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Trains in the 21st century (updated)

The new Mexican President is reviving an old idea of having a "high speed" train that would circle the Yucatan Peninsula -- liking Cancun, Merida, Campeche, Palenque, Calakmul and Tulum -- a US$ 5 billion venture (the figure is between 5 billion and 8 billion).

First, let's do some math:

Assume that the project will cost US$ 5 billion
Assume that 30% will be equity (from the Federal government with zero return)
Assume 70% debt, guaranteed by the Mexican government

The result is US$ 3,5 billion in a 10-year bond
The yield on this bond (issued in Peso) would be around 9% (today's 10-year bond is priced at 8.89%)
This will lead to annual interest payments of US$ 315 million
Operating costs for this rail project will be a small fraction of the total -- let's say there are 300 people working for the railway -- at an average salary of US$ 20,000 (which is way overestimated) and we get a total of US$ 6 million per annum.  The financing costs are US$ 315 million in interest charge per annum...

Let's assume a total cost per annum of US$ 325 million that has to be absorbed by selling tickets to passengers.  Currently, if you are a guest in a hotel in Cancun, a day-long trip to Chichen Itza will cost MXN 1,200 per person (US$ 66) -- and you are picked up at your hotel.

We will use that figure for the train.  How many tickets need to sold to justify that train ride (to Chechen Itza?  There are apparently around 7,000 tourists that go to Chechen Itza every day (the same number go to Calakmul every year!

7,000x 66 = US$ 0.5 million per day or US$ 168 million per annum...


The assumption here is that every visitor uses the train -- but more importantly how many seats are on an average train?  Using US figures, the numbers are as follows:  312/360 per train.  That means 20 trains a day which is not what we had in mind here.  Maybe one day!

The reality is that the train will have maybe 4 departure from Cancun -- so we are looking at maybe a 1,000 passengers.  So, in reality, your total income is a lot lower, and this will be an expensive bit to the railway project since there are no rail lines between Cancun and Chichen Itza (the train from Merida ends at Valladolid -- 150 km west from Cancun).

And this is already the most obvious points where Cancun based tourists will travel to during their stay in the Yucatan Peninsula.

As of 2017, there were 6,000 cars using the Cancun/Merida toll road -- traffic is growing at 15% per annum, but the road is still a long way off from being saturated.  In fact, traffic could grow 10 fold without taxing the current infrastructure.

The reality of rail links is that they don't pay for themselves; even in Japan where population density is very high, the railway and the subway system operate in a deficit.

To justify building the train line there would have to be more than 2.9 million users at US$ 110.00 per ticket per annum just to meet the financial costs of building and operating the railway (never mind the maintenance costs).  But here lies the problem to meet the demand that would mean that more than 8,000 tickets are sold daily and that there are more than 30 trains that go to all the destination.

Like all rail project this is simply not viable, moreover, it's not particularly ecological, because power would be from diesel locomotives where little new technology has been deployed over the past 30 years (see Canada 2000, Transport study).








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