública. Debe señalarse que en el caso de concesionamiento de aeropuertos completos, debe plantearse un control integral que asegure el desarrollo ordenado del conjunto. En este sentido, se sugiere el concesionamiento al sector privado de los aeropuertos rentables, y subsidiar por parte del Gobierno Federal los que no lo son. A este respecto, se contempla evaluar conjuntamente con el Banco Mundial esta sugerencia, con mayor detalle. Igualmente, deberán establecerse mecanismos que eviten prácticas monopólicas que lesionen el interés público. Será conveniente promover la operación, en este caso, de más de un prestador de servicios cuando la escala para operaciones rentables lo permita. En cuanto al plazo de concesiones, deberá guardarse congruencia entre la naturaleza del proyecto, magnitud de inversiones y niveles tarifarios que permitan la recuperación de inversiones y la obtención de razonables márgenes de ganancia. La ley deberá ser explícita en que al término de los plazos, las obras de infraestructura quedarán en propiedad del sector público. Es necesario apuntar que se busca un nuevo modelo, caracterizado por un crecimiento autosostenido y deberá indicarse que se trara de que haya una inyección real de recursos frescos, incorporando recursos externos al sector. En los títulos de concesión habrá que prever un mecanismo que propicie la reinversión de utilidades en los incrementos de capacidad que demande el sistema. Desarrollo de Proyectos aeronáutico inmobiliarios. La búsqueda de índices de rentabilidad adecuados, implica procurar nuevas fuentes de ingresos, para el operador de un aeropuerto. Esta búsqueda ha conducido en todo el mundo a complementar los ingresos derivados de los cobros por servicios aeroportuarios, con ingresos provenientes de otro tipo de actividades desarrolladas en los aeropuertos o en su entorno inmediato, tanto de carácter comercial como industrial. Es importante notar que los ingresos producidos por las actividades no aeronáuticas son, efectivamente, el factor principal generador de ingresos en un número creciente de aeropuertos en todo el orbe. Conforme el volumen de pasajeros se incrementa en las terminales aeroportuarias, las posibilidades de realizar exitosamente negocios no aeronáuticos, crecen de manera muy importante. - 91 - El desarrollo inmobiliario que puede generarse en las inmediaciones de los aeropuertos puede significar la fuente de ingresos que permita cubrir con creces las pérdidas en que incurre la mayoría de los aeropuertos en la parte aeronáutica. Es posible encontrar actividades compatibles con la actividad aeronáutica de carácter comercial e industrial. Los comercios pueden estar orientados hacia los pasajeros y sus acompañantes, pero también a los empleados que laboran en la terminal y a los habitantes de las comunidades vecinas; las industrias se podrían beneficiar adicionalmente por el establecimiento de zonas francas, principalmente para las industrias que fabrican productos de gran valor por unidad de peso o de volumen y las que requieren una aportación importante de mano de obra, o una combinación de ambas. Una limitante importante para el florecimiento de los negocios no aeronáuticos, es la falta de espacio en las terminales o en sus inmediaciones, así como la carencia de una adecuada promoción que dé realce a las potencialidades de negocios. La alternativa que considera el fortalecimiento del papel de ASA en la administración aeroportuaria, asegura la aplicación de una política de integración nacional y de apoyo al desarrollo regional. Sin embargo, por las características propias de un organismo paraestatal, presenta diversas rigideces para actuar en la búsqueda de recursos financieros que sustenten el desarrollo del sistema, sobre todo si la naturaleza de tales negocios es radicalmente diferente a las actividades aeronáuticas. El sector privado, por su propia naturaleza, está en mejor aptitud de establecer la organización requerida para el desarrollo de un complejo aeronáutico - inmobiliario de las características antes señaladas, así como de canalizar los recursos técnicos y financieros requeridos. Esta visión más amplia y compleja de las terminales aeroportuarias, requiere coordinar y armonizar los criterios aeronáuticos y los comerciales. Esto es especialmente importante al revisar el proceso de planificación general y al diseñar el nuevo aeropuerto o terminal. Debe guardarse un adecuado equilibrio en el cual- se cumplan las exigencias de las funciones operacionales básicas del aeropuerto -y se logre una adecuada rentabilidad de las actividades de estos negocios, cuidará que no se comprometan la seguridad, la operación o el funcionamiento en los espacios y actividades aeronáuticas. Reestructuración institucional En el marco de la apertura a concesionarios privados, se impone la redefinición y modernización de Aeropuertos y Servicios Auxiliares. Se acelerará el paso en este proceso, revisando los objetivos y la misión estratégica del organismo y, - 92 - consecuentemente, la adecuación de su marco legal. Los objetivos básicos que se le asignarían, son: a) La administración directa de los aeropuertos federales no concesionados. b) El asesoramiento a los operadores de los aeropuertos concesionados, en la planeación, construcción, desarrollo y operación de aeropuertos. c) La investigación sobre modelos de simulación para optimizar la operación aeroportuaria y el desarrollo de medidas de desempeño para calificar la calidad de los servicios. d) La prestación a través de SENEAM, de los servicios de apoyo a la navegación, de control de tráfico aéreo, de meteorología y de comunicaciones aeronáuticas. Financiamiento de la infraestructura y operación. La estrategia que seguirá el desarrollo aeroportuario enfatiza en el establecimiento de un sistema que opere, de manera integrada, para servir a las diversas