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Dispute erupts over Mexico’s rail bill
From the Financial Times of Tue, 18 Mar 2014 11:46:26 GMT

As Mexico’s antitrust bill arrives in Congress, a dispute has erupted over a rail bill that would alter the terms of the two main railway concessions.

The lower house has passed the rail legislation, which deals with the concessions held by subsidiaries of Grupo México, the mining company, and Kansas City Southern, transport group. The bill is now before the Senate.

The companies fear their rights and the rule of law risk being eroded, while legislators complain a lack of interconnection adds hundreds of miles and costly delays to freight journeys. In addition, while tariffs have increased as much as eight times in recent years, the network has not been expanded.

However, a study by Cidac, a think-tank, argued that the issue is not black and white. Though the study agreed that some changes were overdue, it also pointed out that it would be more effective to focus on the structure of tariffs than to change the way the railways are operated.

That, it warned, “would generate a series of economic inefficiencies affecting other sectors and the national economy”.

Indeed, a report by the OECD found Mexico’s rail privatisation in 1995 had led to a doubling of traffic and “we see no evidence of misuse of railway market power”.

Mexico has no shortage of inefficiencies and has begun to tackle domestic vested interests.

However, shifting the terms partway through a concession “does not bode well” for investor sentiment as Mexico opens up its energy sector, said one former government official.

“Investors are less worried about violence and drugs trafficking than the rules changing as they go along,” he noted.

Meanwhile, the debate over the antitrust bill, which is aimed at stopping companies from achieving market dominance through illegal monopolistic practices, is raising its own concerns that it could actually lead to less, not more, competition in Mexico

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