Mexico Draws $1.4-Billion Offer for Its Prime Railway

MEXICO CITY — Mexico’s troubled privatization process got back on track Thursday as a Mexican shipping giant and a U.S. railroad jointly bid more than $1 billion to buy rights to a major railway line linking Mexico to the U.S. border.

It marks the biggest privatization in the two years since President Ernesto Zedillo came to power pledging to continue the massive sell-off of government property begun by his predecessor, Carlos Salinas de Gortari.

The $1.4-billion offer by Transportacion Maritima Mexicana, or TMM, and Kansas City Southern Industries was the largest of three bids opened Thursday for the Northeast Line, considered the jewel of the Mexican railway system.

Although the government must still review the offers, authorities said the TMM-Kansas City venture will undoubtedly win because its offer is far superior to the others.

The bid is well above the $1-billion figure that observers and some officials had expected, and it marks a turnaround for the privatization of the Mexican railways. Just weeks ago, the process started with a whimper as the government failed to receive acceptable offers for another line, the Chihuahua-Pacific Railroad.

The government was also recently forced to backtrack on an ambitious plan to privatize much of the petrochemical industry as a result of opposition from the ruling party.

The Zedillo administration hopes to raise as much as $12 billion in privatizations, but until Thursday it had sold off less than $500 million in government property.

The 2,500-mile route auctioned Thursday is the main U.S.-Mexico line and the busiest in transporting cargo, carrying 40% of the country’s rail freight. It links Laredo, Texas, to Mexico City, the port of Veracruz on the Gulf of Mexico and the Lazaro Cardenas seaport on the Pacific Ocean.

The Mexican government hopes to raise as much as $2 billion by selling 50-year concessions to the majority of the state railway system--three main routes, including the Northeast, and dozens of shorter lines.

It is also hoping to draw hundreds of millions of dollars in investments that the antiquated system needs. Even though trade with the U.S. has soared since the signing of the North American Free Trade Agreement, the amount of cargo shipped by rail in Mexico has declined.

The bid by TMM and Kansas City was nearly three times those of two other groups that included the U.S. companies Union Pacific and South Orient Railroad.