Kansas City Southern Sees Mexico Preserving Rail Exclusivity

The Mexican Senate will probably abandon an attempt by the lower house of Congress to force the nation’s two largest railroads to open up their networks, according to Kansas City Southern. (KSU)

Senators may change the lower house’s railroad bill in ways that would win support from the U.S. company, Jose Zozaya, president of Kansas City Southern’s Mexico unit, said in an interview. The modifications are likely to boost connections between rail lines without giving third-party companies access to exclusive networks operated by the Missouri-based railroad and Grupo Mexico SAB (GMEXICOB), he said.

“We’re very optimistic about what will come out of this reform,” Zozaya said. “We think senators have the best disposition to improve the reform.”

Leaving exclusive rail networks intact would protect Mexico’s existing railroads by limiting competition and maintaining efficiency. The lower house’s original bill faced opposition from the industry because, as written, it would slow rail traffic and damage the Mexican government’s efforts to attract more foreign investment, according to Credit Suisse Group AG.

Kansas City Southern operates the nation’s second-biggest railroad under a 1997 government concession that extends to 2027, while Grupo Mexico’s rail unit manages the largest.

Zozaya’s comments came as Kansas City Southern Chief Financial Officer Michael Upchurch said the Mexican Senate may make “substantial changes” to the bill approved last month by the Chamber of Deputies. Upchurch spoke today at a JPMorgan conference in New York.

The Senate may propose modifications to the bill before the current legislative session ends April 30, Upchurch said.

Kansas City Southern climbed 1 percent to $101.24 at the close of trading in New York. Grupo Mexico, which got about 20 percent of 2013 sales from its transportation division, advanced 0.6 percent to 38.28 pesos in Mexico City.

To contact the reporter on this story: Brendan Case in Mexico City at bcase4@bloomberg.net

To contact the editors responsible for this story: Ed Dufner at edufner@bloomberg.net Molly Schuetz, John Lear

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