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Ferrocarriles nacionales de Mexico: the existing rate structure for grain/soybean shipments and likely effect on freight rates as a result of railroad privatization in Mexico
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The government owned railway monopoly in Mexico, Ferrocarriles Nacionales de Mexico (FNM), is undergoing a series of reforms designed to create a market orientated railroad company. Railroad freight rates are being deregulated and railroad support systems are being opened to private investment. These reforms may eventually culminate into complete divestiture of the Mexican railroad system. Privatization of the FNM is expected to impact railroad rates on Mexicols overland imports of grain/soybeans from the United States. Historical grain flow data show overland exports are critical to the U.S.'s competitive position in the growing Mexican grain Market. Because transportation charges are the largest marketing cost associated with exporting grain to Mexico, this thesis attempts to explain the FNM's existing rate structure and to project the likely rate structure after privatization. Freight rate studies in the United States and Mexico were reviewed: economic models were specified to explain FNM's existing rate structure and, based on collected FNM Waybill data, regression models were estimated. Projected costs in the privatized railroad system were estimated to provide a lower bound estimate of rates. An upper bound estimate of rates was based on that allowed by intermodal competition. The results of this study indicate the present freight rate structure in Mexico is based on a fixed per ton factor, dependent on commodity type, and a variable per ton-mile factor, also dependent on commodity type. FNM's present rate structure is impacted by distance of shipment, volume of shipment, weight per covered hopper, and shipment type. Railroad rates for grain/soybeans movements are projected to increase for domestic movements in Mexico and import movements into northern Mexico as a result of railroad privatization. Railroad freight rates for imported grain/soybean shipments originating in the United States are expected to decrease for destinations in central and southern Mexico after railroad privatization. Projected revenue-to-variable cost ratios suggest the railroad system could flourish in a free market environment.
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Includes bibliographical references.
Neyer, David McAlister (1994). Ferrocarriles nacionales de Mexico: the existing rate structure for grain/soybean shipments and likely effect on freight rates as a result of railroad privatization in Mexico. Master's thesis, Texas A&M University. Available electronically from
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