remains a bloated, highly political state corporation. For example, one U.S. rail official familiar

with FNM estimated that two thirds of FNM's work force was redundant. Moreover, FNM's

marketing is rudimentary and the impression is frequently conveyed to customers, by FNM sales

personnel, that they have no choice but to deal with FNM.

 FNM's pricing tends to be based strictly upon the commodity type and distance, rather

than actual costs. This system has contributed to the concentration of export traffic by rail

through the Laredo/Nuevo Laredo gateway (estimated to account for 51.8 percent, Mercer

Management Consultants). This gateway offers the lowest mileage, on FNM, from the U.S.

border to Mexico City. In addition, the pricing system has resulted in a cross-subsidy from the

long-distance routes from the U.S. border to the Valley of Mexico to higher cost portions of the

system. Most notable among the high cost routes are those from the Gulf ports to Mexico City,

which involve considerable switching and a climb of 7,000 feet. The cost differential is

evidenced by the fact that trains from the U.S. border to Mexico City frequently have 90-to-100

cars, while those from the Gulf rarely, if ever, exceed 30 cars. One marine carrier speculated

that some current and planned traffic using the Gulf Port would become uncompetitive, with

overland rail routings, if the cross-subsidy problem were rectified.

 In a sense, the ongoing reforms have created problems within FNM's management.

Recognizing the inevitability of outright privatization or concessions of major segments of the

system or, at least, major reorganizations, many of FNM's best managers have gone to the

private sector. Frequently, these individuals become consultants and middlemen for FNM or

for U.S. carriers and shippers doing business with FNM.