Skip to main content

International Update

The Dry Canal Is an Operational Reality

Most of us are accustomed to hearing about grandiose Latin infrastructure projects that get announced with much fanfare only to never come to fruition. That’s why Mexico’s CIIT or Corredor Interoceánico del Istmo de Tehuantepec is so refreshing. It actually got built in four years, and to nearly everyone’s surprise, the “Dry Canal” portion began operating in late 2023 with an initial capacity to move about 1.5 million containers per year. 

The CIIT offers an alternative route for freight coming from Asia destined mainly for the U.S. East Coast. Freight will arrive from the Pacific Ocean at the Port of Salina Cruz, where it can be rolled off and trucked through the new trans-isthmus highway or railed through the brand new Line Z to the Gulf Port of Coatzacoalcos. From there it can either be rolled back onto ocean freighters or loaded onto the brand new “Ferrobuque” rail-ferry operated by CGR, which directly connects to 70% of continental U.S. rail lines via the Port of Mobile, Alabama. 

While this route will be a handy option to have when U.S. West Coast port unions go on strike, or when the Panama Canal goes through a drought, the real value is in the integrated development poles along the corridor, which are set up to take direct advantage of the shift to nearshore manufacturing.

A Fully Integrated Economic Development Strategy

A whopping 12 industrial development poles, or parks, are slated for construction along the corridor. Five of these have already been adjudicated to three firms that won the first round of government bids: Mota Engil, Urcedic and Proistmo. The concession period began in 2024 for two years with automatic five-year extensions. Construction has even begun at Pole No. 4 (Texistepec) where the developer Proistmo has stated they will be investing the equivalent of US$50 million in urbanization, industrial parks and logistics terminals. 

The shift from China to nearshore manufacturing in Mexico has gone mainstream. However, most of the first wave of work went to the already industrialized northern Mexican states. The CIIT changes this completely by opening up Southern Mexico to manufacturers and assemblers with the same skilled workers at even lower costs. Layer on top a hefty incentives package from both the Mexican federal and the state governments of Oaxaca, Veracruz and Chiapas, and the corridor has a goal of creating 550,000 new jobs by the year 2050. 

The CIIT will also finally connect NAFTA to CAFTA by rail, enabling investors to access another lower-cost and skilled labor pool in Guatemala, Honduras, El Salvador and Nicaragua. The federal government and the CIIT Corridor authority are already building the CIIT extension, also known as Line K, which is set to open in December 2024. This rail link runs east-west from the CIIT backbone through the State of Chiapas and the Guatemalan border. Three industrial parks will be connected as well along the route: Chiapas I and Chiapas II Parks at the Chiapas Seaport, and the Tecun Uman park on the Guatemalan side. At the latter, the 75-year rail concessionaire REMED is currently building out that country’s first rail-to-truck multimodal terminal with a logistics and industrial park tied next to it. The rail line will be extended to Puerto Champerico and Puerto Quetzal. 

Stuart Robles is Senior Partner at Briggs Capital. He is based in Charleston, South Carolina.