• Teacher’s Union Railroad Blockades in MichoacÁn Pose Severe Threats to Supply Chain Operations Across Mexico

    30 January 2019

    On Monday, January 14, teachers in the Mexican state of Michoacán primarily associated with the National Coordinator of Education Workers union (CNTE) launched a strike, seeking back payment of salaries and bonuses that some media sources report date back to 2015. Michoacán is known for encountering frequent strikes and protests, and this is not the first time that railways have been targeted. Previously in February 2018, teachers in Michoacán blockaded railways, forcing the closure of a Ford manufacturing plant in Cuatitlán for 3 days and causing widespread disruptions to manufacturers.

    Protestors are again targeting rail lanes within Michoacán, bringing traffic to a complete stop on two routes that are utilized heavily by manufacturers across central Mexico. On the route from Lázaro Cárdenas to Morelia to Mexico City and Toluca, Kansas City of Southern Mexico (KCSM) has encountered major blockades in Maravatío, Caltzontzin, and recently in Toluca (outside Michoacán, west of Mexico City). On the lane between Guadalajara and Mexico City (which briefly crosses through Michoacán between La Barca and La Piedad de Cabadas), Ferromex has encountered blockades in Yurécaro and in La Piedad proper. Combined, these two lanes transport approximately 4 million containers annually.

     

                  Figure 1: Blockades on rail lanes within Michoacán; Source: Resilience360

     

                    Figure 2: Guadalajara – Mexico City lane blockades; Source: Resilience360

     

    Ferromex has stopped loading trains bound for the blockades altogether; in total, at least 200 cargo trains have now been prevented from departing their points of origin. The most recent figures provided by national media and internal DHL sources indicate that the Port of Lázaro Cárdenas now faces a backlog of 4,500 containers.

    Trains departing from Manzanillo in the adjacent state of Colima, which must pass through Guadalajara and are largely bound for the disrupted Guadalajara-Mexico City lane, have faced interruptions since January 21. According to industry media, the port of Manzanillo has reduced its backlog of 2,250 containers to 350 after working closely with Maritime Customs to reissue approvals so that backlogged cargo may be reassigned from rail to commercial truck transportation. However, the director of the Integral Port Administration in Manzanillo acknowledged that roughly 2,000 containers that departed from Manzanillo are currently stranded on the railway. Under normal conditions, the port processes 4000 TEUs per day, approximately 25% of which goes by rail.

    To date, the lack of developments in negotiations suggest that the affected railways will not be able to resume normal operations in the near term. In total, CNTE claims that 7 billion Mexican Pesos (USD 368 million; EUR 322 million) are due to its teachers, but on Saturday, January 26, media sources reported that CNTE stated it would accept a payment of 5 billion Pesos. An offer has been made by federal and state educational authorities for one billion Pesos, and media sources claim that neither the federal government nor the state government of Michoacán has sufficient resources to distribute the requested amount to CNTE. While the Governor of Michoacán has called upon the national authorities to help remove teachers and dismantle the blockades, an official at the Secretary of Public Education has maintained that continued negotiation is the intended pathway at this point. As such, the blockades will continue for the foreseeable future.

    Local business associations now estimate total losses at 1 billion Mexican Pesos (USD 52.5 million; EUR 46 million) for each day that blockades continue. Shippers should closely monitor for progress in securing alternative means of ground transportation to reduce the backlog at the Port of Lázaro Cárdenas and seek alternative ports of entry that avoid the affected rail lanes where possible.

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