A New Route for Global Trade?

By Joanna Marsh

The proposed Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT), cutting through southern Mexico, offers breakbulk movers a promising new trade route and a crucial alternative to the drought-stricken Panama Canal. Project professionals in Mexico offer their views on the new passage.

From Issue 1, 2025 of Breakbulk Magazine.

(5-minute read)

Significantly low water levels at the Panama Canal in 2023 presented breakbulk shippers and container vessels with a dilemma: face extended delays lasting as long as two weeks, or pay up to jump the queue.

But what if shippers had an additional option, beyond sailing around South America to ship goods from the Pacific Ocean to the Atlantic Ocean, or vice versa? Mexico believes it may have the solution: an interoceanic railway connecting the Pacific and Atlantic oceans.

The Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT), located in the narrowest part of the country, is the region where this interoceanic railway would be located. Mexican officials want the Ferrocarril del Istmo de Tehuantepec (FIT), or Isthmus of Tehuantepec Railway, to serve as one of the crown jewels of the corridor.

The railway actually has three legs: the 308km “Z Railroad” is the one that Mexican officials hope can compete with the Panama Canal. It connects the Port of Coatzacoalcos, located along the Gulf Coast in Veracruz state, with the Port of Salina Cruz, located along the Pacific Coast in Oaxaca state, and passenger rail service began serving this line in late 2023.

In addition to the railway, the corridor includes ambitious plans to develop 10 industrial parks located along the FIT’s Z Railroad, as well as construct a national highway system in the states of Oaxaca, Veracruz, Chiapas and Tabasco.

“Plans to connect these two oceans through the Isthmus of Tehuantepec had existed since the Colonial period in the 16th century but were never successfully executed,” Thanya Ramirez, supervisor of project cargo for Logistics Plus, told Breakbulk. The railway was completed in 1895 with passenger rail, and interoceanic cargo traffic began in 1907, but was short-lived due to the Mexican Revolution. The idea of a major interoceanic railway was revived by former Mexican president Andrés Manuel López Obrador, who was born in the region, she said.

Mexican officials have been touting the FIT’s “Z Railroad” leg as an alternative to the Panama Canal, which faced challenging shipping conditions in 2023 because of severe drought. But industry experts with knowledge of the region expressed skepticism that the railway could compete with the Panama Canal, given the capacity of the two transportation routes.

While cargo might face a shorter transit time using the railway, the CIIT corridor is expected to have a capacity of 1.4 million twenty-foot equivalent units, according to Ramirez, in contrast to the Panama Canal’s ability to handle significantly more volumes. That doesn’t mean shippers should dismiss the CIT entirely, however.

“Complementary Option”

“I personally don’t think this project will be able to compete with the Panama Canal as the volume of cargo expected to be moved will not reach the volumes of the cargo moved through Panama, at least in the first middle stage,” Ramirez said. “But - it will indeed be a good complementary and cheaper option. And most importantly, it is finally giving these southern states a big real opportunity of development and economic growth.”

Plans are not just limited to the railroad and the ports, Ramirez said, but include the development of the highways and 10 industrial parks.

Diego Rodriguez, director of logistics and industrial practice at Americas Market Intelligence, also believes that the railway can’t compete with the Panama Canal, since the Panamanian authorities appear to be seeking a long-term solution for the water shortages, he said.

“The Panamanian economy and the government’s revenue depend heavily on the Panama Canal, and it’s a very established logistics hub in the world. So for that reason, I don’t see the interoceanic corridor competing,” Rodriguez said.

But the CIIT “makes a lot of sense because it diversifies the geographies in which companies could invest and set up manufacturing locations. You have access to natural resources, water, and power, and you have plenty of room to grow. So, it makes a lot of sense from the point of view of developing an alternative location for companies looking to establish operations in Mexico to serve the U.S. market,” Rodriguez added.

“If you set up operations in the south, you have to move all your products through roads in Mexico that are insecure. You have lots of cargo theft. [But] it’s cheaper and safer just to move your cargo from the Pacific to the Gulf Coast, and then use the ocean services to connect with the West Coast or the East Coast in the U.S.”

