Regulations play a fundamental role in the performance of an industry. They can facilitate – or restrict – the entry of new companies to a given market, and they can either stifle or promote innovation. While regulations are supposed to pursue a legitimate interest such as protecting consumers, workers and the environment, they may fail to achieve these objectives, and instead create unnecessary burdens on businesses and citizens. Therefore, regulations need to be reviewed and revised continually in order to ensure that they are “fit-for-purpose”.
In Mexico, as in any country, the rail system can be a catalyst of economic activity by transporting inputs for production, distributing intermediate and consumer goods, and allowing people to travel to their workplace or leisure activities. To ensure the system can fulfil this potential, the Mexican government asked OECD to review the elements that define the regulatory governance of its rail sector, including the regulatory framework, the design and attributions of the regulatory oversight agency, and the way stakeholders of the rail system interact.
This report describes the series of structural reforms that the Mexican rail sector has undergone in the past 25 years. A major change was the shift from a publicly run rail service to a rail system under private concessions. More recently, the Regulatory Agency of Rail Transport was established as the sector’s oversight body. These reforms were accompanied by an aggregated growth of 141% in the amount of cargo transported by the Mexican rail system: from 1995 to 2017, it increased from 52 million to 127 million tonnes.
Drawing on the OECD Recommendation on Regulatory Policy and Governance, the report also provides an assessment of the regulatory governance of the rail sector in Mexico, and offers recommendations to continue the reform efforts. It suggests ways to strengthen the capacities of the Regulatory Agency of Rail Transport to issue cost-effective regulations, and more effectively enforce existing rules. It also identifies gaps in the implementation and coverage of the current regulatory framework, such as in the framework related to trackage rights – the ability to use other companies’ rail network – and methodologies to define fares.
The report also recommends that the Mexican government starts working on its medium-term vision of the rail system, considering that the exclusivity rights of most of the current concessions will expire in the next five to seven years. This report provides guidance on elements to consider when defining this new vision.