Mexico teams up with Singapore to launch Tehuantepec trade corridor

Mexico has teamed up with Singapore to push the development of an interoceanic dry trade corridor running along 251-kilometres of the isthmus of Tehuantepec in southern Mexico, which features among the economic development priorities of president Andrés Manuel López Obrador.

“I met with Singapore’s prime minister Lee Hsien... We committed to strengthening economic ties and producing a masterplan for the management of the ports of Salina Cruz, Coatzacoalcos and propelling the development of the isthmus of Tehuantepec,” Mr Obrador wrote on Twitter on November 19.

The strategic value of the isthmus of Tehuantepec as trade corridor traces back to the times of the Spanish colonisation. Known as the Nao-China route, Spanish galleons would sail between the Philippines and Mexico (both of them Spanish colonies until the 19th century), unload and ship their cargo overland across the isthmus, where other vessels would wait and take it to Spain. In the 19th century a railway boosted its trade potential, but the development of the Panama Canal eventually sank its appeal in the 20th century. Past its heyday, the region has fallen behind the rest of Mexico in terms of economic development, thus becoming a major priority for Mr Obrador since he rose to power in late 2018.

The revival of the Tehuantepec corridor entails the upgrade of the two main ports lying on the end points of the isthmus – Salina Cruz on the Pacific coast and Coatzacoalcos on the Atlantic coast. It will also bring the upgrade of road and railway connections running between the two ports and the development of industrial clusters along the whole route. In order to attract investment and foster development, the Mexican government plans to give the whole corridor special economic zone (SEZ) status offering typical customs and tax incentives.

“With the US-China trade conflict, Mexico becomes the US’s main trade partner,” says Martín Ibarra Pardo, president of Colombian law firm and consultancy Araújo Ibarra, which contributed to the early design of the corridor projects. “The Panama Canal is mostly about logistics, whereas the Tehuantepec corridor has a real opportunity to drive industrialisation, also because it can rely on the deep pool of the local workforce – which is not the case in Panama, with only 4 million people in the whole country. Mr Obrador has to design a better SEZ proposal than Panama [to make it competitive].”

The Mexican government has pledged it is ready to invest 97,615m pesos ($5.04bn) for the long-term development of the corridor, and it estimates that the private sector will weigh in with another 159,000m pesos. The goal is to have a new, competitive interoceanic trade route up and running as early as 2020.