Lack of Capacity

For the FIT and the industrial corridor to succeed, Mexico needs to conduct extensive work on the ports touching the railway, so that there is sufficient capacity to handle all the cargo. The ports of Salina Cruz and Coatzacoalcos have a list of capital projects to expand their capacity. While both are already capable of receiving some breakbulk cargoes, they are not able to handle significant container volumes, according to Ramirez.

That existing lack of capacity is a concern for Rodriguez, who says that as the railway and the industrial parks get developed, so do the ports. “The problem is that the ports need to be upgraded as well. You also need to develop the industrial parks. I’m not concerned with the railway because that’s the easiest part, I would say,” Rodriguez said.

“The problem is actually upgrading the ports along the Gulf and the Pacific and also developing the industrial parks to create the infrastructure ecosystem to attract the manufacturing sector. Those are the potential clients: anything that requires bringing in your raw materials and then assembling and then re-exporting.”

The Mexican government is seeking to change that, according to Ramirez at Logistics Plus. In addition to plans to bolster existing capacity at the ports, proposed projects include developing a specialized container terminal and an LNG terminal at the Port of Coatzacoalcos and dredging and constructing a specialized container terminal at the Port of Salina Cruz.

“Talking about the railway service per se, I don’t think it will work for heavy/oversized cargoes, at least not in several years, as it is still very bumpy— there’s not enough service with the cargo rail routes already existing, and there are no real service providers with the rail cars for project cargo in Mexico,” Ramirez said.

“But if the modernization of the ports and construction of highways happen, the parallel highways should indeed do the work of moving project cargo throughout the country.”

Indeed, these capital improvements could also potentially help to ease congestion at the Ports of Manzanillo and Lázaro Cárdenas, which have longer vessel waiting times, Ramirez said. That congestion has resulted in breakbulk vessels having to wait as long as two or three weeks to be discharged.

If the private investments really materialize, project cargo specialists will be able to move even more machinery of all sizes, and for all industries, Ramirez said.

While in office, former President Obrador pushed for the development of the CIIT before his term ended in 2024 because the region has been perceived as less affluent compared with regions to the north that are closer to the U.S. border. He and other Mexican officials have argued that developing the railway and accompanying industrial infrastructure will pique the interest of industrial sectors such as vehicle manufacturing and semiconductor production while bolstering other sectors such as energy production.

Even though Mexico has a new president, Claudia Sheinbaum Pardo, the country is still very interested in showcasing the railway and its potential to facilitate trade among the Americas and Asia.

Efficient Alternative

In June last year, just after the election of Sheinbaum, a delegation of Mexican officials that included Secretary of Foreign Affairs Alicia Bárcena Ibarra and Secretary of the Navy Admiral Rafael Ojeda Durán traveled to Washington, D.C. to discuss Mexico’s plans for the railway and the interoceanic corridor with U.S. government officials.

The meeting, which included Amos Hochstein, U.S. special presidential coordinator for Global Infrastructure and Energy Security, and Elizabeth Sherwood-Randall, Homeland Security Advisor, was Mexico’s opportunity to present the railway as “a modern and efficient alternative for global trade with easy access to the U.S., Asia and Central and South America,” according to a Mexican government statement.

And just recently, the FIT and Mexico’s Ministry of the Navy announced in November that grain producer Viterra Mexico successfully transported 2,000 tons of wheat grain using the railway. The cargo, which was imported from Canada, arrived at the Port of Salina Cruz via the SSI Prudence and was then transshipped to bulk hoppers before heading to warehouses operated by wheat distributor Trimex near the Port of Coatzacoalcos.

“There will be opportunities to take advantage of the interoceanic corridor, and companies will be looking to move to these industrial parks. But that’s medium-term, maybe 2027, 2028, once it’s clearer about what’s going to happen with the new U.S.-Mexico-Canada trade agreement in 2026,” Rodriguez said.

Breakbulk Americas 2025 is taking place on Sep 30 – Oct 2 in Houston.

TOP PHOTO: Logistics Plus transports furnaces in Nuevo León. Credit: Logistics Plus
SECOND: Thanya Ramirez, project cargo supervisor, Logistics Plus. Credit: Logistics Plus
THIRD: Loading a heavy furnace in Nuevo León. Credit: Logistics Plus