Grupo Mexico Railway Takeover

Grupo Mexico, the Mexican mining and infrastructure company, is facing challenges in its negotiations with the Mexican government following the takeover of a portion of its railway by the Mexican Navy. The railway concession, operated by Grupo Mexico Transportes, stretches from Coatzacoalcos to Medias Aguas in Veracruz state. Despite the government’s cancellation of a previous agreement with the company, negotiations are set to continue.

The Navy’s intervention last week, which involved deploying personnel to the railway, has complicated the talks, according to Grupo Mexico. The company expressed surprise at the move, considering it unusual. The expropriation had an immediate impact, causing a drop of over 4% in Grupo Mexico’s shares.

However, Grupo Mexico reassured stakeholders that it would continue to operate trains and maintain infrastructure under the supervision of the armed forces. President Andres Manuel Lopez Obrador has frequently clashed with prominent businesses, accusing political opponents of favoring corporate elites and attempting to increase state control over the energy market, which has led to disputes with the United States and Canada.

The section of the railway that was expropriated covers approximately 120 kilometers (75 miles) and forms part of the Inter-Oceanic Corridor project. This ambitious project aims to upgrade the rail link between Mexico’s Pacific and Gulf coasts, traversing the Isthmus of Tehuantepec, and creating a trade route to rival the Panama Canal. The government declared the expropriation temporary, citing public utility, and compensation is expected in accordance with expropriation laws.

In a previous development, Mexico’s Supreme Court invalidated a government order that classified specific infrastructure projects as matters of national security. The court argued that this measure violated the public’s right to access information. In response, the government issued a new decree designating flagship projects, including the Inter-Oceanic Corridor, as areas of national security.

Grupo Mexico’s transport division, which includes the expropriated section of the railway, accounted for 20.3% of the parent company’s revenue in the past year. The government has assigned various public works projects, such as the “Mayan Train,” to the armed forces as part of its efforts to foster development in the economically disadvantaged southern region of Mexico.