Mexico: The High-Speed Railway Project That Challenges the Panama Canal

Looking at the world map, the temptation is always there: the strip of land connecting North and South America seems tailor-made to be split in two with a single stroke of a pen. While the idea looks attractive on paper, so far, only the Panama Canal has made it a reality. However, for at least a century, engineers and governments have been actively exploring the best location to create a new passage connecting the Pacific and Atlantic or to establish an alternative freight transport route for commercial transport and passengers between the two oceans.

Now it’s Mexico’s turn, as the country has decided to accelerate efforts to make the Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT) efficient and competitive. This high-speed railway passage, stretching approximately 300 kilometers, is set to receive a $7.5 billion investment from the Mexican government to establish itself as a key player in global trade.

At stake is not just a billion-dollar share of maritime transport, but also a strategic geopolitical position.

Mexico’s infrastructure development aims to appeal to shipping companies and major distribution hubs looking for a “Plan B” in case of disruptions to the Panama Canal’s operations. The U.S. government believes that, despite agreements transferring ownership from the U.S. to Panama 25 years ago, China effectively controls the canal.

The dispute revolves around the historic Panama Canal, completed by the U.S. in 1914. The new canal—an enormous parallel expansion of the original—was commissioned in 2007 by the Panamanian government and constructed by a consortium led by Webuild. Completed in 2016, it stands as one of the most complex and innovative infrastructures of the last decade.

Thanks to its new lock system, designed with Italian engineering, the expanded Panama Canal now accommodates Neo Panamax ships, up to 366 meters long and capable of carrying over 17,000 containers—four times the capacity of the old canal. Replacing even a small part of this vital maritime transport infrastructure, which is crucial for international commerce, remains highly challenging.

About ten years ago, Nicaragua—one of eight Central American countries—proposed, and later abandoned, a plan to build a 445-kilometer-long waterway with financial, technical, and labor support from China.

For Mexico’s solution to be considered a viable alternative, it must first guarantee a high-speed/high-capacity railway line and, secondly, undergo a major modernization of port infrastructure on both oceanic coasts.

Imagine a ship carrying 15,000 containers traveling from Busan, South Korea, to New York. Using the Panama Canal, the ship reaches the U.S. port and unloads its entire cargo in a single trip. With Mexico’s interoceanic corridor, however, the ship would need to dock at Salina Cruz, Oaxaca, unload its cargo, which would then be transported by train to the port of Coatzacoalcos, and finally be reloaded onto another vessel bound for New York.

Over the past two years, the Panama Canal has experienced delays in maritime shipping primarily due to drought conditions. The canal’s lock system relies on water from Lake Gatún, an artificial reservoir whose levels have dropped drastically due to climate change.

As a result, last summer, the Panama Canal was forced to limit maritime transport, leading to weeks-long delays for ships waiting to pass.

Despite climate change impacts, the Meexican Interoceanic Corridor of the Isthmus of Tehuantepecstill presents numerous limitations compared to the Panama Canal. The interoceanic railway is not a new concept—the first such line dates back to 1907. Initially built to transport goods from the Pacific to the U.S. East Coast, it was later repurposed by the military during the Mexican Revolution. However, with the opening of the Panama Canal, the railway was abandoned and now requires a complete rebuild.

The new project has received $6 billion in funding from the Mexican government, with an additional $2 billion from international institutions. However, this funding is already insufficient to develop a high-speed rail and road connection and, most importantly, to modernize and make the two exit ports truly competitive.