regiones del territorio. Este sistema deberá crecer y evolucionar, sustentado en sus propios recursos. En efecto, la magnitud y complejidad del sistema aeroportuario debe permitirle desarrollarse a partir de los recursos que genere la operación aeronáutica y de los recursos que generen las actividades no aeronáuticas asociadas. En el caso de que análisis específicos demuestren la necesidad o deseabilidad de que se canalicen recursos públicos a la expansión aeroportuaria, se fijarán con precisión los criterios para la aplicación de estos fondos, de manera semejante a como se practica en otros países. Dada la naturaleza eminentemente comercial y especializada de las actividades no aeronáuticas indicadas con anterioridad, se promoverá que el sector privado se involucre con capital de riesgo. Se procurará que los operadores de los aeropuertos restituyan al gobierno federal el costo de la infraestructura del aeropuerto en cuestión y que paguen a ASA una cantidad que le permita operar con autosuficiencia financiera los aeropuertos con poco ingreso. Dicho pago se justifica no sólo en términos de la explotación de una concesión, sino por los beneficios directos que genera a los grandes aeropuertos la operación de todo un sistema de cobertura nacional. - 93 - Regulación de la competencia entre líneas aéreas. Dadas las características y capacidades de las aerolíneas troncales, en relación a las regionales y a las alimentadoras, se propone un esquema de regulación selectiva que distinga y aplique normas diferenciales a los tres niveles de aviación, con lo cual se favorezca la subsistencia de cada una de ellas sin menoscabo de la eficiencia y productividad del sistema en su conjunto. Recientemente, México ha iniciado una nueva etapa en la evolución del transporte aéreo, mediante la desregulación de las capacidades ofrecidas por prestadores de servicios en las rutas y la liberalización tarifaria, a partir de la cual se han obtenido resultados positivos para los porteadores, pero también en beneficio de los usuarios. No obstante, la liberalización sin cortapisas podría conducir a una descomposición del mercado e imponer costos innecesarios a las líneas aéreas y a la sociedad en su conjunto. Por lo anterior, la autoridad aeronáutica aplicará un esquema de regulación selectiva, no para volver a esquemas superados, sino para consolidar y dar viabilidad, en el largo plazo, a esta actividad en un marco de realismo económico y de mercado. En este sentido se realizarán ajustes graduales, con la certeza de encaminarlos en la dirección correcta. Se trata de mandar señales claras, inequívocas, a los participantes de la industria del transporte aéreo. De manera concomitante, se ha venido redefiniendo el papel de la autoridad aeronáutica en el nuevo esquema, dando énfasis a la promoción del desarrollo de los servicios dentro de márgenes de seguridad y calidad; al mantenimiento de la competencia entre prestadores de servicios que promuevan la superación de servicios y diminuyan permanentemente los costos, y a la protección del consumidor. La estrategia considera continuar con una apertura amplia para el ingreso de nuevos prestadores del servicio del transporte aéreo, al tiempo de establecer una regulación selectiva orientada fundamentalmente a: 1.- Promover la expansión y diversificación de los servicios. 2.- Garantizar la competencia entre aerolíneas. 3.- Evitar la competencia ruinosa. - 94 - 3.- PROYECTOS ESTRATEGICOS Como parte de la estrategia que se considera conveniente aplicar para modificar el desempeño en el sector transporte y lograr de él un verdadero soporte para toda la economía se citan a continuación algunos que se consideran prioritarios, aunque para su instrumentación e implantación se requiera de estudios y proyectos detallados algunos de los cuales ya se realizan. 3.1 Carreteras " Continuación del Programa Nacional de Autopistas. " Descentralización de la conservación, reconstrucción, modernización y construcción de la Red Federal de Carreteras. • Establecimiento de un nuevo sistema de cargos a los usuarios que permita que todas las tareas relacionadas con la conservación, reconstrucción, modernización y construcción, sean financiadas con suficiencia para mantener la red de carreteras en buenas condiciones, permanentemente. • Creación de un órgano que se encargue de dar el soporte financiero necesario y suficiente para el desarrollo de proyectos de transporte, infraestructura de almacenamiento y otros elementos relacionados. 3.2 Ferrocarriles " Incorporación de equipo especializado de carretera a la operación ferroviaria para lograr complementariedad modal. " Convenios con autotransportistas para lograr complementariedad entre ambos modos de transporte. " Convenios con navieras para lograr el mismo propósito de complementariedad modal, a través de la operación con equipos y terminales especializados. " Promoción e impulso para la creación de infraestructura de almacenamiento y transferencia de carga. -.95 - 3.3 Marítimo-Portuario " Incremento de la infraestructuray el equipamiento portuario, a la medida de la pretendida corrección de los desequilibrios existentes en el sector. " Promoción e impulso al transporte marítimo de cabotaje, como obligado complemento al transporte terrestre de grandes distancias y volúmenes. " Convenios con ferrocarriles y autotransportes para la especialización de equipos y el logro consecuente de complementariedad modal. 3.4 Aéreo " Promoción e impulso para la creación de infraestructura de almacenamiento y transferencia de carga aérea. " Promoción e impulso para el desarrollo de proyectos productivos en las inmediaciones de los aereopuertos. Megaproyectos aeroportuarios. 3.5 Comunicaciones o Creación de la infraestructura necesaria del sistema de intercambio electrónico de información. 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