Kansas City Southern marks 16th anniversary of Mexican concession

On June 24, Kansas City Southern and its Mexican subsidiary Kansas City Southern de México S.A. de C.V. (KCSM) marked the 16th anniversary since the Mexican government granted private companies a concession to operate the national railroad system.

In 1995, KCS entered into an agreement with Grupo TMM S.A. de C.V., a Mexican-based ocean shipping and logistics company, to jointly seek the concession of one privatized rail line.

KCS at the time also purchased a 49 percent stake in MexRail Inc., which owned the Texas Mexican Railway Co. (Tex Mex) that operated between Laredo and Corpus Christi, Texas. Tex Mex provided a link between the United States and Mexico via the International Bridge at Laredo.

"At the time, the investment was considered by some observers to be questionable, because Tex Mex did not connect with [our] U.S. network," KCS officials said in an item posted on the "KCS News" web page. "That was remedied in 1996, when the Surface Transportation Board, as part of its review of the proposed [Union Pacific-Southern Pacific] merger, provided the Tex Mex trackage rights to connect with KCS at Beaumont, Texas."

With the U.S.-Mexico connection in place, KCS focused on the Mexican rail concession. In 1996, the Class I and Grupo TMM submitted their bid for the Northeast Line, which was considered the "premiere Mexican rail corridor," KCS officials said. After they won the concession, KCS and Grupo TMM began the commercial operation of Transportacion Ferroviaria Mexicana S.A. de C.V. (TFM) in 1997.

Seven years later, KCS and Grupo TMM agreed that the Class I would acquire Grupo TMM's shares of TFM and become the majority owner. In 2005, KCS acquired full ownership of Mexrail and Grupo TMM's interest in TFM.

Per an agreement with the Mexican government reached later in 2005, KCS acquired the remaining 20 percent interest in TFM, which then became a wholly owned KCS subsidiary and was renamed KCSM.

The Class I since has made significant infrastructure and technology investments in the rail network in Mexico, KCS officials said.

"The transition from a government-operated to a publicly-traded company was not easy, but certainly well worth the effort," said KCSM Executive Representative José Zozaya. "We can all be proud of the service we have been delivering to our customers for the past 16 years, as well as the company's tremendous opportunity for future growth."