One of the major expressed objectives of the 1993 North American Free Trade Agreement (NAFTA) was to facilitate the cross-border movement of goods and services between the territories of Canada, Mexico and the United States. Another objective was to increase trade among the three countries by removing tariffs, quotas and other trade restrictions. A review of the increases in trade volume since 1993 provides ample evidence that the later objective has been achieved. For example, the number of commercial trucks carrying U.S. exports to Mexico increased over 407% from 1990 to 2000 while the number of trucks transporting Mexican exports to the U.S. increased 328% over the same period. There were a reported 2.26 million commercial truck crossings into Mexico from Texas in 2000 and another 2.38 million truck crossings from Mexico into Texas (TAMIU, 2002). In the same report, the Texas Center for Border Economic and Enterprise Development, reported the number of freight railcars transporting goods into Mexico more than doubled from 1993 to 2000 from 147,216 to 298,919 (TAMIU, 2002). However, in the ten years since NAFTA's passage there has been little improvement in the cross-border movement of goods between Mexico and the United States.
Commercial truck movements into each country's interior remain a time-consuming, inconvenient process, largely unchanged since 1990. Neither country yet allows foreign trucking beyond a twenty-mile commercial zone. As a result, the promised benefits of improved transportation, such as faster transit times, reduced pipeline inventories and better reliability of shipment delivery, have not yet been realized. While cross border movement of goods remains as cumbersome, inefficient and unpredictable as it was prior to NAFTA, there have been several significant improvements in Mexico's transportation infrastructure since NAFTA's passage. The purpose of this article is two fold: to examine the progress Mexico has made in modernizing its rail and highway transportation modes and to outline the reasons why there has not been much improvement in the cross-border flow of goods between the U.S. and Mexico. This article also reviews major economic policy changes in Mexico and makes recommendations on how Mexico and the United States might achieve a better flow of goods across their shared border.
RAIL IMPROVEMENTS IN MEXICO
Ferrocarriles Nacionales de Mexico (FNM), Mexico's national railroad, was established in 1873. It was owned and operated by the central government of Mexico from 1937-1994. Over the course of this 57-year period, Mexico's rail system suffered from neglect and severe lack of capital funding (Barrera, 1999). As a result, Mexico's national railroad became slow, unreliable and highly inefficient. The lack of required track replacement and track maintenance caused frequent derailments. By 1980,75 per cent of Mexico's existing track dated back to pre-revolution days before 1910 (Barrera, 1999). Train robberies by organized gangs of armed bandits were also commonplace during this period. Approximately one in every five trains was boarded and robbed as recently as the late 1980's (Kaufman, 2001).
Beginning in 1994, the Mexican government began to address the need for significant improvement in its freight rail system by deciding to privatize the entire 16,500-mile network. In the same year, the first of FNM's three major railway regions was sold to the Transportation Ferroviaria Mexicana (TFM) consortium for $1.4 billion. TFM's winning bid gave TFM partners the right to operate the 2,661-mile Northeast system for 50 years with an option for an additional 50 years (Vantuono, 1999). TFM's line is the most important of the major FNM (Ferrocarril del Noreste) rail regions because it provides the primary rail route in Northern Mexico and links the industrial areas of Mexico City and Monterey with the United States at Laredo, Texas. …