Freight rail transportation and inflation: Analysis of the 2022 Mexican economic regulatory Directives

Abstract

This paper investigates the role of rail transport in Mexican inflation within the post-COVID-19 economic context, addressing critical empirical and geographical gaps in the literature. While previous related studies have largely focused on the role of maritime transport on inflation, this research examines the specific contributions of rail freight. Leveraging industry-level data from the Input-Output Matrix (IOM), the study offers a novel analysis of the significance of rail transport in Mexico’s production processes. The findings reveal that rail accounts for only 5% of intermediate transport demand, making it less dominant compared to road and air freight. The study also analyzes pricing dynamics of Mexican rail freight relative to North American railroads. While Mexican railroads generally charge higher rates, these align with industry averages when adjusted for freight composition, country-specific characteristics, and cross-border acquisitions. Econometric methods, including panel-data stationarity, cointegration, and Granger causality tests, demonstrate a stronger long-term relationship between rail rates and producer prices than with consumer prices. This indicates that rail rates respond to producer prices rather than causing inflationary pressures. Key policy recommendations emphasize the creation of a publicly available, anonymized carload waybill sample to improve regulatory oversight, enable evidence-based policymaking, and address structural challenges in the Mexican rail sector. These findings have broader implications for enhancing economic regulation and transport policy to ensure stability and competitiveness.