document. There is near total agreement among those familiar with the situation that FNM will

eventually be privatized. However, the timing and stages of the process are in doubt. It seems

unlikely if there will be major changes before the end of the Salinas Administration.

 The most frequently mentioned approach for privatizing the rail operations is for the

government to offer long-term concessions, rather than ownership, of segments of the system.

There is little doubt that U.S. railroads would be eager to operate the three main U.S.-to-Mexico

City routes and, possibly, the lines connecting Altamira/Tampico and Veracruz with Mexico City

and the Presido-to-Topolobambo line. However, finding investors and operators for ancillary

lines, including the entire system south and east of the Valley of Mexico will likely prove

difficult.

 It is expected that the eventual privatization of FNM rail operations, either through

concessions or outright sales, will reap dividends in terms of upgrades in the physical plant and,

more importantly, in management. However, several individuals expressed concerns that during

the intervening period FNM is in an institutional limbo. Seeing the handwriting on the wall,

some of its best people are leaving and there is reluctance among those remaining to innovate

and 'rock the boat.'


CURRENT FREIGHT MOVEMENTS BY RAIL BETWEEN MEXICO AND THE U.S.
AND THE POTENTIAL FOR PERISHABLES

 The only significant growth area for FNM has been haulage for trade between the U.S.

and Mexico, particularly southbound movements. Perishables offer some potential for increasing

rail traffic and possibly easing the north-south freight imbalance. However. FNM currently does

not possess the equipment or technical and managerial expertise necessary to deliver acceptable